DIVERSIFIED ROYALTY CORP. Notes toConsolidatedFinancial Statements  (Expressed in Canadian dollars)  Years ended December 31, 2014 and2013  Diversified Royalty Corp., (“DIV”), formerly BENEV Capital Inc. and prior to thatBennett Environmental  Inc., is a company domiciled in Canada and was incorporated on July 29, 1992 under the Canada  Business Corporation Act.  The consolidated financial statements of DIV as at and for the year ended  December31, 2014 are composed of DIV and its subsidiaries (together referred to as the “Company”).  1. Nature of operations:  The current business of the Company is to acquire top-line royalties from well -managed multi- locationbusinesses and franchisorsin North America. On September 26, 2014, the Company completed the acquisition(the “Franworks Acquisition”) of  all ofthe Canadian and U.S. trademarksand other intellectual property rights related to the  Original  Joe’s, Elephant & Castle and State & Main restaurant businesses (the “FW Rights”) froma wholly  owned subsidiary of Franworks Franchise Corp ( “Franworks”). The FW Rights include all  registered and unregistered trademarks (including service marks, logos, brand names, trade dress  and pending applications for registration) used in conn ection with such businesses (including trade  secrets, patented technology, proprietary databases, domain names, know -how and show-how,  recipes and uniform standards, methods, procedures and specifications regarding the  establishment and operation of the re staurants operated under the aforementioned  brands). As  part of the Franworks Acquisition and pursuant to  the License and Royalty agreement dated  September 26, 2014, DIV licensed the FW Rights to Franworks’ wholly-owned subsidiaryfor a  payment of a royalty equal to 6% of the gross sales of the  restaurants included in the royalty pool (the “Royalty Pool”).  Currently, substantially all of the Company’s operating revenues are earned from the receipt of  royalties from Franworks and, accordin gly, the revenues of the Company and its ability to pay  dividends to shareholdersare dependent on the ongoing ability of Franworks to generate and pay  royalties to the Company. From June 1, 2013 until acquisition of the Franworks A cquisition on September 26, 2014, the  Company was actively pursuing new business opportunities.   Prior to June 1, 2013, the Company  operated a waste treatment facility. On May 31, 2013, the Company completed the sale of its Saint Ambroise plan t to 8439117Canada  Inc., a company controlled by the plant’s manager. The Saint Ambroise plant was the Company’s  sole operating facility and  was responsible for all of the Company’s sales and a substantial portion  of its expenses for the past four years. As a result of the sale, all of thesales related to this plant  and all of itsoperating costs and substantially all of the amortization and some administrative and  business development costs willnot be recurring going forward. 5 