RISK MANAGEMENT

Royal Canadian Mortgage Investment Corporation has implemented strict default management controls to minimize and manage risk with our mortgages through operating policies and procedures to include:

• a policy that up to 100% of the Company's capital may be in First Mortgages, Second Mortgages, Insured Mortgages, AAA Rated Mortgage Backed Securities and/or Related Investments;
• a policy that no more than 80% of the Company's capital may be in Subordinate Mortgages;
• a restriction limiting investment in Commercial Mortgage Backed Securities that are not AAA Rated Mortgage Backed Securities to a maximum of 30% of Company Capital in aggregate;
• a restriction providing that the Company will not lend more than 20% of its capital in any single First Mortgage or a Commercial Mortgage Backed Securities pool class, unless it is required for risk management purposes only;
• a restriction providing that the Company may not make or acquire a Mortgage with a single borrower if the aggregate of the book value of such loan and the book value of the Company's Mortgages, loans already provided to or with such single borrower would exceed 30% of the Company's capital;
• a restriction limiting borrowing exposure from entities who are not at arms length to the Company to amounts which do not exceed an amount equal to 25% of the book value of the Conventional First Mortgages borrowings held by the Company as at the date of drawdown of the borrowed funds;

• The retention of the Mortgage Manager, who has substantial experience in originating, underwriting and servicing Mortgage lending in the markets in which the Company intends to invest; and
• Where determined necessary, arranging for or reviewing existing independent appraisals prepared by Qualified Appraisers for Mortgage investments.