2007 annual report aveiro investment corp. - First West Properties

AVEIRO INVESTMENT CORP. 

2007 ANNUAL REPORT

ASSETS LETHBRIDGE 

About Lethbridge: 

• Closer to U.S. markets than 

any major city in Alberta. 

• One hour from major Port of 

Entry at Coutts/Sweetgrass. 

• Local trading area of 

approximately 27,000. 

• Recently ranked 10th out of 

128 cities in nine industrialized 

countries for lowest cost of 

doing business. 

110,200 SQUARE FOOT INDUSTRIAL WAREHOUSE IN NORTH LETHBRIDGE INDUSTRIAL PARK, LETHBRIDGE, ALBERTA

CHAIRMAN’S LETTER 

DEAR FELLOW SHAREHOLDERS: 

It is a pleasure to present to you Aveiro Investment Corp.’s fi rst 

annual report, covering our fi rst year of operations as a real estate 

investment company. Our company has grown signifi cantly since 

we launched it last year, both in terms of its real estate assets 

owned and market capitalization, and in the depth of the people 

who manage it. 

Harold Kunik and I created Aveiro to own real estate in an area of 

North America where the economy is expected to outperform the 

rest of the continent in the foreseeable future. 

We have chosen to acquire real estate in western Canada because 

we believe the commodities that are found throughout the western 

provinces are in the early stages of a long-term uptrend. Strong 

commodity prices are already contributing to unprecedented 

economic growth across British Columbia, Alberta, Saskatchewan 

and Manitoba. 

Aveiro gives you the opportunity to own well-managed real estate 

assets in these strong economies. 

Our objective as a company is to increase shareholder value by 

acquiring real estate assets that provide both sustainable and 

growing free cash fl ow per share. We are doing this by building 

a portfolio of primarily income-producing real estate assets in 

secondary markets in Western Canada. 

Before becoming an Aveiro shareholder, you may have 

only invested in real estate directly and not through share 

ownership of a real estate investment company, but it’s really not 

that different. 

You, like most Canadians, will probably rank your primary 

residence as your single best investment. It is also probably 

the investment that you have owned the longest, resisting the 

temptation to immediately stick a “for sale” sign on the lawn when 

your neighbor sells his house for more than you paid for yours. 

When you do sell, you sell carefully and for compelling reasons. 

And this thoughtful approach to investing has most likely paid off 

in outstanding long-term results. 

In his company’s Owner’s Manual, Warren Buffet describes how 

he would like Berkshire Hathaway’s shareholders to think about 

their shares: 

“[I] hope that you do not think of yourself as merely owning a piece 

of paper whose price wiggles around daily and that is a candidate 

for sale when some economic or political event makes you 

nervous. We hope you instead visualize yourself as a part owner 

of a business that you expect to stay with indefi nitely, much as you 

might if you owned a farm or apartment house in partnership with 

members of your family. For our part, we do not view Berkshire 

shareholders as faceless members of an ever-shifting crowd, but 

rather as co-venturers who have entrusted their funds to us for 

what may well turn out to be the remainder of their lives.” 

We hope you will think about your investment in Aveiro the 

same way: as the beginning of a long-term relationship, with 

like-minded co-venturers. 

Aveiro Investment Corp. | 2007 Annual Report | 

3

CHAIRMAN’S LETTER 

Later in this annual report, you will fi nd a discussion of our 

fi rst-year milestones and management’s discussion and analysis 

of Aveiro’s fi nancial statements. Together, these will provide you 

with an in-depth understanding of Aveiro’s business and the real 

estate we now own. Our approach is to be candid in our reporting 

to you: we want you to know all the material facts that we would 

want to know if our positions were reversed. We owe you no less. 

Finally, I would like to thank Harold for his superb execution of the 

role of president which he held from August 2006 until September 

of this year when Eric Wesling was appointed. One of Harold’s 

objectives when he took on the role was to work himself out of 

the position by building the company in a manner that allowed 

us to attract a real estate professional with deep subject matter 

expertise and experience in a high growth real estate investment 

company. I think that we have done that with Eric. 

4 | Aveiro Investment Corp. | 2007 Annual Report 

I hope that you fi nd our annual report informative and useful. 

We are pleased to welcome all of you as fellow shareholders of 

Aveiro, we thank you for trusting us with your capital, and we look 

forward to an exciting and prosperous future together. 

John Mackay 

CHAIRMAN OF THE BOARD

ASSETS SASKATOON 

TOTAL OF APPROXIMATELY 21,000 SQUARE FEET ON 2.45 ACRES OF LAND, SASKATOON, SASKATCHEWAN

THE CONTEXT: WESTERN CANADA TODAY 

UNPRECEDENTED ECONOMIC GROWTH 

Western Canada is rich in resources: uranium, diamonds, potash, 

copper and zinc. It’s also rich in agriculture and it’s rich in oil. 

Virtually all of these commodities are currently fetching record prices 

and helping to fuel unprecedented economic growth: 

• “ Canada has two economies: in the East, 

a somewhat fragile economy that’s more 

susceptible to global competitive pressures, 

and in the West, a resource-based, 

boom times economy.” 

(David Herle, Globe and Mail, September 17, 2007) 

• “ Alberta and Saskatchewan’s provincial 

economies are booming because of 

strong prices for oil, minerals and 

agricultural commodities.” 

(The Canadian Press, September 20, 2007) 

• “ The seven fastest-growing metropolitan 

economies this year are all located in 

the West.” 

(Conference Board of Canada, September 2007) 


ALBERTA’S OIL SANDS 

The largest oil sands 

deposits outside of Saudi 

Arabia are located in the 

Province of Alberta. 

Time Magazine has 

described these deposits 

as “Canada’s greatest 

buried energy treasure” 

and said they “could 

satisfy the world’s 

demand for petroleum 

for the next century.” 

• “ Statistics Canada attributed the [Canadian] construction boom to 

the dynamic economy in Western Canada….” (CBC News, July 2006) 

• “ Recent real economic growth in the four western provinces 

exceeds the Canadian average” (Western Economic Diversifi cation 

Canada, 2006), which is already exceptionally high: “Canada’s real 

GDP growth rates in the last 10 years were the highest among the 

G7 countries.” (Japan Credit Rating Agency Ltd, August 13, 2007) 

CORPORATE PROFILE 

Aveiro Investment Corp. 

Based in Alberta, Aveiro Investment Corp. is a 

real estate investment company established to 

take advantage of real estate opportunities in the 

secondary markets of Western Canada, which 

means the markets outside the major cities of 

Vancouver, Calgary and Edmonton. 

Our primary focus is to acquire high-quality 

commercial, industrial, retail, offi ce and mixeduse 

properties with high-quality tenants already 

in place, in centres where we anticipate strong 

economic growth and where the opportunity exists 

to lease or re-lease at current market rents. In 

those same centres, we are also working to fi nd 

high-quality non-income producing assets (bare 

land) where we believe we will be able to increase 

the value of the land. 

In 2007, we began to build our portfolio of real 

estate assets in three small but signifi cant centres: 

Airdrie and Lethbridge, Alberta, and Saskatoon, 

Saskatchewan. Future acquisitions will focus on 

these and other secondary markets in Alberta, 

British Columbia, Saskatchewan and Manitoba.

ASSETS AIRDRIE 

77 ACRES OF UNDEVELOPED LAND (CURRENTLY ZONED “LIGHT INDUSTRIAL”) IN AIRDRIE, ALBERTA 

About Airdrie: 

• Located along Alberta’s 

key economic corridor, 

between Calgary 

and Edmonton. 

• 20 million vehicles pass 

through Airdrie every year. 

• Grew by 32.8 per cent over 

the past 5 years (Calgary 

grew by only 8 per cent in 

the same period.) 

• 29,000 residents, but 

clear access to Calgary’s 

population of more 

than 1 million. 

• Airdrie’s industrial taxes 

are 30 per cent lower 

than Calgary’s.

EXPERIENCE AND EXPERTISE 

The Aveiro team is a group of real estate and business 

professionals with proven track records and the skills necessary 

to build a substantial, and profi table, real estate portfolio in 

Western Canada. 

TEAM MEMBERS 

THE AVEIRO TEAM 

Eric Wesling, President 

Eric Wesling joined Aveiro as Executive Vice-President, 

Real Estate, in February 2007; he was appointed President in 

September 2007. 

Eric is a real estate professional with 25 years’ experience in 

acquiring, managing and developing real estate across Canada. 


SENIOR MANAGEMENT TEAM Eric Wesling, John Mackay, Harold Kunik 

He spent 18 years with Oxford Properties Group Inc., taking on the 

position of Senior Vice-President, Western Canada before forming 

his own real estate consulting practice in 1998. 

While at Oxford Properties Group Inc., Eric was responsible for 

the company’s acquisition of such major commercial properties 

as Gulf Canada Square and the Calgary Tower in Calgary, and 401 

West Georgia and Granville Square in Vancouver, British Columbia. 

He was also responsible for managing Oxford’s renovation of 

major commercial properties – ranging in scope from $20 to $200 

million – as well as acting as project manager for new development 

construction projects valued from $8 to $600 million, including the 

Calgary Eaton Centre and the Ernst and Young Tower (Calgary).

Harold Kunik, Chief Financial Officer and Director 

Harold was a co-founder of Aveiro and began the year as 

President. He now holds the offi ce of Chief Financial Offi cer 

of both Aveiro and Mosaic Capital Partners Ltd., manager of a 

private income fund investing in Western Canadian businesses. 

He began his career with KPMG Peat Marwick in Edmonton in 

1983 and transferred with the fi rm to New Zealand from 1987 to 

1992. He has also worked as a manager or partner with private 

equity fi rms in Edmonton and Calgary and, in that capacity, has 

served as chief fi nancial offi cer and as a director of several public 

and private businesses. 

Harold holds two professional accounting designations: 

Certifi ed Management Accountant (1986) and Chartered 

Accountant (NZ) (1992). 

John Mackay, Chairman of the Board and Director 

A lawyer by training, John was a co-founder of Aveiro and is both 

Chairman of Aveiro and President of Mosaic Capital Partners 

Ltd., manager of a private income fund investing in Western 

Canadian businesses. 

John was formerly a partner in the corporate fi nance and mergers 

and acquisition practice group at McCarthy Tétrault LLP – one 

of Canada’s largest law fi rms. There, he advised public and 

private companies, venture capitalists, private equity funds and 

underwriters on the structuring and securities law implications of 

domestic and international private placements, public offerings, 

corporate reorganizations, mergers and acquisitions. 

Frank Phillet, Director 

Frank is a chartered accountant and entrepreneur. He is 

currently chief fi nancial offi cer of DevStudios International Inc., 

an Edmonton-based software development company that has 

been ranked by PROFIT magazine as one of Canada’s 100 fastest 

growing companies and by Alberta Venture Magazine as one of 

Alberta’s 30 fastest growing companies. 

Dallas Wingerak, Director 

Dallas began her career as an urban planner, working for cities, 

towns and regional districts in British Columbia and Alberta 

(including Airdrie, Alberta, where Aveiro recently purchased 77 

acres of undeveloped industrial land). She also has extensive 

experience in industry, having worked for a private developer and 

as a development consultant. Dallas is currently the Director, 

Real Estate, for Loblaw Properties West Inc. 

