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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C. 20549
  Form 20-F
   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31,
    2010
  Commission file number
    001-04192
   
   Terra Nova Royalty
    Corporation
 (Exact name of Registrant as
    specified in its charter)
  British Columbia,
    Canada
 (Jurisdiction of incorporation
    or organization)
  Suite 1620  400
    Burrard Street, Vancouver, British Columbia, Canada V6C
    3A6
 (Address of principal
    offices)
  Michael J. Smith
    Suite 1620  400 Burrard Street
    Vancouver, British Columbia, Canada V6C 3A6
    Telephone: +1
    604-683-8286
    Facsimile: +1
    604-683-3205

with a copy to:H.S. Sangra, Sangra Moller
    LLP
    1000 Cathedral Place, 925 West Georgia Street
    Vancouver, British Columbia, Canada V6C 3L2
    Facsimile: +1 604-669-8803   (Name, Telephone,
    E-mail
    and/or Facsimile number and Address of Company Contact
    Person)
  Securities registered or to be
    registered pursuant to Section 12(b) of the Act:
   Title of each class

Name of each exchange on which registeredCommon Shares

New York Stock Exchange   Securities registered or to be
    registered pursuant to Section 12(g) of the Act:
    None.
 Securities for which there is a
    reporting obligation pursuant to Section 15(d) of the Act:
    None.
     There were 62,561,421 common shares, without par value,
    issued and outstanding as of December 31, 2010.
  o þ
  o þ
    þ o
    Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o     U.S.
    GAAP  o

International Financial Reporting Standards as issued by the
    International Accounting Standards
    Board  þ

Other  o
   o o
  Rule 12b-2 o þ




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DEAR FELLOW SHAREHOLDERS
    Book value
    
    $
    548
    millionBook value per share
    
    $
    
    8.76Cash & securities
    
    $
    426
    millionWorking capital
    
    $
    412
    million2011 Projected revenues with Mass*
    
    $
    410 to 425
    millionCommon share listing
    
    New York Stock Exchange
 
 *
    
    note: This projection, without new projects, is being
provided for illustrative purposes for our company going forward
after the acquisition of Mass and is based on various assumptions
made by management, including that the financial results of the
businesses remain consistent with the preceding year and is based
on current economic and operating conditions. Readers are
cautioned that such information is subject to various risks and
uncertainties, including those set forth under Risk Factorsin our
annual report on Form 20-F, is not indicative of actual results
and is not appropriate for other purposes. Results
 It should be clearly noted that our results of operations for 2010 only include the results of the
businesses acquired through our acquisition of Mass from November 16, 2010, or less than 30 working
days. Accordingly, they are not comparable to prior periods.
 The results also include expenses for the period and negative goodwill in the amount of $41.1
million, which do not have a direct relationship to our business platform going forward.
     1




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2010
    
    
    2009Commodities and resources
    
    $
    76,478
    
    
    $
    13,530Merchant banking
    
    
    4,821
    
    
    
    Other
    
    
    4,131
    
    
    
    1,188Total revenues
    
    $
    85,430
    
    
    $
    14,718
 Negative
Goodwill
  Pro
Forma Consolidated Results for 2010
   Revenues
    
    $
    379,695Net income
    
    $
    29,307Net income attributable to equity shareholders
    
    $
    28,619
  2




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Liquidity
    Financial Highlights
  December 31
    
    2010
    
    
    2009Cash and cash equivalent
    
    $
    397,697
    
    
    $
    38,046Securities
    
    $
    27,894
    
    
    $
    11,212Current assets
    
    $
    560,471
    
    
    $
    736,747Total assets
    
    $
    854,256
    
    
    $
    951,720Current liabilities
    
    $
    148,551
    
    
    $
    365,926Working capital
    
    $
    411,920
    
    
    $
    370,821Current ratio
    
    
    3.77
    
    
    
    2.01Acid test ratio
    
    
    3.07
    
    
    
    8.72Long-term debt, less current portion
    
    $
    48,604
    
    
    
    N/ALong-term debt-to-shareholders equity
    
    
    0.09
    
    
    
    N/ATotal liabilities
    
    $
    301,816
    
    
    $
    510,628Shareholders equity
    
    $
    547,756
    
    
    $
    435,689Equity per common share
    
    $
    8.76
    
    
    $
    14.40
  3




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Business
  Trading of Commodities and Resources
        4




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Metals and Minerals
    
    Chemicals and Plastics
    
    Wood Productsiron-ore
bauxite
manganese-ore
cobalt
base metals
magnesium
steel products 
zinc alloys
aluminum foils
aluminum sheets
coal
clinker
cement
ferrous alloys
silicon metals
    
    polystyrene 
high density polyethylene
linear low density
polyethylene
low density polyethylene
polyethylene terephthalate
polypropylene
polyvinyl chloride
    
    pulp
saw logs
round logs
sawn timber
plywood
medium density
fiberboard
wood pellets
 Merchant Banking
  Other
  Transactions Highlights for 2010
 
    
    January 6th, we announced our intention to restructure our
assets and operations by dividing into two independent publicly traded companies; one
company to focus on the industrial engineering business and the other to focus on our
resource-focused business. To effect this division we effected a reorganization whereby
substantially all of our subsidiaries engaged in the industrial engineering business
were transferred to KID.
  5




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
    
    February 26th, we entered into an Arrangement Agreement with
KID, which was approved by our shareholders on March 29, 2010.
    
    March 30th, pursuant to the arrangement we separated into two
distinct owned and operated businesses: a mineral royalty and natural resources business
conducted by Terra Nova Royalty Corporation; and an industrial plant technology,
equipment and service business conducted by our former subsidiary, KID.
    
    March 30th, we distributed to our shareholders, by way of
return of capital, approximately 26% of the issued KID shares at such time without any
withholding taxes. This was tax efficient.
    
    July 1st, we distributed to our shareholders approximately 23%
of the issued KID shares at such time, for which there was Canadian withholding tax of
15% for U.S. residents, which was nottax efficient.
    
    July 27th, we announced a rights offering (the Rights
Offering), pursuant to which, each holder of our common shares of record as of August
6, 2010, received one transferable right (a Right) for every common share held. Every
four Rights entitled a holder to purchase one common share at a price of $6.60. On
September 8, 2010, we announced that the Rights Offering was fully subscribed. We issued
a total of 7,571,227 common shares under the Rights Offering, representing total gross
proceeds of approximately $50 million. The Rights Offering provided us with much needed
paid-up capital to assist with further distributions of the KID shares.
    
    September 23rd, we distributed to our shareholders, by way of a
return of capital, approximately 29% of the issued KID shares at such time without any
withholding taxes. This was tax efficient.
    
    September 27th, we announced that we had entered into an
agreement with Mass for us to acquire all of the issued and outstanding shares of Mass
by way of a take-over bid. We offered one of our common shares for each Mass share
pursuant to our offer, valuing the transaction at approximately $225 million. The offer
ratio was based upon the adjusted book value of each company and valued our shares at
$8.91 per share.
    
    November 9th, we announced the expiry of our offer to acquire
all of the common shares of Mass through our wholly-owned subsidiary. Mass shares,
representing over 93% of the outstanding shares of Mass, were tendered pursuant to the
Offer.
    
    December 31st, we distributed to our shareholders by way of a
return of capital, the substantial balance of the KID shares held by us, without any
withholding tax for our shareholders. This was tax efficient.
  
    
    The annual dividend is based on the annual dividend yield of the New York
Stock Exchange Composite Index for the preceding year plus 25 basis points.
  6




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
    
    On January 15, 2011, we announced the declaration of an aggregate cash
dividend for 2011 of $0.20 per common share, representing a dividend yield of 2.58
percent, payable in quarterly instalments.
    
    The first payment of $0.05 per common share was paid on January 31, 2011 to
shareholders of record on January 20, 2011. The second payment will be made on April 11,
2011 to shareholders of record on March 31, 2011. In the future, we plan to announce
and declare the cash dividend during the first full week of each year. The declaration,
timing and payment of future dividends will depend on, among other things, our financial
results.
 Accounting Changes
 IFRS 1, First-time Adoption of
International Financial Reporting Standards,
  Carrying value January 1, 2009
    
    $
    24,861Valuation increase
    
    $
    175,139Revised book value
    
    $
    200,000Deferred income tax liability
    
    $
    (51,133
    )Increase in shareholders equity
    
    $
    124,006Shares outstanding (000s)
    
    
    62,561Increase in shareholders equity per share
    
    $
    1.98
 
 notes:
    
    Number of shares outstanding after the acquisition of 100 percent of the
common shares of Mass.    7




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Corporate Tax
  Objectives
  Management Disappointments for 2010
  
    
    Our general and administrative expenses are still way too high. It should now
come down as we have completed all our major transactions in 2010;
    
    we have several new projects that we are working on, but have yet completed,
but we are pleased that we controlled our risk in assessing these new
opportunities; and
    
    we did not cut off all expenses related to the former
industrial business
quickly enough.
  Summary
   Chairman of the Board
  8




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TERRA
    NOVA ROYALTY CORPORATION
  Form 20-F
  TABLE OF
    CONTENTS
   
 PART IFORWARD-LOOKING STATEMENTS


1ITEM 1:


IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISERS


3ITEM 2:


OFFER STATISTICS AND EXPECTED TIMETABLE


3ITEM 3:


KEY INFORMATION


4A. Selected Financial Data


4B. Capitalization and Indebtedness


4C. Reasons for the Offer and Use of Proceeds


4D. Risk Factors


4ITEM 4:


INFORMATION ON THE COMPANY


13A. History and Development of the Company


13B. Business Overview


15C. Organizational Structure


22D. Property, Plants and Equipment


22ITEM 4A:


UNRESOLVED STAFF COMMENTS


22ITEM 5:


OPERATING AND FINANCIAL REVIEW AND PROSPECTS


23Operating Results


24Liquidity and Capital Resources


28Application of Critical Accounting Policies


33New Standards and Interpretations Not Yet
    Adopted


35Trend Information


35Off-Balance Sheet Arrangements


35Safe Harbour


35ITEM 6:


DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


36A. Directors and Senior Management


36B. Compensation


37C. Board Practices


39D. Employees


40E. Share Ownership


40ITEM 7:


MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS


41A. Major Shareholders


41B. Related Party Transactions


41C. Interests of Experts and Counsel


42ITEM 8:


FINANCIAL INFORMATION


42A. Consolidated Statements and Other Financial
    Information


42B. Significant Changes


43ITEM 9:


THE OFFER AND LISTING


43A. Offer and Listing Details


43B. Plan of Distribution


44C. Markets


44D. Selling Shareholders


44E. Dilution


44F. Expenses of the Issue


45




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ITEM 10:


ADDITIONAL INFORMATION


45A. Share Capital


45B. Memorandum and Articles of Association


45C. Material Contracts


46D. Exchange Controls


46E. Taxation


47F. Dividends and Paying Agents


50G. Statement by Experts


50H. Documents on Display


50I. Subsidiary Information


50ITEM 11:


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


50ITEM 12:


DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES


50PART IIITEM 13:


DEFAULTS, DIVIDEND ARREARAGES AND
    DELINQUENCIES


50ITEM 14:


MATERIAL MODIFICATIONS TO RIGHTS OF SECURITY
    HOLDERS AND USE OF PROCEEDS


50ITEM 15:


CONTROLS AND PROCEDURES


51ITEM 16:


[RESERVED]


52ITEM 16A:


AUDIT COMMITTEE FINANCIAL EXPERT


52ITEM 16B:


CODE OF ETHICS


52ITEM 16C:


PRINCIPAL ACCOUNTANT FEES AND SERVICES


53ITEM 16D:


EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
    COMMITTEES


54ITEM 16E:


PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
    AFFILIATED PURCHASERS


54ITEM 16F:


CHANGE IN REGISTRANTS CERTIFYING
    ACCOUNTANT


54ITEM 16G:


CORPORATE GOVERNANCE


55ITEM 17:


FINANCIAL STATEMENTS


56ITEM 18:


FINANCIAL STATEMENTS


57ITEM 19:


EXHIBITS


120EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2EX-15.1EX-15.2EX-15.3




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PART I FORWARD-LOOKING
    STATEMENTS  United States
    Private Securities Litigation Reform Act of 1995
    
    our financial results may fluctuate substantially from period to
    period;
    our earnings and, therefore, our profitability, may be affected
    by commodities price volatility;
    a weak global economy can adversely affect our business and
    financial results and have a material adverse effect on our
    liquidity and capital resources;
    the commodities and resources and merchant banking businesses
    are highly competitive;
    the operation of the Wabush iron ore mine is generally
    determined by a third party owner and we have no decision making
    power as to how the property is operated. In addition, we have
    no or very limited access to technical or geological data
    respecting the mine including as to reserves. The owners
    failure to perform or other operating decisions made by the
    owner, including as to scaling back or ceasing operations, could
    have a material adverse effect on our revenue, our results of
    operations and financial condition;
    the profitability of our commodities and resources operations
    depends, in part, on the availability of adequate sources of
    supply;
    we may face a lack of suitable acquisition or merger or other
    proprietary investment candidates, which may limit our future
    growth;
    we may be unable to successfully compete for mineral interests
    with companies that have greater financial resources;
    strategic investments or acquisitions and joint ventures, or our
    entry into new business areas, may result in additional risks
    and uncertainties in our business;
    we may fail to realize all of the anticipated benefits of our
    acquisition of Mass Financial Corp., referred to as
    Mass;
    the industries in which we operate may be affected by
    disruptions beyond our control;
    our trading activities are subject to counterparty risks
    associated with performance of obligations by our trading
    partners and suppliers;
    larger and more frequent capital commitments in our merchant
    banking business increase the potential for significant losses; 1




