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ANNUAL REPORT e Fund shall not accept redemption requests for preferred shares in the same calendar month where they represent more than 5% of the total number of preferred shares outstanding on the redemption date. Should the amount of preferred shares tendered for redemption exceed the limit, the Fund may, at its discretion redeem all tendered preferred shares, redeem the preferred shares tendered on a pro rata basis, or suspend redemptions. Redemption of any preferred shares of the Fund is at the option of the Fund's board of directors, in their absolute discretion. (b) Dividends: e Fund intends to pay dividends to shareholders on a monthly basis, on or about the 15th day following the end of each month. For the year ended February 28, 2014, the Fund declared dividends on Class A preferred shares of $1,430,689 (2013 - $765,689) on the issued and outstanding preferred shares. As at February 28, 2014, $67,651 (2013 - $43,380) was payable to the Class A preferred shareholders. For the year ended February 28, 2014, the Fund declared dividends on Class B preferred shares of $590,072 (2013 - $4,377) on the issued and outstanding preferred shares. As at February 28, 2014, $51,028 (2013 - $3,681) was payable to the Class B preferred shareholders. (c) Dividend reinvestment plan: e Fund has instituted a dividend reinvestment plan ("DRIP") available to Class A and Class B preferred shareholders. Under the DRIP, shareholders may enroll to have their cash dividends reinvested to purchase additional preferred shares of the same class. e preferred shares are issued from treasury at an amount of $10.00 per share. For the year ended February 28, 2014, 74,263 (2013 - 36,716) Class A preferred shares were issued under the DRIP, resulting in reinvested dividends of $742,633 (2013 - $367,160). For the year ended February 28, 2014, 17,377 (2013 - 48) Class B preferred shares were issued under the DRIP, resulting in reinvested dividends of $173,765 (2013 - $487). Dividend reinvestments are recorded on a monthly basis. 5. Expenses: (a) Management fees: e Fund Manager is responsible for the day-to-day operations, including administration of the Fund's mortgage loan investments. In respect of these services, the Fund pays to the Fund Manager a management fee. For the year ended February 28, 2014 the Fund incurred management fees of $191,015 (2013 - $81,045). On June 1, 2012 the Fund and the Fund Manager mutually agreed to revise the management fee on a go forward basis. Subsequent to June 1, 2012 the management fee paid by the Fund is equal to 7.5% of the Fund's revenue, and is calculated monthly and paid quarterly. e Fund Manager's eligibility to receive the management fee for any month is subject to the Fund generating an increase in net assets from operations that is sufficient to provide a minimum 8% annualized return (the "Hurdle Rate") on the opening monthly capital of the Fund. Prior to June 1, 2012 the Fund Manager's management fee was calculated as 10% of the Fund's revenue and was not subject to achieving a Hurdle Rate. (b) Service fees: e Fund pays each registered dealer service fees in respect of outstanding Class A preferred shares that are held by clients of that registered dealer. In respect of outstanding Class B preferred shares, the Fund pays service fees to the Fund Manager. Service fees are calculated and paid at the end of each fiscal quarter. For the year ended February 28, 2014, the Fund incurred service fees of $273,034 (2013 – $87,381). 46

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