E-Delivery

2015 ANNUAL REPORT In preparing its opening IFRS statement of financial position, the Fund has adjusted the presentation of amounts previously reported in the financial statements prepared in accordance with Canadian GAAP. An explanation of how the transition from Canadian GAAP to IFRS has affected the Fund's financial position, financial performance and cash flows is set out in the following notes. (a) Exemptions and exceptions from full retrospective application: First-time adopters of IFRS must apply the provisions of IFRS 1. IFRS 1 requires adopters to retrospectively apply all IFRS standards as of the reporting date with certain optional exemptions and certain mandatory exceptions. In preparing the opening IFRS balance sheet in accordance with IFRS 1, the Fund has applied the mandatory exception from full retrospective application of IFRS for estimates. e mandatory exception requires that estimates previously determined under Canadian GAAP cannot be revised due to the application of IFRS, except when necessary to reflect differences in accounting policies. (b) Mortgage loan investments: Previously under Canadian GAAP, the Fund's mortgage loan investments were classified as financial assets held- for-trading measured at fair value. e Fund's mortgage loan investments have been reclassified as loans and receivable investments. is reclassification did not result in any adjustments to the reported financial position, financial performance and cash flows of the Fund. 5. Mortgage loan investments: e following is a breakdown of the mortgage loan investments held by the Fund as at February 28, 2015, February 28, 2014 and March 1, 2013 % Feb 28, 2015 % Feb 28, 2014 % Mar 1, 2013 Interest in first mortgages 98.4 $ 56,398,964 99.8 $ 36,997,597 92.1 $ 11,993,170 Interest in KV second mortgages 1.6 920,177 0.2 70,177 3.1 400,000 Interest in second mortgages behind a third party - - - - 4.8 626,000 100.0 $ 57,319,141 100.0 $ 37,067,774 100.0 $ 13,019,170 Interest in KV second mortgages refers to the Fund's interest in second mortgages behind first position mortgages that are originated and serviced by the Fund Manager. Mortgage loan investments are secured by the real property to which they relate and bear interest at a weighted average interest rate of 10.29% (February 28, 2014 - 10.60% and March 1, 2013 - 10.88%). As at February 28, 2015, three (February 28, 2014 - five and March 1, 2013 - nil) mortgages with principal balances totaling $2,740,000 (February 28, 2014 - $3,788,942 and March 1, 2013 - $nil) are in arrears. Subsequent to year end, arrears interest due as at February 28, 2015 was collected on all of the mortgage in arrears. During the year ended February 28, 2015 the Fund, through the Fund Manager, was engaged in enforcement remedies against one mortgage loan investment. As at February 28, 2015, the Fund Manager has stayed these enforcement remedies against this mortgage as described in Note 11. 48

• Cover