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
    our income from royalty and other similar interests will be
    dependent on the payments made by the owners and operators of
    our royalty and similar interests, and any delay in or failure
    of such royalty payments will affect the revenues generated by
    our royalty interests;
    we are subject to transaction risks that may have a material
    adverse effect on our business, results of operations, financial
    condition and cash flow;
    our risk management strategies expose us to unidentified or
    unanticipated risks that could impact our risk management
    strategies in the future and could negatively affect our results
    of operations and financial condition;
    derivative transactions may expose us to unexpected risks and
    potential losses;
    fluctuations in interest rates and foreign currency exchange
    rates may affect our results of operations and financial
    condition;
    our operations and infrastructure may malfunction or fail;
    the exploration and development of resource properties is
    inherently dangerous and subject to risks beyond our control;
    our commodities and resources operations are subject to
    environmental laws and regulations that may increase the costs
    of doing business and may restrict such operations;
    we or the operators of our current and any future resource
    interests may not be able to secure required permits and
    licenses;
    there can be no assurance that we will be able to obtain
    adequate financing in the future or that the terms of such
    financing will be favourable and, as a result, we may have to
    raise additional capital through the issuance of additional
    equity, which will result in dilution to our shareholders;
    limitations on our access to capital could impair our liquidity
    and our ability to conduct our business;
    we may substantially increase our debt in the future;
    we are exposed to political, economic, legal, operational and
    other risks as a result of our global operations that could
    negatively affect our business, and our results of operations,
    financial condition and cash flow could be adversely affected;
    we are exposed to litigation risks in our business that are
    often difficult to assess or quantify. We anticipate that we
    will incur significant legal expenses every year in defending
    against litigation;
    we rely significantly on the skills and experience of our
    executives and the loss of these individuals could harm our
    business;
    we may experience difficulty attracting and retaining qualified
    management and technical personnel to efficiently operate our
    business, and the failure to operate our business effectively
    could have a material and adverse effect on our profitability,
    financial condition and results of operations;
    certain of our directors and officers may, from time to time,
    serve in similar positions with other public companies, which
    may put them in a conflict position from time to time;
    we conduct business in countries with a history of corruption
    and transactions with foreign governments increases the risks
    associated with our international activities;
    employee misconduct could harm us and is difficult to detect and
    deter;
    we may incur losses as a result of unforeseen or catastrophic
    events, including the emergence of a pandemic, terrorist attacks
    or natural disasters;
    investors interests may be diluted and investors may
    suffer dilution in their net book value per share if we issue
    additional shares or raise funds through the sale of equity
    securities;
    our constating documents contain indemnification provisions, and
    we have entered into agreements indemnifying our officers and
    directors against all costs, charges and expenses incurred by
    them; and 2




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
    certain factors may inhibit, delay or prevent a takeover of our
    company, which may adversely affect the price of our common
    shares.  Item 3: Key Information  D. Risk
    Factors
    CURRENCY
    PRESENTATION
    OF FINANCIAL INFORMATION
  Form 6-K
  Form 20-F Item 5: Operating and Financial Review
    and Prospects  Operating Results 
    Discontinued Operations
  ITEM 1:
    Identity
    of Directors, Senior Management and Advisers    ITEM 2:
    Offer
    Statistics and Expected Timetable   3




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ITEM 3:
    Key
    Information  A.
    Selected
    Financial Data  Form 20-F Item 5: Operating and Financial Review and
    Prospects
  Selected
    Financial Data
    (Stated in United States dollars in accordance with IFRS)
    (in thousands, other than per share amounts)
  Fiscal Years Ended December 31,2010(1)

2009Net sales

$
84,476


$
14,718Net income (loss) from continuing
    operations(2)


45,839



(16,320
)Net income (loss) income from discontinued
    operations(2)


(15,523
)


52,992Basic earnings (loss) per share:Continuing operations


1.28



(0.54
)Discontinued operations


(0.43
)


1.75Diluted earnings (loss) per shareContinuing operations


1.28



(0.54
)Discontinued operations


(0.43
)


1.75Net
    income(2)


30,316



36,672Net income per shareBasic


0.85



1.21Diluted


0.85



1.21Total assets


854,256



951,720Net assets


552,440



441,092Long-term debt, less current portion


48,604



Shareholders equity


547,756



435,689Capital stock, net of treasury stock


314,172



58,270Weighted average common stock outstanding, diluted


35,859



30,354     Notes
  (1)
    
    We consolidated the operations of Mass from November 16,
    2010.(2)
    
    Net income attributable to our shareholders.  B.
    Capitalization
    and Indebtedness    C.
    Reasons
    for the Offer and Use of Proceeds    D.
    Risk
    Factors  Form 20-F
 4




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Form 20-F
  Risk
    Factors Relating to Our Business
  Our
    financial results may fluctuate substantially from period to
    period.
    Our
    earnings and, therefore, our profitability, may be affected by
    commodities price volatility.
    A weak
    global economy can adversely affect our business and financial
    results and have a material adverse effect on our liquidity and
    capital resources.
       5




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The
    commodities and resources and merchant banking businesses are
    highly competitive.
          The
    operation of the Wabush iron ore mine is generally determined by
    a third party owner and we have no decision making power as to
    how the property is operated. In addition, we have no or very
    limited access to technical or geological data respecting the
    mine including as to reserves. The owners failure to
    perform or other operating decisions made by the owner,
    including as to scaling back or ceasing operations, could have a
    material adverse effect on our revenue, our results of
    operations and financial condition.
    43-101
  The
    profitability of our commodities and resources operations
    depends, in part, on the availability of adequate sources of
    supply.
   6




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We may
    face a lack of suitable acquisition or merger or other
    proprietary investment candidates, which may limit our
    growth.
    We may be
    unable to successfully compete for mineral interests with
    companies having greater financial resources than we
    have.
    Strategic
    investments or acquisitions and joint ventures, or our entry
    into new business areas, may result in additional risks and
    uncertainties in our business.
          
    problems with the effective integration of operations;
    inability to maintain key pre-acquisition business relationships;
    increased operating costs;
    exposure to substantial unanticipated liabilities;
    difficulties in realizing projected efficiencies, synergies and
    cost savings;
    the risks of entering markets in which we have limited or no
    prior experience; and
    the possibility that we may be unable to recruit additional
    managers with the necessary skills to supplement the management
    of the acquired businesses.   7




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We may
    fail to realize all of the anticipated benefits of our
    acquisition of Mass.
    The
    industries in which we operate may be affected by disruptions
    beyond our control.
    Our
    trading activities are subject to counterparty risks associated
    with performance of obligations by our trading partners and
    suppliers.
    Larger
    and more frequent capital commitments in our merchant banking
    business increase the potential for significant
    losses.
    We will
    be dependent on the payments made by the owners and operators of
    our royalty and similar interests, and any delay in or failure
    of such royalty payments will affect the revenues generated by
    such interests.
   8




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We are
    subject to transaction risks that may have a material adverse
    effect on our business, results of operations, financial
    condition and cash flow.
    Our risk
    management strategies leave us exposed to unidentified or
    unanticipated risks that could impact our risk management
    strategies in the future and could negatively affect our results
    of operations and financial condition.
    Derivative
    transactions may expose us to unexpected risk and potential
    losses.
    Fluctuations
    in interest rates and foreign currency exchange rates may affect
    our results of operations and financial condition.
   9




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Our
    operations and infrastructure may malfunction or fail.
    The
    exploration and development of mining and resource properties is
    inherently dangerous and subject to risk beyond our
    control.
    Our
    commodities and resources operations are subject to
    environmental laws and regulations that may increase the costs
    of doing business and may restrict the operations.
      We or the
    operators of our current and any future resource interests may
    not be able to secure required permits and licenses.
   10




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There can
    be no assurance that we will be able to obtain adequate
    financing in the future or that the terms of such financing will
    be favourable and, as a result, we may have to raise additional
    capital through the issuance of additional equity, which will
    result in dilution to our shareholders.
    Limitations
    on our access to capital could impair our liquidity and our
    ability to conduct our businesses.
    We may
    substantially increase our debt in the future.
    As a
    result of our global operations, we are exposed to political,
    economic, legal, operational and other risks that could
    adversely affect our business, our results of operations,
    financial condition and cash flow.
    We are
    exposed to litigation risks in our business that are often
    difficult to assess or quantify. We anticipate that we will
    incur significant legal expenses every year in defending against
    litigation.
     11




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and/or
  We rely
    significantly on the skills and experience of our executives and
    the loss of these individuals may harm our business.
    We may
    experience difficulty attracting and retaining qualified
    management and technical personnel to efficiently operate our
    business, and the failure to operate our business effectively
    could have a material and adverse effect on our profitability,
    financial condition and results of operations.
    Certain
    of our directors and officers may, from time to time, serve in
    similar positions with other public companies, which may put
    them in a conflict position from time to time.
    We
    conduct business in countries with a history of corruption and
    transactions with foreign governments, and doing so increases
    the risks associated with our international
    activities.
  Foreign Corrupt Practices Act Foreign Corrupt Practices Act Foreign Corrupt
    Practices Act
 12




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Employee
    misconduct could harm us and is difficult to detect and
    deter.
    We may
    incur losses as a result of unforeseen or catastrophic events,
    including the emergence of a pandemic, terrorist attacks or
    natural disasters.
    General
    Risks Faced by Us
  Investors
    interests may be diluted and investors may suffer dilution in
    their net book value per share if we issue additional shares or
    raise funds through the sale of equity securities.
    Our
    constating documents contain indemnification provisions, and we
    have entered into agreements indemnifying our officers and
    directors against all costs, charges and expenses incurred by
    them.
    Certain
    factors may inhibit, delay or prevent a takeover of our company,
    which may adversely affect the price of our common
    shares.
  Investment Canada
    Act
  ITEM 4:
    Information
    on the Company  A.
    History
    and Development of the Company  Corporate
    Information
  Companies
    Act of 1934
 13




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Canada Business Corporations Act Business Corporations Act Business Corporations Act
  (604) 683-8286.
  General
      Recent
    Developments
    Separation
    of the Industrial Business
    two-for-one
    
    approximately 23% of the total issued shares of KID (at such
    time) were distributed to our shareholders of record on
    July 1, 2010 by way of a pro-rataspecial dividend
    on the basis of one common share of KID for every four of our
    common shares held; 14




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##### Table of Contents




    approximately 29% of the total issued shares of KID (at such
    time) were distributed to our shareholders of record on
    September 23, 2010, by way of a pro-ratareturn of
    capital on the basis of one common share of KID for every four
    of our common shares held; and
    approximately 19.3% of the total issued shares of KID (at such
    time) were distributed to our shareholders of record on
    December 31, 2010, by way of a pro-ratareturn of
    capital on the basis of one share of KID for every ten of our
    common shares held.  Rights
    Offering
    Acquisition
    of Mass Financial Corp.
    Cash
    Dividend Policy
    B.
    Business
    Overview    Business
    Segments
   15




---



##### Table of Contents



Commodities
    and Resources
  sub-lease
          Metals and Minerals

Chemicals and Plastics

Wood Products   iron-ore;

   general purpose polystyrene;

   pulp and saw logs;   bauxite;

   high density polyethylene;

   round logs;   manganese-ore;

   linear low density polyethylene;

   sawn timber;   cobalt;

   low density polyethylene;

   plywood;   base metals;

   polyethylene terephthalate;

   medium density fiberboard; and   magnesium;

   polypropylene; and

   wood pellets.   steel products;

   polyvinyl chloride.   zinc alloys;   aluminum foils and sheets;   coal;   clinker;   cement;   ferrous alloys; and   silicon metals      16




---



##### Table of Contents



sub-lease sub-lease
  sub-lease, sub-lease. sub-lease
        sub-lease sub-lease
   17




---



##### Table of Contents



sub-lease,
    
    we received a favorable decision from the arbitration panel
    relating to our claims against the mine owners and received an
    award for an aggregate royalty underpayment of approximately
    CDN$11.7 million. We are currently seeking to recover
    interest and expenses of approximately CDN$4.0 million.
    the current royalty rate went up to CDN$6.63 per ton in the
    fourth quarter from CDN$6.57, CDN$5.96 and CDN$5.16 per ton, for
    the third, second and first quarters of 2010, respectively;
    the fourth quarter of 2010 showed a slightly lower than average
    tons shipped, primarily related to approximately 18 days of
    scheduled maintenance taken by the mine operator;
    we have given notice pursuant to our rights under the terms of
    the lease agreement underlying the Wabush royalty to renegotiate
    the royalty rate; and
    the operator of the Wabush mine has indicated planned capital
    expenditures for 2011 of approximately $40.0 to
    $45.0 million for conversion of the production lines to
    reduce manganese, an additional $30.0 million for other
    equipment upgrades and replacement and approximately
    $30.0 million for environmental matters.    GrossAverageTotal

Gross

RoyaltyTonnage Shipped

Tonnage

Royalties

Rate/TonYear

Q1

Q2

Q3

Q4

Shipped

Received(1)

Received(In thousands, other than the Royalty Rate)(All monetary amounts in Canadian dollars)2005


789



1,392



1,299



982



4,462


$
13,736


$
3.082006


751



1,296



942



1,289



4,278



16,393



3.832007


472



1,607



1,591



1,339



5,009



22,357



4.462008


694



1,437



1,117



705



3,953



31,288



7.912009


402



386



1,202



1,198



3,188



17,350



5.442010


874



941



832



1,105



3,752



22,915
(2)


6.11Average Shipments (Tons)


664



1,177



1,164



1,102



4,107     Notes
  (1)
    
    Subject to a 20% resource property revenue tax.(2)
    
    Does not include the amount of arbitration award.  Merchant
    Banking
     18




---



##### Table of Contents



and/or
    off-the-shelf
          Other
   19




---



##### Table of Contents



Company
    Strategy
    
    Investing in Undervalued Opportunities.  We
    seek to invest in businesses or assets whose intrinsic value is
    not properly reflected in their share price, or where we
    perceive that our commodities and financial expertise and
    management can add or unlock value. These include investments in
    highly unstructured situations and in companies undergoing
    financial or operational stress. Such investments often involve
    severe time constraints, and given our liquid resources, we are
    well positioned to capitalize on such opportunities. Unlike
    traditional companies in the financial services sector, our
    investing is generally not passive.
    Geographic Scope of Operations.  We operate
    globally so we supply a diversified range of commodities to our
    customers, develop new relationships with producers and
    consumers of commodities and selectively target new business and
    investment opportunities worldwide.
    Strategic Investments.  Strategic investments
    in resource assets are an important component of our commodities
    trading activities and value added services. We pursue selective
    strategic acquisitions and alliances to support and strengthen
    our commodities operations as and when opportunities arise. We
    will continue to apply our investment criteria to our
    acquisitions, pursuing investments in assets that are of
    strategic importance to our core businesses. At the same time,
    we continue to evaluate dispositions of investments or assets,
    in particular when they are no longer deemed to support our core
    business or when attractive selling opportunities arise.
    Create Shareholder Value.  The nature of our
    business is cyclical and affected by several factors that do not
    lend themselves to regular evaluation. Therefore, we do not
    evaluate our performance and do not believe we should be
    scrutinized in terms of our
    price-to-earnings
    multiple. We seek to grow our asset base and net worth and
    believe these are the best valuation measures for our business.
    Financial Profile.  We seek to maintain our
    fiscal profile so we can access necessary financing on
    competitive terms. In addition, we believe our fiscal approach
    helps us to manage acquisition risks and maintain a high level
    of liquidity.
    Risk Approach.  We have adopted policies
    intended to mitigate and manage commodity price and counterparty
    risks associated with our commodities trading activities. For
    example, a substantial portion of our inventory of commodities
    is at any time under contract for sale at a pre-determined
    price. We also reduce the risk of non-payment by customers by
    imposing limits on open accounts extended to creditworthy
    customers and imposing credit support requirements for other
    customers.  Competitive
    Strengths
    
    International Capabilities.  Unlike other
    similarly sized companies, we have sought to develop a broad
    geographic scope rather than focusing on any one particular
    market. While many of our larger competitors have greater
    presences in more international markets, including merchant and
    investment banks, trading firms, brokerage firms, commercial
    banks and hedge funds, we believe our smaller size and
    collegiality allow us to work as a team on cross-border
    transactions better than many of our competitors.
    Liquidity.  Liquidity is of critical importance
    to companies in the merchant banking industry and commodities
    and resources business and is key to strategic acquisitions to
    further expand and support our commodities and resources
    business. We therefore maintain liquidity in order to be able to
    capitalize on business opportunities in time sensitive
    transactions, fund our core businesses to continue to generate
    revenues, and fund a broad range of potential cash outflows in
    stressed environments, including financing obligations. Our
    approach to liquidity allows us to meet immediate obligations
    without needing to sell other assets or depend on additional
    funding from credit-sensitive markets, and affords us
    significant flexibility in structuring our affairs and managing
    through difficult funding environments. Historically, we have
    funded our businesses with cash generated from our operations.
    Independence.  We are an independent company
    managed by our directors and officers, rather than part of a
    larger, diversified financial services institution. Such
    financial services companies can develop conflicts with their 20




---



##### Table of Contents



clients due to the large number of customers they service, their
    own investment and trading position and the broad range of
    products and services they offer. We believe that awareness of
    these potential conflicts has heightened and that such awareness
    has resulted in increased opportunities for independent firms
    like us in respect of merger, acquisition, restructuring and
    similar transactions.  
    Management.  We believe that our management has
    expertise in the commodities and resources and merchant banking
    industries, including critical expertise with respect to our
    specialized financial services and corporate finance services
    internationally, including on corporate restructurings and
    mergers and acquisitions.
    Integrated Service Approach.  We believe our
    logistics and financing activities allow us to provide a
    full-service solution to our commodities trading customers and
    suppliers. We are able to provide our customers and suppliers
    assistance with transportation and logistics as well as trading,
    hedging, financing and risk management services.
    Operating Structure Allows Prompt Response to Investment
    Opportunities.  We have a lean operating structure
    and are therefore able to quickly assess whether a business
    venture represents an appropriate investment for us, responding
    promptly to all desirable business opportunities. We carefully
    select the business opportunities we investigate and do not move
    forward unless we have a high level of confidence that the
    opportunities fit within our objectives and core competencies.  Competitive
    Conditions
         21




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##### Table of Contents



C.
    Organizational
    Structure    Country of

BeneficialIncorporation

Interest(1)M Financial Corp.

