Firm Capital Mortgage Investment Trust announces third quarter 2007 results



    TSX Symbol FC.UN

    TORONTO, Oct. 23 /CNW/ - Firm Capital Mortgage Investment Trust (the
"Trust") (TSX FC.UN), released today its financial statements for the third
quarter ended September 30, 2007.
    Net earnings for the third quarter ended September 30, 2007 increased to
$3,221,939 from $3,150,562 for the same period last year. Basic weighted
average earnings per unit for the third quarter amounted to $0.255 versus
$0.250 last year. Net earnings for the nine month period ended September 30,
2007 increased to $9,735,662 from $9,161,537 for the same period last year.
Basic weighted average earnings per unit for the nine month period ended
September 30, 2007 increased to $0.772 versus $0.729 last year. For the nine
month period ended September 30, 2007, net earnings exceeded distributions by
$1,008,044, representing $0.08 per unit. The Trust distributes the balance of
its net earnings, less distributions made up to November 30 of that year, to
Unitholders of record as at December 31. Net earnings for the nine month
period ended September 30, 2007 represented an annualized return on average
Unitholders' equity of 10.84% per annum. This return on Unitholders' equity
equates to 660 basis points per annum over the average One Year Government of
Canada Treasury Bill yield for the related period, and is well in excess of
the Trust's target yield objective of 400 basis points per annum over the One
Year Treasury Bill yield.
    As at September 30, 2007, the Trust's mortgage portfolio, net of loan
loss provision, stood at $210,194,972 as compared to $208,102,557 as at
December 31, 2006. The portfolio continues to be heavily concentrated in first
mortgages based in Ontario.
    The Trust is not involved in the sub-prime mortgage investment
marketplace and has no exposure to the securitization market. The Trust's
investments are comprised of mortgages registered on properties primarily for
the short-term bridge financing and interim financing purposes, secured on
residential, development and investment properties. Residential single family
owner occupied housing mortgage investments have loan to values not exceeding
75%, and these investments represent a very small percentage of the Trust's
portfolio. The Trust's investment objective is the preservation of
Unitholders' equity, while providing Unitholders with a stable stream of
monthly distributions from investments. The Trust achieves its investment
objectives by pursuing a strategy of growth through investments in selected
niche markets that are under-serviced by large lending institutions. Lending
activities to date continue to develop a diversified mortgage portfolio,
producing a stable return to Unitholders.

    Firm Capital Corporation, as Mortgage Banker to the Trust, is a non-bank
lender providing residential and commercial short-term bridge and conventional
real estate finance, including construction, mezzanine and equity investments.
    Additional information about the Trust, including the Management's
Discussion and Analysis relating to the financial statements, will be
available on the SEDAR website at www.sedar.com.

    
                      Unaudited Financial Statements of

                   FIRM CAPITAL MORTGAGE INVESTMENT TRUST

                For the Nine Months Ended September 30, 2007

                   NOTICE UNDER NATIONAL INSTRUMENT 51-102

    National Instrument 51-102: Continuous Disclosure Requirements requires
that these interim financial statements be accompanied by this notice which
indicates that these financial statements have not been reviewed by the
auditors of Firm Capital Mortgage Investment Trust.



    FIRM CAPITAL MORTGAGE INVESTMENT TRUST
    Balance Sheets

    September 30, 2007, with comparative figures for December 31, 2006 and
    September 30, 2006

    -------------------------------------------------------------------------
                                        Sept. 30,      Dec. 31,     Sept. 30,
                                            2007          2006          2006
                                      (Unaudited)     (Audited)   (Unaudited)
    -------------------------------------------------------------------------

    Assets

    Amounts receivable and
     prepaid expenses               $  1,988,079  $  2,074,690  $  1,798,555
    Mortgages (note 5)               210,194,972   208,102,557   200,764,020
    -------------------------------------------------------------------------
                                    $212,183,051  $210,177,247  $202,562,575
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and
     Unitholders' Equity

    Liabilities:
      Bank indebtedness (note 6)    $ 29,540,984  $ 40,101,684  $ 31,845,147
      Accounts payable and
       accrued liabilities             1,057,172       571,991       901,136
      Unearned income                    326,633       305,607       301,281
      Unitholder distribution
       payable                           985,260             -       943,792
      Loans payable (note 7)          35,499,918    25,983,173    24,786,944
      Convertible debenture
       (note 8)                       23,698,759    23,537,211    23,533,317
    -------------------------------------------------------------------------
                                    $ 91,108,726  $ 90,499,666  $ 82,311,617

    Unitholders' equity (note 9):    121,074,325   119,677,581   120,250,958
      Issued and outstanding:
        12,631,540 units
         (2006 - 12,583,893)

    Commitments (note 5)
    Contingent liabilities
     (note 15)

    -------------------------------------------------------------------------
                                    $212,183,051  $210,177,247  $202,562,575
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to financial statements.