Aveiro Investment Corp. | 2007 Annual Report | 

9

AUGUST 2006 

LAUNCH OF BUSINESS PLAN 

Harold Kunik and John Mackay 

acquired control of Aveiro (then 

called Dagger Resources Inc.), 

appointed a new board of directors 

and implemented Aveiro’s new 

business plan as a real estate 

investment company. 

2007 MILESTONES 

JANUARY 2007 

FIRST PROPERTY: 

AIRDRIE, ALBERTA 


We acquired our fi rst real estate 

asset on January 1, 2007: 77 acres 

of undeveloped land (currently 

zoned “light industrial”) in Airdrie, 

Alberta, for $7.75 million. 

Airdrie is strategically located 

four miles north of the northern 

edge of the City of Calgary, 

and directly along the Calgary- 

Edmonton corridor. 

Market Capitalization 

Approximately $5.5 million. 

JUNE 2007 

SECOND AND 

THIRD PROPERTIES: 

LETHBRIDGE, ALBERTA 

In June 2007, we made our 

second and third purchases, both 

in Lethbridge, Alberta: 

• A 110,200 square foot industrial 

warehouse in Churchill 

Industrial Park for $5.5 million. 

Immediately after we closed 

on this purchase, we leased 40 

per cent of the warehouse to a 

new tenant, a U.S.-based plastic 

container manufacturer. 

• And 7.01 acres of raw industrial 

land also in the Churchill 

Industrial Park for $1.3 million. 

The land is a block-and-a-half 

away from the new Lethbridge 

Smartcentre, anchored by a 

Wal-Mart superstore. 

Private Placement 

Also in June, we completed the 

private placement of 11 million 

Class “A” voting common shares 

at $1.00 per share. We increased 

the size of the placement by an 

additional 430,000 shares to meet 

higher than expected demand, 

resulting in gross proceeds of 

$11.43 million. 


Approximately $13.5 million.

JULY 2007 

Private Placement 

In July 2007, we completed the private placement of 3 million 

Class “A” voting common shares at $1.50 per share, for gross 

proceeds of $4.5 million. 

Airdrie, Alberta 

We joined with a group of other property owners who hold lands 

adjoining our 77 acres to accelerate the timing of development 

approvals by the City of Airdrie. 

Lethbridge, Alberta 

We leased the remaining 60 per cent of the 110,200 square foot 

warehouse in Churchill Industrial Park purchased in June to a leading 

Canadian agricultural business. 



AUGUST 2007 

FOURTH PROPERTY: SASKATOON, SASKATCHEWAN 

At the end of August, we purchased an industrial warehouse property 

located in the North Industrial area of Saskatoon, Saskatchewan, for 

$2 million, paid by issuing 1,238,095 Class “A” voting common shares 

at a deemed price of $1.62 per share. 

The warehouse property consists of four separate warehouse 

buildings for a total of approximately 21,000 square feet on 2.45 

acres of land. The property is leased to an established Saskatchewan 

industrial coating removal company for a 10-year term. 



Aveiro Investment Corp. | 2007 Annual Report | 11

WHY ALBERTA? 

WESTERN CANADA FACTS AND FIGURES 

We focused primarily on Alberta in our fi rst year of operation 

because: 

• Over the past ten years, Alberta had the highest rate of economic 

growth in Canada at 4.3 per cent per year. 

• In 2006 alone, Alberta’s economy grew by 6.8 per cent. 

• The province consistently has the highest investment per capita 

among provinces. In 2006, Alberta investment per capita was 

$22,296, more than twice the national average. A total of $75.3 

billion was invested in 2006, almost quadruple the 1996 level. 

(Government of Alberta) 

Alberta also has the lowest overall taxes in Canada and no 

provincial sales tax (the only province without it). 

Over the next year, we will also be looking for properties similar 

to the ones we have already bought in Alberta – properties 

with strong cash fl ow and the potential for price appreciation – 

in Alberta, British Columbia, Saskatchewan and Manitoba. 


WHY BRITISH COLUMBIA? 

• BC’s economy, as measured by real GDP, is expected to increase 

31 per cent between 2004 and 2014. (Canadian Occupational 

Projection System) 

• British Columbia is expected to experience economic growth 

averaging 3.3 per cent in both 2007 and 2008. (Scotiabank Group, 

Provincial Trends, July 2007) 

• The value of building permits issued in British Columbia is up 

22 per cent to approximately $6.6 billion this year, compared 

to $5.4 billion for the fi rst six months of 2006. For June 2007, 

the value of permits in BC’s non-residential construction sector 

reached nearly $498 million – the second highest level on record, 

according to the report. In addition, the total value of permits for 

2007 is up 64 per cent in Victoria and 57 per cent in Kelowna, 

compared to the same time last year. (Statistics Canada, Building 

permits, August 3, 2007) 

• British Columbia’s new Major Projects Inventory shows 804 

major capital projects, worth an estimated $124.2 billion, were 

planned or underway between January and March 2007. Every 

region in the province experienced growth compared to the 

fi rst quarter of 2006, when the inventory stood at 711 major 

capital projects worth an estimated $90.6 billion. This is the 

15th straight quarter the inventory has grown. (BC Ministry of 

Economic Development)

WHY SASKATCHEWAN? 

Once solely an agricultural economy, Saskatchewan has 

diversifi ed with the development of its mineral resources – and 

the momentum in Saskatchewan’s economy continues to build: 

• According to Statistics Canada’s preliminary estimates (released 

April 25, 2007), Saskatchewan’s Gross Domestic Product (GDP), 

infl ation adjusted, stood at $34.3 billion in 2006. In the last 

decade – from 1996 to 2006 – Saskatchewan’s real GDP grew, 

on average, at a rate of 2.0 per cent annually. 

• Saskatchewan grows half of the entire quantity of 

Canada’s major export crops: wheat, oats, barley, rye, fl axseed 

and canola. 

• Saskatchewan has 14,000 oil wells, which produce about 12 

percent of Canada’s total oil output. 

• Saskatchewan is the leading exporter of potash, with two-thirds 

of the world’s reserves. 

• Potash production and sales, oil production, farm cash receipts, 

urban housing starts, international exports, retail sales, 

building permit values, and average weekly earnings are all up. 

Many independent forecasters expect Saskatchewan to be 

among the nation’s leaders in economic growth this year. 

(Government of Saskatchewan) 

WHY MANITOBA? 

Manitoba’s economy was built on agriculture, forestry and 

mining, as well as the City of Winnipeg’s central role as the 

transportation gateway from Eastern to Western Canada and to 

the U.S. Midwest. 

A recent KPMG study concluded that Manitoba has some of the 

lowest overall business costs in the North American Midwest. 

Offi ce space and industrial land are inexpensive and readily 

available; electricity and long distance rates are among the lowest 

in Canada; and labour rates are competitive. 

The Government of Manitoba reports that growth in 2006 was 

broadly based with particular strength in mining, agriculture 

and construction. The Economic and Fiscal Analysis Branch also 

reports that: 

• Real GDP in Manitoba grew 3.1 per cent in 2006 and is forecast 

to grow by 2.8 per cent in 2007. 

• Manitoba capital investment increased 14.2 per cent in 2006, 

second highest in the country. In 2007, capital investment is 

projected to increase 11.3 per cent, again second highest among 

provinces, while private investment is projected to increase 

6.5 per cent and public investment 23.7 per cent. 

• In the fi rst six months of 2007, Manitoba exports increased 

22.6 per cent, substantially higher than the 5.1 per cent 

national increase. 


MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended June 30, 2007 

The following discussion and analysis (“MD&A”) of the fi nancial 

condition and results of operations of Aveiro Investment Corp. 

(“Aveiro” or “the Company”) should be read in conjunction with the 

Company’s audited annual fi nancial statements for the year ended 

June 30, 2007. The fi nancial statements are stated in Canadian 

dollars and have been prepared in accordance with Canadian 

generally accepted accounting principles (“GAAP”). This MD&A 

has been prepared taking into account material transactions 

and events up to and including September 11, 2007. Additional 

information about the Company has been fi led with applicable 

Canadian securities regulatory authorities and is available 

at www.sedar.com. 

FORWARD-LOOKING DISCLAIMER 

This MD&A contains forward-looking statements. For this purpose, 

any statements contained herein that are not statements of 

historical fact may be deemed to be forward-looking statements. 

Without limiting the foregoing, the words “expects”, “anticipates”, 

“intends”, “estimates”, “projects”, and similar expressions are 

intended to identify forward-looking statements. Although Aveiro 

believes that the expectations refl ected in such forward-looking 

statements are reasonable, undue reliance should not be placed 

on forward-looking statements because Aveiro can give no 

assurance that such expectations will prove to be correct. The 

Company is subject to signifi cant risks and uncertainties which 

may cause the actual results, performance or achievements of 

the Company to be materially different from any future results, 


performance or achievements expressed or implied in these 

forward-looking statements. Such risk factors include, but are 

not limited to, the ability of management to execute its business 

plan, risks associated with real property ownership, availability 

and cost of fi nancing, general uninsured losses, future property 

acquisitions, environmental matters, tax related matters, 

shareholder liability, potential confl icts of interest, potential 

dilution, reliance on key personnel and, changes in legislation 

and other risks and uncertainties described elsewhere in the 

MD&A or in any of Aveiro’s other fi lings and documents that 

have been distributed to shareholders of Aveiro. The Company 

cannot assure investors that actual results will be consistent with 

any forward-looking statements and the Company assumes no 

obligation to update or revise such forward-looking statements to 

refl ect actual events or new circumstances. All forward-looking 

statements contained in this MD&A are expressly qualifi ed by 

this cautionary statement.

OVERVIEW 

About Aveiro 

Aveiro is an Alberta-based real estate investment company 

building a portfolio of primarily income producing commercial 

real estate assets in secondary markets in western Canada with 

quality tenants in markets where management expects strong 

economic growth. Aveiro also acquires other real estate to which 

management can conduct activity that provides fundamental 

value growth within a reasonable time frame. 

Aveiro is a reporting issuer pursuant to the securities laws of the 

Province of Alberta. Its shares are not listed for trading on any 

stock exchange or quotation system. 

Short-term Objectives 

The Company’s short term objectives are to acquire income 

producing properties in secondary markets in western Canada 

and to raise equity and debt capital suffi cient to fi nance property 

acquisitions contemplated over the next twelve months. 

2007 ANNUAL HIGHLIGHTS 

Initiation of Operations 

As at the date of the last fi scal year ended June 30, 2006, the 

Company (then known as Dagger Resources Inc.) was a reporting 

issuer in Alberta with no active business operations. Effective 

August 21, 2006, the previous directors of the Company resigned 

as directors and offi cers of the Company and were replaced by 

John Mackay, Harold Kunik and Frank Phillet. Mr. Mackay was 

appointed as Chairman and Mr. Kunik as President of the Company. 

On the same date, the Company then initiated operations as a 

real estate investment fi rm, and changed its name from Dagger 

Resources Inc. to Aveiro Investment Corp. 

Purchase of Airdrie Land 

On August 21, 2006 the Company entered into an agreement 

to acquire approximately 77.44 acres of undeveloped land (the 

“Airdrie Land”) located in the southwest quadrant of the City of 

Airdrie, approximately 4 miles north of the City of Calgary. The 

transaction closed on January 1, 2007. The City of Airdrie Municipal 

Development Plan designates the Airdrie Land as “Industrial”. 