Barbados


100
%MFC Commodities GmbH

Austria


100
%MFC Trade & Financial Service GmbH

Austria


100
%IC Management Service GmbH

Austria


100
%Global Bulk Transport GmbH

Austria


100
%International Trade Service GmbH

Austria


100
%Magnum Minerals Private Limited

India


100
%AFM Aluminiumfolie Merseberg GmbH

Germany


55
%MAW Mansfelder Alumiumwerk GmbH

Germany


55
%MFC(A) Ltd

Marshall Islands


100
%MFC(D) Ltd

Marshall Islands


100
%Brock Metals s.r.o.

Slovakia


100
%MFC Corporate Services AG

Switzerland


100
%Mednet (Shanghai) Medical Technical Developing Co., Ltd

China


90
%Chongqing Lasernet Guangji Eye Hospital (a limited company)

China


52
%Hangzhou Zhe-er Optical Co. Ltd

China


46
%MFC Metal Trading GmbH

Austria


100
%MEG International Services Ltd

Canada


100
%     Note
  (1)
    
    Percentages rounded to nearest whole number.  D.
    Property,
    Plants and Equipment  Office
    Space
      Royalty
    Interest
  sub-lease Item 4:
    Information on the Company  B. Business
    Overview  Business Segments  Commodities
    and Resources
  ITEM 4A:
    Unresolved
    Staff Comments   22




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##### Table of Contents



ITEM 5:
    Operating
    and Financial Review and Prospects  The following discussion and analysis of our financial
    condition and results of operations for the fiscal years ended
    December 31, 2010 and 2009 should be read in conjunction
    with our audited consolidated financial statements and related
    notes included in this annual report on
    Form 20-F.
    Our financial statements included in this annual report on
    Form 20-F
    were prepared in accordance with IFRS. We adopted IFRS as of
    January 1, 2010. The impact of the transition from Canadian
    generally accepted accounting principles to IFRS is explained in
    Note 36 to the audited consolidated financial statements
    included in this annual report on
    Form 20-F.
  General
          Business
    Environment
       23




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##### Table of Contents



Operating
    Results        Discontinued
    Operations
     24




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##### Table of Contents



Summary
    of Quarterly Results
    December 31,

September 30,

June 30,

March 31,2010(1)

2010

2010

2010(United States dollars in thousands, except per share
    amounts)Net sales

$
57,006


$
17,622


$
5,836


$
4,012Equity income


954











Total revenues


57,960



17,622



5,836



4,012Net income (loss) from continuing
    operations(2)


46,565



71



1,004



(1,801
)Basic earnings (loss) from continuing operations, per share


0.92



0.00



0.03



(0.06
)Diluted earnings (loss) from continuing operations, per share


0.92



0.00



0.03



(0.06
)Net income
    (loss)(2)


46,374



4,941



(1,721
)


(19,278
)Basic earnings (loss), per share


0.92



0.15



(0.06
)


(0.64
)Diluted earnings (loss), per share


0.92



0.15



(0.06
)


(0.64
)     Notes
  (1)
    
    We consolidated the operations of Mass from November 16,
    2010.(2)
    
    Net income attributable to our shareholders.  December 31,

September 30,

June 30,

March 31,2009

2009

2009

2009(United States dollars in thousands, except per share
    amounts)Net sales and total revenues

$
5,573


$
4,914


$
1,920


$
2,311Net loss from continuing
    operations(1)


(1,483
)


(2,246
)


(11,049
)


(1,542
)Basic loss from continuing operations, per share


(0.05
)


(0.07
)


(0.36
)


(0.05
)Diluted loss from continuing operations, per share


(0.05
)


(0.07
)


(0.36
)


(0.05
)Net income
    (loss)(1)


37,691



5,883



(7,751
)


849Basic earnings (loss), per share


1.25



0.19



(0.26
)


0.03Diluted earnings (loss), per share


1.25



0.19



(0.26
)


0.03     Note
  (1)
    
    Net income attributable to our shareholders. 25




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##### Table of Contents



Overview
    of 2010 Results Compared to 2009
    Year Ended December 312010(1)

2009(United States dollars in thousands, except per share
    amounts)Net sales

$
84,476


$
14,718Gross revenues


85,430



14,718Costs and expenses


70,724



22,763Costs of sales


49,352



8,525Selling, general and administrative expense


18,316



16,474Net income (loss) from continuing
    operations(2)


45,839



(16,320
)Net income (loss) from discontinued
    operations(2)


(15,523
)


52,992Net
    income(2)


30,316



36,672Basic earnings (loss) per share:Continuing operations


1.28



(0.54
)Discontinued operations


(0.43
)


1.75Diluted earnings (loss) per share:Continuing operations discontinued operations


1.28



(0.54
)Discontinued operations


(0.43
)


1.75     Notes
  (1)
    
    We consolidated the operations of Mass from November 16,
    2010.(2)
    
    Net income attributable to our shareholders.  Year
    Ended December 31, 2010 Compared to the Year Ended
    December 31, 2009
    December 31,2010(1)


2009(United States dollars in thousands)Gross Revenues:Commodities and resources

$
76,478


$
13,530Proprietary investing


4,821



Other


4,131



1,188$
85,430


$
14,718     Note
  (1)
    
    The operations of Mass were consolidated from November 16,
    2010. 26




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##### Table of Contents



(PIE CHART)

(PIE CHART)                    27




---



##### Table of Contents



Liquidity
    and Capital Resources  General
          debt-to-adjusted debt-to-equity debt-to-adjusted debt-to-equity
  2010

2009(United States dollars in thousands)Total debt

$
52,748


$
Less: cash and cash equivalents


(397,697
)


(38,046
)Net debt (net cash and cash equivalents)


(344,949
)


(38,046
)Shareholders equity


547,756



435,689Debt-to-adjusted
    capital ratio


Not applicable



Not applicable  28




---



##### Table of Contents



debt-to-adjusted
  2010

2009(United States dollars in thousands)Long-term debt

$
48,604


$
Shareholders equity


547,756



435,689Long-term
    debt-to-equity
    ratio


0.09



Not applicable   debt-to-adjusted debt-to-equity debt-to-equity
  Financial
    Position
    December 31,2010

2009(United States Dollars in thousands)Cash and cash equivalents

$
397,697


$
38,046Short-term securities


27,894



11,212Total assets


854,256



951,720Working capital


411,920



370,821Long-term debt, less current portion


48,604



Shareholders equity


547,756



435,689         Short-Term
    Bank Loans and Facilities
  day-to-day
 29




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##### Table of Contents



Long-Term
    Debt
    Maturity

Principal


Interest(1)(United States dollars in thousands)2011

$
4,144


$
1,8412012


27,845



1,0762013


19,152



5852014


1,607



33$
52,748


$
3,535     Note
  (1)
    
    Undiscounted.    Cash
    Flows
        Cash
    from Operating Activities
   30




---



##### Table of Contents



Cash
    Flows from Investing Activities
    Cash
    Flows from Financing Activities
    Future
    Liquidity
    Foreign
    Currency
       31




---



##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodLess than








More thanContractual
    Obligations(1)(2)

1 Year


1-3 Years


3-5 Years


5 Years(United States dollars in thousands)Long-term debt obligations

$
5,985


$
48,658


$
1,640


$
Capital lease obligations














Operating lease obligations


2,077



2,581



1,471



12Purchase obligations


32,748











Other long  term liabilities, provision


362



232







Total

$
41,172


$
51,471


$
3,111


$
12     Notes
  (1)
    
    The table does not include non-financial instrument liabilities
    and guarantees.(2)
    
    In addition to the tabular information, we have granted a credit
    facility up to $20.0 million to an affiliate, of which
    $5.8 million had been drawn and remains outstanding as at
    December 31, 2010.  Indebtedness
    Risk
    Management
    Sensitivities
    Interest Rates.
  Foreign Exchange.
   32




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##### Table of Contents



Equity Prices.
  Inflation
   Application
    of Critical Accounting Policies    Form 20-F.
    Revenue
    Recognition
    Inventories
  work-in-progress
    Receivables
   33




---



##### Table of Contents



Valuation
    of Securities
    Available-for-sale available-for-sale and/or
    Income
    Taxes
        
    the history of the tax loss carry-forwards and their expiry
    dates;
    future reversals of temporary differences;
    our projected earnings; and
    tax planning opportunities.     34




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##### Table of Contents



New
    Standards and Interpretations Not Yet Adopted  and/or
  Financial Instruments, Financial Instruments: Recognition and Measurement,
  Disclosures  Transfers of
    Financial Assets, Financial
    Instruments,
  Deferred Tax: Recovery of Underlying
    Assets, Income
    Taxes. Investment Property
  Related Party Disclosures,
   Trend
    Information  Item 4: Information
    on the Company  B. Business Overview 
    Business Segments  Commodities and
    Resources
 Off-Balance
    Sheet Arrangements     Safe
    Harbour   35




---



##### Table of Contents



ITEM 6:
    Directors,
    Senior Management and Employees  A.
    Directors
    and Senior Management    Date ofCommencement of

Expiration ofOffice with our

Term of OfficeName (Age)

Present Position

Company

with our CompanyMichael J. Smith (62)

Chairman, Chief Executive Officer,
    Interim Chief Financial Officer and Director


1986



2011Dr. Shuming Zhao
    (55)(1)(2)(3)

Director


2004



2013Robert Ian Rigg
    (64)(1)(2)(3)

Director


2010



2011Indrajit Chatterjee
    (66)(1)(2)(3)

Director


2005



2012     Notes
  (1)
    
    Member of our audit committee.(2)
    
    Member of our compensation committee.(3)
    
    Member of our nominating and corporate governance committee.  Michael
    J. Smith  Chairman, Chief Executive Officer and
    Director
  Securities
    Exchange Act of 1934
  Dr. Shuming
    Zhao  Director
    Robert
    Ian Rigg  Director
    Indrajit
    Chatterjee  Director
   36




---



##### Table of Contents



Family
    Relationships
    B.
    Compensation    Executive
    Officers
    Non-Equity Incentive Compensation PlanCompensation($)Share-

Option-



Long-Based

Based

Annual

Term

Pension

All Other

TotalSalary

Awards

Awards

Incentive

Incentive

Value

Compensation

CompensationName and Principal Position

($)

($)

($)(1)

Plans

Plans

($)

($)

($)Michael J. Smith
    Chairman and Chief Executive Officer


250,034











100,000











150,670(1
)


500,704Jouni
    Salo(2)


135,176























52,559(3
)


187,735Former President and Chief Executive OfficerAlan
    Hartslief(4)


265,404























150,042(5
)


415,446Former Chief Financial Officer and SecretaryJames
    Purkis(6)


109,124























847,747(7
)


956,871Former Chief Operating Officer     Notes
  (1)
    
    Consisting of housing expenses and medical expenses.(2)
    
    Mr. Salo was appointed as our President and Chief Executive
    Officer effective April 13, 2009. Mr. Salo ceased
    acting as our President and Chief Executive Officer effective
    March 30, 2010 and was replaced by Michael J. Smith.(3)
    
    Consisting of medical, health and other expenses.(4)
    
    Mr. Hartslief ceased acting as our Chief Financial Officer
    in October 2010.(5)
    
    Consisting of medical, housing and other expenses.(6)
    
    Mr. Purkis was appointed the President of our Construction
    Division effective June 1, 2008, Executive Vice-President
    effective November 1, 2008, and Chief Operating Officer
    effective August 12, 2009. Mr. Purkis resigned as
    Chief Operating Officer effective March 31, 2010.(7)
    
    Consisting of automobile, housing and termination payments. 37




---



##### Table of Contents



Directors
    Compensation
    DIRECTOR
    COMPENSATION TABLE
  Share-


Option-


Non-EquityFees


Based


Based


Incentive Plan


Pension


All OtherEarned


Awards


Awards


Compensation


Value


Compensation


TotalName

($)


($)


($)


($)


($)


($)


($)Michael J.
    Smith(1)


3,000























3,000Dr. Shuming Zhao


39,750























39,750Ian
    Rigg(2)


21,000























21,000Indrajit Chatterjee


114,750























114,750Gerhard
    Rolf(3)


20,585























20,585Silke
    Stenger(3)


3,750























3,750     Notes
  (1)
    
    Compensation provided to our Chairman, Michael Smith, is
    disclosed in the table above under the heading
    Executive Officers.(2)
    
    Ian Rigg was appointed as director of our company on
    March 30, 2010.(3)
    
    Gerhard Rolf and Silke Stenger resigned as directors of our
    company effective March 30, 2010.    Termination
    and Change of Control Benefits
         38




---



##### Table of Contents



Pension
    Plan Benefits
    C.
    Board
    Practices  Business Corporations Act
  Expiration ofName of Director

Director Since


Current TermMichael J. Smith


1986



2011Ian Rigg


2010



2011Indrajit Chatterjee


2005



2012Dr. Shuming Zhao


2004



2013          39




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##### Table of Contents



D.
    Employees    E.
    Share
    Ownership    Common Shares

Percentage of TotalBeneficially

Common Shares

Stock OptionsOwned

Outstanding

HeldName and Principal Position

(#)