    FIRM CAPITAL MORTGAGE INVESTMENT TRUST
    Unaudited Statements of Earnings

    -------------------------------------------------------------------------
                              3 Month Period              9 Month Period
                          Sept. 30,     Sept. 30,     Sept. 30,     Sept. 30,
                              2007          2006          2007          2006
    -------------------------------------------------------------------------

    Interest and fees
     earned, net of
     Trust Manager
     interest
     allocation
     (note 13)        $  4,891,355  $  4,590,249  $ 14,460,770  $ 12,606,821
    Less interest
     expense (note 14)   1,455,468     1,214,744     4,045,907     2,899,444
    -------------------------------------------------------------------------

    Net interest and
     fee income          3,435,887     3,375,505    10,414,863     9,707,377

    Expenses:
      General and
       administrative      213,948       224,943       679,201       545,840
    -------------------------------------------------------------------------
    Net earnings for
     the period       $  3,221,939  $  3,150,562  $  9,735,662  $  9,161,537
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per
     unit (note 10)
      Basic           $      0.255  $      0.250  $      0.772  $      0.729
      Diluted         $      0.247  $      0.240  $      0.747  $      0.712
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to financial statements.



    FIRM CAPITAL MORTGAGE INVESTMENT TRUST
    Statement of Unitholders' Equity

    -------------------------------------------------------------------------
                                        Sept. 30,      Dec. 31,     Sept. 30,
                                            2007          2006          2006
    -------------------------------------------------------------------------
                                      (Unaudited)     (Audited)   (Unaudited)
    -------------------------------------------------------------------------

    Trust units (note 9)

    Balance, beginning of period    $119,297,099  $119,055,455  $119,055,455

    Proceeds from issuance
     of units                            388,700       241,644       142,550

    -------------------------------------------------------------------------
    Balance, end of period          $119,685,799  $119,297,099  $119,198,005
    -------------------------------------------------------------------------

    Equity component of convertible
     debenture (note 8)

    Balance, beginning of period         380,482             -             -

    Equity component of convertible
     debenture issued                          -       380,482       380,482

    -------------------------------------------------------------------------
    Balance, end of period               380,482       380,482       380,482
    -------------------------------------------------------------------------

    Cumulative earnings

    Balance, beginning of period    $ 53,289,186  $ 41,099,121  $ 41,099,121

    Net earnings                       9,735,662    12,190,065     9,161,537

    -------------------------------------------------------------------------
    Balance, end of period          $ 63,024,848  $ 53,289,186  $ 50,260,658
    -------------------------------------------------------------------------

    Cumulative distributions
     to unitholders

    Balance, beginning of period    $ 53,289,186  $ 41,099,121  $ 41,099,121

    Distributions to unitholders       8,727,618    12,190,065     8,489,065

    -------------------------------------------------------------------------
    Balance, end of period          $ 62,016,804  $ 53,289,186  $ 49,588,186
    -------------------------------------------------------------------------

    Total unitholders equity        $121,074,325  $119,677,581  $120,250,958

    Units issued and outstanding      12,631,540    12,593,549    12,583,893

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to financial statements.