Appointment of Eric Wesling 

During the quarter ended March 31, 2007, the Company announced 

the appointment of Mr. Eric Wesling as Executive Vice-President, 

Real Estate effective February 1, 2007. Mr. Wesling is a real 

estate professional with 25 years of professional management 

and project management experience. Mr. Wesling spent 18 years 

with Oxford Properties Group Inc. leading to his role as Senior 

Vice-President, Western Canada before building his real estate 

consulting practice in 1998. 


Purchase of Lethbridge Warehouse and Lethbridge Land 

On June 5, 2007, Aveiro announced that it had entered into an 

agreement to purchase a 110,205 square foot warehouse (the 

“Lethbridge Warehouse”) at 2821 18 th Avenue North in the 

Churchill Industrial Park in north Lethbridge, Alberta and an 

adjacent 7.01 acre parcel of industrial land (the “Lethbridge Land”) 

also in the Churchill Industrial Park. The Lethbridge Warehouse 

was purchased for $5,500,000 and the Lethbridge Land was 

purchased for $1,331,900, in both cases excluding closing costs. 

The Lethbridge Warehouse consists of 103,805 square feet of 

storage space and 6,400 square feet of offi ce/mezzanine space. 

At the time of purchase, Aveiro entered into a 10 year lease with 

a U.S. based plastic container manufacturer to lease 

42,274 square feet. 

The Lethbridge Land is currently zoned “I-G General Industrial” 

and is located at 1820 – 31 Street in the Churchill Industrial Park 

approximately one and a half blocks from the north Lethbridge 

Smartcentre which is currently under construction. Management 

believes that there is the potential to add value to the Lethbridge 

Land through the land use planning process. 

Completion of $11,000,000 Private Placement 

On June 6, 2007, the Company announced that it had completed its 

previously announced $11,000,000 private placement of 11,000,000 

Class “A” voting common shares (“Common Shares”) at $1.00 per 

share. Due to demand, the private placement was increased by 

430,000 Common Shares to partially deal with increased demand 

for the offering resulting in the issuance of 11,430,000 Common 

Shares for gross proceeds of $11,430,000. 


Subsequent to June 30, 2007 

Announcement of $4,500,000 Private Placement 

On June 19, 2007, Aveiro announced that it intended to issue up to 

3,000,000 Common Shares at $1.50 per share for gross proceeds 

of up to $4,500,000. This private placement was completed on 

July 17, 2007. Net proceeds of the offering were approximately 

$4,065,000 and will be used by Aveiro as working capital and for 

additional real estate acquisitions. 

Completion of Leasing of Lethbridge Warehouse 

On August 2, 2007, Aveiro reported that it had fully leased the 

recently acquired Lethbridge Warehouse. Aveiro entered into a 

10 year lease with a U.S. based plastic container manufacturer 

to lease approximately 42,274 square feet at the closing of the 

acquisition and in August 2007 entered into a 2 year lease with a 

leading Canadian agricultural business for the remaining square 

footage in the Lethbridge Warehouse. These leases provide the 

Company with rental revenue (net of operating costs) of $776,000 

per annum. 

Purchase of Saskatoon Warehouse 

On August 28, 2007, Aveiro completed the purchase of an industrial 

warehouse property (the “Saskatoon Warehouse”) located at 

807/809 50th Street East in the North Industrial area of Saskatoon, 

Saskatchewan for a purchase price of $2,000,000. 

The warehouse property consists of four warehouse buildings 

comprising in aggregate approximately 21,000 square feet on 2.45 

acres of land. The property has been leased to an established 

Saskatchewan industrial coating removal company for a ten year 

term for rental revenue (net of operating costs) of $240,000 per 

annum. The total purchase price of $2,000,000 was satisfi ed by 

the issuance of 1,238,095 Common Shares.

OVERALL PERFORMANCE 

Financial Position 

Assets 

Total assets at June 30, 2007 were $17,149,884, compared to total 

assets of $700 at June 30, 2006. Assets increased during the year 

fundamentally as a result of the purchase of three properties 

which were fi nanced by the issuance of debt and equity. 

Property Purchases 

DATE DESCRIPTION PURCHASE PRICE 

January 2007 Airdrie Land $ 7,750,000 

June 2007 Lethbridge Warehouse $ 5,579,409 

June 2007 Lethbridge Land $ 1,350,526 

Airdrie Land 

On August 21, 2006, the Company entered into a purchase and 

sale agreement to acquire the Airdrie Land. 

The transaction closed on January 1, 2007. At June 30, 2007, the 

Airdrie Land purchase increased the total assets of the Company 

by $7,971,034, being the cost of the Airdrie Land of $7,750,000 

and other costs (including capitalized interest) of $221,034. Prior 

to the closing of the acquisition, the Company paid deposits in the 

aggregate amount of $1,000,000 in September and October 2006. 

On January 1, 2007, at the closing of the transaction, the Company 

paid $217,000 in cash, $735,000 by assumption of an existing 

fi rst mortgage, $3,078,000 by assumption of an existing second 

mortgage and the remaining $2,720,000 by granting a mortgage 

bearing interest at the rate of 10% per annum in favor of the seller 

(the “Seller”) and repayable by June 30, 2007. The $735,000 fi rst 

mortgage bears interest at 7.5% payable quarterly and matures 

on May 15, 2009. The second mortgage bears interest at a rate 

of 7.5% per annum and is repayable as to three equal principal 

payments of $1,026,000 plus applicable interest due on January 

16, 2007, October 16, 2007 and April 16, 2008. The payment 

due on January 16, 2007 was made in accordance with the loan 

agreement. The Company repaid $350,000 of the principal on 

the Seller’s mortgage on February 28, 2007 and the remaining 

principal balance of $2,370,000 plus interest was repaid in full on 

May 23, 2007. John Mackay and Harold Kunik, independent of the 

Seller’s owner, were offi cers of the Seller during negotiations to 

purchase the Airdrie Land from the Seller. Messrs. Mackay and 

Kunik were directors and offi cers of the Company at the time the 

Company and the Seller entered into an agreement of purchase 

and sale. The transaction terms were determined based on, 

among other things, negotiation between the Company and Seller 

and an independent third party valuation. 

In order to fi nance (i) the acquisition of the Airdrie Land, (ii) 

initial planning expenses, (iii) working capital to fund other real 

estate acquisitions, and (iv) general and administrative expenses, 

the Company initiated a private placement (the “Offering”) of 

11,000,000 Common Shares at $1.00 per share. The Offering was 

oversubscribed and the Company issued 11,430,000 Common 

Shares pursuant to the Offering resulting in net proceeds of 

$10,352,694. The Company solicited subscriptions through its 

employees and agents and paid a commission of up to 10% of 

the gross proceeds and issued compensation warrants entitling 

certain employees and agents thereof to acquire 239,067 

Common Shares at an exercise price of $1.00 exercisable until 

December 31, 2007. 

Lethbridge Warehouse 

On June 5, 2007 Aveiro entered into an agreement to purchase 

the Lethbridge Warehouse at 2821 18th Avenue North in the 

Churchill Industrial Park in north Lethbridge, Alberta. The 

Lethbridge Warehouse consists of 103,805 square feet of storage 

space and 6,400 square feet of offi ce/mezzanine space. At June 

30, 2007, the Lethbridge Warehouse purchase had increased the 

total assets of the Company by $5,575,780, being the cost of the 


Lethbridge Warehouse of $5,500,000 and other costs of $79,409 

less accumulated amortization of $3,629. 

Aveiro initially entered into a 10 year lease with a U.S. based 

plastic container manufacturer to lease approximately 42,274 

square feet at closing of the transaction. Subsequent to June 30, 

2007, Aveiro entered into a 2 year lease with a leading Canadian 

agricultural business for the remaining square footage in the 

Lethbridge Warehouse. These leases provide the Company with 

rental revenue (net of operating costs) of $776,000 per annum. 

The acquisition of the Lethbridge Warehouse was fi nanced by 

way of new mortgage fi nancing in the amount of $3,625,000 (the 

“Warehouse Mortgage”) and the remainder by cash at closing. The 

Warehouse Mortgage has a term of 5 years and bears interest at 

prime + 1% and is repayable as to interest only for six months and 

thereafter as to principal and interest. The Warehouse Mortgage 

may be repaid at any time without penalty. 

Lethbridge Land 

On June 5, 2007 Aveiro entered into an agreement to purchase 

the Lethbridge Land also in the Churchill Industrial Park. The 

Lethbridge Land was purchased for $1,331,900 excluding closing 

costs. At June 30, 2007, the Lethbridge Land purchase had 

increased the total assets of the Company by $1,350,527, being 

the cost of the Lethbridge Land of $1,331,900 and other costs of 

$18,627. 

The Lethbridge Land is currently zoned “I-G General Industrial” 

and is located at 1820 – 31 Street in the Churchill Industrial Park 

approximately one and a half blocks from the north Lethbridge 

Smartcentre which is currently under construction. Management 

believes that there is the potential to add value to the Lethbridge 

Land through the land use planning process. 

The acquisition of the Lethbridge Land was fi nanced by way of 

new mortgage fi nancing in the amount of $665,950 (the “Land 


Mortgage”) and the remainder in cash. The Land Mortgage has 

a term of 18 months and bears interest at prime + 1% and is 

repayable as to interest only over a period of 18 months. The Land 

Mortgage may be repaid at any time without penalty. 

Equipment Purchases 

During the year the Company purchased equipment of $54,143 

to support its operations. The equipment purchases included 

computer hardware of $22,395, offi ce equipment of $30,873 and 

computer software of $875. 

Cash 

At June 30, 2007 the Company had $1,930,423 in cash. Subsequent 

to the year end, the Company completed a private placement of 

3,000,000 Common Shares at $1.50 per share resulting in net 

proceeds of approximately $4,065,000. The cash position at the 

date of this MD&A is approximately $5,900,000. 

Liabilities 

Total liabilities were $7,408,764 on June 30, 2007. Of this amount, 

$7,077,950 are mortgages secured by the properties purchased 

during the year. Liabilities at June 30, 2006 consists of accounts 

payable totaling $6,349. 

The $7,077,950 of mortgages payable consists of four mortgages. 

The Land Mortgage comprises of a fi rst mortgage and demand 

promissory note for $665,950, which note can only be demanded 

on default or if in the opinion of the bank there has been a change 

in the business, fi nancial condition, operations or conduct of the 

Company which will adversely affect either the Company or the 

Company’s ability to fulfi ll its obligations or the bank’s security. 

The note bears interest at prime plus 1% per annum (an effective 

rate of 7% as at June 30, 2007), with interest payable monthly, 

secured by land having a net book value of $1,350,527 and is to be 

repaid on December 13, 2008.

The Warehouse Mortgage is a fi rst mortgage and demand 

promissory note for $3,625,000, which note can only be demanded 

on default or if in the opinion of the bank there has been a change 

in the business fi nancial condition, operations or conduct of the 

Company which will adversely affect either the Company or the 

Company’s ability to fulfi ll its obligations or the bank’s security. 

The note bears interest at prime plus 1% per annum (an effective 

rate of 7% as at June 30, 2007), with interest payable monthly, 

secured by land having a net book value of $5,575,780 and is to be 

repaid on June 13, 2012. 

The Airdrie Land is subject to a fi rst mortgage bearing interest 

at 7.5% per annum secured by land having a net book value of 

$7,971,034 with interest only quarterly payments. The loan is due 

on May 15, 2009. 

The Airdrie Land is also subject to a second mortgage bearing 

interest at 7.5% per annum secured by land having a net book 

value of $7,971,034. The mortgage is to be repaid in two equal 

installments of $1,026,000 plus interest on October 16, 2007 and 

April 16, 2008. 