(%)

(#)Michael J. Smith


92,727



0.1



390,000Chairman and Chief Executive OfficerDirectorDr. Shuming Zhao










55,000DirectorIan Rigg


7,230



0.0



55,000DirectorIndrajit Chatterjee










55,000Director   Stock
    Option Plan
    Incentive
    Plan
     40




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##### Table of Contents



Form 20-F,
  ITEM 7:
    Major
    Shareholders and Related Party Transactions  A.
    Major
    Shareholders    Name

Amount Owned


Percent of
    Class(1)Peter Kellogg


13,820,910(2
)


22.1
%     Notes
  (1)
    
    Based on 62,561,421 common shares issued and outstanding on
    March 31, 2011.(2)
    
    In his public filings, Mr. Kellogg disclaims beneficial
    ownership of 10,097,211 of the shares, or approximately 16.1% of
    the issued and outstanding common shares.          B.
    Related
    Party Transactions    and/or
 41




---



##### Table of Contents



Continuing
    Operations
    (United States dollars in thousands)Dividend income on common
    shares(1)

$
193Royalty expense paid and
    payable(1)


(800
)Fee income


3Purchase of goods


(1,856
)Fee expense for managing resource property


(1,575
)Fee expense for management services, including expense
    reimbursements


(333
)Interest income


44     Note
  (1)
    
    Included in income from royalty interest in resource property.    (United States dollars in thousands)Loan receivable

$
5,792Other receivables, due from an affiliate


8Contract deposits, prepaid and other


16,942Long-term securities


1,233Equity method investments


5,713Accounts payable and accrued expenses, due to affiliates


524   Discontinued
    Operations
  (United States dollars in thousands)Fee expense for management services, including expense
    reimbursements

$
(127
)       C.
    Interests
    of Experts and Counsel    ITEM 8:
    Financial
    Information  A.
    Consolidated
    Statements and Other Financial Information  52-107, Acceptable Accounting Principles, Auditing Standards and
    Reporting Currency Item 18  Financial
    Statements
 42




---



##### Table of Contents



Legal
    Proceedings
  Form 20-F,
  Dividend
    Distributions
      B.
    Significant
    Changes  Item 4  A. History and
    Development of the Company  Recent
    Developments
  ITEM 9:
    The
    Offer and Listing  A.
    Offer
    and Listing Details   43




---



##### Table of Contents



Exchange(1)LowHigh
    (U.S.$)(2)

(U.S.$)(2)Annual Highs and Lows2006


22.10



10.342007


45.74



18.002008


35.79



6.502009


14.20



6.652010


16.10



6.60Quarterly Highs and Lows2009First Quarter


13.59



6.65Second Quarter


9.60



6.81Third Quarter


12.39



8.12Fourth Quarter


14.20



8.902010First Quarter


16.10



11.82Second Quarter


14.94



7.00Third Quarter


8.94



6.60Fourth Quarter


8.79



7.46Monthly Highs and LowsSeptember 2010


8.57



6.60October 2010


8.18



7.46November 2010


8.36



7.64December 2010


8.79



7.76January 2011


7.87



7.15February 2011


8.79



7.50March 2011


9.00



7.72     Notes
  (1)
    
    Shares were traded on the Nasdaq Global Select Market up to and
    including June 15, 2007 and then on the NYSE on and after
    June 18, 2007.(2)
    
    All numbers have been adjusted to reflect the two (2) for
    one (1) stock split effective September 10, 2007.  201-680-5258; 201-680-4604).
  B.
    Plan
    of Distribution    C.
    Markets    D.
    Selling
    Shareholders    E.
    Dilution   44




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##### Table of Contents



F.
    Expenses
    of the Issue    ITEM 10:
    Additional
    Information  A.
    Share
    Capital    B.
    Memorandum
    and Articles of Association            winding-up
    Business
    Corporations Act
    Investment Canada Act
 45




---



##### Table of Contents



Form 20-F Exchange Controls Investment Canada
    Act
      Business Corporations Act Business Corporations Act
  C.
    Material
    Contracts    Form 20-F Item 4: Information on the Company History and Development of the
    Company
  Form 20-F Item 4: Information on the
    Company  History and Development of the
    Company
  D.
    Exchange
    Controls  Item 10: Additional
    Information  Taxation
  Investment Canada Act Investment Canada
    Act
  This summary is of a general nature only and is not intended
    to be, and should not be construed to be, legal advice to any
    holder or prospective holder of our common shares, and no
    opinion or representation to any holder or prospective holder of
    our common shares is hereby made. Accordingly, holders and
    prospective holders of our common shares should consult with
    their own legal advisors with respect to the consequences of
    purchasing and owning our common shares.
  Investment Canada Act Investment Canada Act Investment Canada Act Investment Canada Act
 46




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##### Table of Contents



Investment Canada Act Investment Canada Act
  Investment Canada
    Act Investment Canada Act
  Investment Canada Act
  (a)
    the acquisition of our common shares by a person in the ordinary
    course of that persons business as a trader or dealer in
    securities;  (b)
    the acquisition of control of our company in connection with the
    realization of security granted for a loan or other financial
    assistance and not for a purpose related to the provisions of
    the Investment Canada Act; and  (c)
    the acquisition of control of our company by reason of an
    amalgamation, merger, consolidation or corporate reorganization
    following which the ultimate direct or indirect control in fact
    of our company, through ownership of our common shares, remains
    unchanged.  E.
    Taxation  Material
    Canadian Federal Income Tax Consequences
  Income
    Tax Act
  Income Tax Act Income Tax Act
  This summary is of a general nature only and is not intended
    to be, and should not be construed to be, legal, business or tax
    advice to any particular holder or prospective holder of our
    common shares, and no opinion or representation with respect to
    the tax consequences to any holder or prospective holder of our
    common shares is made. Accordingly, holders and prospective
    holders of our common shares should consult their own tax
    advisors with respect to the income tax consequences of
    purchasing, owning and disposing of our common shares in their
    particular circumstances.
 47




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##### Table of Contents



Dividends
  Income Tax Act Income
    Tax Act
  Capital
    Gains
  Income
    Tax Act Income Tax Act
  Material
    United States Federal Income Tax Consequences
  Certain Canadian Federal Income Tax
    Consequences
  Internal Revenue
    Code of 1986
  The following discussion is for general information only and
    is not intended to be, nor should it be construed to be, legal,
    business or tax advice to any holder or prospective holder of
    our common shares, and no opinion or representation with respect
    to the United States Federal income tax consequences to any such
    holder or prospective holder is made. Accordingly, holders and
    prospective holders of common shares are urged to consult their
    own tax advisors with respect to Federal, state, local and
    foreign tax consequences of purchasing, owning and disposing of
    our common shares.
  U.S.
    Holders
   48




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##### Table of Contents



Distributions
    Capital
    Gains
    Foreign
    Tax Credit
  dollar-for-dollar year-by-year
  Passive
    Foreign Investment Corporation
      U.S. Holders and prospective holders should consult
    their own tax advisors regarding the potential application of
    the PFIC rules to their ownership of our common shares.
 49




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##### Table of Contents



F.
    Dividends
    and Paying Agents    G.
    Statement
    by Experts    H.
    Documents
    on Display    I.
    Subsidiary
    Information  Item 4: Information on the Company 
    Organizational Structure
  ITEM 11:
    Quantitative
    and Qualitative Disclosures About Market Risk          ITEM 12:
    Description
    of Securities Other Than Equity Securities   PART II  ITEM 13:
    Defaults,
    Dividend Arrearages and Delinquencies    ITEM 14:
    Material
    Modifications to Rights of Security Holders and Use Of
    Proceeds   50




---



##### Table of Contents



ITEM 15:
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Securities Exchange Act of 1934 Securities Exchange Act of 1934
  Rule 13a-15 Securities Exchange Act of 1934 Form 20-F,
  Report
    of Management on Internal Control over Financial
    Reporting
  Rule 13a-15(f) 13d-15(f)
  1.
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of our assets and our consolidated entities;2.
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of the consolidated financial
    statements in accordance with IFRS, and that receipts and
    expenditures of our company are being made only in accordance
    with authorizations of management and our directors; and3.
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use, or disposition of
    our assets that could have a material effect on the consolidated
    financial statements.  Internal Control  Integrated Framework
    Form 20-F.
  Acquired
    Business
   51




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##### Table of Contents



Changes
    in Internal Control over Financial Reporting
  Form 20-F
  Inherent
    Limitations on Effectiveness of Controls
    ITEM 16:
    [Reserved]  ITEM 16A:
    Audit
    Committee Financial Expert      ITEM 16B:
    Code
    of Ethics  Code
    of Ethics and Code of Conduct
     52




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##### Table of Contents



ITEM 16C:
    Principal
    Accountant Fees and Services  Audit
    Fees
    Audit
    Related Fees
    Tax
    Fees
    All
    Other Fees
   53




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##### Table of Contents



Audit
    Committee Pre-approval Policies and Procedures
  Rule 2-01 Regulation S-X.
    ITEM 16D:
    Exemptions
    From the Listing Standards for Audit Committees    ITEM 16E:
    Purchases
    of Equity Securities by the Issuer And Affiliated
    Purchasers  Securities Exchange Act of 1934
  ITEM 16F:
    Change
    in Registrants Certifying Accountant    Resignation
    of Deloitte & Touche LLP
          (A)
    Deloitte & Touche LLP advised us that the internal
    controls necessary for us to develop reliable financial
    statements did not exist;  (B)
    Deloitte & Touche LLP advised us that information came
    to Deloitte & Touche LLP attention that has led it to
    no longer be able to rely on our managements
    representations, or that had made it unwilling to be associated
    with the financial statements prepared by our management;(C)
    Deloitte & Touche LLP advised us of the need to expand
    significantly the scope of its audit, or that information came
    to Deloitte & Touche LLPs attention during our
    two most recent fiscal years and any subsequent interim period,
    that if further investigated may:  (i)
    materially impact the fairness or reliability of either: a
    previously issued audit report or the underlying financial
    statements, or the financial statements issued or to be issued
    covering the fiscal period(s) subsequent to the date of the most
    recent financial statements covered by an audit report
    (including 54




---



##### Table of Contents



information that may prevent it from rendering an unqualified
    audit report on those financial statements); or  (ii)
    cause it to be unwilling to rely on our managements
    representations or be associated with our financial
    statements; and  due to Deloitte & Touche LLPs resignation (due
    to audit scope limitations or otherwise), or for any other
    reason, Deloitte & Touche LLP did not so expand the
    scope of its audit or conduct such further investigation; or  (D)
    Deloitte & Touche LLP advised us that information came
    to Deloitte & Touche LLPs attention that it had
    concluded materially impacts the fairness or reliability of
    either:  (i)
    a previously issued audit report or the underlying financial
    statements, or(ii)
    the financial statements issued or to be issued covering the
    fiscal period(s) subsequent to the date of the most recent
    financial statements covered by an audit report (including
    information that, unless resolved to Deloitte & Touche
    LLPs satisfaction, would prevent it from rendering an
    unqualified audit report on those financial statements); and    Appointment
    of a Member of NEXIA International, Davidson & Company
    LLP
    Form 20-F.
  Disclosure
    Provided to Former Accountants
  Form 20-F. Form 20-F.
  ITEM 16G:
    Corporate
    Governance    
    Section 303A.03 of the NYSEs Listed Company Manual
    requires the non-management directors of a listed company to
    meet at regularly scheduled executive sessions without
    management.  Since January 1, 2006, our independent directors (all of
    whom are non-management directors) have not held any meetings at
    which non-independent directors and members of management were
    not in attendance.  
    Section 303A.08 of the NYSEs Listed Company Manual
    requires shareholder approval of all equity compensation plans
    and material revisions to such plans.   55




---



##### Table of Contents



ITEM 17:
    Financial
    Statements  Item 18  Financial
    Statements
 56




---



##### Table of Contents



ITEM 18:
    Financial
    Statements    1.


Report of Independent Registered Chartered
    Accountants, a member of NEXIA International,
    Davidson & Company LLP, dated March 31, 2011 on
    the consolidated financial statements of our company for the
    years ended December 31, 2010 and 2009


582.


Report of Independent Registered Chartered
    Accountants, a member of NEXIA International, Davidson &
    Company on the effectiveness of internal controls over financial
    reporting


593.


Report of Independent Chartered Accountants,
    Deloitte & Touche LLP, dated March 26, 2011 on
    the consolidated financial statements of our company for the
    year ended December 31, 2009 and 2008 prepared in
    accordance with Canadian generally accepted accounting
    principles


614.


Consolidated statements of financial position as
    at December 31, 2010, December 31, 2009 and
    January 1, 2009


625.


Consolidated statements of operations for the
    years ended December 31, 2010 and 2009


636.


Consolidated statements of comprehensive income
    for the years ended December 31, 2010 and 2009


647.


Consolidated statements of changes in equity for
    the years ended December 31, 2010 and 2009


658.


Consolidated statements of cash flows for the
    years ended December 31, 2010 and 2009


669.