    FIRM CAPITAL MORTGAGE INVESTMENT TRUST
    Unaudited Statement of Cash Flows

    -------------------------------------------------------------------------
                              3 Month Period              9 Month Period
                          Sept. 30,     Sept. 30,     Sept. 30,     Sept. 30,
                              2007          2006          2007          2006
    -------------------------------------------------------------------------

    Cash provided by
     (used in):

    Operating
     activities
      Net earnings for
       the period     $  3,221,939  $  3,150,562  $  9,735,662  $  9,161,537
      Net changes in
       non-cash items
        Increase in
         allowance for
         loan losses             -        80,000        95,000        80,000
        Implicit
         interest rate
         in excess of
         coupon rate -
         convertible
         debenture          54,493        51,937       161,548        89,735
        Decrease
         (increase)
         in amounts
         receivable
         and prepaid
         expenses          (14,936)      (81,800)       86,611      (197,867)
        Increase
         (decrease)
         in accounts
         payable and
         accrued
         liabilities       596,821       509,194     1,470,441     1,411,464
        Increase
         (decrease)
         in unearned
         income             29,852       (32,434)       21,026       (15,186)
    -------------------------------------------------------------------------
                         3,888,169     3,677,459    11,570,288    10,529,683

    Financing
     activities:
      Proceeds from
       issuance of
       units               113,876        62,229       388,701       142,550
      Proceeds from
       convertible
       debenture                 -             -             -    25,000,000
      Increase
       (decrease)
       in bank
       indebtedness     (4,696,987)     (405,348)  (10,560,700)   (7,627,270)
      Increase
       (decrease) in
       loans payable     8,891,816     8,869,645     9,516,745    17,482,497
      Debenture
       offering costs            -             -             -    (1,175,937)
      Distributions
       to unitholders   (2,954,898)   (2,830,917)   (8,727,618)   (8,489,065)
    -------------------------------------------------------------------------
                         1,353,807     5,695,609    (9,382,872)   25,332,775


    Investing
     activities:
      Funding of
       mortgages       (47,584,754)  (32,243,476) (119,681,028) (105,590,679)
      Discharge of
       mortgages        42,342,778    22,870,408   117,493,612    69,728,221
    -------------------------------------------------------------------------
                        (5,241,976)   (9,373,068)   (2,187,416)  (35,862,458)

    -------------------------------------------------------------------------
    Increase in cash,
     being cash,
     beginning and
     end of period    $          -  $          -  $          -  $          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash
     flow information
      Interest paid
      (note 14)       $    867,646  $    696,380  $  3,378,449  $  2,362,315

    See accompanying notes to financial statements.



    FIRM CAPITAL MORTGAGE INVESTMENT TRUST
    Notes to Financial Statements

    Three Months and Nine Months ended September 30, 2007

    -------------------------------------------------------------------------

    1.  Organization of Trust:

        Firm Capital Mortgage Investment Trust (the "Trust") is a closed-end
        trust created for the benefit of the unitholders, pursuant to the
        Declaration of Trust dated July 13, 1999, as amended and restated.

        Pursuant to the Declaration of Trust, the Trust's mortgage banker is
        Firm Capital Corporation and the trust manager is FC Treasury
        Management Inc.

    2.  Basis of Presentation:

        The unaudited interim period financial statements were prepared in
        accordance with Canadian generally accepted accounting principles
        ("GAAP") and follow the same accounting policies and methods of
        application with those used in the preparation of the audited
        financial statements for the year ended December 31, 2006, except as
        indicated in Note 3. Under Canadian GAAP, additional disclosure is
        required in annual financial statements and accordingly the interim
        financial statements should be read together with the audited
        financial statements and the accompanying notes included in Firm
        Capital Mortgage Investment Trust's 2006 Annual Report.

    3.  Summary of significant accounting policies:

        The Trust's accounting policies and its standards of financial
        disclosure are in accordance with Canadian generally accepted
        accounting principles ("GAAP").

        (a) Mortgages

            Mortgages are stated at fair value. Fair value is the amount of
            consideration that would be agreed upon in an arm's length
            transaction between knowledgeable, willing parties who are under
            no compulsion to act. An allowance for loan losses is recorded
            against the portfolio where fair value is determined to be less
            than the original value.

        (b) Convertible debentures

            The Trust's convertible debentures are classified into debt and
            equity components. The equity component represents the estimated
            value of the conversion rights of the holders.

        (c) Revenue recognition

            (i)  Interest and fee income

                 Interest income is accounted for on the accrual basis, and
                 is recorded net of the Trust Manager interest spread
                 described in note 13. Commitment fees received are amortized
                 over the expected term of the mortgage.

            (ii) Non-conventional mortgages:

                 Special profit participations earned by the Trust on non-
                 conventional mortgages are recognized only once the receipt
                 of such amounts is certain.

