First Commonwealth Mortgage Trust

Description

Although no determination has been made by the Internal Revenue Service, the Trust Managers believe that the Trust qualifies as a REIT for federal income tax purposes. As such, with certain limited exceptions, the Trust will not be taxed at the Trust level on net income that is distributed to its shareholders. The Trust is designed to provide an investment vehicle through which individual and institutional investors acquire real estate loans and equity interests on a diversified-pooled basis. In general, the Trust invests primarily in mortgage loans, including those with equity enhancements, and other real estate investments which offer the potential for (i) providing current income from operations to be distributed quarterly to shareholders, (ii) participating in potential capital appreciation, and (iii) preserving and protecting the shareholders' capital. There can be no assurance that all of these objectives can be met in each of the Trust's investments. The Trust expects to continue to make mortgage loans which, in addition to providing for base interest at a fixed or variable rate, may include provisions permitting the Trust to participate in the economic benefits of an increase in the value of the underlying property realized through sale or refinancing. The terms and the extent of any equity enhancements will vary with each transaction, depending on such factors as the equity investment and financial resources of the borrower, the base interest of the mortgage loan, the projected cash flow from the underlying real estate involved and current market conditions. Certain limitations regarding equity enhancements are applicable to the Trust under the current federal tax law which if exceeded could cause the Trust to lose its REIT status. The Trust's mortgage activity includes the origination or mortgage loans, the purchase of existing mortgage loans, and the participation in mortgage loans created by independent mortgage brokers and its Manager, First Commonwealth Holdings Corp. The Trust does not intend to engage in the active operation or management of real property. If the nature of any investment is such as to require that the Trust operate such property or furnish services to tenants, the Trust will do so only through a property manager meeting the Internal Revenue Code's requirements of an "independent contractor." The Trust Managers do not intend to acquire any real estate investments primarily for sale in the ordinary course of business, or to hold any investments with a view to making short-term profits from their sale. The various investment objectives and policies enumerated above may be changed by the Trust Managers without approval of its shareholders.

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