Notes to consolidated financial statements for
    the years ended December 31, 2010 and 2009


67  57




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##### Table of Contents



INDEPENDENT
    AUDITORS REPORT               Internal Control 
    Integrated Framework
  DAVIDSON & COMPANY LLP
  Vancouver,
    Canada
    Chartered
    Accountants    
 58




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##### Table of Contents



INDEPENDENT
    AUDITORS REPORT
  To the Board
    of Directors and Shareholders of
    Internal Control  Integrated Framework
      
 59




---



##### Table of Contents



Internal Control  Integrated Framework
     DAVIDSON &
    COMPANY LLP
  Vancouver,
    Canada
    Chartered
    Accountants    
 60




---



##### Table of Contents



Deloitte &
    Touche LLP
 2800  1055
    Dunsmuir Street
 4
    Bentall Centre
 P.O.
    Box 49279
 Vancouver
    BC V7X 1P4
 Canada
  Tel:
    604-669-4466
 Fax:
    604-685-0395
 www.deloitte.ca
   Report of
    Independent Registered Chartered Accountants
  
        
  
            Membre     de / Member of Deloitte Touche Tohmatsu Limited
 61




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)CONSOLIDATED STATEMENTS OF
    FINANCIAL POSITION
    (United States Dollars in Thousands)
   December 31,


December 31,


January 1,Notes


2010


2009


2009ASSETSCurrent AssetsCash and cash equivalents





$
397,697


$
38,046


$
42,111Securities


6



27,894



11,212



54Restricted cash


7



3,464







Loan receivable


8



5,792







Trade receivables


9



13,088







Other receivables


10



12,107



5,666



13,243Inventories


11



67,102







Real estate held for sale






12,480







Contract deposits, prepaid and other


12



20,847



774



1,008Current assets of discontinued operations


4







681,049



647,594Total current assets






560,471



736,747



704,010Non-current AssetsNote receivable


13







1,672



Investment in preferred shares of former subsidiaries


13











19,125Securities


14



7,262







Equity method investments


15



5,713







Investment property


16



38,584







Property, plant and equipment


17



4,202



152



186Interests in resource properties


18



231,297



191,488



200,000Deferred income tax assets


19



6,727



12,115



5,571Non-current assets of discontinued operations


4







9,546



7,693Total non-current assets






293,785



214,973



232,575$
854,256


$
951,720


$
936,585LIABILITIES AND EQUITYCurrent LiabilitiesShort-term bank borrowings


20


$
69,979


$



$
Debt, current portion


21



4,144







Account payables and accrued expenses


22



47,130



6,022



7,903Provisions


23



362







Income tax liabilities






3,803



278



125Deferred sale liabilities


11



23,133







Current liabilities relating to discontinued operations


4







359,626



419,583Total current liabilities






148,551



365,926



427,611Long-term LiabilitiesDebt, less current portion


21



48,604







Provisions


23



232







51,133Deferred income tax liabilities


19



64,436



48,664



Deferred sale liabilities


11



39,993







Long-term liabilities relating to discontinued operations


4







96,038



68,212Total long-term liabilities






153,265



144,702



119,345Total liabilities






301,816



510,628



546,956EquityCapital stock


24



381,673



141,604



143,826Treasury stock


24



(67,501
)


(83,334
)


(93,793
)Contributed surplus






5,775



7,232



7,623Retained earnings






213,519



354,334



328,264Accumulated other comprehensive income






14,290



15,853



Total shareholders equity






547,756



435,689



385,920Non-controlling interests






4,684



5,403



3,709Total equity






552,440



441,092



389,629$
854,256


$
951,720


$
936,585    62




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)CONSOLIDATED STATEMENTS OF
    OPERATIONS For the Years Ended December 31,
    2010 and 2009
    (United States Dollars in Thousands, Except Earnings per
    Share)
  Notes


2010


2009Net sales


5&26


$
84,476


$
14,718Equity income


5&15



954



Gross revenues






85,430



14,718Costs and Expenses:Costs of sales


26



49,352



8,525Selling, general and administrative






18,316



16,474Share-based compensation (recovery)  selling, general
    and administrative


25



72



(2,713
)Interest


30



974



477Loss on derivative contracts






2,010



70,724



22,76314,706



(8,045
)Other items:Currency transaction loss, net






(3,608
)


(3,208
)Loss on settlement of investment in preferred shares of former
    subsidiaries


13







(9,538
)Negative goodwill


3



41,058



Income (loss) before income taxes






52,156



(20,791
)Income tax (expense) recovery:Income taxes


27



(231
)


7,510Resource property revenue taxes


27



(6,744
)


(3,039
)(6,975
)


4,471Income (loss) from continuing operations






45,181



(16,320
)Income (loss) from discontinued operations


4



(15,449
)


54,042Net income for the year






29,732



37,722Less: Net (income) loss attributable to non-controlling interests






584



(1,050
)Net income attributable to owners of the parent company





$
30,316


$
36,672Consisting of:  Continuing operations





$
45,839


$
(16,320
)Discontinued operations


4



(15,523
)


52,992$
30,316


$
36,672Basic earnings (loss) per
    share:    Continuing operations





$
1.28


$
(0.54
)Discontinued operations






(0.43
)


1.75$
0.85


$
1.21Diluted earnings (loss) per
    share    Continuing operations





$
1.28


$
(0.54
)Discontinued operations





$
(0.43
)


1.75$
0.85


$
1.21Weighted average number of common shares outstanding basic


28



35,857,873



30,354,207 diluted


28



35,858,911



30,354,207    63




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)CONSOLIDATED STATEMENTS OF
    COMPREHENSIVE INCOMEFor the Years Ended December 31, 2010 and
    2009
    (United States Dollars in Thousands)
  2010


2009Net income for the year

$
29,732


$
37,722Other comprehensive income (loss), net of taxUnrealized gains and losses on translating financial statements
    of self-sustaining foreign operations and adjustments from the
    application of U.S. dollar reporting


(7,810
)


16,916Reclassification adjustment for translation gains and losses to
    income statements for subsidiaries deconsolidated


3,928



Fair value gain on
    available-for-sale
    securities


10,313



Reclassification of fair value gain on
    available-for-sale
    securities to statements of operations for securities distributed


(8,322
)


Other comprehensive income (loss)


(1,891
)


16,916Comprehensive income for the year


27,841


$
54,638Less: comprehensive (income) loss attributable to
    non-controlling interests


(912
)


2,113Comprehensive income attributable to owners of the parent company

$
28,753


$
52,525Consisting of:  Continuing operations

$
52,069


$
(2,288
)Discontinued operations


(23,316
)


54,813$
28,753


$
52,525    64




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)CONSOLIDATED STATEMENTS OF CHANGES
    IN EQUITYFor the Years Ended December 31, 2010 and
    2009
    (United States Dollars in Thousands)
  Accumulated OtherComprehensive IncomeCapital Stock


Treasury Stock








Available-


Currency


Total


Non-Number of





Number of





Contributed


Retained


for-Sale


Translation


Shareholders


controlling


TotalShares


Amount


Shares


Amount


Surplus


Earnings


Securities


Adjustment


Equity


Interests


EquityBalance at January 1, 2009


36,135,528


$
143,826



(5,612,883
)

$
(93,793
)

$
7,623


$
328,264


$



$



$
385,920


$
3,709


$
389,629Net income






















36,672











36,672



1,050



37,722Settlement with an affiliate










(262,734
)


(2,365
)


















(2,365
)






(2,365
)Cancellation of treasury stock


(558,373
)


(2,222
)


558,373



12,824







(10,602
)


















Purchase of shares in a subsidiary






































(419
)


(419
)Stock-based compensation


















(391
)














(391
)






(391
)Translation adjustment






























15,853



15,853



1,063



16,916Balance at December 31, 2009


35,577,155


$
141,604



(5,317,244
)

$
(83,334
)

$
7,232


$
354,334


$



$
15,853


$
435,689


$
5,403


$
441,092Net income






















30,316











30,316



(584
)


29,732Dividend paid






































(1,212
)


(1,212
)Cancellation of treasury stock


(2,174,988
)


(8,676
)


2,174,988



18,459







(9,783
)


















Purchase of shares in a company


41,400



303



























303







303Purchase of shares in a subsidiary






































(12
)


(12
)Distribution of shares in a former subsidiary






















(161,348
)










(161,348
)


(3,930
)


(165,278
)Rights offering


7,571,227



49,549



























49,549







49,549Acquisition of Mass Financial Corp.


24,992,122



198,487



(328,239
)


(2,626
)


















195,861



5,313



201,174Exercise of stock options


25,000



406











(80
)














326







326Stock-based compensation


















(1,377
)














(1,377
)


34



(1,343
)Net change in
    available-for-sale
    securities


























1,991







1,991







1,991Translation adjustment






























(3,554
)


(3,554
)


(328
)


(3,882
)Balance at December 31, 2010


66,031,916


$
381,673



(3,470,495
)

$
(67,501
)

$
5,775


$
213,519


$
1,991


$
12,299


$
547,756


$
4,684


$
552,440   Components
    of Capital Stock
  Common Shares


Class A Common Shares*


Preferred Shares*


Total Capital StockNumber of





Number of





Number of





Number ofShares


Amount


Shares


Amount


Shares


Amount


Shares


AmountBalance at January 1, 2009


36,135,528


$
143,826






$







$




36,135,528


$
143,826Cancellation of treasury stock


(558,373
)


(2,222
)


















(558,373
)


(2,222
)Balance at December 31, 2009


35,577,155



141,604



















35,577,155



141,604Cancellation and re-issuance


(5,317,244
)


(21,210
)


2,174,988



8,676



3,142,256



12,534







Cancellation of treasury stock










(2,174,988
)


(8,676
)










(2,174,988
)


(8,676
)Purchase of shares in subsidiaries


41,400



303



















41,400



303Rights offering


7,571,227



49,549



















7,571,227



49,549Acquisition of Mass Financial Corp.


24,992,122



198,487



















24,992,122



198,487Exercise of stock options


25,000



406



















25,000



406Balance at December 31, 2010


62,889,660


$
369,139






$




3,142,256


$
12,534



66,031,916


$
381,673     *
    
    All the Class A Common Shares and Preferred Shares were and
    are held by the Group as treasury stock.   65




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)CONSOLIDATED STATEMENTS OF CASH
    FLOWSFor the Year Ended December 31, 2010 and
    2009
    (United States Dollars in Thousands)
  2010


2009Cash flows from continuing operating activitiesIncome from continuing operations

$
45,181


$
(16,320
)Adjustments for:Amortization, depreciation and depletion


11,766



8,563Foreign currency transaction (gains) losses, net


3,608



3,208(Gain) loss on short-term securities


171



(324
)Stock-based compensation (recovery)


72



(2,713
)Future income taxes


(1,447
)


(7,598
)Equity income


(954
)


Market value increment on commodity inventories


(1,982
)


Negative goodwill


(41,058
)


Loss on settlement of investment in preferred shares of former
    subsidiaries






9,538Changes in operating assets and liabilities, net of effects of
    acquisitions and dispositionsShort-term securities


(395
)


Restricted cash


723



Receivables


4,380



(958
)Inventories


(4,403
)


Contract deposits, prepaid and other


7,334



371Short-term bank borrowings


(4,893
)


Accounts payable and accrued expenses


23,755



(1,692
)Income tax liabilities


318



129Provisions


(73
)


Other


1,795



175Cash flows (used in) provided by continuing operating activities


43,898



(7,621
)Cash flows from continuing investing activitiesPurchases of property, plant and equipment, net


(1,111
)


(6
)Purchases of long-term investments


(1,338
)


Proceeds from sales of long-term investments


13,519



Settlement of investment in preferred shares of former
    subsidiaries






6,195Increase in loan receivables


(9,715
)


Decrease in loan receivables


8,000



Acquisition of a subsidiary (net of cash acquired)


213,850



Other


981



Cash flows provided by continuing investing activities


224,186



6,189Cash flows from continuing financing activitiesDebt repayment


(813
)


Issuance of shares


48,224



Dividend paid to non-controlling interests


(1,212
)


Cash flows provided by continuing financing activities


46,199



Cash flows used in discontinued operating activities


(15,671
)


(2,227
)Cash flows (used in) provided by discontinued investing
    activities


(286,375
)


1,095Cash flows used in discontinued financing activities


(10,329
)


Exchange rate effect on cash and cash equivalents


(24,762
)


14,028Change in cash and cash equivalents


(22,854
)


11,464Cash and cash equivalents, beginning of year


420,551



409,087Cash and cash equivalents, end of year

$
397,697


$
420,551Cash and cash equivalents at end of year consisted of:Cash

$
219,109


$
406,219Money market and highly liquid funds


178,588



14,332$
397,697


$
420,551Continuing operations

$
397,697


$
38,046Discontinued operations






382,505$
397,697


$
420,551Supplemental cash flows disclosure (see Note 32).    66




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    DECEMBER 31, 2010
  Note 1.
    Nature of
    Business and Summary of Significant Accounting
    Policies        A.
    Basis of
    Presentation  First-time Adoption of International Financial
    Reporting Standards
  
    provided comparative financial information;
    applied the same accounting policies throughout all periods
    presented;
    retrospectively applied all effective IFRS as of
    December 31, 2010, as required; and
    applied certain optional exemptions and certain mandatory
    exceptions as applicable for first time IFRS adopters.  line-by-line
      Principles
    of Consolidation
   67




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Interest in a special interest entity
    (SPE) Consolidation  Special Purpose Entities.
  Interests in joint ventures
          Interests in associates
  Foreign
    Currency Translation
       68




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          CDN

EUR

RMBClosing rate at December 31, 2010


1.0054



1.3390



0.1517Average rate for the year 2010


0.9710



1.3264



0.1477Closing rate at December 31, 2009


0.9555



1.4332



0.1465Average rate for the year 2009


0.8757



1.3884



0.1464   Use
    of Estimates and Assumptions and Measurement
    Uncertainty
    B.
    Significant
    Accounting Policies  (i)  Financial
    Instruments
  and/or held-to-maturity, available-for-sale;
   69




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Available-for-sale held-to-maturity
      (a) held-to-maturity
    available-for-sale
      (a)
    quoted prices (unadjusted) in active markets for identical
    assets or liabilities (Level 1);  (b)
    inputs other than quoted prices included in Level 1 that
    are observable for the asset or liability, either directly
    (i.e., as prices) or indirectly (i.e., derived from prices)
    (Level 2); and  (c)
    inputs for the asset or liability that are not based on
    observable market data (unobservable inputs) (Level 3).   70




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  held-for-trading
  (ii)  Cash
    and Cash Equivalents
    (iii)  Restricted
    Cash
    (iv)  Securities
  available-for-sale
    Available-for-sale available-for-sale available-for-sale available-for-sale available-for-sale
    (v)  Receivables
  available-for-sale.
    (vi)  Allowance
    for Credit Losses
   71




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (vii)  Derivative
    Financial Instruments
  Financial Instruments: Recognition and Measurement,
                  (viii)  Inventories
  work-in-progress,
 72




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (ix)  Properties
    for Sale
      (x)  Investment
    Property
    Investment Property
  (xi)  Property,
    Plant and Equipment
      Lives

MethodBuildings (including leasehold improvement)


up to 25 years



straight-lineProcessing plant equipment


3 to 20 years



straight-lineOffice equipment


3 to 10 years



straight-line  73




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          (xii)  Interests
    in Resource Properties
    (xiii)  Impairment
    of Property, Plant and Equipment
      (xiv)  Decommissioning
   74




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (xv)  Provisions
    and Contingencies
      (xvi)  Own
    Equity Instruments
    (xvii)  Revenue
    Recognition
         75




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (xviii)  Costs
    of Sales
    available-for-sale
  (xix)  Employee
    Benefits
    (xx)  Share-Based
    Compensation
        (xxi)  Research
    (xxii)  Finance
    Costs
   76




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (xxiii)  Income
    Taxes
      
    except where the deferred tax liability arises on goodwill that
    is not tax deductible or the initial recognition of an asset or
    liability in a transaction that is not a business combination
    and, at the time of the transaction, affects neither the
    accounting profit nor taxable profit or loss.
    in respect of taxable temporary differences associated with
    investments in subsidiaries, joint ventures and associates,
    except where the Group is able to control the timing of the
    reversal of the temporary differences and it is probable that
    the temporary differences will not reverse in the foreseeable
    future.    
    except where the deferred income tax asset relating to the
    deductible temporary difference arises from the initial
    recognition of an asset or liability in a transaction that is
    not a business combination and, at the time of the transaction,
    affects neither the accounting profit nor taxable profit or loss.
    in respect of deductible temporary differences associated with
    investments in subsidiaries, joint ventures and associates,
    deferred tax assets are recognized only to the extent that it is
    probable that the temporary differences will reverse in the
    foreseeable future and taxable profit will be available against
    which the temporary differences can be utilized.       77