        (d) Use of estimates:

            The preparation of financial statements requires management to
            make estimates and assumptions that affect the reported amounts
            of assets and liabilities, disclosure of contingent assets and
            liabilities at the date of the financial statements and the
            reported amounts of revenue and expenses during the year. Actual
            results could differ from those estimates.

        (e) Unit-based compensation:

            The Trust has unit-based compensation plans (i.e. incentive
            option plan) which are described in note 9. The Trust accounts
            for its unit-based compensation using the fair value method,
            under which compensation expense is measured at the grant date
            and recognized over the vesting period.

        (f) Basic and diluted net earnings per unit:

            Basic net earnings per unit is computed by dividing net earnings
            for the period by the weighted average number of units
            outstanding during the reporting period. Diluted net earnings per
            unit is computed similarly to basic net earnings per unit, except
            that the weighted average number of shares outstanding is
            increased to include additional shares from the assumed exercise
            of incentive option units and the conversion of the convertible
            debenture, if dilutive. The number of additional units is
            calculated by assuming that outstanding incentive options were
            exercised and that proceeds from such exercises were used to
            acquire units at the average market price during the reporting
            period. The additional units would also include those units
            issuable upon the assumed conversion of the convertible
            debenture, with an adjustment to net earnings for the period to
            add back any interest paid to the debenture holders. These common
            equivalent units are not included in the calculation of the
            weighted average number of units outstanding for diluted earnings
            per unit when the effect would be anti-dilutive.

    4.  Changes in accounting policy:

        Effective January 1, 2007, the Trust adopted the new accounting
        standards issued by the Canadian Institute of Chartered Accountants,
        relating to financial instruments. In accordance with this new
        standard, the Trust has classified its financial assets as one of the
        following: (i) held-to-maturity, (ii) loans and receivables, (iii)
        held for trading or (iv) available for sale. All financial
        liabilities have been classified as: (i) held for trading or (ii)
        other liabilities. The adoption of this standard has not resulted in
        a material change in the carry value of any of the Trust's assets or
        liabilities.

        In accordance with this new standard, Deferred financing costs
        relating to the issuance of convertible debentures are no longer
        presented as a separate asset on the balance sheet and are now
        included in the carrying value of the convertible debenture. This
        change in accounting policy has not resulted in a material change in
        the net carrying value of the convertible debenture and as such no
        resulting entry has been made to Unitholders Equity.

        The new standard requires the presentation of a Statement of
        Comprehensive Income. The Trust does not have any material income
        from this source and as such a Statement of Comprehensive Income has
        not been included in these financial statements.

    5.  Mortgages:

        The following is a breakdown of the mortgages as at September 30,
        2007, December 31, 2006 and September 30, 2006:

        ---------------------------------------------------------------------
                                        Sept. 30, 2007       Dec. 31, 2006
        ---------------------------------------------------------------------
                                          Amount      %        Amount      %
        ---------------------------------------------------------------------

        Conventional first
         mortgages                  $177,676,084   83.9  $170,806,640   81.4
        Conventional non-first
         mortgages                    21,889,384   10.4    26,049,819   12.5
        Non-conventional mortgages
         & related investments        12,149,504    5.7    12,671,098    6.1
        ---------------------------------------------------------------------
                                    $211,714,972  100.0   209,527,557  100.0

        Allowance for loan losses      1,520,000            1,425,000

        ---------------------------------------------------------------------
                                    $210,194,972         $208,102,557
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ------------------------------------------------
                                        Sept. 30, 2006
        ------------------------------------------------
                                          Amount      %
        ------------------------------------------------

        Conventional first
         mortgages                  $164,286,753   81.3
        Conventional non-first
         mortgages                    24,272,972   12.0
        Non-conventional mortgages
         & related investments        13,399,295    6.7
        ------------------------------------------------
                                    $201,959,020  100.0

        Allowance for loan losses      1,195,000

        ------------------------------------------------
                                    $200,764,020
        ------------------------------------------------
        ------------------------------------------------

        The mortgages are secured by real property, bear interest at the
        weighted average rate of 9.54% (2006 - 9.48%) and mature between 2007
        and 2011. Included with mortgages is one loan not directly secured on
        real property totalling $1,311,043 (2006 - $1,500,000).

