2017 ANNUAL REPORT

BUILDING A STRONGER TOMORROWTOGETHER

VISION | A shared aspirationTo create value for members as an innovative, growing and responsive financial co-operative.

MISSION | Why we existTo make a positive difference in people’s lives. We build mutually supportive relationships to create wealth, enhance quality of life and serve the needs of the community.

VALUES | Our core foundationHuman Dignity Treating each member as a unique individual

Excellence Providing the best value for our members

Co-operation People helping people, being stronger together

Responsiveness Providing Initiatives for the well-being of individuals and communities

Integrity Acting in a an ethical and trustworthy manner

Social Responsibility Being a positive force in our communities

PACE CREDIT UNION

2017 ANNUAL REPORT 1

2 Message from the Chair of the Board

4 Message from the CEO

6 In Review

11 Building A Stronger Tomorrow Together

12 Management’s Responsibility for Financial Information

12 Report of the Independent Auditor on the Summarized Financial Statements

13 Summarized Financial Statements

17 Report of the Audit Committee

CONTENTS

It takes a community of individuals all working together towards a common goal to ensure the success of their collective vision.

For us that vision is wrapped up in our desire to be the number one financial services organization in the communities we serve.

Handpicked by our members and the business owners within our communities to serve all of their financial needs and to be entrusted with their financial health and happiness.

To achieve this vision of success we need to come together - to support one another, to encourage one another, to look out for each other’s best interests.

It is through our collective efforts and our shared vision of success that this is possible. Together we can build a stronger tomorrow.

BUILDING A STRONGER TOMORROWTOGETHER

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Building a stronger tomorrow together has been our focus this past year with three mergers taking place in 2016 and 2017. All Trans Credit Union, Durham Educational Employees Credit Union, and London Firefighters Credit Union joined with PACE to create a stronger, more unified Credit Union.

Bringing our forces together was no small feat and the Board is grateful to the staff, management team and members for their patience, perseverance and continued support throughout the merger process.

We continue to be strengthened by our partnerships not just in numbers, but by the collective uprising of a financial community with a shared vision of success.

In order to ensure this vision can thrive, PACE’s management team has been working hard on year two deliverables from our comprehensive five-year strategic plan that will continue to build on our past successes and focus on being the best for our members.

The Board is confident that the dedication and passion of our people will safeguard our success. In return we will continue to invest in the people and processes that support our members.

I am deeply honoured to continue to serve as your Board Chair, and I am genuinely grateful to be a part of our Credit Union’s progress.

Ian Goodfellow, Chair

MESSAGE FROM THE CHAIR OF THE BOARD

PACE CREDIT UNION

BRINGING OUR FORCES TOGETHER

32017 ANNUAL REPORT

Deborah BakerAudit Committee Chair

Stan DimakosVice Chair

George PohleDirector

Jim TindallDirector

Al JonesDirector

Peter RebellatiDirector

Ken ToppingDirector

Neil WilliamsonDirector

Brent BaileyDirector

Ian GoodfellowChair

Pauline WainwrightBoard Secretary

Wendy MitchellVice Chair

BOARD OF DIRECTORS

2017 was a busy year for PACE as we welcomed Durham Educational Employees Credit Union and London Firefighter’s Credit Union into our cooperative banking family.

Add that to the amalgamation with All Trans Credit Union in late 2016, and we had our work cut out for us with the merging of four distinct financial institutions.

It has been a considerable effort by our entire team to ensure a smooth and seamless transition throughout the mergers and everyone from our front line staff to our executive team to our Board has been working together to make this happen.

These new alliances have brought our membership to over 37,465 members and our assets have grown to $1.08 billion, a true testament to the belief that there is strength in numbers.

In addition to the monetary gains achieved through these partnerships, we are encouraged by the opportunity to share insights, widen our scope of expertise and explore unchartered territories together.

We always knew we were building on a strong foundation. We are a Credit Union that has evolved on collaboration and entrepreneurship. We have a sustainable business model and a competitive spirit with the desire to be the number one financial services organization in the communities we serve.

With this assurance of who we are, we could see more clearly where we wanted to go.

We have set our sights over the next five years on strengthening our relationships with our members, building a knowledgeable and passionate workforce, nurturing and growing beneficial partnerships, using our technology to our utmost advantage, and ensuring a successful financial future for us all.

Our members are the foundation of our Credit Union and they are the reason we exist. Leveraging tools like our Customer Relationship Management System allows us to offer proactive solutions to our members before they come to us, and to track member satisfaction through our Member Effort Score program. These are just two examples of how innovative technologies have helped us to better serve our members this past year.

