L'ASSOCIATION DES FRANCOPHONES DE NANAIMO NOTES TO FINANCIAL STATEMENTS (Unaudited) Page 9

MARCH 31, 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) g) Contributed services and material

Contributed materials and services are recognized only when their fair value can be reasonably estimated.

h) Income taxes

The Association is a not-for-profit organization as defined by the Canada Revenue Agency and as such is not subject to income taxes.

2. FINANCIAL INSTRUMENTS RISKS

The Association's financial instruments are described in Note 1(b). In management's opinion, the Association is not exposed to significant currency, credit, interest or liquidity except as described below. In addition, the Association is not exposed to any material concentrations of risk and there has been no change in the risk exposures.

Interest risk

The Association's investments are comprised of guaranteed investments certificates and floating rate redeemable term deposit . The Association is exposed to interest risk due to fluctuations in interest rates on the term deposit.

As explained in Note 5, the Association's bank indebtedness bears interest at a variable rate. Accordingly, the Association is exposed to interest rate cash flow risk from this financial instrument.

3. SHORT-TERM INVESTMENTS

The investments of the Association are comprised of guaranteed investment certificates and a floating rate redeemable term deposit which approximate their fair value due to their short-term nature.

2014 2013

Coastal Community Credit Union - guaranteed investment certificate, rate of 1% per year, matures November 3, 2014 $ 30,237 $ 29,804 Canadian Western Bank - guaranteed investment certificate, rate of 2.05% per year, matures May 30, 2015 45,152 55,934 Canadian Western Bank - redeemable term deposit, floating rate of 0.75% per year, matures January 30, 2015 11,647 -

$___ 87,036 $____ 85,738