        The continuity of allowance for loan losses is as follows:

        ---------------------------------------------------------------------
                                              Nine Months Ended September 30:
                                                          2007          2006
        ---------------------------------------------------------------------

        Balance, beginning of period                 1,425,000     1,115,000
        Increase during the period                      95,000        80,000

        ---------------------------------------------------------------------
        Balance - End of period                      1,520,000     1,195,000
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The unadvanced funds under the existing mortgage portfolio (which are
        commitments of the Trust) amounted to $53,577,945 as at September 30,
        2007 (September 30, 2006 - $38,355,338 & December 31, 2006 -
        $40,759,332).

        Credit risk arises from the possibility that mortgagors may
        experience financial difficulty and be unable to fulfill their
        mortgage commitments. In accordance with the operating policies of
        the Declaration of Trust, the Trust mitigates the risk of credit loss
        by ensuring that its mix of mortgages is diversified between
        conventional and non-conventional mortgages, and by limiting its
        exposure to any one mortgagor.

        Where appropriate, management makes specific provisions for loan
        losses. Specific provisions are determined on an item by item basis
        and reflect the estimated realizable amount of a mortgage.

        Interest rate risk arises from a mismatch of terms on borrowings to
        terms on the mortgage investments. The bank indebtedness bears
        interest at a floating rate that fluctuates with bank prime. A
        significant portion of the investment portfolio is short term in
        nature and also bears interest that fluctuates with bank prime,
        subject to an interest rate floor, thereby partially mitigating the
        interest rate risk. Interest on loans payable is matched to specific
        mortgage investments, thereby ensuring positive interest rate spread.

        Principal repayments based on contractual maturity dates are as
        follows:

        ---------------------------------------------------------------------

        2007                                                     $44,718,368
        2008                                                     131,438,201
        2009                                                      29,382,160
        2010                                                       6,156,716
        2011                                                          19,528
        ---------------------------------------------------------------------
                                                                $211,714,973
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Borrowers who have open loans have the option to repay principal at
        anytime prior to the maturity date.

    6.  Bank indebtedness:

        The Trust has entered into credit arrangements of which $29,540,984
        (September 30, 2006 - $31,845,147 & December 31, 2006 - $40,101,684)
        has been drawn. Interest on bank indebtedness is predominately
        charged at rates that vary with bank prime and may have a component
        with a fixed interest rate established based on a formula linked to
        Bankers Acceptance rates. Bank indebtedness is secured by a general
        security agreement. The credit agreement contains certain financial
        covenants that must be maintained.

    7.  Loans Payable

        First priority charges on specific mortgage investments have been
        granted as security for the loans payable. The loans mature on dates
        consistent with those of the underlying mortgages. The loans are on a
        non-recourse basis and bear interest at rates ranging from 5.35% to
        7.25% (2006 - 5.30% to 8.50%).

        The loans are repayable at the earlier of the contractual expiry date
        of the underlying mortgage investment and the date the underlying
        mortgage is repaid. Repayments based on contractual maturity dates
        are as follows:

        ---------------------------------------------------------------------
        2007                                                      $3,178,000
        2008                                                      21,235,503
        2009                                                      10,286,775
        2010                                                         799,640
        ---------------------------------------------------------------------
                                                                 $35,499,918
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    8.  Convertible Debenture:

        On April 24, 2006, the Trust completed a public offering of 25,000 6%
        convertible unsecured subordinated debentures at a price of $1,000
        per debenture for gross proceeds of $25,000,000. The debentures
        mature on June 30, 2013 and interest is paid semi-annually on June 30
        and December 31. The debentures are convertible at the option of the
        holder at any time prior to the maturity date at a conversion price
        of $11.75. The debentures may not be redeemed by the Trust prior to
        June 30, 2009. On and after June 30, 2009, but prior to June 30,
        2010, the debentures are redeemable at a price equal to the
        principal, plus accrued interest, at the Trust's option on not more
        than 60 days and not less than 30 days notice, provided that the
        weighted average trading price of the units on the Toronto Stock
        Exchange for the 20 consecutive trading days ending five trading days
        preceding the date on which the notice of redemption is given is not
        less than 125% of the conversion price. On and after June 30, 2010
        and prior to the maturity date, the debentures are redeemable at a
        price equal to the principal amount plus accrued interest, at the
        Trust's option on not more than 60 days and not less than 30 days
        prior notice. On redemption or at maturity, the Trust may, at its
        option, elect to satisfy its obligation to pay all or a portion of
        the principal amount of the debenture by issuing that number of units
        of the Trust obtained by dividing the principal amount being repaid
        by 95% of the weighted average trading price of the units for the 20
        consecutive trading days ending on the fifth trading day preceding
        the redemption or maturity date.