We know that ultimately the success of our Credit Union starts and ends with our staff. Therefore we are committed to ensuring our team members are provided the opportunity to thrive in their careers with the proper support and encouragement for their efforts. Throughout the year we offer training, feedback, rewards and recognition, so that our team can in turn provide a knowledgeable and caring experience to our members.

These are just some of the ways we are working hard to ensure the continued success of our cooperative. With one full year of our five-year strategic plan under our belt I am so pleased with the course we have set and with the progress we have made.

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MESSAGE FROM THE CEO

PACE CREDIT UNION

I would like to thank our Board, executive team and staff for their dedication and genuine care of our members. It is my honour to serve as your CEO and I look forward to our continued success together.

Respectfully, Philip Smith, CEO

52017 ANNUAL REPORT

Dan ColdwellChief Marketing and Community Relations Officer

Larry SmithPresident

Gary Lockwood Chief Risk Officer

Brian Hogan Vice President Commercial Lending

Kim StoddartChief Information Officer

Phillip Smith Chief Executive Officer

Mary Benincasa Chief Operating Officer

EXECUTIVE TEAM

Kim Colacicco Corporate Secretary

Sandra Delabbio Chief Financial Officer

Heather SarneckiVice President, Branch and Property Development

Heather Lee Vice President Credit

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FINANCIAL RESULTS FROM 2017• As of December 31, 2017 PACE membership stood

at 37,465 members• Assets, through growth, increased to a total of just

under $209 million or an overall increase of 23.9%• Income before income taxes for 2017 was $6.7 million

($2.3 million in 2016)• The total service holdings of our membership; that is,

aggregate deposits, loans and investments increased to $1.8 Billion as of December 31, 2017.

• On our balance sheet loans and mortgages to members increased by 9.6% to $415.4 million. Off balance sheet programs through our affiliate Concentra Financial stood at $41.6 million.

• Commercial Loans to members increased by $87.6 million to a total of $396.9 million.

• The Board approved dividend payments to members holding Class A and B shares in the amount of $ 491,989 plus an additional $210,679 on membership shares

• Overall interest paid to members in 2017 totaled $12.9 million

• Total Members’ Equity increased to $63.4 million or 6.6% of deposits as of December 31, 2017 representing an increase of $5.6 million or nearly 9.6% ($57.8 million – 2016)

MEMBER PROFILEOur membership is made up of three distinct member groups under the categories of personal, business and organization services. Our staff and management team are uniquely qualified to meet the evolving needs of these individual segments in an ever-changing financial landscape through the products and services we offer.

ACCESS TO SERVICESPACE currently services its members from our Contact Centre in Vaughan and our 17 locations spanning from Whitby to London, Hamilton to Barrie.

Members can also access their accounts through the onsite ATM at most branch locations, or surcharge-free through THE EXCHANGE® Network, Canada’s second largest financial institution ATM network with over 3,300 locations coast to coast.

Telephone banking and online banking through MemberDirect® provides PACE members with secure access to their accounts 24 hours a day, 7 days a week from virtually anywhere. The PACE website and world class PACE Mobile App also provides members with quick and secure access to account information and is easily accessible from all smart devices.

PACE CREDIT UNION

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IN REVIEW

BUILDING A STRONGER 2017In April we launched our new Contact Centre that would act as the hub of communication for our members and our team. This valuable addition to our member service model extended our hours of accessibility beyond traditional branch hours. Currently they operate 8 a.m. to 8 p.m. Monday to Friday and 9 a.m. to 2 p.m. on Saturdays.

During the All Trans banking system conversion, we assigned a dedicated team within our Contact Centre to provide support to any members requiring assistance during the transition.

Our Uxbridge, Hamilton and Head Office locations all underwent significant renovations intended to enhance the member experience. We are particularly proud to have received the Business Improvement Award (BIA) for our branch improvements in Hamilton. The award recognizes the contribution property owners and businesses make to their local community through the continual upkeep and beautification of their buildings and their support of community initiatives.

Having committed to the downtown location, our goal was to enhance value to members, provide a great work environment for employees, and contribute to the beautification and betterment of the communities we serve.

Our PACE mobile app received an update to version 13 on January 30th. The new features include Touch ID, which allows members to login using Touch ID on devices that support this technology. As well as a filter or search feature for viewing their account activity. Transactions can viewed using a pre-defined date range or custom date range, or based on a single amount or an amount range.

As part of an initiative to improve member experience and improve security posture, PACE upgraded to Risk Based Policies on January 24th. This change empowers the Risk Engine (software program) to determine when to ask members their challenge questions, versus the previous method, which is based on a static rule to always ask unless the computer is selected to remember.

LENDING SERVICESPromoting our personal lending products was once again a priority for us as we helped members restructure their finances in preparation for the anticipated higher interest rate environment.

