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2015 ANNUAL REPORT (ii) Due from Fund Manager: As at February 28, 2015, the Fund Manager held $20,536 (February 28, 2014 - $2,095 and March 1, 2013 - $nil) of interest receivable in trust on behalf of the Fund. Subsequent to year end, the Fund Manager disbursed the proceeds to the Fund in accordance with the terms of its normal mortgage servicing operations. 10. Fair value of financial instruments: Financial instruments measured at fair value are categorized by the Fund into one of three hierarchy levels for disclosure purposes. Each level is based on the transparency of the inputs to measure fair value of assets and liabilities. Level 1 – inputs are unadjusted quoted prices of identical instruments in active markets. Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – inputs used in a valuation technique are not based on observable market data in determining fair values of these instruments. Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available. If different levels of inputs are used to measure a financial instrument's fair value, the classification within the hierarchy is based on the lowest level input that is significant to the fair value measurement. (a) 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. e Fund Manager acts as market maker for these transactions, and there is no quoted price in an active market for these investments. e Fund makes its determination of fair value based on its assessment of the current lending market for mortgage loan investments of same or similar terms. e carrying values of mortgage loan investments approximate their fair values due to the relatively short periods to maturity and terms. As a result the fair value of mortgage loan investments is based on Level 3 of the fair value hierarchy. (b) Other financial assets and liabilities: e fair value of subscription proceeds receivable, accrued interest receivable, amounts due to Fund Manager, accounts payable and accrued expenses, and dividends payable approximate their carrying values due to their short- term maturities. 11. Risk management: (a) Interest rate risk: Interest rate risk is the risk that the fair value or future cash flows of the mortgage loan investments will fluctuate because of changes in market interest rates. As of February 28, 2015, no mortgage investments (February 28, 2014 - nil) bear interest at variable rates, therefore, as at February 28, 2015 the Fund is not exposed to cash flow risk as a result of interest rate fluctuations. Further, the Fund does not have material fair value risk on its mortgage investment portfolio primarily as a result of the short term nature of the maturity dates of the mortgage loan investments. No liabilities of the Fund bear interest. e Fund does not have material interest rate risk on any of its other financial instruments. 54

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