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Annual report 2013 The following tables show an analysis of mortgage loan investments recorded at fair value by level of the fair value hierarchy at February 28, 2013 and February 29, 2012: Feb 28, 2013 Level 1 Mortgage loan investments $ Feb 29, 2012 - Level 2 $ Level 1 Mortgage loan investments $ - Level 3 - $ $ 7,840,484 Level 2 $ Total 13,019,170 $ 13,019,170 $ 7,840,484 Level 3 - Total The Fund's maximum exposure in respect of all its financial assets is their carrying value as reflected in the statements of net assets. (i) Mortgage loan investments: Fair value is the amount of consideration that would be agreed upon in an arm's-length transaction between knowledgeable, willing parties under no compulsion to act. As there is no quoted price in an active market for these mortgage loan investments, the Fund Manager makes its determination of fair value based on its assessment of the current lending market for mortgage loan investments of same or similar terms. Typically, these mortgage loan investments approximate their carrying values given the mortgage investments consist of short-term loans. When collection of the principal amount of a mortgage loan is no longer reasonably assured, the fair value of the mortgage loan is adjusted to the fair value of the underlying security. (ii) Other financial assets and liabilities: The fair values of other financial assets and liabilities approximates their carrying amounts due to their short term maturities. Changes in Level 3 financial instruments recorded at fair value: The following table shows a reconciliation of the opening and closing balance of mortgage loan investments: As at Mar 1, 2012 Mortgage investments $ 7,840,484 Realized fair value gain $ - Unrealized fair value gain $ - Net advances and repayments $ 5,178,686 As at Feb 28, 2013 $ 13,019,170 10.Commitments and contingencies: In the ordinary course of business activities, the Fund may be contingently liable for litigation and claims arising from investing in mortgages and loans. Where required, management records provisions in the accounts. Although not possible to accurately estimate the extent of potential costs and losses, if any, management believes that the ultimate resolution of such contingencies would not have a material adverse effect on the Fund's financial position. 11.Comparative figures: Certain 2012 figures have been reclassified to conform with the financial statement presentation adopted in 2013. 42