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      (xxiv)  Earnings
    Per Share
        C.
    Major
    Sources of Estimation Uncertainty    (i)  Recoverable
    Value of Receivables
    (ii)  Provison
    for inventories
    (iii)  Impairment
    of Property, Plant and
    Equipment
   78




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (iv)  Impairment
    of Equity Method Investments
    (v)  Taxation
          D.
    Recent
    Accounting Standards and Amendments not yet Adopted  and/or
  Financial Instruments, Financial Instruments: Recognition and Measurement,
  Disclosures  Transfers of
    Financial Assets, Financial
    Instruments,
 79




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Deferred Tax: Recovery of Underlying
    Assets, Income Taxes. Investment Property
  Related Party Disclosures,
  Note 2.
    Capital
    Disclosure on the Groups Objectives, Policies and
    Processes for Managing Its Capital Structure      debt-to-adjusted debt-to-equity debt-to-adjusted debt-to-equity
  2010


2009Total debt

$
52,748


$
Less: cash and cash equivalents


(397,697
)


(38,046
)Net debt (net cash and cash equivalents)

$
(344,949
)

$
(38,046
)Shareholders equity

$
547,756


$
435,689Debt-to-adjusted
    capital ratio


Not applicable



Not applicable   debt-to-adjusted
  2010


2009Long-term debt

$
48,604


$
Shareholders equity

$
547,756


$
435,689Long-term
    debt-to-equity
    ratio


0.09



   debt-to-adjusted debt-to-equity
 80




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  debt-to-equity
  Note 3.
    Acquisitions
    of Subsidiaries  Year
    2010
           81




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Cash

$
213,850Receivables, net


23,040Other current assets


131,371Property, plant and equipment


3,840Interest in resource property


51,000Treasury stock


2,626Other non-current assets


67,362Current liabilities


(128,444
)Non-current liabilities


(108,747
)Non-controlling interests


(5,313
)Total identifiable net assets acquired

$
250,585Total consideration transferred

$
209,527Negative goodwill


41,058$
250,585           (Unaudited)Revenues

$
379,695Net income


29,307Net income attributable to equity shareholders


28,619   Year
    2009
   82




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 4.
    Discontinued
    Operations  2010 
    KID
          ,
 83




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Cash

$
285,739Other assets


237,561Liabilities


(356,720
)Non-controlling interests


(3,930
)Net identifiable net assets

$
162,650             2009 
    Workshop and Coal and Minerals Customer Groups (part of
    KID)
   84




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2010


2009Sale revenues

$
101,585


$
576,408Other revenues


1,765



10,895Expenses


(101,435
)


(510,448
)Gain on sale (included in income before income taxes)






5,254Income before income taxes


1,915



82,109Income taxes


17,364



28,067Net income (loss)


(15,449
)


54,042Non-controlling interests


(74
)


(1,050
)Net income (loss) attributable to equity shareholders

$
(15,523
)

$
52,992   Note 5.
    Business
    Segment Information      Basis
    of Presentation
       85




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Products
    and Services
    2010


2009Commodities and resources

$
74,608


$
13,530Fees


2,602



Gains on securities


402



324Interest


2,792



435Dividend


467



1954



Other


3,605



428Total revenues

$
85,430


$
14,718     Segment
    Operating Results
  Year ended December 31, 2010Commodities


Proprietaryand resources


Investing


All other


TotalRevenues from external customers

$
76,478


$
4,821


$
4,131


$
85,430Intersegment sale


37



978







1,015Interest expenseExternal


909



9



56



974Internal










252



252Income (loss) from continuing operations before income taxes


23,901



44,206



(15,951
)


52,156   86




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Year ended December 31, 2009Commodities


Proprietaryand resources


Investing


All other


TotalRevenues from external customers

$
13,530


$



$
1,188


$
14,718Interest expenseExternal










477



477Internal










52



52Income (loss) from continuing operations before income taxes


3,148







(23,939
)


(20,791
)   As at December 31, 2010Commodities


Proprietaryand resources


Investing


All other


TotalSegment assets

$
409,146


$
418,490


$
26,620


$
854,256Equity method investments










5,713



5,713   As at December 31, 2009Commodities


Proprietaryand resources


Investing


All other


TotalSegment assets

$
196,273


$



$
64,852


$
261,125Add: assets of discontinued operations














690,595Consolidated total assets













$
951,720   As at December 31, 2010Commodities


Proprietaryand resources


Investing


All other


TotalSegment liabilities

$
252,897


$
44,082


$
4,837


$
301,816   As at December 31, 2009Commodities


Proprietaryand resources


Investing


All other


TotalSegment liabilities

$
50,196


$



$
4,768


$
54,964Add: liabilities relating to discontinued operations














455,664Consolidated total liabilities













$
510,628   Geographic
    Information
   87




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Segment

Basis for attributing revenuesCommodities and resources

Locations of external customersMerchant banking

Locations of clients, assets or the reporting units, whichever
    is appropriateAll other segments

Locations of the reporting units     2010


2009Canada

$
33,303


$
13,567Africa


1,508



Americas


6,277



407Asia


7,735



617Europe


36,607



127$
85,430


$
14,718         2010


2009Canada

$
182,192


$
191,640Asia


50,879



Europe


41,012



$
274,083


$
191,640     Note 6.
    Securities  Short-term
    securities
  2010


2009Trading securities:Common shares, at fair value

$
25,145


$
11,212Available-for-sale
    security:Common shares, at fair value (see Note 30)


2,733



Investment in a private company, at cost


16



$
27,894


$
11,212  88




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  available-for-sale
    Note 7.
    Restricted
    Cash  2010


2009Cash pledged with a bank in connection with sales of securities

$
125


$
Cash deposit with a bank in connection with currency derivative
    contracts


2,822



Bank accounts temporarily restricted pursuant to court orders


431



Other


86



$
3,464


$
     Note 8.
    Loan
    Receivable  2010


2009Loans to an affiliate under a credit facility of $20,000,
    interest at London Inter-Bank Offered Rate (LIBOR)
    plus 3.5% per annum (4.38% at December 31, 2010) and
    payable monthly, collateralized by a charge on all the
    borrowers undertaking, goodwill and other assets and
    property, ranking only behind the charges created in favour of
    the purchaser under a forward sales agreement. The credit
    facility is to expire in December 2011 and may be extended for
    one additional term of up to six months at the option of the
    Group

$
5,792


$
Total  current

$
5,792


$
     Note 9.
    Trade
    Receivables  2010


2009Trade receivables, gross amount

$
13,789


$
Less: Allowance for credit losses


(701
)


Trade receivables, net amount

$
13,088


$
      89




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Past-Due

2010


2009Below 30 days

$
1,170


$
Between 31 and 60 days


537



Between 61 and 90 days


354



Between 91 and 365 days


131



Over 365 days


253



$
2,445


$
   and/or
  Past-Due

2010


2009Below 30 days

$
3


$
Between 31 and 60 days


8



Between 61 and 90 days


4



Between 91 and 365 days


48



Over 365 days


1,438



$
1,501


$
     2010


2009Balance, beginning of the year

$



$
Additions


698



Reversals






Write-offs






Cumulative translation adjustment


3



Balance, end of the year

$
701


$
    90




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 10.
    Other
    Receivables  2010


2009Investment income (of which $nil and $43 were due from
    affiliates at December 31, 2010 and 2009, respectively)

$
827


$
43Government taxes (primarily value-added and
    goods-and-services
    taxes)


2,997



168Due from affiliates


8



Royalty income from an interest in resource property


5,650



4,584Employees


25



Derivative assets


12



Other


2,588



871$
12,107


$
5,666       Note 11.
    Inventories  2010


2009Raw materials

$
6,467


$
Work-in-progress


10,842



Finished goods


4,968



Commodity inventories (including
    goods-in-transit
    of $30,603)


44,825



$
67,102


$
       Note 12.
    Contract
    Deposits, Prepaid and Other  2010


2009Prepayments and deposits for inventories (of which $16,942 was
    prepaid to an affiliate)

$
18,657


$
Taxes on stockpile


325



201Prepaid, deposits and other


1,865



573$
20,847


$
774  91




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##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 13.
    Note
    Receivable  2010


2009Note receivable from a former subsidiary (CDN$ nil and CDN$1,750
    at December 31, 2010 and 2009, respectively)

$



$
1,672     Note 14.
    Long-term
    securities  2010


2009Available-for-sale
    securities:Publicly-traded

$
7,235


$
Unlisted


27



$
7,262


$
   available-for-sale available-for-sale
 92




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 15.
    Equity
    method investments    2010Joint ventures

$
5,534Other


179$
5,713   Joint
    ventures
    Proportion ofOwnershipJoint ventures

InterestZhejiang University No. 2 Hospital Hangzhou Eye Center


55
%Chongqing Lasernet Guangji Eye Hospital (incorporated)


58
%Chongqing Fuling Lasernet Eye Center


65
%Sichuan Suining Lasernet Eye Center


40
%     2010Current assets

$
3,901Long-term assets


3,7957,696Liabilities


(2,162
)Net

$
5,534Income

$
1,918Expenses


(964
)Net

$
954      93




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 16.
    Investment
    property    2010Balance at beginning of the year

$
Acquired through business combination


39,405Additions


Change of fair value during the year


(294
)Cumulative translation adjustment


(527
)Balance at end of the year

$
38,584       2010Rental income

$
194Direct operating expenses (including repairs and maintenance)
    from investment property that generated rental income during the
    period


109       Note 17.
    Property,
    Plant and Equipment    Acquisition








CumulativeOpening


through








translation


EndingHistorical costs

balance


consolidation


Additions


Divestiture


adjustments


balanceLand and building

$



$
384


$
50


$



$
6


$
440Processing plant and equipment






2,457



164







(66
)


2,555Office equipment


964



999



303



(110
)


38



2,194$
964


$
3,840


$
517


$
(110
)

$
(22
)

$
5,189   Acquisition








CumulativeOpening


through








translation


EndingAccumulated depreciation

balance


consolidation


Additions


Divestiture


adjustments


balanceLand and building

$



$



$
17


$



$
2


$
19Processing plant and equipment










121







(42
)


79Office equipment


812







128



(82
)


31



889$
812


$



$
266


$
(82
)

$
(9
)

$
987Net book value

$
152


















$
4,202  94




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    CumulativeOpening








translation


EndingOffice equipment

balance


Additions


Divestiture


adjustments


balanceHistorical costs

$
839


$
7


$
(23
)

$
141


$
964Accumulated depreciation


(652
)


(52
)


9



(117
)


(812
)Net book value

$
187














$
152   Note 18.
    Interests
    in Resource Properties    2010


2009Interest in an iron ore mine in Newfoundland and Labrador, Canada

$
181,772


$
191,488Interest in an iron ore extracting facility in Goa, India


49,525



Total

$
231,297


$
191,488   Newfoundland
    and Labrador, Canada
    Goa,
    India
            Acquisition





CumulativeOpening


through





translation


EndingHistorical costs

balance


consolidation


Additions


adjustments


balanceInterest in iron ore mine in Canada

$
200,000


$



$
303


$



$
200,303Interest in iron ore extracting facility in India






51,001







26



51,027$
200,000


$
51,001


$
303


$
26


$
251,330   95




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Acquisition





CumulativeOpening


through





translation


EndingAccumulated depletion

balance


consolidation


Additions


adjustments


balanceInterest in iron ore mine in Canada

$
8,512


$



$
10,019


$



$
18,531Interest in iron ore extracting facility in India










1,481



21



1,502$
8,512


$



$
11,500


$
21


$
20,033Net book value

$
191,488














$
231,297     Opening





EndingInterest in iron ore mine in Newfoundland and Labrador,
    Canada

balance


Additions


balanceHistorical costs

$
200,000






$
200,000Accumulated depletion






(8,512
)


(8,512
)Net book value

$
200,000






$
191,488   Note 19.
    Deferred
    Income Tax Assets and Liabilities    2010


2009Non-capital tax loss carry-forwards

$
5,639


$
11,004Interest in resource property


(62,531
)


(48,664
)Other assets


1,512



1,160Other liabilities


(2,329
)


(49
)$
(57,709
)

$
(36,549
)Deferred income tax assets and liabilities are included in the
    consolidated statement of financial position as follows:Deferred income tax assets

$
6,727


$
12,115Deferred income tax liabilities


(64,436
)


(48,664
)Net future income tax liabilities

$
(57,709
)

$
(36,549
)     Country

Amount


Expiration datesCanada

$
52,163


2021-2030Germany


543


IndefiniteSwitzerland


2,373


2014-2017China


101


2014US


20,662


2011-2030Austria


11,946


IndefiniteIndia


63,573


2013-2018  96




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 20.
    Short-term
    Bank Borrowings    Short-term
    bank borrowings
 2010


2009Credit facilities from banks

$
69,979


$
$
69,979


$
     Note 21.
    Debt  2010


2009Due to a bank, 14,350 at December 31, 2010, interest
    fixed at Austrias Oesterreichische Kontrollbank
    Aktiengesellschaft (OeKB) financing rate of 3.7% per
    annum and payable quarterly, secured by a guarantee of the
    Republic of Austria and due in January 2012

$
19,215


$
Due to a bank, 1,172 at December 31, 2010, interest
    fixed at 4.05% per annum and payable quarterly, secured by a
    charge on land and due in quarterly payments with a balloon
    final payment in March 2013


1,569



Due to a bank, 4,070 at December 31, 2010, interest
    at interbank rate plus an interest margin (2.7% at
    December 31, 2010) and payable quarterly and due in
    2011 to 2012


5,450



Due to a bank, 3,000 at December 31, 2010, interest
    at interbank rate plus an interest margin (2.1% at
    December 31, 2010) and payable monthly and due in
    December 2012


4,017Due to a bank, 4,800 at December 31, 2010, interest
    at Austrias OeKB financing rate plus an interest margin
    (2.8% at December 31, 2010) and payable quarterly,
    secured by a guarantee of the Republic of Austria and due in
    2011 to 2014 in four equal instalments


6,428Due to a bank, 12,000 at December 31, 2010, interest
    fixed at OeKBs financing rates between 4.6% and 4.9% per
    annum and payable quarterly, secured by a guarantee of the
    Republic of Austria and due in 2013


16,069



$
52,748


$
Current portion

$
4,144


$
Long-term portion


48,604



$
52,748


$
  97




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Maturity

Principal


Interest


Total2011

$
4,144


$
1,841


$
5,9852012


27,845



1,076



28,9212013


19,152



585



19,7372014


1,607



33



1,640$
52,748


$
3,535


$
56,283     Note 22.
    Accounts
    Payable and Accrued Expenses  2010


2009Trade and accounts payables

$
35,536


$
3,496Value-added,
    goods-and-sales
    and other taxes (other than income taxes)


3,023



983Affiliates


524



1,522Compensation


2,060



Interest


42



21Derivative liabilities


5,821



Short-sale


124



$
47,130


$
6,022   day-to-day
  Note 23.
    Provisions  Termination ofoffice lease


Warranty


TotalAcquisitions through business combination

$
500


$
144


$
644Additions










Paid


(21
)