The provisions of the mortgage agreements require repayment of 

the principal amounts as follows: 

2008 $ 2,108,820 

2009 1,491,295 

2010 96,876 

2011 103,879 

2012 3,277,080 

$ 7,077,950 

Shareholders’ Equity 

Shareholders’ Equity at June 30, 2007 totaled $9,741,120. At 

June 30, 2006 the Shareholders’ Defi cit was $5,649. The changes 

in the Shareholders’ Equity accounts occurred as follows during 

the year: 

1) Share Capital increased from $20,900 at June 30, 2006 to 

$10,373,594 at June 30, 2007 due to the private placement 

issuance of Common Shares of $11,430,000 less share issue 

costs of $1,077,306. 

2) Contributed surplus increased from $16,634 at June 30 2006 

to $283,459 due to the recording of stock based compensation 

of $249,207 and stock based share issue costs of $17,618 in 

accordance with generally accepted accounting principles. 

3) The accumulated defi cit increased from $43,183 to $915,933 

due to the net loss of $872,750. This net loss is described in 

more detail in the following section. 

Results of Operations 

The Company had no operations for the year ended June 30, 2006. 

For the year ended June 30, 2007, the Company had total revenues 

of $74,496, total expenses of $947,246 and as a result a net loss 

of $872,750 or $0.1535 per basic and fully diluted Common Share. 

The loss for the comparative year ended June 30, 2006 was $6,863 

or $0.0033 per basic and diluted Common Share. 

Cash Flows 

During the year ended June 30, 2007, the Company generated 

net cash infl ows from fi nancing activities of $17,438,262 which 

included the issuance of mortgages and Common Shares less 

share issue costs and subsequent mortgage repayments. Those 

net cash infl ows were used to fund investing activities, which were 

the purchase of assets (as described above) totaling $14,955,113, 

including the Lethbridge Warehouse for $5,579,409, the Airdrie 


Land and Lethbridge Land acquisitions for an aggregate of 

$9,321,561 and equipment of $54,143. The cash infl ows from 

investing activities were also used to fund the cash outfl ows 

from the operations of the business totaling $552,726. The net 

increase in cash from all activities was $1,930,423. For the prior 

year ended June 30, 2006, there was no net change in the cash of 

the business. 

SELECTED ANNUAL INFORMATION 

2005 2006 2007 

Total Revenues $ – $ – $ 74,496 

Net Income (loss) $ – $ (6,863 ) $ (872,750 ) 

Net Income (loss) 

per share 

$ – $ (.0033 ) $ (.1535 ) 

Net Income (loss) 

per share (diluted) 

$ – $ (.0033 ) $ (.1535 ) 

Total assets $ – $ 700 $ 17,149,884 

Total long term 

fi nancial liabilities 

$ – $ – $ 4,969,130 

Cash dividends 

per share 

$ – $ – $ – 

Revenues 

For the year ended June 30, 2007, the Company had total revenues 

of $74,496. Revenues were derived from three sources. First, 

rental revenues representing 15 days rental revenue received 

on account of the Lethbridge Warehouse totaled $29,178, which 

included charges in respect of property operating costs. Second, 

the Company earned $27,318 in interest income from excess funds 

invested in guaranteed investment certifi cates with a Canadian 

chartered bank. Third, in April 2007, the Company entered into 

an agreement with a company which shares common offi cers and 

directors, pursuant to which the Company provides shared offi ce 

costs, including rent and overhead, at the fi xed amount of $6,000 


per month. During the year $18,000 related to this agreement has 

been recorded in revenue. 

Related party transactions are in the normal course of 

operations and are recorded at the exchange amount which 

management believes to be at market rates under normal terms 

and conditions. 

Expenses 

Expenses for the year totaled $947,246 compared to total expenses 

of $6,863 for the year ended June 30, 2006. All expenses of the 

prior year related to professional accounting and legal services. 

Expenses increased signifi cantly due to the startup of operations 

of Aveiro’s business. 

Corporate expenses for the year ended June 30, 2007 totaled 

$673,976. These expenses include (but are not limited to) sales 

and marketing costs of $77,422, offi ce costs of $119,400, salaries 

and wages (excluding stock-based compensation) of $125,291, 

professional accounting and legal fees of $48,084. Effective August 

21, 2006, the Company entered into a strategic management 

agreement (the “Management Agreement”) with True North 

Strategy Corp. (the “Manager”), a Company owned as to 50% by 

each of Messrs. Kunik and Mackay, directors of the Company, 

pursuant to which the Manager provides strategic management 

services to Aveiro. The Manager is entitled to a fee equal to 1.5% 

of the net assets of Aveiro payable as to 0.125% plus tax calculated 

at the end of each calendar month. In the event that Aveiro 

purchases any assets (other than the Airdrie Land), whether by 

direct acquisition, corporate acquisition, amalgamation, majority 

or minority investment or otherwise, the Manager is entitled to 

a fee equal to 1.5% of the acquisition price or transaction value, 

as the case may be. Management fees and acquisition fees 

pursuant to the Management Agreement were $159,318 for the 

year. Also included in general and administrative expenses for 

the year ended June 30, 2007 is $17,312 in offi ce costs paid to

a company with common management. In addition general and 

administrative expenses in the amount of $4,651 were paid on 

that company’s behalf and were subsequently reimbursed during 

the period. 

Stock-based compensation expenses for the year were $249,207. 

The Company uses the fair value method of accounting for stockbased 

compensation whereby the Company recognizes the fair 

value of stock options granted to employees, directors and certain 

consultants. In order to determine the fair value option and 

warrant prices management selected the Black-Scholes pricing 

model. This method of determining the option and warrant prices 

requires management to use several estimates. In the absence of 

signifi cant historical data, management utilized other companies 

in the real estate industry and the TSX Venture Exchange index 

to develop a reasonable expectation of what the volatility of the 

Company will be. Other companies in the Company’s industry 

range from 13% to 17% volatility, but as they are mostly established 

with a large asset base this may not be an accurate indication of 

the Company’s future volatility. Since the Company is a growth 

oriented company in its initial stages management expects that 

the volatility of the Company’s stock will be in excess of that of 

a more established company. Management has determined 

that another useful comparison is the average volatility on the 

TSX Venture Exchange index which is approximately 20%. After 

weighing the facts, management has determined that a volatility 

measure of 20% would be reasonable. 

Interest expense for the year on the mortgage payable related to 

the Lethbridge Warehouse and Lethbridge Land totaled $14,813. 

Amortization for the year was $5,692. $3,629 of this amount 

related to the Lethbridge Warehouse and the remainder of $2,063 

related to offi ce equipment and computer hardware and software. 

Property operating costs related to the Lethbridge Warehouse 

totaled $3,558. 

As a result of the foregoing, the loss for the 12 month period was 

$872,750 or $0.1535 per basic and fully diluted Common Share. 

The loss for the comparative year ended June 30, 2006 was $6,863 

or $0.0033 per basic and diluted Common Share. 

SUMMARY OF QUARTERLY RESULTS 

For the quarter ended June 30, 2007 the Company recorded 

revenues of $71,900. This amount was derived from three 

sources. First, the Company earned $29,178 in rental revenue on 

the Lethbridge Warehouse. Second, the Company earned $24,722 

in interest income from excess funds invested in guaranteed 

investment certifi cates with a Canadian chartered bank. Finally, 

the Company recorded $18,000 in revenue from a company 

which shares common offi cers and directors, pursuant to which 

the Company shares offi ce costs (including rent and certain 

offi ce expenses). 

Operating expenses for the quarter totaled $621,043. This 

amount was higher than the prior quarter due primarily to the 

recording of share-based compensation during the fourth quarter 

of $249,207 and to acquisition fees of $103,949 paid pursuant to 

the Management Agreement in respect of the acquisition of the 

Lethbridge Warehouse and the Lethbridge Land. Other expenses 

during the quarter included salaries, wages and benefi ts paid to 

Aveiro staff of $32,393; offi ce rent of $61,240; sales and marketing 

expenses of $34,368 and offi ce expenses of $36,801. As a result of 

the foregoing, the loss for the three month period was $549,143 

or $0.0499 per basic and fully diluted Common Share. The loss 

for the comparative three month period ended June 30, 2006 was 

$5,070 or $0.0025 per basic and diluted Common Share. 


LIQUIDITY 

Working Capital Position 

At June 30 2007, the Company had cash of $1,930,423 (June 30 

2007 - $Nil) and a working capital defi cit of $239,871 (June 30, 2007 

– ($6,349)). The working capital defi cit was short term in nature 

due to the required short term debt payments on the mortgages 

payable. As at the date of this MD&A the working capital position 

of the Company had improved to approximately $3,750,000. From 


Sept. 2005 Dec. 2005 March 2006 June 2006 Sept. 2006 Dec. 2006 March 2007 June 2007 

Total Revenue $ Nil $ Nil $ Nil $ Nil $ Nil $ Nil $ 2,596 $ 71,900 

Loss from Operations $ (157 ) $ (713 ) $ (923 ) $ (5,070 ) $ (38,278 ) $ (126,893 ) $ (158,436 ) $ (549,143 ) 

Net Loss $ (157 ) $ (713 ) $ (923 ) $ (5,070 ) $ (38,278 ) $ (126,893 ) $ (158,436 ) $ (549,143 ) 

Net loss per Share $ (0.0001 ) $ (0.0003 ) $ (0.0005 ) $ (0.0025 ) $ (0.01861 ) $ (0.0339 ) $ (0.0310 ) $ (0.0499 ) 

Net loss per $ (0.0001 ) $ (0.0003 ) $ (0.0005 ) $ (0.0025 ) $ (0.01861 ) $ (0.0339 ) $ (0.0310 ) $ (0.0499 ) 

Share (diluted) 

Contractual obligations 

Contractual obligations currently owed by the Company at June 30, 2007 are summarized in the 

following table: 

Less than Years Years 

$ Total $ 1 year $ 2 and 3 $ 4 and 5 

First Mortgage on Lethbridge Lands 665,950 – 665,950 – 

First Mortgage on Lethbridge Warehouse 3,625,000 56,820 187,221 3,380,959 

First Mortgage on Airdrie Lands 735,000 – 735,000 – 

Second Mortgage on Airdrie Land 2,052,000 2,052,000 – – 

Total 7,077,950 2,108,820 1,588,171 3,380,959 

Operating Lease - Photocopier 9,072 3,024 6,048 – 

July 1, 2007 to the date of this MD & A, the Company received 

net proceeds of approximately $4,065,000 from the issuance of 

3,000,000 Common Shares at $1.50 per share. As at the date 

of this MD&A, the Company has the necessary liquidity to meet 

its obligations for the next fi scal year. The Company continues 

to actively search for real estate investment opportunities that 

meet its acquisition criteria, however its success in acquiring 

additional real estate assets that meet its investment criteria will 

be determined by its ability to raise additional capital.

During the 2008 fi scal year, the Company has committed to 

make principal and interest payments of $335,000 in regards to 

the mortgages payable on the Lethbridge Warehouse property. 

The Company has entered into leases on that property which 

will provide an aggregate of $776,000 of net rent during the 

same period of time resulting in excess cash fl ows of $441,000 

generated from the Lethbridge Warehouse. 

The Company has also entered into a lease agreement for its 

Saskatoon Warehouse, which was acquired subsequent to the 

year end, which will result in net rent of $240,000 from this 

property. The Saskatoon Warehouse is not currently encumbered 

by any fi nancing. 