        The convertible debentures were allocated into liability and equity
        components on the date of issuance as follows:

        ---------------------------------------------------------------------
        Liability                              $25,000,000
        Equity                                     380,482
        ---------------------------------------------------------------------

        Principal                              $24,619,518
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The accretion of the liability component of the convertible
        debenture, which increases the liability component from the initial
        allocation on the date of issuance, is included in interest expense.

        ---------------------------------------------------------------------
        Liability, December 31, 2006           $23,537,211
        Implicit interest rate in excess
         of coupon rate                             33,658
        Amortization of debenture
         financing costs                           127,890
        ---------------------------------------------------------------------

        Liability, September 30, 2007          $23,698,759
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As discussed in Note 4 herein, in accordance with the new accounting
        standard adopted by the Trust, Deferred financing costs relating to
        the issuance of convertible debentures are no longer presented as a
        separate asset on the balance sheet and are now netted against the
        carrying value of the convertible debenture.

        Notwithstanding the carry value of the convertible debenture, the
        principal balance outstanding to the debenture holders is
        $25,000,000.

    9.  Unitholders' equity:

        The beneficial interests in the Trust are represented by a single
        class of units which are unlimited in number. Each unit carries a
        single vote at any meeting of unitholders and carries the right to
        participate pro rata in any distributions.

        (a) The following units are issued and outstanding:

        ---------------------------------------------------------------------
                                        Sept. 30,      Dec. 31,     Sept. 30,
                                            2007          2006          2006
                                          Amount        Amount        Amount
        ---------------------------------------------------------------------

        Balance, beginning of period  12,593,549    12,570,072    12,570,072
        New units issued from
         exercise of options              22,500             -             -

        New units issued during the
         year under Distribution
         Reinvestment Plan                15,491        23,477        13,821

        ---------------------------------------------------------------------
        Balance, end of period        12,631,540    12,593,549    12,583,893
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (b) Incentive option plan:

            In November, 2005, 415,000 options were issued to trustees,
            directors, officers and employees of the Trust Manager and
            Mortgage Banker, with an exercise price of $9.90 per unit. The
            options are exercisable any time up to November 17, 2010. The
            fair value of the unit options used to compute compensation
            expense of $21,729 (which was recorded in the fourth quarter of
            2005) is the estimated fair value of each option grant on the
            grant date. This was calculated for the options granted during
            the 2005 using the Black-Scholes option pricing model with the
            following assumptions: expected distribution yield is 9.44%,
            expected volatility is 8.83%; risk free interest rate is 3.96%;
            and expected option life in years is 5. The options vested on the
            grant date.

        (c) Distribution reinvestment plan and direct unit purchase plan:

            The Trust has a distribution reinvestment plan and direct unit
            purchase plan for its unitholders which allows participants to
            reinvest their monthly cash distributions in additional trust
            units at a unit price equivalent to the weighted average price of
            units for the proceeding five day period.

    10. Per unit amounts:

        The following table reconciles the numerators and denominators of the
        basic and diluted earnings per unit.

        Basic earnings per unit calculation:

    -------------------------------------------------------------------------
                                  Three Months ended:      Nine months ended:
                                Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Numerator for basic
     earnings per unit:
      Net earnings            $3,221,939  $3,150,562  $9,735,662  $9,161,537

    -------------------------------------------------------------------------

    Denominator for basic
     earnings per unit:
      Weighted average units  12,626,740  12,580,856  12,611,273  12,575,696

    -------------------------------------------------------------------------

    Basic earnings per unit       $0.255      $0.250      $0.772      $0.729

    -------------------------------------------------------------------------

    Diluted earnings per unit
     calculation:

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                  Three Months ended:      Nine months ended:
                                Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Numerator for diluted
     earnings per unit:
      Net earnings            $3,221,939  $3,150,562  $9,735,662  $9,161,537
      Interest on
       convertible debentures    429,493     375,000   1,286,548     688,141