As your financial partner it is our responsibility to ensure we are helping you make the kind of choices that will make sense to your entire financial picture.

While we offer our members affordable options for borrowing at a low interest rate, we also practice due diligence to ensure our members can comfortably manage the cost of borrowing both in the short and long term.

The allowance for impaired loans is governed by policy and DICO guidelines, reviewed on an annual basis and approved by the audit Committee of the Board. Management monitors the allowance on a monthly basis, with a detailed review on a semi-annual basis. Watch list accounts, delinquencies, credit quality, bankruptcy trends and economic trends are considered during the semi-annual review and as well as reviewed by our credit committee.

Commercial loans are generally secured by a mortgage and/or general security agreement and/or the personal guarantees of the business owners. Commercial loans typically have a higher risk rating than personal mortgages and lines of credit. The overall commercial portfolio has 91.1% of loans rated as satisfactory or superior. These measures and the overall performance of the loan portfolio indicate that PACE has a strong lending operation.

RISK MANAGEMENTEnterprise Risk Management (ERM) includes the methods and processes used to identify and manage significant risks. Significant risk is defined as an event or activity, which may materially interfere with the achievement of the Credit Unions goals or an event or activity, which may cause a significant opportunity to be missed.

The ERM process is ongoing and evolving at PACE, headed by the Chief Risk Officer and a committed Executive Management Team that meets on as quarterly basis to; provide a framework which involves a number of key steps including risk identification, risk assessment and measurement, risk response and action, monitoring and reporting. By being proactive and identifying any significant risk in advance, we can protect and create value for our members.

Listed below are some of them:

72017 ANNUAL REPORT

TOTAL LOAN ACTIVITY at December 31, 2017

6,304 Personal Lines of Credit $ 11,384,1632,723 Personal Loans $ 38,734,042

9,027 Total $ 50,118,205

1,188 Mortgages $ 282,499,3471,155 HELOCs $ 82,812,253

2,343 Total Loans $ 365,311,600

COMMERCIAL LOANS/MORTGAGES 106 Mortgages $ 123,266,750193 Loans $ 176,900,306240 LOC $ 96,717,309

539 Total $ 396,884,365

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Credit RiskThe credit union uses a disciplined lending approach with standard underwriting parameters for each category of loans with related policies and lending philosophy detailed in its Credit Risk Management policy. The Board, in conjunction with the impact of the changing economic environment, responds with policy changes as necessary to ensure that we address the needs of the borrowers within our membership and ensures the safety of depositors’ funds. The Board provides direction to Management with operational policies that are used to implement a prudent and effective credit granting process that includes collateral requirements, credit assessment and regulatory requirements. The Credit Union mitigates this credit risk by obtaining good quality collateral. The Credit Union monitors its loan concentration in accordance with policy, DICO guidelines and risk tolerance.

Interest Rate RiskThe potential impact of changes to interest rates on the Credit Union’s earnings and equity when maturities of its financial liabilities are not matched with the maturities of its financial assets is monitored on a monthly basis. It is the policy of the Credit Union to keep exposure to interest rate fluctuations within limits set by DICO.

LiquidityLiquidity risk is the risk of being unable to meet financial commitments, under all circumstances, without having to raise funds at unreasonable prices or sell assets on a forced basis. PACE has implemented policies that address limits on the sources, quality and amount of the assets to meet normal operational, contingency funding for significant deposit withdrawals and regulatory requirements.

Management reports to the Board monthly on the Credit Union’s position in respect to compliance with the policy and regulatory requirements, concentration of large deposits of single/connected depositors as a percentage of total deposits and reports borrowings for liquidity purposes, the level of borrowings and the liquidity less borrowings in relation to the statutory minimum. A stress-testing module is also utilized to further enhance management of the Credit Union’s liquidity.

COMMERCIAL SERVICESPACE has a very knowledgeable, experienced and dedicated commercial lending and administrative team to provide and service the business needs of our business membership. Our commercial lending portfolio continued to achieve strong results for the period ending December 31, 2017.

We continue to provide optimum service delivery and professional management support to our business community. We listen to our members’ specific needs and are confident in our ability to provide evolving products and services for that we believe are “WELL BEYOND A BANK”!

PACE Securities Corp.PACE Securities Corp. has continued to increase its revenue and margins. Its growth is largely attributed to its high yield bond businesses. In 2017 it increased its revenue by 31%, returned 16% on the Credit Union’s original investment, and generated net income of $748,000. The firm anticipates a higher rate of return for 2018. In 2017 PSC launched its first managed products under the PACE Capital Management brand. PACE Capital Partners LP an absolute return credit fund returned 14.17% in 2017 and PACE Financial Limited was able to pay both its base and discretionary dividend in its first two quarters of operation. PSC has acquired new office space in Mississauga to establish a headquarters and increase its advisor force and asset management staff.