CAPITAL RESOURCES 

The Company’s capital resources include both equity capital 

from the issuance of Common Shares and debt capital secured 

by mortgages on properties purchased by the Company. The 

Company had made no commitments for capital expenditures at 

June 30, 2007. On August 28, 2007 the Company issued 1,238,095 

Common Shares to purchase an industrial warehouse property in 

Saskatoon, Saskatchewan. 

OFF BALANCE SHEET ARRANGEMENTS 

The Company did not have any off-balance sheet arrangements in 

place at as and during the year ending June 30, 2007. 

RISK MANAGEMENT AND FAIR VALUE 

The Company is exposed to both interest rate and credit risk. 

The Company is exposed to interest rate risk on its variable rate 

mortgages payable. It minimizes this risk by restricting mortgages 

payable to 75% of the purchase price of the property. 

As an owner of real estate the Company is exposed to credit risk 

in that tenants may become unable to pay amounts owing under 

lease agreements. Management mitigates this risk by carrying 

out appropriate credit checks and related due diligence on the 

signifi cant tenants. 

The fair values of the Company’s cash, accounts receivable, 

restricted cash, accounts payable and accrued liabilities, and 

mortgages payable approximate their carrying amounts. 

RISKS AND UNCERTAINTIES 

In evaluating Aveiro and its business, the following is a brief review 

of certain of the potential impact different risks and uncertainties 

may have on the Company’s operations. 

Dependence on Key Personnel 

The success of Aveiro will be largely dependent upon the quality 

of its management and personnel, including the offi cers and 

employees of the Manager which provides strategic management 

services to Aveiro (see “Results of Operations - Expenses”). 

Loss of the services of such persons, or the inability to attract 

personnel of equal ability, could materially affect Aveiro’s business 

operations and prospects. Aveiro has not purchased “key man” 

insurance on any of its directors, offi cers or key employees, and 

has no plans to do so. 

Real Estate Industry 

All real estate investments are subject to varying degrees of risk 

depending on the nature of the property in question. The value 

of Aveiro’s investments in its properties is subject to changes in 

general economic conditions (such as the availability and cost of 

mortgage funds), local conditions (such as the over supply of a 

real estate product or a reduction in demand for properties in any 

particular area), the attractiveness of such properties to current 

and potential tenants, the competition from others with similar 

developments and the ability of Aveiro to adequately maintain and 

improve its properties pursuant to its business plan at an economic 


cost. Aveiro may be unable to obtain fi nancing to maintain an 

appropriate capital structure. There is no certainty that fi nancing 

will be available upon the maturity of any existing mortgage at 

interest rates equal to or lower than the interest rate payable 

under an expiring mortgage, or on other terms as favourable as 

the original term of the existing mortgage, or at all. 

If Aveiro is unable to refi nance its indebtedness on acceptable 

terms, or at all, Aveiro may need to dispose of one or more of 

its properties upon disadvantageous terms. Prevailing interest 

rates or other factors at the time of refi nancing could increase 

its interest expense, and if Aveiro mortgages property to secure 

payment of indebtedness and is unable to make mortgage 

payments, the mortgagee could foreclose upon such property or 

appoint a receiver to receive an assignment of Aveiro’s rents and 

leases. This may adversely affect Aveiro’s ability to make dividend 

or other payments to its investors. 

Economic Conditions 

As it will be dependent on lease income for a substantial portion of 

its revenue, Aveiro’s operating results will be sensitive to prevailing 

economic conditions, including changes in local, regional and 

national economic conditions, particularly as they may affect lease 

rates in its properties. In particular, given the concentration of 

Aveiro’s properties in Alberta, a material reduction in oil or natural 

gas prices or in oil and natural gas industry investment could 

materially adversely affect Aveiro. Aveiro’s operating results in 

individual markets could be adversely affected by local or regional 

economic downturns, which could have a material adverse effect 

on the business, fi nancial condition and results of Aveiro. 

Credit and Default Risk 

Credit risk arises from the possibility that tenants may experience 

fi nancial diffi culty and be unable to fulfi ll their lease commitments. 

Further risks arise in the event that borrowers default on the 

repayment of their mortgages to Aveiro. 


Lease Renewal Risk 

Lease renewal risk arises from the possibility that the Company 

may experience diffi culty renewing leases as they expire or in releasing 

space vacated by tenants upon early lease termination. 

Fixed Costs 

Certain expenditures, including mortgage payments, insurance 

costs and related property taxes, must be made regardless 

of whether or not Aveiro’s properties are producing suffi cient 

income to service such expenses. Aveiro’s properties are subject 

to mortgages, which require debt service payments. If Aveiro is 

unable or unwilling to make required mortgage payments on any 

property owned by it, losses could be sustained as a result of the 

mortgagee’s exercise of its right of foreclosure or power of sale, 

as applicable. In addition, interest rates on variable rate debt 

are subject to fl uctuations and may affect the viability of a 

particular property. 

Illiquidity 

Real estate is relatively illiquid relative to publicly traded securities. 

Such illiquidity will limit Aveiro’s ability to adjust its portfolio 

in response to changing economic or investment conditions. 

Financial diffi culties of other property owners that result in distress 

sales could depress real estate values in markets in which Aveiro 

operates. If Aveiro were required to liquidate its assets, there is a 

risk that it would realize sale proceeds of less than the book value 

of the properties that have been or may in the future be acquired 

by Aveiro. 

Demand Risk 

The value of real property and any improvements thereon may 

depend on the strength of the commercial property market 

in Aveiro’s target markets. Aveiro’s projected income would 

be adversely affected if there was a marked increase in the 

vacancy rates or decrease in the market lease rates for its

properties. The ability of Aveiro to lease un-leased properties 

will be affected by many factors. The failure of Aveiro to lease 

un-leased properties on a timely basis or at all would likely have 

an adverse effect on Aveiro’s fi nancial condition. Upon the expiry 

of any lease, there can be no assurance that the lease will be 

renewed or the tenant replaced. The terms of any subsequent 

lease may be less favourable to Aveiro than the existing lease. 

Aveiro could be adversely affected, in particular, if any major 

tenant ceases to be a tenant and cannot be replaced on similar 

or better terms. 

Tenant Default 

In the event of default by a tenant, Aveiro may experience delays 

in enforcing its rights as lessor and may incur signifi cant costs 

in protecting its investment. In addition, a tenant may seek the 

protection of bankruptcy, insolvency or similar laws. Aveiro cannot 

evict a tenant solely because of its bankruptcy. A court, however, 

may authorize a tenant to reject and terminate its lease with 

Aveiro. In such a case, Aveiro’s claim against the tenant for unpaid, 

future rent would be subject to a statutory limit that might be 

substantially less than the remaining rent owed under the lease. 

The loss of rental payments from tenants and costs of re-leasing 

could adversely affect Aveiro’s cash fl ows and operating results. 

Competition for Real Estate Investments 

Aveiro competes for suitable real estate investments with 

individuals, corporations and institutions (both Canadian and 

foreign) which are currently seeking or which may in the future 

seek real estate investments similar to those sought by Aveiro. 

Some of these investors may have greater fi nancial resources 

than those of Aveiro. An increase in the availability of investment 

funds, and an increase in interest in real estate investments, 

would tend to increase competition for real estate investments, 

thereby increasing purchase prices and reducing yields therefrom. 

In addition, Aveiro may require additional fi nancing to complete 

future real estate acquisitions which may not be available on 

terms acceptable to Aveiro. 

Environmental Liabilities 

Under various federal and provincial environmental laws and 

regulations, a current or previous owner or operator of real property 

may be held liable for the costs of removal or remediation of certain 

hazardous or toxic substances, including, without limitation, 

asbestos-containing materials or oil-related items that could be 

located on, in or under such property. Such laws and regulations 

often impose liability whether or not the owner or operator knew 

of, or was responsible for, the presence of the hazardous or toxic 

substances. The costs of any required removal or remediation of 

these substances could be material. The liability of an owner or 

operator is generally not limited under such laws and regulations 

and could exceed a property’s value or even the value of the total 

assets of the owner or operator. The presence of these substances 

or failure to remediate such substances properly may also have 

an adverse effect on an owner or operator’s ability to sell or lease 

a property, or to borrow money using the property as collateral. 

Although Aveiro typically conducts environmental due diligence 

prior to acquiring any property, Aveiro could be liable for such type 

of costs as well as for certain other costs, including governmental 

fi nes and damages for injuries caused to persons or property. 

As a result, the presence, with or without Aveiro’s knowledge, of 

hazardous or toxic substances at a property held or operated by 

Aveiro could have a material adverse effect on Aveiro’s business 

and its results of operations. 

Need for Further Financing 

Aveiro will require additional fi nancing to implement its business 

plan. The ability of Aveiro to arrange such fi nancing in the future 

will depend in part upon prevailing capital market conditions 

as well as the business performance of Aveiro. There can be no 

assurance that Aveiro will be successful in its efforts to arrange 


additional fi nancing on satisfactory terms. If additional fi nancing 

is raised by the issuance of securities, control of Aveiro may 

change and owners may suffer additional dilution. If Aveiro is 

unable to successfully secure adequate or satisfactory fi nancing 

as required, Aveiro’s ability to implement its business plan could 

be seriously and adversely affected. 

Risks Relating to Taxation and Reassessment 

Aveiro may be subject to certain provisions of the Income Tax Act 

(Canada) and applicable provincial income tax legislation relating 

to characterization of costs incurred in its business which affects 

whether such costs are deductible and, if deductible, the rate 

at which they may be deducted for the purposes of calculating 

taxable income. Aveiro has reviewed its income tax returns and 

has found no basis for change or amendment. Aveiro has fi led all 

required income tax returns and believes that it has complied fully 

with the provisions of the Income Tax Act (Canada) and applicable 

provincial income tax legislation, but such returns are subject to 

review and reassessment. Aveiro may potentially be subject to a 

higher than expected past or future tax liability as well as interest 

and penalties in the event of a successful reassessment of Aveiro, 

and such amount could be material. 

Potential Conflicts of Interest 

Aveiro may be subject to various confl icts of interest because of 

the fact that the directors and executive management, and their 

associates, and the manager of Aveiro, True North Strategy Corp., 

are engaged in a wide range of real estate and other business 

activities. Aveiro may become involved in transactions which 

confl ict with the interests of the foregoing. 

The directors, executive management and their associates or 

affi liates and the manager of Aveiro, True North Strategy Corp., 

may from time to time deal with persons, fi rms, institutions or 

corporations with which Aveiro may be dealing, or which may 

be seeking investments similar to those desired by Aveiro. The 


interests of these persons could confl ict with those of Aveiro. In 

addition, from time to time, these persons may be competing with 

Aveiro for available investment opportunities. 

John Mackay and Harold Kunik, directors and offi cers of Aveiro, 

each own 50% of True North Strategy Corp., which provides 

strategic management services to Aveiro. (See “Results of 

Operations - Expenses”). 

CRITICAL ACCOUNTING ESTIMATES 

The preparation of fi nancial statements in accordance with 

Canadian generally accepted accounting principles requires 

management to make estimates and assumptions that affect 

the reported amount of assets and liabilities and disclosure 

of contingent assets and liabilities at the date of the fi nancial 

statements and the reported amounts of revenues and expenses 

during the period then ended. Actual results could differ 

from those estimates. Signifi cant areas requiring the use of 

management estimates include assessing the recoverability of 

income producing properties and property held for development. 