    -------------------------------------------------------------------------
    Net earnings for diluted
     earnings per unit        $3,651,432  $3,525,562 $11,022,210  $9,849,678
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------

    Denominator for diluted
     earnings per unit:
      Weighted average units  12,626,740  12,580,856  12,611,273  12,575,696
      Net units that would
       be issued:
        Assuming the proceeds
         from options are used
         to repurchase units at
         the average unit price    4,893       9,822      20,005      16,503

        Assuming convertible
         debentures are
         converted             2,127,660   2,127,660   2,127,660   1,239,186

    -------------------------------------------------------------------------
    Diluted weighted average
     units                    14,759,293  14,718,338  14,758,937  13,831,386
    -------------------------------------------------------------------------

    Diluted earnings per unit     $0.247      $0.240      $0.747      $0.712

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    11. Distributions:

        The Trust makes distributions to the unitholders on a monthly basis
        on or about the 15th day of each month other than January and on
        December 31 in each calendar year. The Declaration of Trust provides
        that the Trust will distribute at least 100% of the net income of the
        Trust determined in accordance with the Income Tax Act (Canada),
        subject to certain adjustments, to Unitholders. The net income of the
        Trust determined in accordance with the Income Tax Act (Canada), for
        the nine month period ended September 30, 2007 was $9,422,433.

        For the nine months ended September 30, 2007, the Trust recorded
        distributions of $8,727,618 (2006 - $8,489,065) to its unitholders.
        Distributions were $0.692 (2006 - $0.675) per unit.

    12. Income taxes:

        The Trust is taxed as a mutual fund trust for income tax purposes.
        Pursuant to the Declaration of Trust, the Trust is required to
        distribute its income for income tax purposes each year to such an
        extent that it will not be liable for income tax under Part 1 of the
        Income Tax Act (Canada). Therefore, no provision for income taxes is
        required on income earned by the Trust.

        On June 22, 2007, Bill C-52, which significantly modifies the income
        tax rules applicable to certain publicly traded or listed trusts and
        partnerships, received Royal Assent. In particular, certain income of
        (and distributions made by) these entities will be taxed in a manner
        similar to income earned by (and distributions made by) a
        corporation. These rules will be effective for the 2007 taxation year
        with respect to trusts which commence public trading after
        October 31, 2006. For trusts which were publicly traded or listed
        prior to November 1, 2006, the application of the rules will be
        delayed to the earlier of (i) the trust's 2011 taxation year, and
        (ii) a taxation year of the trust in which the trust exceeds normal
        growth as determined by reference to the normal growth guidelines, as
        amended from time to time, unless that excess arose as a result of a
        prescribed transaction. As currently structured, the Trust will be
        subject to these new rules.

        On December 15, 2006, the Department of Finance (Canada) released the
        normal growth guidelines for income trusts and other flow-through
        entities that qualify for the four-year transitional relief. The
        guidance establishes objective tests with respect to how much an
        income trust is permitted to grow without jeopardizing its
        transitional relief. In general, the Trust will be permitted to issue
        new equity in each of the next four years equal to the greater of
        $50 million and a certain percentage of the Trust's market
        capitalization as of the end of trading on October 31, 2006 (up to
        100% percent over the four years). This latter amount is cumulative
        to the extent it is not used in a given year and, accordingly, the
        Trust will be permitted to issue new equity over the next four years
        at least equal to its October 31, 2006 market capitalization (subject
        to the applicable annual limits). Market capitalization, for these
        purposes, is to be measured in terms of the value of the Trust's
        issued and outstanding publicly-traded units. If these limits are
        exceeded, the Trust may lose its transitional relief and thereby
        become immediately subject to the new rules.

        The Trust is considering these legislative changes and their possible
        impact to the Trust. The new rules (including the normal growth
        guidelines released on December 15, 2006) may adversely affect the
        marketability of the Trust's units and the ability of the Trust to
        undertake financings and acquisitions, and, at such time as the new
        rules apply to the Trust, the distributable cash of the Trust may be
        materially reduced.

        The Trust expects that its distributions will not be subject to tax
        prior to 2011 and accordingly has not recorded future income taxes on
        temporary differences expected to be reversed prior to then.