PACE Insurance Brokers Ltd.PACE Insurance Brokers Ltd. (PIB) is a wholly owned subsidiary of PACE Securities Corp. (PSC). It was originally established in 2014 for compliance purposes to separate the insurance business of PSC advisors licensed to engage in life insurance sales. In 2017, PIB began its transformation to become its own unique organization with the goal of growing life insurance sales by targeting the needs of credit union members and the public at large. While the credit union cannot sell life insurance to its members, as an organization, we recognize the need. Insurance advisors in other channels are not taking care of our members and so Mitchell Singer was brought on as CEO of PIB so that PACE would have somewhere to refer members to take care of their life insurance needs. In his first six months in the organization, Mitchell renegotiated PIB’s contracts with the insurers and distributors so that higher revenues could be more easily achieved. He installed new compliance procedures and policies to bring the company up to date. And now, PIB is poised to begin marketing life insurance to the members of PACE. A website is now live at www.pacelife.ca and marketing materials are continually being developed.

COMMUNITY INVESTMENT As a community centered Credit Union we exist to meet the financial needs of our members and to give back to the communities where we work and live. We do that through sponsorship, support and donations to a wide number of causes and organizations.

PACE CREDIT UNION

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From local food banks to hospital fundraisers, sports team sponsorships to global initiatives, our staff and management are primary motivators in our efforts to support these causes. They invest their own time and energy into these events and this past year they walked, biked and ran for a wide range of events in their communities, all with support from PACE.Here are just of few of the community events and organizations we contributed to in 2017:• Covenant House – We raised $70,000 this year with two

major initiatives to help youth get off the streets. A Fun Night of Comedy in Memory of Matthew Benincasa and the Executive Sleep Out, where our very own Chief Marketing and Community Relations Officer participated in the Executive Sleep Out spending a night on the streets of Toronto with a sleeping bag and a piece of cardboard.

• SouthLake Hospital Foundation – $50,000 was donated to support this organization that provides world-class health care to our community.

• Georgian Bay Club Foundation – $30,000 was donated to this local foundation that supports local charities and groups who have worked to raise the standard of ‘health and well-being’ in our area.

• The Justin Eves Foundation – $25,000 was donated to support students with learning disabilities achieve a post-secondary education at institutions that support them.

• Ride Don’t Hide Event – $10,490 was donated to the Canadian Mental Health Association in York Region. The event has evolved over the past year to include a walk and run. The goal is to raise awareness and help break the stigma around mental health while raising funds to help support mental health programs that change and save lives.

• Co-operative Young Leaders Program – PACE donated $10,000 in order to provide 7 students with the opportunity to attend a weeklong camp where they learn effective communication and leadership skills. In addition, we sponsored an entire week at the camp, which provided financial assistance in order for the program to run.

• Music Palooza – $12,500 was donated to the Tune In Foundation who host music camps for underprivileged kids in the Hamilton area during the summer and March breaks.

A complete listing of the causes and organizations our team supported in 2017 can be found on Page 10 of this report.

MARKETING Spreading the word about our Credit Union and how wonderful it is to bank with us is an important part of our growth strategy. Our marketing initiatives include promoting the products and services that will add value to our members’ financial health and happiness. Using our Customer Relationship Management Tool, we can identify products and services that are being underused by our members and offer targeted offers and advice in a pro-active manner. Identifying a need to promote our electronic banking tools including Deposit Anywhere™ and our Mobile App prompted a campaign to encourage members to take advantage of these free and convenient services. Further incentive was given with the chance to win a $500 PACE Rewards Card for any member who signed up for a digital service. Patricia Joseph was the proud recipient of our prize.Our ClickSwitch Campaign encouraged members and non-members to move more of their primary banking over to PACE using this innovative new technology that makes switching easier than ever. This past year we extended our marketing mediums to include advertisements on CP24 in our campaign efforts. This initiative reaches 4.3 million viewers each day and has contributed significantly to our overall website traffic and brand awareness.We continue to maintain an active presence on social media and currently participate on 4 major social networking platforms: Facebook, Twitter, Instagram, and Linkedin.

• 92 new followers on Facebook (339 total)

• 82 new followers on Twitter (1,103 total)

• 127 followers on Instagram

• 384 followers on Linkedin

Our annual investment in the Cooperative Young Leaders program helped send 7 kids from at risk communities within the Toronto District School Board and York Region District School Board to attend this weeklong camp. These kids are so appreciative of this opportunity and provide us with feedback via personalized letters expressing their gratitude. In addition, this year we sponsored an entire week, which provided financial assistance in order for the program to run.