(21
)Reversal






(31
)


(31
)Cumulative translation adjustment






2



2Balance, December 31, 2010

$
479


$
115


$
594Current portion









$
362Long-term portion










232$
594    98




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 24.
    Share
    Capital    winding-up
      Note 25.
    Share-Based
    Compensation    1997
    Stock Option Plan (Amended)
    2008
    Equity Incentive Plan
   99




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008 Plan


2008 Plan


1997 Plan


1997 PlanWeighted





WeightedAverage





AverageNumber of


Exercise Price


Number of


Exercise PriceAwards


Per Share


Options


Per ShareOutstanding at December 31, 2008










1,579,720



24.96Cancelled by agreements










(72,500
)


31.16Forfeited










(1,065,556
)


23.74Outstanding at December 31, 2009










441,664



26.89Exercised










(25,000
)


13.06Forfeited










(416,664
)


27.72Outstanding at December 31, 2010














As at December 31, 2010


Options granted and exercised










3,791,656Options available for granting in the future periods


1,500,000







1,732,344         2010


2009Stock-based compensation recovery (expenses) arising from
    options granted by:Terra Nova

$
1,415


$
391A Canadian non-wholly owned subsidiary


(72
)


Total

$
1,343


$
391As allocated to:Continuing operations

$
(72
)

$
2,713Discontinued operations


1,415



(2,322
)Total

$
1,343


$
391     Note 26.
    Consolidated
    Statements of Operations  Revenues
  2010


2009Gross revenues as reported

$
85,430


$
14,718    100




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2010


2009Realized gain on
    available-for-sale
    securities

$
568


$
Holding gains on advance sales of securities


4



Collection of underpayment of resource property royalty from
    prior years


11,219



Market value increment on commodities


1,982



   Expenses
    2010


2009Commodities and resources

$
35,975


$
Depletion of Wabush resource property


10,019



8,512Loss on dispositions of subsidiaries


834



Credit losses on loans and receivables


795



Revaluation adjustment on investment property


294



Revaluation adjustment on properties for sale


241



Other


1,194



13Total costs of sales

$
49,352


$
8,525     2010


2009Inventories as costs of goods sold

$
34,647


$
Write-down of inventories


88



   Additional
    information on the nature of expenses
  2010


2009Depreciation, amortization and depletion

$
11,766


$
8,563Employee benefits expenses


3,758



2,759   Note 27.
    Income
    Taxes   101




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2010


2009Income (loss) before income taxes from continuing operations

$
52,156


$
(20,791
)Computed recovery of (provision for) income taxes at Terra
    Novas statutory rates

$
(14,865
)

$
6,030(Increase) decrease in taxes resulting from:Foreign tax rate differences


374



(155
)Non-taxable negative goodwill


11,702



Other non-taxable income


926



7Stock-based compensation


(19
)


807Net tax reductions unrecognized in prior years


1,352



3,112Resource property revenue taxes


(6,744
)


(3,039
)Unrecognized losses in current year


(363
)


Permanent differences


135



487Reduction in future tax rate


34



(330
)Loss on investment in preferred shares of former subsidiaries






(2,828
)Other, net


493



380Recovery of (provision for) income taxes

$
(6,975
)

$
4,471Consisting of:Resource property revenue taxes

$
(6,744
)

$
(3,039
)Other income tax expense (recovery)


(231
)


7,510$
(6,975
)

$
4,471       Income
    Tax Act
  Note 28.
    Earnings
    (Loss) Per Share    2010


2009Basic earnings (loss) from continuing operations available to
    holders of common shares

$
45,839


$
(16,320
)Effect of dilutive securities:






Diluted earnings (loss) from continuing operations

$
45,839


$
(16,320
)   102




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Number of Shares2010


2009Weighted average number of common shares outstanding 
    basic


35,857,873



30,354,207Effect of dilutive securities:Options


1,038



Weighted average number of common shares outstanding 
    diluted


35,858,911



30,354,207       Note 29.
    Commitments
    and Contingencies  Leases
    as lessors
      Year

Amount2011

$
2,0982012


9602013


2472014


352015


21Thereafter


$
3,361     Leases
    as lessees
    Year

Amount2011

$
2,0772012


1,5702013


1,0112014


7632015


708Thereafter


12$
6,141  103




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Litigation
    Guarantees
        Loan
    Commitment
    Purchase
    Obligations
   104




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 30.
    Financial
    Instruments    2010


2009Carrying


Fair


Carrying


FairAmount


Value


Amount


ValueFinancial Assets:Fair value through profit or loss:Cash and cash equivalents (including short-term cash deposits
    and restricted cash)

$
401,161


$
401,161


$
38,046


$
38,046Short-term securities


25,145



25,145



11,212



11,212Derivative assets


12



12







Loans and receivables:Receivables*


27,978



27,978



5,498



5,498Available-for-sale
    instruments:Securities, at market value


9,968



9,968







Available-for-sale
    instruments that do no have a quoted market price in an active
    market:Securities, unlisted


43



43







Total

$
464,307


$
464,307


$
54,756


$
54,756Financial Liabilities:Other financial liabilities:Short-term borrowings

$
69,979


$
69,979


$



$
Accounts payable and accrued expenses and provisions*


38,765



38,765



5,039



5,039Debt


52,748



53,399







Held for trading:Derivative liabilities


5,821



5,821







Total

$
167,313


$
167,964


$
5,039


$
5,039     *
    
    not including derivative financial instruments    available-for-sale
 105




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
    As at December 31, 2010

Level 1


Level 2


Level 3


TotalFinancial Assets:Held for trading:Short-term securities

$
25,145


$



$



$
25,145Derivative assets






12







12Available-for-sale
    securities


9,968











9,968Total

$
35,113


$
12


$



$
35,125Financial Liabilities:Held for trading:Derivative liabilities

$



$
5,821


$



$
5,821   As at December 31, 2009

Level 1


Level 2


Level 3


TotalFinancial Assets:Held for trading:Short-term securities

$
11,212


$







$
11,212Total

$
11,212


$



$



$
11,212Financial Liabilities:Held for trading:Derivative liabilities

$



$



$



$
   Movement of Level 3 of fair value hierarchy:

2010


2009Opening balance

$



$
19,125Settlement (see Note 13)






(19,125
)Additions (see Note 4)


162,958



Distributions to shareholders (see Note 4)


(161,348
)


Reclassification to Level 1 of fair value hierarchy (see
    Notes 4 and 6)


(1,610
)


Ending balance

$



$
    106




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          RisksMarket RisksFinancial Instrument

Credit

Liquidity

Currency

Interest Rate

Other PriceCash and cash equivalents, short-term cash deposits and
    restricted cash


X







X



XShort-term securities










X







XLong-term securities






X



X







XDerivative assets and liabilities


X



X



X







XReceivables


X







XShort-term bank borrowings






X



X



XAccounts payable and accrued expenses






X



XProvisions














XLong-term debt






X







X     Interest
    rate risk
    Sensitivity
    analysis:
   107




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Credit
    risk
  and/or
  60-90 days.
    Amounts recognized on the consolidated statement of financial
    position:Cash and cash equivalents and restricted cash

$
401,161Derivative assets


12Loans and receivables


27,978429,151Amount of credit facility committed but not drawn (see
    Note 29)


14,208Guarantee (see Note 29)


44,965Maximum credit risk exposure

$
488,324     Currency
    risk
   108




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Sensitivity
    analysis:
      Other
    price risk
  available-for-sale
  Sensitivity
    analysis:
        Sensitivity
    analysis:
    Liquidity
    risk
   109




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Cash
    flow risk
    Concentration
    risk
      Additional
    disclosure
    2010


2009Interest income on financial assets not at fair value through
    profit and loss

$
2,044


$
309Interest income on financial assets classified at fair value
    through profit and loss


748



126Total interest income

$
2,792


$
435Interest expense on financial liabilities not at fair value
    through profit and loss

$
(397
)

$
(473
)Interest expense on financial liabilities classified at fair
    value through profit and loss


(577
)


(4
)Total interest expense

$
(974
)

$
(477
)Dividend income on financial assets at fair value through profit
    and loss

$
467


$
1Dividend income on financial assets classified as available for
    sale*


193



280Net gain (loss) on financial assets at fair value through profit
    and loss


(170
)


324 including change in fair value of the trading
    securities


3,346



324Credit losses


795



     *
    
    included in income from interest in resource property 110




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 31.
    Related
    Party Transactions  and/or
  Continuing
    operations
  2010


2009Dividend income on common shares*

$
193


$
280Royalty expense paid and payable*


(800
)


(614
)Fee income


3



Purchases of goods


(1,856
)


Fee expense for managing resource property


(1,575
)


(839
)Fee expense for management services, including expense
    reimbursements


(333
)


(3,069
)Interest income


44



309Interest expense






(447
)     *
    
    included in income from interest in resource property  Discontinued
    Operations
  2010

2009Fee income

$



$
494Fee expense for management services, including expense
    reimbursements


(127
)


(990
)       Key
    management personnel
    Year Ended December 31

2010


2009Short-term employee benefits

$
1,277


$
2,247Post-employment benefits






44Other long term benefits






Termination benefits


784



Share-based payments






Directors fees


203



451  111




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Note 32.
    Consolidated
    Statements of Cash Flows  Supplemental
    Disclosure    2010


2009Interest income

$
2,277


$
126Dividend income


466



281Interest expense


(463
)


(478
)Income taxes


(9,647
)


(3,039
)         Note 33.
    Terra
    Nova and its Significant Subsidiaries   112




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Proportion ofSubsidiaries

Country of Incorporation

Ownership InterestTTT Acquisition Corp.

Barbados


100
%MFC Commodities GmbH

Austria


100
%MFC Trade & Financial Service GmbH

Austria


100
%IC Management Service GmbH

Austria


100
%Global Bulk Transport GmbH

Austria


100
%International Trade Service GmbH

Austria


100
%Magnum Minerals Private Limited

India


100
%AFM Aluminiumfolie Merseberg GmbH

Germany


55
%MAW Mansfelder Alumiumwerk GmbH

Germany


55
%MFC(A) Ltd.

Marshall Islands


100
%MFC(D) Ltd.

Marshall Islands


100
%Brock Metals s.r.o.

Slovakia


100
%MFC Corporate Services AG

Switzerland


100
%Mednet (Shanghai) Medical Technical Developing Co., Ltd.

China


90
%Chongqing Lasernet Guangji Eye Hospital (a limited company)

China


52
%Hangzhou Zhe-er Optical Co. Ltd.

China


46
%MFC Metal Trading GmbH

Austria


100
%MEG International Services Ltd.

Canada


100
%       (a)
    
    The proportion of ownership interest is the same as the
    proportion of voting power held;(b)
    
    Subsidiaries whose results did not, in the opinion of the
    Directors, materially affect the results or net assets of the
    Group are not shown.  Note 34.
    Subsequent
    Events  Stock
    Options
    Dividend
    
    The annual dividend will be based on the annual dividend yield
    of the New York Stock Exchange Composite Index (the NYSE
    Composite Index) for the preceding year plus 25 basis
    points.
    For 2011, an aggregate cash dividend will be $0.20 per common
    share, representing a dividend yield of 2.58 percent.
    The 2011 annual cash dividend will be paid in quarterly
    installments. 113




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    The first payment of $0.05 per common share would be paid on
    January 31, 2011 to shareholders of record on
    January 20, 2011.
    The remaining quarterly dividend payments will be made in each
    of March, June and September, 2011.
    In the future, Terra Nova will announce and declare the cash
    dividend during the first full week of each year.  Note 35.
    Approval
    of Consolidated Financial Statements    Note 36.
    Reconciliation
    of Prior Periods Consolidated Financial
    Statements      Initial
    Elections upon Adoption
    IFRS
    Exemption Options
  Business combinations Business
    Combinations,
  Cumulative translation differences
  Deemed cost
  IFRS
    Mandatory Exceptions
    Estimates
  Reconciliations
    of Canadian GAAP to IFRS
   114




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    January 1, 2009


December 31, 2009Equity in accordance with Canadian GAAPShareholders equity

$
261,914


$
319,788Minority interests


3,709



5,403265,623



325,191Revaluation of interest in resource property, gross


175,139



168,404Deferred tax liability, revaluation of interest in resource
    property


(51,133
)


(48,664
)Reversal of impairment






227Translation loss on interest in resource property






(4,066
)Equity in accordance with IFRS

$
389,629


$
441,092     For the year ended December 31, 2009Total comprehensive income in accordance with Canadian GAAP

$
60,630Additional amortization on interest in resource property, net of
    income taxes


(4,266
)Comprehensive income attributable to non-controlling interest


2,113Reversal of impairment


227Translation loss on interest in resource property


(4,066
)Total comprehensive income in accordance with IFRS

$
54,638     Change
    in Accounting Policies
  (i) Amortization
    method for interest in resource property
  unit-of-production
  (ii) Business
    combinations
   115




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (iii) Income
    taxes
  Canadian GAAP
  IFRS
  (iv) Foreign
    currency translation adjustment
    (v) Reversal
    of impairments
  Canadian GAAP
  IFRS
  Presentation
    Reclassifications
  (i) Deferred
    taxes
  Canadian GAAP
  IFRS
  (ii) Non-controlling
    interests
  Canadian GAAP
  IFRS
  Amended
    Terra Novas Consolidated Financial
    Statements
   116




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Reconciliation of Consolidated Statement of Operations for
    the Year Ended December 31, 2009
  CanadianGAAP


Discontinued


IFRS


IFRS


IFRSCanadian GAAP accounts

balance


Operations


adjustments


reclassifications


balance


IFRS accountsRevenues

$
576,408


$
(576,408
)

$



$
Cost of revenues


(457,847
)


457,847







Reduction in loss on terminated customer contracts


17,829



(17,829
)






Gross profit


136,390



(136,390
)






Income from interest in resource property


13,530














$
13,530


Income from interest in resource  property



(6,735
)


(1,777
)


(8,512
)

Amortization, resource propertySelling, general and administrative expense


(74,796
)


56,545







1,777



(16,474
)

Selling, general and  administrative expenseStock-based compensation  general and administrative


391



2,322











2,713


Share-based compensation   general and
    administrativeRestructuring costs


(9,220
)


9,220







Gain on sale of workshop and related assets


5,254



(5,254
)






Operating income


71,549



(73,557
)


(6,735
)






(8,743
)

Operating lossInterest income


7,043



(6,608
)










435


Interest incomeInterest expense


(2,793
)


2,316











(477
)

Interest expenseForeign currency transaction losses, net


(2,006
)


(1,202
)










(3,208
)

Foreign currency transaction  losses, netShare of loss of equity method investee


(254
)


254







Loss on settlement of investment in preferred shares of former
    subsidiaries


(9,538
)














(9,538
)

Loss on settlement of investment  in preferred shares
    of former subsidiariesOther income, net


3,825



(3,085
)










740


Other income, netIncome before income taxes and minority interests from
    continuing operations