    13. Related party transactions and balances:

        Transactions with related parties are in the normal course of
        business and are recorded at the exchange amount, which is the amount
        of consideration established and agreed to by the related parties,
        and represents fair market value.

        The Trust Manager (a company controlled by some of the trustees),
        pursuant to the Trust Management Agreement and Declaration of Trust,
        receives an allocation of mortgage interest referred to as Trust
        Manager spread interest, calculated as 0.75% per annum of the Trust's
        daily outstanding performing mortgage investment balances. For the
        nine months ended September 30, 2007 this amount was $1,168,429 (2006
        - $1,040,522), and for the three month period ended September 30,
        2007 this amount was $405,178 (September 30, 2006 - $373,808), and
        was deducted from interest and fees earned.

        The Mortgage Banker (a company controlled by a Trustee), pursuant to
        the Mortgage Banking Agreement and Declaration of Trust, receives
        certain fees from the borrowers as follows: loan servicing fees equal
        to 0.10% per annum on the principal amount of each of the Trust's
        mortgage investments; 75% of all the commitment and renewal fees
        generated from the Trust's mortgage investments and 25% of all the
        special profit income generated from the non-conventional mortgage
        investments after the Trust has yielded a 10% per annum return on its
        investments. Interest and fee income is net of the loan servicing
        fees paid to the Mortgage Banker of approximately $156,000 for the
        nine month period ended September 30, 2007 (2006 - $139,000). The
        Mortgage Banker also retains all overnight float interest and
        incidental fees and charges payable by borrowers on the Trust's
        mortgage investments. The Trust's share of commitment and renewal
        fees recorded in income for the nine months ended September 30, 2007
        was $682,486 (2006 - $466,181) and for the three month period ended
        September 30, 2007 was $221,771 (September 30, 2006 - $158,645) and
        applicable special profit income for the nine months ended
        September 30, 2007 was $478,362 (2006 - $400,145) and for the three
        month period ended September 30, 2007 was $42,310 (September 30, 2006
        - $204,017).

        The Trust Management Agreement and Mortgage Banking Agreement
        contains provisions for the payment of termination fees to the Trust
        Manager and Mortgage Banker in the event that the respective
        agreements are either terminated or not renewed.

        Several of the Trust's mortgages are shared with other investors of
        the Mortgage Banker, which may include members of management of the
        Mortgage Banker and/or Officers or Trustees of the Trust. The Trust
        ranks equally with other members of the syndicate as to receipt of
        principal and income.

        Mortgages totalling $1,760,000 at September 30, 2007 (2006 -
        $1,760,000) were issued to borrowers controlled by certain Trustees
        of the Trust. Each mortgage is dealt with in accordance with the
        Trust's existing investment and operating policies and is personally
        guaranteed by the related Trustee.

    14. Interest

    -------------------------------------------------------------------------
                                  Three Months ended:      Nine months ended:
                                Sept. 30,   Sept. 30,   Sept. 30,   Sept. 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Bank interest expense     $  532,729  $  456,871  $1,480,540  $1,455,084
    Loans payable interest
     expense                     493,246     330,936   1,278,818     704,282
    Debenture interest
     expense                     429,493     426,937   1,286,548     740,078
    -------------------------------------------------------------------------
    Interest expense          $1,455,468  $1,214,744  $4,045,906  $2,899,444
    Deferred finance cost
     amortization - convertible
      Debenture                  (43,099)    (41,229)   (127,890)    (71,255)
    Implicit interest rate
     in excess of coupon rate -
      Convertible debentures     (11,394)    (10,707)    (33,658)    (18,480)
    Change in accrued interest  (533,329)   (466,428)   (505,909)   (447,394)
    -------------------------------------------------------------------------

    Cash interest paid        $  867,646  $  696,380  $3,378,449  $2,362,315

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. Contingent liabilities:

        The Trust is involved in certain litigation arising out of the
        ordinary course of investing in mortgages. Although such matters
        cannot be predicted with certainty, management believes the claims
        are without merit and does not consider the Trust's exposure to such
        litigation to have an impact on these financial statements.

    16. Comparative figures:

        Certain 2006 comparative figures have been reclassified to conform
        with the financial statement presentation adopted in 2007.
    





For further information:

For further information: Eli Dadouch, President & Chief Executive
Officer, (416) 635-0221, www.firmcapital.com


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