Word of mouth is still a valuable asset when it comes to growing our membership. The PACE Rewards Program is just one way we can show our appreciation to our members who spread the word about our Credit Union to their family and friends. With each new member who joins, both our existing member and their referral

2017 ANNUAL REPORT

10 PACE CREDIT UNION

will receive a $100 PACE Rewards Card to be redeemed at participating PACE merchant locations.

HUMAN RESOURCES Our human resources strategy includes recruitment, orientation, training and development, performance planning and management, compensation and rewards, continuity and above all care, for all of the members of our team.

This strategy is one we continue to develop year after year in our comprehensive approach to enhance human resource management practices.

This past year we welcomed 19 new full-time employees and 11 part-time employees, in a wide range of disciplines, to help us meet the growing needs of our membership.

Ensuring the members of our team feel recognized and supported in their efforts is an important part of our Credit Union’s success. It is their dedication and hard work that our members experience everyday and to us there is no substitution for great customer service.

This past year the following individuals were recognized for their years of dedication and commitment to our financial family with an Employee Service Award.

20 YEARS KUMARIE ANNIBALELAURA HAMKATHY MACNEILPHILLIP SMITH25 YEARS DAN COLDWELLRITA COSTAANDREA O’NEILL

In addition, our Alcona Branch was recognized for achieving the highest asset growth at 26% in 2017.

All these achievements would not be possible without our members and the communities we serve. Year after year our team goes above and beyond the call of duty to participate in and show support for various community-based organizations, businesses and their causes. We are continually inspired by the dedication and compassion our team shows for their community.

Aurora Prayer Breakfast

Aurora Santa Parade

Big Brothers Big Sisters - Winding Roads

Big Brothers Big Sisters Bowl for Kids Sake

Caledon Equestrian School

Central York Girls Hockey

Chai Life Line Canada

CMHA York Region - Ride Don’t Hide

Co-operative Young Leaders

Covenant House Toronto

Deaf Blind Ontario

Etobicoke Philharmonic Orchestra

Georgian Bay Foundation

Hamilton Health Science

Heart & Stroke - Big Bike Stouffville

IBM Picnic

Kerry’s Place Autism Services

Lefroy Minor Hockey Association

Mackenzie Health Foundation

Markham Santa Parade

Mississauga Soccer Club

Nantry Shores

Ontario Charitable Credit Union Foundation

Parkinson Superwalk

Peel Region Bowling

Scouts Canada, Barrie

Shelburne Minor Hockey

St. Mark’s Building Fundraiser

Stroud Curling Club

Stouffville Strawberry Festival

Stouffville Terry Fox Run

SouthLake Hospital Foundation

The Leukemia & Lymphoma Light the Night

Tourette Canada

Tune in Foundation

Uxbridge Agricultural Fair

Welcoming Arms

York Harmony Chorus

IN 2017, PACE SUPPORTED THE FOLLOWING CAUSES AND ORGANIZATIONS:

112017 ANNUAL REPORT

In the coming year we will be focused on the launch of several exciting initiatives that will enhance the level of service PACE members can expect.

For our members who are in the market for a new vehicle, our new Dealertrack Program will help streamline the process by providing quick approvals at the dealership level within minutes.

For our Business Banking Members, we will be launching in the spring Member Direct Small Business. An online banking solution designed especially for the needs of business owners. Consolidate your accounts to make moving money between your business and personal accounts easy. View your accounts at a glance without having to login more than once. Authorize users to view or initiate transactions. Automate dual signature approvals, plus invoicing and more.

A new member facing calendar management system will be launched in mid 2018. The system allows members to book appointments with PACE service professionals at their convenience from our website.

Later this year, we will be introducing our members to a new suite of value added credit cards through our new partnership Collabria MasterCard.

Interac Online will allow members to shop online at participating online retailers and pay for their purchases easily and directly from their bank account.

Online chat is technology that allows our Contact Centre staff to communicate with members and potential members via web chat. This will allow us to better communicate with people in real time who are surfing our webpage.

Our Apple Watch Launch will allow our members to use our Mobile App from their Apple Watch.

Our focus in the coming year will be multi-faceted. As always our core objective is to ensure our members and our team are well supported and cared for. By putting the individual first we can ensure we are properly motivated and aligned with our vision of success.

We have a strong and knowledgeable team behind us, and we will continue leverage our passionate and innovative culture to grow from within and to help us develop new relationships that can expand our reach.

By constantly evolving and looking for ways to better ourselves through we can deliver greater opportunities for success to our members and the communities we serve. Together we can build a stronger tomorrow.

BUILDING A STRONGER TOMORROW TOGETHER

Management is responsible for the preparation, presentation and consistency of the accompanying summarized consolidated financial statements and other information contained in this Annual Report.