Accounting standard setters have determined that the use of the 

Black-Scholes or a customized lattice option pricing model will 

provide a reasonable estimate of the fair value of options granted 

by an enterprise. The Company has selected the Black-Scholes 

model as appropriate for its circumstances. The factors used in 

the Black-Scholes calculation are a signifi cant estimate. See 

“Results of Operations – Expenses”.

OUTSTANDING SHARE DATA 

Common Shares 

The Company is authorized to issue an unlimited number of 

Common Shares, an unlimited number of Class “B” voting 

common shares, an unlimited number of Class “C” non-voting 

common shares and an unlimited number of Preferred Shares, of 

which 13,480,000 Common Shares were outstanding as at June 

30, 2007. As at the date hereof, there are 17,780,003 Common 

Shares outstanding. 

Stock Options 

The Board of Directors of the Company may from time to time, in 

its discretion, grant to directors, offi cers, employees, consultants, 

technical consultants to the Corporation and other persons or 

entities whose efforts it believes will assist the Corporation, nontransferable 

options to purchase Common Shares, provided that 

the number of Common Shares reserved for issuance will not 

exceed 10% of the issued and outstanding Common Shares. At 

June 30, 2007, there were options outstanding to acquire 1,345,000 

Common Shares, of which options to acquire 446,668 Common 

Shares were exercisable. The weighted average exercise price of 

the options is $1.00 per Common Share. Options vest and expire 

as set forth in the option agreements as determined at the time of 

granting of the option by the board of directors. The exercise price 

at the date of granting approximates fair market value. There were 

no options outstanding at June 30, 2006. 

Warrants 

In conjunction with the Company’s private placement of 11,430,000 

Common Shares, 239,067 Common Share purchase warrants 

(“Compensation Warrants”) were issued to employees and agents 

of the Company as partial compensation for soliciting Common 

Shares of the Company. These Compensation Warrants vest 

immediately and expire December 31, 2007. At June 30, 2007 there 

were 239,067 Compensation Warrants outstanding to acquire 

239,067 Common Shares. The exercise price of the Compensation 

Warrants is $1.00 per share. 

INTERNAL CONTROLS 

The Company has implemented a system of internal controls that 

it believes adequately protects the assets of the Company and 

is appropriate for the nature of its business and the size of its 

operations. These internal controls include disclosure controls 

and procedures designed to ensure that information required to 

be disclosed by the Company is accumulated and communicated 

to management as appropriate to allow timely decisions 

regarding required disclosure. The Company’s Chairman and 

President have concluded, based on their evaluation, that the 

Company’s disclosure controls and procedures are effective to 

provide reasonable assurance that material information related 

to the Company is made known to them and have been operating 

effectively during 2007. It should be noted that while the 

Company’s Chairman and President believe that the Company’s 

disclosure controls and procedures provide a reasonable level of 

assurance that the system of internal controls are effective, they 

do not guarantee that the disclosure controls and procedures will 

prevent all errors and fraud. A control system, no matter how well 

conceived or operated, can provide only reasonable, not absolute, 

assurance that the objectives of the control system are met. 

In addition, the Company has, under the supervision of its 

Chairman and President, designed a process of internal control 

over fi nancial reporting. The process was designed to provide 

reasonable assurance regarding the reliability of fi nancial 

reporting and the preparation of fi nancial statements for external 

purposes in accordance with Canadian generally accepted 

accounting principles. 

Based on the Chairman and the President’s review of the design 

of internal controls over fi nancial reporting, the Chairman and 

President have concluded that the design of internal controls 


is adequate for the nature of the Company’s business and size 

of its operations. As a small organization, and similar to other 

small organizations, the Company’s management is composed of 

a small number of key individuals, resulting in a situation where 

limitations on the segregation of duties as well as expertise in 

such areas as complex calculations and estimations do not exist, 

as such these risks are compensated by more effective supervision 

and monitoring by the Chairman and President as well as reliance 

on third party expertise where appropriate. It is important to note 

that in order to eliminate the potential risk associated with these 

issues the Company would be required to hire additional staff 

in order to provide greater segregation of duties and expertise 

in certain areas. Currently the Company has chosen to 

disclose the potential risk in its annual fi lings and proceed with 

increased staffi ng as the Company’s growth supports such 

overhead expansion. 

NEW ACCOUNTING POLICIES 

The Company has adopted the following new accounting policies 

during the year. 

Revenue Recognition 

Revenue from income-producing properties includes rents 

earned from tenants under lease agreements, realty tax and 

operating costs recoveries and other incidental income and is 

recognized as revenue over the term of the underlying leases. All 

rent increases based on escalation clauses in lease agreements 

are accounted for on a straight-line basis over the term of the 

respective leases. 


Per Share Amounts 

Basic earnings per share is computed by dividing the net loss by 

the weighted average shares outstanding during the reporting 

year. Diluted earnings per share is calculated by using the treasury 

stock method. This method assumes that proceeds received from 

the exercise of in-the-money options are used to repurchase 

shares at the average market price for the period. 

Stock Based Compensation 

The Company uses the fair value method of accounting for stockbased 

compensation whereby the Company recognizes the fair 

value of stock options granted to employees, directors, offi cers and 

certain consultants. The fair value of stock options is determined 

using the Black-Scholes option pricing model. Consideration 

paid by the option holder on exercise of stock options is recorded 

as share capital. 

Income-Producing Properties 

Income-producing properties are carried at cost less accumulated 

amortization. If events or circumstances indicate that the carrying 

value of the income-producing property may be impaired, a 

recoverability analysis is performed based upon estimated 

undiscounted cash fl ows to be generated from the incomeproducing 

property. If the analysis indicates that the carrying 

value is not recoverable from future cash fl ows, the incomeproducing 

property is written-down to estimated fair value and an 

impairment loss is recognized. 

Upon acquisition of properties, the purchase price is allocated 

based on estimated fair values to land, building, parking lots and 

intangibles, if any. 

Amortization of income-producing properties is provided on the 

following basis and rates: 

Buildings Straight-line up to 50 years

The rates are determined based on market factors and the type of 

structure specifi c to the properties. 

Property Held For Development 

Property under development includes initial acquisition costs, 

other direct costs and realty taxes, interest, and operating 

expenses net of revenues during the period of development. 

NEW ACCOUNTING PRONOUNCEMENTS 

In 2005, the Canadian Institute of Chartered Accountants (“CICA”) 

issued three new accounting standards: Handbook Section 1530, 

“Comprehensive Income”, Handbook Section 3855, “Financial 

Instruments – Recognition and Measurement”, and Handbook 

Section 3865, “Hedges”. The new standards introduce the 

Statement of Comprehensive Income which is used to temporarily 

provide for gains and losses including foreign currency translation 

adjustments for net investments of self sustaining foreign 

operations and other amounts arising from changes in fair value of 

investments categorized as available for sale until they are realized 

and recorded in earnings. As well, all other fi nancial instruments, 

including derivatives, are to be included in the Company’s balance 

sheet and measured at fair value. In certain situations assets that 

are classifi ed as held to maturity will continue to be measured at 

cost or amortized cost. 

The new standards also include further clarifi cation on the 

application of hedge accounting which will have no impact on 

the Company’s fi nancial statements since the Company does 

not intend to enter into any hedging relationships. These new 

standards are effective for fi scal years beginning on or after 

October 1, 2006 and early adoption is permitted. The Company 

has assessed the impact of these new accounting standards on 

the fi nancial statements at July 1, 2007 and has determined that 

these standards will not have a material impact. 

In July of 2006, the CICA replaced Handbook Section 1506, 

“Accounting Changes” with a new Section 1506, “Accounting 

Changes” to substantially harmonize with International Accounting 

Standards for the accounting and disclosure of changes in 

accounting policies, estimates and errors. Under the new 

standard, accounting changes should be applied retrospectively 

unless otherwise permitted or where impracticable to determine. 

In addition, voluntary changes in accounting policy are made 

only if they result in the fi nancial statements providing reliable 

and more relevant information. New disclosure is required for 

changes in accounting policies, changes in accounting estimates 

and correction of errors. The standard is effective for fi scal years 

beginning on or after January 1, 2007. The Company does not 

expect the application of this revised standard to have a material 

impact on the fi nancial statements. 

In December 2006, the CICA issued two new accounting standards: 

Handbook Section 3862, “Financial Instruments – Disclosures” 

and Section 3863, “Financial Instruments – Presentation”. These 

new standards will require increased disclosure of fi nancial 

instruments with particular emphasis on the risks associated 

with recognized and unrecognized fi nancial instruments and how 

those risks are managed. The standards are effective for fi scal 

years beginning on or after October 1, 2007 and the Company is 

currently considering the additional disclosures, if any, required in 

future fi nancial statements. 

In December 2006, the CICA issued a new accounting standard: 

Handbook Section 1535, “Capital Disclosures”, requiring 

disclosure of information about an entity’s capital and the 

objectives, policies, and processes for managing capital. The 

standard is effective for fi scal years beginning on or after October 

1, 2007 and the Company is currently considering the additional 

disclosures, if any, required in future fi nancial statements. 


MANAGEMENT’S REPORT 

To the shareholders of Aveiro Investment Corp. 

The accompanying Financial Statements of Aveiro Investment Corp. (the “Company”) are the responsibility of 

Management and have been prepared by Management in accordance with Canadian generally accepted accounting 

principles and policies as stated in the notes to the Financial Statements. 

The Company’s Board of Directors has approved the Financial Statements on the recommendation of the 

Audit Committee. 

John Mackay Harold Kunik 

CHAIRMAN CHIEF FINANCIAL OFFICER 

30 | Aveiro Investment Corp. | 2007 Annual Report

AUDITOR’S REPORT 

To the shareholders of Aveiro Investment Corp. 

We have audited the balance sheet of Aveiro Investment Corp. as at June 30, 2007 and the statements of loss and 

defi cit and cash fl ows for the year then ended. These fi nancial statements are the responsibility of the Company’s 

management. Our responsibility is to express an opinion on these fi nancial statements based on our audit. 

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require 

that we plan and perform an audit to obtain reasonable assurance whether the fi nancial statements are free of material 

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 

fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made 

by management, as well as evaluating the overall fi nancial statement presentation. 

In our opinion, these fi nancial statements present fairly, in all material respects, the fi nancial position of the Company 

as at June 30, 2007 and the results of its operations and its cash fl ows for the year then ended in accordance with 

Canadian generally accepted accounting principles. 

The fi nancial statements as at June 30, 2006 and for the year then ended were audited by other auditors who expressed 

an opinion without reservation on those statements in their report dated August 18, 2006. 

