E-Delivery

At the end of fiscal 2014 98.30 % of the mortgage portfolio was allocated in Alberta e Fund continues to maintain a diversified portfolio of mortgage investments located in Western Canada. At February 28, 2014, 98.30% (2013 – 93.94%) of the mortgage portfolio was allocated to Alberta, and 1.70% (2013 – 6.06%) to Saskatchewan. e Fund has continued to maintain significant exposure to Alberta as it benefits directly from a strong real estate market underlying it's attractive risk adjusted yields and the local expertise of the Manager in originating, underwriting and servicing these mortgage investments. e Manager places a high degree of emphasis on closely monitoring the portfolio and, where appropriate, will adjust the fair value of a mortgage investment if it is determined that the full value of the Fund's investment and accrued interest is unlikely to be recovered. At February 28, 2014, the Manager was engaged in enforcement actions on three of the mortgage investments in which the Fund had participated as follows: • A first mortgage investment in which the Fund had invested $500,000 with $19,167 accrued interest that was past due. As of the date of this MRFP the enforcement action remains before the courts pending the expiry of the notice period, the Fund has advanced new principal of $31,105 to pay property taxes on the security that were in priority to the mortgage and accrued interest owing to the Fund has increased by $14,590 to $33,757. • A first mortgage investment in which the Fund had invested $762,478 with $9,944 accrued interest that was past due. e past due interest on this mortgage was collected by the Fund subsequent to year end, the Fund has advanced new principal of $87,870 on the basis of construction draws, and the enforcement actions have been stayed while this mortgage continues to perform. • A first mortgage investment in which the Fund had invested $591,070 with $20,981 accrued interest that was past due. In respect of the enforcement action on this mortgage the Manager has agreed to allow the second position mortgage holder to direct the enforcement proceedings until May 31, 2014, and the second mortgage holder has agreed to pay interest due on the first mortgage while they direct the enforcement proceedings. As of the date of this MRFP the Fund holds an investment in a first mortgage investment where it has invested $1,050,000 and $21,000 of accrued interest that was past due is outstanding. e Manager is working with this borrower to catch up the interest payments and accordingly enforcement action has not commenced as of May 26, 2014. No fair value adjustment has been recorded in the financial statements as the Manager assessed that no impairments exist. As of May 26, 2014 the Manager's assessment is unchanged, and it expects the Fund to fully recover the principal and accrued interest from the investments that are the subject of enforcement actions, although there is no assurance that it will be able to do so. 21

• Cover