The summarized consolidated financial statements have been derived from the audited consolidated financial statements which were prepared in accordance with International Financial Reporting Standards and have been audited by Deloitte LLP.

Management maintains the necessary system of internal controls to provide reasonable assurance that transactions are authorized, assets safeguarded and proper records maintained. This system of internal controls provides reasonable assurance that financial records are reliable and are a proper basis for preparation of the consolidated financial statements.

The Audit Committee and the Board of Directors, in carrying out their responsibility, have reviewed and approved the consolidated financial statements.

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MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION

REPORT OF THE INDEPENDENT AUDITOR ON THE SUMMARIZED CONSOLIDATED FINANCIAL STATEMENTS

Phillip Smith, CEO Sandra Delabbio, CFO

To the Members of PACE Savings & Credit Union LimitedThe accompanying summarized consolidated financial statements, which comprise the summarized consolidated statement of financial position as at December 31, 2017, and the summarized consolidated statement of comprehensive income, summarized consolidated statement of changes in members’ equity and summarized consolidated statement of cash flows for the year then ended, are derived from the audited consolidated financial statements of PACE Savings & Credit Union Limited for the year ended December 31, 2017. We expressed an unmodified audit opinion on those consolidated financial statements in our report dated April 4, 2018. Those consolidated financial statements, and the summarized consolidated financial statements, do not reflect the effects of events that occurred subsequent to the date of our report on those consolidated financial statements.The summarized consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards. Reading the summarized consolidated financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of PACE Savings & Credit Union Limited.Management’s Responsibility for the Summarized Consolidated Financial StatementsManagement is responsible for the preparation of a summary of the audited consolidated financial statements in accordance with International Financial Reporting Standards.Auditor’s ResponsibilityOur responsibility is to express an opinion on the summarized consolidated financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standard (CAS) 810, “Engagements to Report on Summary Financial Statements.”OpinionIn our opinion, the summarized consolidated financial statements derived from the audited consolidated financial statements of PACE Savings & Credit Union Limited for the year ended December 31, 2017 are a fair summary of those consolidated financial statements, in accordance with International Financial Reporting Standards.

Chartered Professional AccountantsLicensed Public AccountantsApril 4, 2018

PACE CREDIT UNION

/s/ Deloitte LLP

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SUMMARIZED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2017 (IN CANADIAN DOLLARS)

2017 2016

$ $

Assets

Cash and cash equivalents 29,809,594 44,403,235

Investments 159,223,136 75,769,985

Investments in associates 27,849,069 15,019,571

Loans to members 810,420,281 686,154,182

Index-linked derivative contracts 89,512 201,814

Property and equipment 12,586,423 10,372,853

Intangible assets 2,892,020 2,859,395

Investment property 4,952,358 5,119,797

Other assets 35,141,152 34,034,858

Deferred income tax assets 728,655 791,600

1,083,692,200 874,727,290

Liabilities

Deposits from members 956,577,276 806,560,106

Other liabilities 59,846,296 8,489,823

Index-linked derivative contracts 89,512 201,814

Class A profit shares 478,786 439,974

Class B investment shares 1,210,375 1,199,531

1,018,202,245 816,891,248

Members’ equity

Membership shares 7,022,675 6,319,599

Class A profit shares 4,309,078 3,959,767

Class B investment shares 10,893,374 10,795,774

Contributed surplus 3,544,262 3,544,262

Retained earnings 35,977,030 30,788,181

Accumulated other comprehensive income 1,657,441 2,428,459

Equity attributable to members 63,403,860 57,836,042

Equity attributable to non-controlling interests 2,086,095 -

65,489,955 57,836,042

1,083,692,200 874,727,290

Approved by the Board

Ian Goodfellow, Chair Deborah Baker, Director

2017 ANNUAL REPORT

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SUMMARIZED CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS’ EQUITYYEAR ENDED DECEMBER 31, 2017 (IN CANADIAN DOLLARS)

$ $ $ $ $ $ $ $ $

As at January 1, 2016 5,347,632 3,624,391 10,701,195 3,544,262 28,348,270 2,008,283 - - 53,574,033

Total comprehensive income - - - - 2,239,262 420,176 - - 2,659,438

Business combination - - - - 630,422 - - - 630,422

Dividends on Class A profit shares - - - - (120,813) - - - (120,813)Dividends on Class A profit

shares qualifying as liabilities reclassified to expense

- - - - 12,081 - - - 12,081

Dividends re-invested in Class A profit shares

- 372,638 - - - - - - 372,638

Dividends on Class B investment shares

- - - - (356,712) - - - (356,712)

Dividends on Class B investment shares qualifying as liabilities reclassified to expense