Calgary, Canada Chartered Accountants 

September 7, 2007 


BALANCE SHEETS 

June 30, 2007 and 2006 


2007 2006 

ASSETS 

Property held for development (Note 4) $ 9,321,561 $ – 

Income-producing property (Note 5) 5,575,780 – 

Cash 1,930,423 – 

Accounts receivable 174,454 – 

Prepaids 84,886 – 

Equipment (Note 6) 52,080 – 

Restricted cash (Note 7) 10,000 – 

Incorporation costs 700 700 

LIABILITIES AND SHAREHOLDERS’ EQUITY 

$ 17,149,884 $ 700 

LIABILITIES 

Mortgages payable (Note 8) $ 7,077,950 $ – 

Accounts payable and accrued liabilities 278,162 6,349 

Security deposits 52,652 – 

7,408,764 6,349 

SHAREHOLDERS’ EQUITY (DEFICIENCY) 

Share capital (Note 9) 10,373,594 20,900 

Contributed surplus (Note 10) 283,459 16,634 

Defi cit (915,933 ) (43,183 ) 

Commitments (Note 17) 

Subsequent events (Note 18) 

See accompanying notes to the fi nancial statements 

9,741,120 (5,649 ) 

$ 17,149,884 $ 700 

On behalf of the Board of Directors: 

DIRECTOR DIRECTOR

STATEMENTS OF LOSS AND DEFICIT 

Years ended June 30, 2007 and 2006 


Revenue $ 74,496 $ – 

Expenses: 

Property operating costs 3,558 – 

Corporate 673,976 6,863 

Stock based compensation 249,207 – 

Interest 14,813 – 

Amortization 5,692 – 

947,246 6,863 

Net loss (872,750 ) (6,863 ) 

Defi cit, beginning of year (43,183 ) (36,320 ) 

Defi cit, end of year $ (915,933 ) $ (43,183 ) 

Basic and diluted net loss per share (Note 14) $ (0.1535 ) $ (0.0033 ) 

See accompanying notes to the fi nancial statements 


STATEMENTS OF CASH FLOWS 

Years ended June 30, 2007 and 2006 

Cash provided by (used in): 



OPERATIONS 

Net loss 

Adjustments for non-cash items: 

$ (872,750 ) $ (6,863 ) 

Amortization 5,692 – 


Changes in non-cash operating working capital 65,125 2,669 

(552,726 ) (4,194 ) 

FINANCING 

Issuance of mortgages payable 10,823,950 – 

Repayment of mortgages payable (3,746,000 ) – 

Shares issued for cash 11,430,000 – 

Restricted cash (10,000 ) – 

Advances from related parties – 4,194 

Share issue costs (1,059,688 ) – 

17,438,262 4,194 

INVESTING 

Purchase of income-producing property (5,579,409 ) – 

Purchase of property held for development (9,321,561 ) – 

Purchase of equipment (54,143 ) – 

(14,955,113 ) – 

Net increase in cash 1,930,423 – 

Cash, beginning of period – – 

Cash, end of period $ 1,930,423 $ – 

Interest paid $ 142,240 $ – 

See accompanying notes to the fi nancial statements

NOTES TO THE FINANCIAL STATEMENTS June 30, 2007 and 2006 

1. ORGANIZATION AND NATURE OF BUSINESS 

The Company (formerly Dagger Resources Inc.) was incorporated under the Alberta Business Corporations Act on June 7, 

1996 and its articles were amended on June 24, 1996. The Company was an inactive public company until August 21, 2006, 

when the Board of Directors and management were changed and a new business plan was adopted. 

The Company is an Alberta based real estate investment company building a portfolio of real estate assets in secondary 

markets in western Canada consisting primarily of income producing properties in addition to other real estate to which 

management can conduct activity to provide fundamental value growth. 

These fi nancial statements have been prepared on the basis of a going concern. Should the going concern assumption 

not be applicable, then adjustments would be required to the carrying value of the Company’s net assets and to its statements 

of operations. 

2. BASIS OF PRESENTATION 

The Company prepares fi nancial statements in accordance with Canadian generally accepted accounting principles. 

3. SIGNIFICANT ACCOUNTING POLICIES 

(a) Income taxes 

The Company uses the liability method of accounting for future income taxes whereby future income tax assets and 

liabilities are determined based on temporary differences between the accounting basis and the tax basis of the assets and 

liabilities, and are measured using the substantively enacted tax rates and laws expected to apply when these differences 

reverse. In assessing whether the future tax assets are realizable, management considers whether it is more likely than 

not that some portion or all of the future tax assets will not be realized. The ultimate realization of future tax assets, 

consisting of loss carryforwards and taxable temporary differences, is dependent upon the generation of future taxable 

income during the periods in which those temporary differences and tax loss carryforwards can be utilized. 

(b) Revenue recognition 

Revenue from income-producing properties includes rents earned from tenants under lease agreements, realty tax and 

operating costs recoveries and other incidental income and is recognized as revenue over the term of the underlying 

leases. All rent increases based on escalation clauses in lease agreements are accounted for on a straight-line basis over 

the term of the respective leases. 

(c) Per share amounts 

Basic earnings per share is computed by dividing the net loss by the weighted average shares outstanding during the 

reporting year. Diluted earnings per share is calculated by using the treasury stock method. This method assumes that 

proceeds received from the exercise of in-the-money options are used to repurchase shares at the average market price 

for the period. 



3. SIGNIFICANT ACCOUNTING POLICIES (continued) 

(d) Use of estimates 

The preparation of fi nancial statements in accordance with Canadian generally accepted accounting principles 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 fi nancial statements and the reported amounts of revenues and 

expenses during the period then ended. Actual results could differ from those estimates. Signifi cant areas requiring the 

use of management estimates include assessing the recoverability of income producing properties and property held 

for development. 

Accounting standard setters have determined that the use of the Black-Scholes or a customized lattice option pricing 

model will provide a reasonable estimate of the fair value of options granted by an enterprise. The Company has selected 

the Black-Scholes model as appropriate for its circumstances. The factors used in the Black-Scholes calculation are a 

signifi cant estimate. 

(e) Stock based compensation 

The Company uses the fair value method of accounting for stock-based compensation whereby the Company recognizes 

the fair value of stock options granted to employees, directors, offi cers and certain consultants. The fair value of stock 

options is determined using the Black-Scholes option pricing model. Consideration paid by the option holder on exercise 

of stock options is recorded as share capital. 

(f) Income-producing properties 

Income-producing properties are carried at cost less accumulated amortization. If events or circumstances indicate that 

the carrying value of the income-producing property may be impaired, a recoverability analysis is performed based upon 

estimated undiscounted cash fl ows to be generated from the income-producing property. If the analysis indicates that the 

carrying value is not recoverable from future cash fl ows, the income-producing property is written-down to estimated fair 

value and an impairment loss is recognized. 

Upon acquisition of properties, the purchase price is allocated based on estimated fair values to land, building, parking 

lots and intangibles, if any. 

Amortization of income-producing properties is provided on the following basis and rates: 

Buildings Straight-line up to 50 years 

The rates are determined based on market factors and the type of structure specifi c to the properties. 

(g) Property held for development 

Property held for development includes initial acquisition costs, other direct costs and realty taxes, interest, and operating 

expenses net of revenues during the period of development. 




(h) Equipment 

Equipment is carried at cost less accumulated amortization. Additions and improvements are capitalized while repairs 

and maintenance are charged to expenses as incurred. 

Amortization on equipment is provided on the following basis and rates: 

Computer hardware 20% declining balance 

Offi ce equipment 20% declining balance 

Software 2 years straight line 

(i) Recent accounting pronouncements 

In 2005, the Canadian Institute of Chartered Accountants (“CICA”) issued three new accounting standards: Handbook 

Section 1530, “Comprehensive Income”, Handbook Section 3855, “Financial Instruments – Recognition and Measurement”, 

and Handbook Section 3865, “Hedges”. The new standards introduce the Statement of Comprehensive Income which is 

used to temporarily provide for gains and losses including foreign currency translation adjustments for net investments 

of self sustaining foreign operations and other amounts arising from changes in fair value of investments categorized 

as available for sale until they are realized and recorded in earnings. As well, all other fi nancial instruments, including 

derivatives, are to be included in the Company’s balance sheet and measured at fair value. In certain situations assets that 

are classifi ed as held to maturity will continue to be measured at cost or amortized cost. 

The new standards also include further clarifi cation on the application of hedge accounting which will have no impact on 

the Company’s fi nancial statements since the Company does not intend to enter into any hedging relationships. These 

new standards are effective for fi scal years beginning on or after October 1, 2006 and early adoption is permitted. The 

Company has assessed the impact of these new accounting standards on the fi nancial statements at July 1, 2007 and has 

determined that these standards will not have a material impact. 

In July of 2006, the CICA replaced Handbook Section 1506, “Accounting Changes” with a new Section 1506, “Accounting 

Changes” to substantially harmonize with International Accounting Standards for the accounting and disclosure of changes 

in accounting policies, estimates and errors. Under the new standard, accounting changes should be applied retrospectively 

unless otherwise permitted or where impracticable to determine. In addition, voluntary changes in accounting policy are 

made only if they result in the fi nancial statements providing reliable and more relevant information. New disclosure is 

required for changes in accounting policies, changes in accounting estimates and correction of errors. The standard is 

effective for fi scal years beginning on or after January 1, 2007. The Company does not expect the application of this revised 

standard to have a material impact on the fi nancial statements. 

In December 2006, the CICA issued two new accounting standards: Handbook Section 3862, “Financial Instruments – Disclosures” 

and Section 3863, “Financial Instruments – Presentation”. These new standards will require increased disclosure of fi nancial 

instruments with particular emphasis on the risks associated with recognized and unrecognized fi nancial instruments and how 

those risks are managed. The standards are effective for fi scal years beginning on or after October 1, 2007 and the Company is 

currently considering the additional disclosures, if any, required in future fi nancial statements. 




(i) Recent accounting pronouncements (continued) 

In December 2006, the CICA issued a new accounting standard: Handbook Section 1535, “Capital Disclosures”, requiring 

disclosure of information about an entity’s capital and the objectives, policies, and processes for managing capital. The 

standard is effective for fi scal years beginning on or after October 1, 2007 and the Company is currently considering the 

additional disclosures, if any, required in future fi nancial statements. 

4. PROPERTY HELD FOR DEVELOPMENT 

Property held for development includes bare land in Airdrie and Lethbridge, Alberta. Property held for development includes 

$219,752 of interest and $1,282 of other carrying charges capitalized during the year. 

On January 1, 2007, the Company acquired real property for $7,750,000 from a company (the “Vendor”). Two individuals, 

independent of the Vendor’s owner, were offi cers of the Vendor during negotiations to purchase the property from the Vendor. 

The two individuals were directors and offi cers of the Company at the time the Company and the Vendor entered into an 

agreement of purchase and sale. The two individuals remained as directors and offi cers subsequent to closing. The transaction 

terms were determined based on, among other things, negotiation between the Company and Vendor and an independent 

third party valuation. 

5. INCOME-PRODUCING PROPERTY 

2007 

Accumulated 

2006 

Cost Amortization Net Book Value Net Book Value 

Building $ 4,350,256 $ 3,629 $ 4,346,627 $ – 

Land 1,229,153 – 1,229,153 – 

6. EQUIPMENT 


$ 5,579,409 $ 3,629 $ 5,575,780 $ – 

2007 

Accumulated 

2006 

Cost Amortization Net Book Value Net Book Value 

Computer hardware $ 22,395 $ 947 $ 21,448 $ – 

Offi ce equipment 30,873 959 29,914 – 

Software 875 157 718 – 

$ 54,143 $ 2,063 $ 52,080 $ –


7. RESTRICTED CASH 

The Company is required to set aside $10,000 in term deposits that are held by the Bank of Montreal as security relating to the 

use of Corporate Credit Cards. 