67,826



(81,882
)


(6,735
)






(20,791
)

Loss before income taxes from  continuing operationsProvision for income taxes:





















Income tax recovery:Income taxes


(23,026
)


28,067



2,469







7,510


Income taxes recoveryResource property revenue taxes


(3,039
)














(3,039
)

Resource property revenue taxes(26,065
)


28,067



2,469







4,471Income before minority interests from continuing operations


41,761



(53,815
)


(4,266
)






(16,320
)

Loss from continuing operations53,815



227







54,042


Income from discontinued  operations



(4,039
)






37,722


Net incomeMinority interests


(1,050
)














(1,050
)

Less: net income attributable to  non-controlling
    interestsNet income

$
40,711


$



$
(4,039
)

$



$
36,672


Net income attributable to equity  shareholdersBasic earnings per share

$
1.34














$
1.21


Basic earnings per shareDiluted earnings per share

$
1.34














$
1.21


Diluted earnings per shareWeighted average number of common shares outstanding





















Weighted average number of  common shares outstandingBasic


30,354,207















30,354,207


BasicDiluted


30,354,207















30,354,207


Diluted  117




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Reformat
    of Consolidated Statement of Operations for the Year Ended
    December 31, 2009
    IFRS


Reclassification adjustments


FinalIFRS accounts

balance


Revenues


Expenses


balance


IFRS accounts$



$
14,718


$



$
14,718


RevenuesCosts and expensesIncome from interest in resource property


13,530



(13,530
)


Amortization, resource property


(8,512
)






8,512







(8,525
)


(8,525
)

Costs of salesSelling, general and administrative expense


(16,474
)










(16,474
)

Selling, general and administrative expenseShare-based compensation recovery  selling, general
    and administrative expense


2,713











2,713


Share-based compensation
    recovery  selling,  general and
    administrative expense







(477
)


(477
)

InterestOperating loss


(8,743
)


1,188



(490
)(22,763
)(8,045
)Interest income


435



(435
)


Interest expense


(477
)






477Foreign currency transaction losses, net


(3,208
)










(3,208
)

Currency  transaction loss, netLoss on settlement of investment in preferred shares of former
    subsidiaries


(9,538
)










(9,538
)

Loss on settlement of investment in preferred  shares
    of former subsidiariesOther income, net


740



(753
)


13



Loss before income taxes from continuing operations


(20,791
)










(20,791
)

Loss before income taxes from continuing  operationsIncome tax recovery:

















Income tax recovery:Income taxes


7,510











7,510


Income taxesResource property revenue taxes


(3,039
)










(3,039
)

Resource property revenue taxes4,471











4,471Loss from continuing operations


(16,320
)










(16,320
)

Loss from continuing operationsIncome from discontinued operations


54,042











54,042


Income from discontinued operationsNet income


37,722











37,722


Net incomeLess: net income attributable to non-controlling interests


(1,050
)










(1,050
)

Less: net income attributable to
    non   controlling interestsNet income attributable to equity shareholders

$
36,672


$



$



$
36,672


Net income attributable to equity shareholders  118




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Reconciliation
    of Consolidated Statement of Comprehensive Income for the Year
    Ended December 31, 2009
  CanadianGAAP


IFRS


IFRS


IFRSCanadian GAAP accounts

balance


adjustments


reclassifications


balance


IFRS accountsNet income for the period

$
40,711


$
(4,039
)

$
1,050


$
37,722


Net income for the periodOther comprehensive income, net of tax
    Unrealized gains and losses on translating financial statements
    of self-sustaining foreign operations


19,919



(4,066
)


1,063



16,916


Other comprehensive income, net of tax
      Unrealized gains and losses on
    self-     sustaining foreign operationsOther comprehensive income


19,919



(4,066
)


1,063



16,916


Other comprehensive incomeComprehensive income for the period

$
60,630


$
(8,105
)

$
2,113


$
54,638


Comprehensive income for the periodAttributable to:Comprehensive income for the period

$
60,630


$
(8,105
)

$



$
52,525


Shareholders of common shares of
         Terra Nova Royalty Corporation2,113



2,113


Non-controlling interests$
60,630


$
(8,105
)

$
2,113


$
54,638   Reconciliation
    of Consolidated Statement of Financial Position as of
    December 31, 2009
  CanadianGAAP


Discontinued


IFRS


IFRS


IFRSCanadian GAAP accounts

balance


operations


adjustments


reclassifications


balance


IFRS accountsASSETS





















ASSETSCurrent Assets





















Current AssetsCash and cash equivalents

$
420,551


$
(382,505
)

$



$



$
38,046


Cash and cash equivalentsShort-term deposits


6,916



(6,916
)






Securities


16,432



(5,220
)










11,212


SecuritiesRestricted cash


24,979



(24,979
)






Accounts receivable, trade


96,982



(96,982
)






Other receivables


36,179



(30,513
)










5,666


Other receivablesInventories


80,815



(80,815
)






Contract deposits, prepaid and other


53,893



(53,119
)










774


Contract deposits, prepaid and  otherFuture income tax assets


1,748







(1,748
)


681,049











681,049


Current assets of
    discontinued     operationsTotal current assets


738,495







(1,748
)






736,747


Total current assetsNon-current Assets





















Non-current AssetsNote receivable


1,672















1,672


Note receivableAccounts receivable, trade


4,660



(4,660
)






Property, plant and equipment


2,257



(2,105
)










152


Property, plant and equipmentInterest in resource property


27,150







164,338







191,488


Interest in resource propertyEquity method investments


73



(73
)






Future income tax assets


13,405



(1,290
)










12,115


Deferred tax assetsOther non-current assets


1,191



(1,191
)






9,319



227







9,546


Non-current assets of  discontinued
    operationsTotal non-current assets


50,408







164,565







214,973


Total non-current assets$
788,903


$



$
162,817


$



$
951,720 119




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CanadianGAAP


Discontinued


IFRS


IFRS


IFRSCanadian GAAP accounts

balance


operations


adjustments


reclassifications


balance


IFRS accountsLIABILITIES AND SHAREHOLDERS EQUITY





















LIABILITIES AND EQUITYCurrent Liabilities





















Current LiabilitiesAccounts payable and accrued expenses

$
191,746


$
(185,724
)

$



$



$
6,022


Accounts payable and accrued  expensesProgress billings above costs and estimated earnings on
    uncompleted contracts


77,841



(77,841
)






Advance payments received from customers


26,927



(26,927
)






Income tax liabilities


18,092



(17,814
)










278


Income tax liabilitiesDeferred credit, future income tax assets


1,748







(1,748
)


Accrued pension liabilities, current portion


2,070



(2,070
)






Provision for warranty costs, current portion


28,282



(28,282
)






Provision for supplier commitments on terminated customer
    contracts


12,943



(12,943
)






Provision for restructuring costs


8,025



(8,025
)






359,626











359,626


Current liabilities relating
    to  discontinued operationsTotal current liabilities


367,674







(1,748
)






365,926


Total current liabilitiesLong-term Liabilities





















Long-term LiabilitiesLong-term debt, less current portion


11,649



(11,649
)






Accrued pension liabilities, less current portion


28,861



(28,861
)






Provision for warranty costs, less current portion


25,711



(25,711
)






Future income tax liability


14,210



(14,210
)


48,664







48,664


Deferred tax liabilityOther long-term liabilities


15,607



(15,607
)






96,038











96,038


Long-term liabilities relating to discontinued
    operationsTotal long-term liabilities


96,038







48,664







144,702


Total long-term liabilitiesTotal liabilities


463,712







46,916







510,628


Total liabilitiesMinority interests


5,403











(5,403
)EquityShareholders Equity





















Shareholders equityCommon stock


141,604















141,604


Common stockTreasury stock


(83,334
)














(83,334
)

Treasury stockContributed surplus


7,232















7,232


Contributed surplusRetained earnings


185,790







168,544







354,334


Retained earningsAccumulated other comprehensive income


68,496







(52,643
)






15,853


Accumulated other  comprehensive incomeTotal shareholders equity


319,788







115,901







435,689







5,403



5,403


Non-controlling interests



115,901



5,403



441,092


Total equity$
788,903


$



$
162,817


$



$
951,720  120




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Reconciliation
    of Consolidated Statement of Financial Position as of
    January 1, 2009
  CanadianGAAP











IFRSbalance


Discontinued


IFRS


IFRS


balanceCanadian GAAP accounts

Dec 31, 2008


operations


adjustments


reclassifications


Jan 1, 2009


IFRS accountsASSETS





















ASSETSCurrent Assets





















Current AssetsCash and cash equivalents

$
409,087


$
(366,976
)

$



$



$
42,111


Cash and cash equivalentsSecurities


2,987



(2,933
)










54


SecuritiesRestricted cash


32,008



(32,008
)






Accounts receivable, trade


62,760



(62,760
)






Other receivables


28,313



(15,070
)










13,243


Other receivablesInventories


110,161



(110,161
)






Contract deposits, prepaid and other


58,694



(57,686
)










1,008


Contract deposits, prepaid  and otherFuture income tax assets


7,679



(3,467
)


(4,212
)


651,061



(3,467
)






647,594


Current assets of  discontinued  operationsTotal current assets


711,689







(7,679
)






704,010


Total current assetsNon-current Assets





















Non-current AssetsProperty, plant and equipment


2,489



(2,303
)










186


Property, plant and  equipmentInterest in resource property


24,861







175,139







200,000


Interest in resource propertyEquity method investments


325



(325
)






Future income tax assets


6,339



(768
)










5,571


Deferred tax assetsInvestment in preferred shares of former subsidiaries


19,125















19,125


Investment in preferred  shares of former
    subsidiariesOther non-current assets


830



(830
)






4,226



3,467







7,693


Non-current assets of  discontinued
    operationsTotal non-current assets


53,969







178,606







232,575


Total non-current assets$
765,658


$



$
170,927


$



$
936,585  121




---



##### Table of Contents



TERRA
    NOVA ROYALTY CORPORATION
    (Formerly KHD HUMBOLDT WEDAG INTERNATIONAL LTD.)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Reconciliation of Consolidated Statement of Financial
    Position as of January 1, 2009 (Continued)
  CanadianGAAP











IFRSbalance


Discontinued


IFRS


IFRS


balance


IFRSCanadian GAAP accounts

Dec 31, 2008


operations


adjustments


reclassifications


Jan 1, 2009


accountsLIABILITIES AND SHAREHOLDERS EQUITY





















LIABILITIES AND EQUITYCurrent Liabilities





















Current LiabilitiesAccounts payable and accrued expenses

$
178,582


$
(170,679
)

$



$



$
7,903


Accounts payable and  accrued expensesProgress billings above costs and estimated earnings on
    uncompleted contracts


171,843



(171,843
)






Advance payments received from customers


11,331



(11,331
)






Income tax liabilities


9,112



(8,987
)










125


Income tax liabilitiesDeferred credit, future income tax assets


4,212







(4,212
)


Accrued pension liabilities, current portion


2,158



(2,158
)






Provision for warranty costs, current portion


30,856



(30,856
)






Provision for supplier commitments on terminated customer
    contracts


23,729



(23,729
)






419,583











419,583


Current liabilities relating
    to  discontinued operationsTotal current liabilities


431,823







(4,212
)






427,611


Total current liabilitiesLong-term LiabilitiesLong-term debt, less current portion


11,313



(11,313
)






Accrued pension liabilities, less current portion


29,209



(29,209
)






Provision for warranty costs, less current portion


7,524



(7,524
)






Deferred credit, future income tax assets


4,176



(4,176
)






Future income tax liability


7,646



(7,646
)


51,133







51,133


Deferred tax liabilityOther long-term liabilities


8,344



(8,344
)






68,212











68,212


Long-term liabilities relating  to
    discontinued operationsTotal long-term liabilities


68,212







51,133







119,345


Total long-term liabilitiesTotal liabilities


500,035







46,921







546,956


Total liabilitiesMinority interests


3,709











(3,709
)EquityShareholders Equity





















Shareholders equityCommon stock


143,826















143,826


Common stockTreasury stock


(93,793
)














(93,793
)

Treasury stockContributed surplus


7,623















7,623


Contributed surplusRetained earnings


155,681







172,583







328,264


Retained earningsAccumulated other comprehensive income


48,577







(48,577
)


Total shareholders equity


261,914







124,006







385,920







3,709



3,709


Non-controlling interests



124,006



3,709



389,629


Total equity$
765,658


$



$
170,927


$



$
936,585  122




---



##### Table of Contents



ITEM 19:
    Exhibits  Exhibits Required
    by
    Form 20-F
  ExhibitNumber

Description1
.1

Articles of Terra Nova Royalty Corporation. Incorporated by
    reference from our
    Form F-4
    dated October 7, 2010.4
.1

Amendment to Mining Lease Agreement dated January 1, 1987
    between Terra Nova Royalty Corporation and Wabush Iron Co.
    Limited, Stelco Inc. and Dofasco Inc. Incorporated by reference
    from our
    Form 10-K
    for the year ended December 31, 1989.4
.2

Memorandum of Agreement dated November 24, 1987 between
    Terra Nova Royalty Corporation and Wabush Iron Co. Limited,
    Stelco Inc. and Dofasco Inc. Incorporated by reference from our
    Form 10-K
    for the year ended December 31, 1989.4
.3

First Amendment to the Memorandum of Agreement between Terra
    Nova Royalty Corporation and Wabush Iron Co. Limited, Stelco
    Inc. and Dofasco Inc. Incorporated by reference from our
    Form 10-K
    for the year ended December 31, 1989.4
.4

Amended 1997 Stock Option Plan. Incorporated by reference from
    our
    Form S-8
    dated May 23, 2007.4
.5

Arrangement Agreement dated February 26, 2010 between Terra
    Nova Royalty Corporation and KHD Humboldt International
    (Deutschland) AG. Incorporated by reference from our
    Form 6-K
    dated March 3, 2010.4
.6

Agreement dated September 24, 2010 between Terra Nova
    Royalty Corporation and Mass Financial Corp. Incorporated by
    reference from our
    Form 6-K
    dated September 30, 2010.4
.7

2008 Equity Incentive Plan. Incorporated by reference from our
    Form F-4
    dated October 7, 2010.8
.1

List of significant subsidiaries of our company as at
    March 31, 2011.11
.1

Code of Ethics. Incorporated by reference from our
    Form 6-K
    dated October 5, 2009.12
.1

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.12
.2

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.13
.1

Certification of Chief Executive Officer pursuant to
    18 U.S.C. section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.13
.2

Certification of Chief Financial Officer pursuant to
    18 U.S.C. section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.15
.1

Letter dated March 31, 2011 of Deloitte & Touche
    LLP as required by Item 16F of
    Form 20-F.15
.2

Consent dated March 31, 2011 of a member of NEXIA
    International, Davidson & Company LLP.15
.3

Consent dated March 31, 2011 of Deloitte & Touche LLP.  123




---



##### Table of Contents



SIGNATURES
  Form 20-F
  TERRA NOVA ROYALTY CORPORATION
  
      124