- - - - 35,671 - - - 35,671

Dividends re-invested in Class B investment shares

- - 104,887 - - - - - 104,887

Issued shares 971,967 1,000 108,602 - - - - - 1,081,569

Redeemed shares - (1,000) (108,406) - - - - - (109,406)

Shares reclassified to liabilities - (37,262) (10,504) - - - - - (47,766)

As at December 31, 2016 6,319,599 3,959,767 10,795,774 3,544,262 30,788,181 2,428,459 57,836,042 - 57,836,042

Total comprehensive income - - - - 5,192,968 (771,018) 4,421,950 109,123 4,531,073

Business combination - - - 438,671 - - 438,671 - 438,671 Transfer of contributed surplus to

retained earnings - - - (438,671) 438,671 - - - -

Dividends on Class A profit shares - - - - (383,943) - (383,943) - (383,943)Dividends on Class A profit

shares qualifying as liabilities reclassified to expense

- - - - 38,394 - 38,394 - 38,394

Dividends re-invested in Class A profit shares

- 383,943 - - - - 383,943 - 383,943

Dividends on Class B investment shares

- - - - (108,046) - (108,046) - (108,046)

Dividends on Class B investment shares qualifying as liabilities reclassified to expense

- - - - 10,805 - 10,805 - 10,805

Dividends re-invested in Class B investment shares

- - 108,046 - - - 108,046 - 108,046

Issued shares 703,076 13,123 9,307 - - - 725,506 - 725,506

Redeemed shares - (8,943) (8,948) - - - (17,891) - (17,891)

Shares reclassified to liabilities - (38,812) (10,805) - - - (49,617) - (49,617)Non-controlling interest arising

in the year - - - - - - - 1,976,972 1,976,972

As at December 31, 2017 7,022,675 4,309,078 10,893,374 3,544,262 35,977,030 1,657,441 63,403,860 2,086,095 65,489,955

PACE CREDIT UNION

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15

SUMMARIZED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEYEAR ENDED DECEMBER 31, 2017(IN CANADIAN DOLLARS)

2017 2016

$ $

Interest income 34,332,873 29,730,136

Investment income 4,656,361 1,848,119

38,989,234 31,578,255

Interest expense 12,927,632 10,543,470

Net interest income 26,061,602 21,034,785

(Recovery of) provision for impaired loans (1,610,244) 4,860,714

Net interest margin 27,671,846 16,174,071

Other operating income 8,275,083 5,303,018

35,946,929 21,477,089

Amortization of intangible assets 523,618 673,809

Deposit insurance premium 694,418 611,300

Depreciation of property and equipment 1,041,096 932,398

General and administrative 9,415,098 7,412,407

Marketing 1,955,672 1,136,983

Occupancy 1,642,259 1,627,264

Personnel expenses 14,474,661 12,291,022

29,746,822 24,685,183

Income on investment in associates (856,523) (4,345,691)

Gain on sale of investment property - (1,192,917)

Dividends on Class A profit shares 38,394 12,081

Dividends on Class B investment shares 10,805 35,671

Dividends on preference shares 285,340 -

Income before income taxes 6,722,091 2,282,762

Income tax expense 1,420,000 43,500

Net income 5,302,091 2,239,262

Net income attributable to members 5,192,968 2,239,262

Net income attributable to non-controlling interest 109,123 -

Net income 5,302,091 2,239,262

Other comprehensive (loss) income, net of income taxes, attributable to members (771,018) 420,176

Other comprehensive (loss) income, net of income taxes, attributable to non-controlling interests - -

Other comprehensive income, net of income taxes (771,018) 420,176

Total comprehensive income for the year 4,531,073 2,659,438

2017 ANNUAL REPORT

16

SUMMARIZED CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2017 (IN CANADIAN DOLLARS) 2017 2016

$ $Operating activities

Net income 5,302,091 2,239,262 Adjustments for

Provision for impaired loans (1,610,244) 4,860,714 Interest income (34,332,873) (31,578,255)Interest expense 12,927,632 10,543,470 Depreciation of property and equipment 1,041,096 932,398 Amortization of intangible assets 523,618 673,809 Amortization of fair value adjustment on financial assets and liabilities (1,681) (215,450)Loss on disposition of property and equipment - 6,638 Gain on sale of investment property - (1,192,917)Income from investment in associates (856,523) (4,345,691)Income tax expense 1,420,000 43,500

Changes in operating assets/liabilitiesChange in loans to members (119,214,982) (70,548,702)Change in deposits from members 141,856,755 45,361,402 Change in other operating assets (1,035,543) (7,765,258)Change in other operating liabilities 38,810,530 1,015,154

Changes generated (used) from operating activities before interest and taxes Interest received 38,061,867 31,518,302 Interest paid (10,006,618) (9,019,661)Income tax received (paid) (502,797) 331,821