8. MORTGAGES PAYABLE 


First mortgage and demand promissory note (which note can only be 

demanded on default or if in the opinion of the bank, there has been a 

change in the business fi nancial condition, operations or conduct of the 

Company which will adversely affect either the Company’s ability to fulfi ll 

its obligations or the bank’s security) bearing interest at prime plus 1% 

per annum (an effective rate of 7%), with interest payable monthly, secured 

by land having a net book value of $1,350,527 to be repaid on 

December 13, 2008. $ 665,950 $ – 

First mortgage and demand promissory note (which note can only be 

demanded on default or if in the opinion of the bank, there has been a 

change in the business fi nancial condition, operations or conduct of the 

Company which will adversely affect either the Company’s ability to 

fulfi ll its obligations or the bank’s security) bearing interest at prime 

plus 1% per annum (an effective rate of 7%), with interest only monthly 

payments from July to October 2007 and blended interest and principal 

monthly payments thereafter, secured by land and a building having 

a net book value of $5,575,780 to be repaid on June 13, 2012. 3,625,000 – 

First mortgage bearing interest at 7.5% per annum secured by land 

having a net book value of $7,971,034 with interest only quarterly 

payments, due on May 15, 2009. 735,000 – 

Second mortgage bearing interest at 7.5% per annum secured by 

land having a net book value of $7,971,034 to be repaid in two equal 

installments of $1,026,000 plus interest on October 16, 2007 

and April 16, 2008. 2,052,000 – 

$ 7,077,950 $ – 



8. MORTGAGES PAYABLE (continued) 

The repayment provisions of the mortgage agreements require repayment of the principal amounts as follows: 

2008 $ 2,108,820 

2009 1,491,295 

2010 96,876 

2011 103,879 

2012 3,277,080 

9. SHARE CAPITAL 

a) Authorized: 

Unlimited Class “A” and “B” voting common shares 

Unlimited Class “C” non-voting common shares 

Unlimited number of preferred shares 

b) Issued: 


$ 7,077,950 

Number 

of Shares Amount 

Class “A” voting common shares 

Balance, June 30, 2005 and 2006 2,050,000 $ 20,900 

Private placement 11,430,000 11,430,000 

Share issue costs – (1,077,306 ) 

Balance June 30, 2007 13,480,000 $ 10,373,594


10. CONTRIBUTED SURPLUS 


Balance, beginning of year $ 16,634 $ – 

Forgiven amounts due to a former shareholder – 16,634 


Stock based share issuance costs 17,618 – 

Balance, end of year $ 283,459 $ 16,634 

Contributed surplus arises as a result of recording the fair value of options and warrants granted during the year (see Notes 

11 and 12). The fair value of the options and warrants is recorded to contributed surplus as the options and warrants vest. 

Upon exercise, the proceeds received, as well as any balance previously recorded to contributed surplus, is credited to 

share capital. 

The amount due to a shareholder was forgiven on June 30, 2006 and has been credited to contributed surplus. 

11. STOCK OPTIONS 

The Company’s Stock Option Plan provides certain directors, offi cers, employees and consultants of the Company an 

opportunity to purchase Class “A” voting common shares (“Common Shares”) and to benefi t from the appreciation thereof. 

The number of options authorized by the board at June 30, 2007 is 1,348,000 to acquire 1,348,000 Common Shares. 

Options vest and expire as set forth in the Option Agreements as determined at the time of granting the Option by the Board. 

The exercise price at the date of granting approximates fair market value. The following table summarizes the stock options 

outstanding at June 30, 2007: 


Weighted Weighted 

Number of average Number of average 

Options exercise price Options exercise price 

Outstanding, beginning of year – $ – – $ – 

Granted 1,345,000 1.00 – – 

Outstanding, end of year 1,345,000 $ 1.00 – $ – 



11. STOCK OPTIONS (continued) 

Options outstanding at June 30, 2007 consist of the following: 


Weighted average 

Exercise Number remaining Number 

price Outstanding contractual life exercisable 

$ 1.00 1,345,000 9.96 years 446,668 

The fair value per option granted was $0.43. The compensation expense related to stock options granted under the Stock 

Option Plan for the year ended June 30, 2007 amounted to $249,207. The compensation expense was determined based 

on the fair value of the stock options at the date of grant using the Black-Scholes option pricing model with the following 

assumptions: 

Expected option life 10 years 

Risk-free interest rate 4.62 % 

Dividend yield Nil 

Expected volatility 20 % 

12. WARRANTS 

In conjunction with the company’s private placement of 11,430,000 Common Shares, 239,067 warrants to acquire 239,067 

Common Shares were issued to agents of the Company as part of their commission compensation package. These warrants 

vested immediately and expire December 31, 2007. 

The following table summarizes the warrants outstanding at June 30, 2007: 


Weighted Weighted 

Number of average Number of average 

Warrants exercise price Warrants exercise price 

Outstanding, beginning of year – $ – – $ – 

Granted 239,067 $ 1.00 – $ – 

Outstanding, end of year 239,067 $ 1.00 – $ –


12. WARRANTS (continued) 

Warrants outstanding at June 30, 2007 consist of the following: 

Weighted average 

Exercise Number remaining Number 

price Outstanding contractual life exercisable 

$ 1.00 239,067 .50 years 239,067 

The fair value per option granted was $0.07. The share issuance commission expense related to warrants granted for the year 

ended June 30, 2007 amounted to $17,618. The share issuance commission expense was determined based on the fair value 

of the warrants at the date of grant using the Black-Scholes option pricing model with the following assumptions: 

Expected warrant life .58 years 

Risk-free interest rate 4.62 % 

Dividend yield Nil 

Expected volatility 20 % 



13. FUTURE INCOME TAXES 

The following table reconciles income taxes calculated at the Canadian statutory rate with actual income taxes: 



Loss before taxes $ (872,750 ) $ (6,863 ) 

Canadian statutory rate 32.12 % 32.12 % 

Expected income taxes $ (280,327 ) $ (2,204 ) 

Effect on taxes resulting from: 

Non-deductible stock based compensation 80,045 – 

Change in tax rates 22,330 – 

Valuation allowance 171,065 2,204 

Other 6,887 – 

Provision for Income taxes $ – $ – 

The net future income tax liability is comprised of: 


Future income tax liabilities 

Income producing properties and equipment in excess of tax values $ 25,615 $ – 

Future income tax assets 

Unused non-capital tax losses (263,313 ) (7,024 ) 

Share issuance costs (241,608 ) – 

Valuation allowance 479,306 7,024 

Net future income taxes $ – $ – 

As at June 30, 2007 the Company has non-capital losses available to carry forward to future years of approximately $923,907 

(2006 - $21,868). These losses will begin to expire in 2026. 

The non-capital loss carry-forwards refl ected above expire as follows: 

2026 $ 5,234 

2027 918,673 

$ 923,907


14. LOSS PER SHARE 

Basic and diluted net loss per share is calculated using the weighted average number of shares outstanding during the period. 

There were no dilutive options or warrants outstanding at June 30, 2007. Basic and diluted net loss per share is calculated 

as follows: 


Weighted Basic and Weighted Basic and 

average diluted average diluted 

common net loss common net loss 

Net loss shares per share Net loss shares per share 

$ (872,750 ) $ 5,685,371 $ (0.1535 ) $ (6,863 ) 2,050,000 $ (0.0033 ) 

15. RELATED PARTY TRANSACTIONS 

During the year the Company entered into an agreement with True North Strategy Corp. to provide the Company with strategic 

management services. Pursuant to the terms of the strategic management agreement, the Manager is entitled to a fee equal 

to 1.5% of the defi ned net assets of the Company payable as to 0.125% plus tax calculated at the end of each calendar month. 

In the event that the Company purchases any assets (other than the Airdrie industrial land), whether by direct acquisition, 

corporate acquisition, amalgamation, majority or minority investment or otherwise, the Manager will be entitled to a fee equal 

to 1.5% of the acquisition price or transaction value, as the case may be. Certain offi cers and directors of the Company are 

shareholders of True North Strategy Corp. There was a total of $159,318 of management fees and acquisition fees which were 

included in corporate expenses that were incurred during the year to True North Strategy Corp. of which $15,422 are included 

in accounts payable and accrued liabilities. 

In April of 2007, the Company entered into an agreement with a company which shares certain common offi cers and directors, 

pursuant to which the Company provides shared offi ce costs, including rent and overhead, at the fi xed amount of $6,000 

per month. During the year, $18,000 related to this agreement has been recorded in revenue. Also included in general 

and administrative expenses for the year ended June 30, 2007 is $17,312 in offi ce costs paid to a company with common 

management. In addition, general and administrative expenses in the amount of $4,651 were paid on that company’s behalf 

and were subsequently reimbursed during the period. 

Related party transactions are in the normal course of operations and are recorded at the exchange amount which management 

believes to be at market rates under normal terms and conditions. 



16. RISK MANAGEMENT AND FAIR VALUES 

a) Risk management: 

i. Interest rate risk: 

The Company is exposed to interest rate risk on its variable rate mortgages payable. It minimizes this risk by restricting 

mortgages payable to 75% of the purchase price of the property. 

ii. Credit risk: 

The Company is exposed to credit risk as an owner of real estate in that tenants may become unable to pay the 

contracted rents. Management mitigates this risk by carrying out appropriate credit checks and related due diligence 

on the signifi cant tenants. 

b) Financial instruments: 

The fair values of the Company’s cash, accounts receivable, restricted cash, accounts payable and accrued liabilities, and 

mortgages payable approximate their carrying amounts. 

17. COMMITMENTS 

The Company has entered into an 18 month lease for a portion of its premises which requires annual payments of $46,693. 

The remainder of the premises is leased under a 24 month term and requires annual payments of $117,852. The leases expire 

on September 15, 2008 and March 14, 2009 respectively. 

In addition the Company has entered into a 48 month lease of its photocopier requiring annual payments of $3,024. This lease 

expires in February of 2011. 

18. SUBSEQUENT EVENTS 

Subsequent to year end, the Company entered into an agreement which completed the lease arrangements for one hundred 

percent of the available space in its 110,205 square foot warehouse at $776,000 per annum. 

On July 17, 2007, the Company issued from treasury an additional 3,000,000 Common Shares at $1.50 per share for aggregate 

gross proceeds of $4,500,000. 

On August 29, 2007, the Company acquired an income producing property having an approximate value of $2,000,000. The 

Company paid $2,000,000 for the property by issuing 1,238,095 Common Shares. The Company entered into a lease agreement 

for one hundred percent of the available space for $240,000 per annum. The Company paid a fi nders fee in the amount of 

$100,000 in connection with the transaction by issuing 61,908 Common Shares. 


AUDITORS 

Grant Thornton LLP 

1000, 112 - 4th Avenue SW 

Calgary, Alberta 

T2P 0H3 

Tel. 403.260.2500 

Fax. 403.260.2571 

www.grantthornton.ca 

Canadian member of Grant Thornton International 

SOLICITORS 

Macleod Dixon LLP 

3700 Canterra Tower 

400 Third Avenue SW 

Calgary, Alberta 

T2P 4H2 

Tel. 403.267.8222 

Fax. 403.264.5973 

www.macleoddixon.com 

TRANSFER AGENT 

Olympia Trust Company 

2300, 125th - 9th Ave SW 

Calgary Alberta 

T2G 0P6 

Tel. 403.261.0900 

www.olympiatrust.com

AVEIRO INVESTMENT CORP. 

200 - 1204 Kensington Rd. N.W. Calgary, Alberta T2N 3P5 

Tel 403.237.6800 | Fax 403.266.1541 

general@aveiro.ca | www.aveiro.ca

2007 annual report aveiro investment corp. - First West Properties

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