E-Delivery

ANNUAL REPORT • Turnover ratio – represents principal repayment of mortgage investments received during the stated period expressed as a ratio of the daily weighted average size of the mortgage investment portfolio. • Payout ratio – represents total dividends declared to the holders of all classes of preferred shares divided by the increase in net assets from operations attributable to all classes of preferred shares for the period presented. Results of Operations e Fund generated an internal rate of return (IRR) of 8.88% (2013 - 8.91%) for the Year after the payment of all fees and expenses. In comparison, the Fund's targeted annual return for the year was 6.59% (2013 – 6.61%). e targeted return is calculated as the Government of Canada 2-year bench mark bond yield (series V122538) plus 550 basis points. e Manager is very pleased with the performance of the Fund over the Year, and believes that the IRR of 8.92% (2013 – 8.98%) since inception of the Fund in 2009, combined with a $0.00 cumulative loss history demonstrates a strong track record of achieving the stated objectives. During the Year, the Fund grew its net assets by $25,007,221 (2013 – $5,155,419) to $38,212,776 (2013 - $13,205,555) as at February 28, 2014 primarily by completing ongoing sales of its Class A and Class B preferred shares. Overall, the Fund's net assets have grown during the Year by approximately 189.37% since February 28, 2013. e Fund's continued growth has meant that a greater number of mortgage securities are included in the portfolio and that larger individual mortgage investments are now compatible with the investment strategy and asset allocation model. Having capacity to participate in larger individual mortgage investments increases the universe of potential investments for the Fund, and improves its ability to hold larger positions in any single mortgage in the interest of deploying capital efficiently. Over the Year, the Fund advanced monies for investment in mortgages 114 times (2013 – 69 times) totalling $38,148,352 (2013 - $14,142,515) and received principal pay downs 56 times (2013 – 58 times) on previously advanced mortgage investments totalling $14,099,748 (2013 - $8,963,829). e net result of these transactions are total portfolio investments at February 28, 2014 of $37,067,774 (2013 - $13,019,170) or a portfolio turnover rate of 0.61 times (2013 - 1.03 times). Further, the new mortgage fundings from the Year equate to approximately 87.03% of the Fund's mortgage investments at year end. e weighted average interest rate on the portfolio at February 28, 2014 was 10.60% (2013 – 10.88%). e weighted average interest rate has decreased over the Year, primarily as a result of competition within the market exerting downward pressure on the yields from the mortgages in which the Fund invests and the Manager strategically allocating a portion of the capital pool to higher quality mortgage opportunities that are priced at lower yields. e average loan advance during the Year of $334,635 (2013 - $204,964) represented an increase from the prior year as the Fund took larger positions in the available syndicated mortgages because of its increased size and larger available cash balance at the date when fundings occurred. $ 0.00 cumulative loss history 20

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