72,382,328 (27,139,465)

Investing activities Net change in investments (89,367,436) 31,997,713 Capital contribution in investments in associates (13,724,400) (2,895,000)Withdrawals from investments in associates 1,769,425 6,696,720 Proceeds on sale of property and equipment - 8,000 Purchase of property and equipment (3,252,612) (1,675,818)Purchase of investment property - (5,775)Purchase of intangible assets (347,576) (62,465)Cash received on business combination 4,008,801 16,993,262

(100,913,798) 51,056,637

Financing activities Issuance of membership shares 453,566 450,182 Issuance of Class A profit shares 13,123 1,000 Redemption of Class A profit shares (8,943) (1,000)Issuance of Class B investment shares 9,307 108,602 Redemption of Class B investment shares (8,948) (108,406)Dividends paid on Class A profit shares (345,549) (108,732)Dividends paid on Class B investment shares (97,241) (321,041)Dividends re-invested in Class A profit shares 383,943 372,638 Dividends re-invested in Class B investment shares 108,046 104,887 Issuance of preference shares 11,453,454 - Subscriptions by non-controlling interests 2,937,153 - Redemptions by non-controlling interests (960,082) -

13,937,829 498,130

Net change in cash and cash equivalents (14,593,641) 24,415,302 Cash and cash equivalents, beginning of year 44,403,235 19,987,933 Cash and cash equivalents, end of year 29,809,594 44,403,235

PACE CREDIT UNION

17

REPORT OF THE AUDIT COMMITTEE

2017 ANNUAL REPORT

Pursuant to Section 125 of the Credit Unions and Caisses Populaires Act, 1994 and Article 5.03 of the by-laws, the Board of Directors established an Audit Committee. Elected members of the Committee include directors; Jim Tindall, Peter Rebellati, George Pohle, Brent Bailey, Al Jones and myself, Deborah Baker, Chair.

The committee has adopted a mandate covering all of the duties, which are specified to be performed by audit committees in the regulations to the act.

In addition, the Audit Committee contracted the services of an internal auditor to assist in fulfilling those duties.

The committee, which meets at least quarterly, held five meetings throughout the year.

The agenda of those meetings is arranged so that the following duties will be performed and appropriate action taken as a result thereof:

Serve as the principal communication link between the external auditors and the Board of directors and, in particular, review the terms of engagement and scope of the audit and review the Credit Union’s annual financial statements prior to Board approval for issuance to the members.

Obtain a reasonable understanding of the key elements of internal controls that are important to safeguarding the assets of the Credit Union, ensuring the accuracy of financial reports and ensuring compliance with policies, procedures and regulations.

Serve as the Board’s liaison with the internal auditor and review the internal audit mandate, workplan and reports.

Review the policies, procedures and controls, which relate to legislative compliance, with a particular focus on requirements for liquidity, capital adequacy and interest rate risk management.

The committee receives full co-operation and support from management to enable it to play an effective role in improving the quality of financial reporting to the members and enhancing the overall control structure of the Credit Union.

No significant recommendations were made by the audit committee that have not been either implemented or are in the process of being implemented. In addition, there are no matters which the audit committee believes should be reported to the membership, nor are there any further matters which are required to be disclosed pursuant to the act or the Regulations thereto.

Respectfully submitted,

Deborah Baker, Chair, Audit Committee

ALCONA1040 Innisfil Beach Rd., Innisfil 705.436.6005

AURORA15010 Yonge St., Aurora905.727.1656

ETOBICOKE1 The East Mall Cres., Etobicoke416.622.8500

HAMILTON1005 King St. West, Hamilton905.522.2903

HILLCREST1138 Bathurst St., Operations Building, Toronto416.937.1708

IBM MARKHAM3600 Steeles Ave. East, Markham905.474.1885

LONDON 450 Highbury Avenue North, London519.453.2480

FIRE FIGHTERS LONDON111 Waterloo Street, Suite 205, London519.661.5635

MARKHAM8555 Woodbine Ave. Unit 500B, Markham 905.477.4311

MISSISSAUGA550 Matheson Blvd. West, Unit 109, Mississauga905.566.7223

SHELBURNE133 Owen Sound St., P.O. Box, Shelburne519.925.3204

STOUFFVILLE6212 Main St. P.O. Box 1019, Stouffville 905.640.2811

STROUD8034 Yonge St., Innisfil705.436.1910

TOLLENDALE274 Hurst Dr. Suite 102, Barrie705.719.4460

UXBRIDGE99 Brock St. West P.O. Box 490, Uxbridge905.852.3388

WHITBY420 Green St., Whitby905.668.5231

PACE ADMINISTRATION OFFICE8111 Jane St., Unit 1, Vaughan, ON L4K 4L7 905.738.8900

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