MacKenzie Realty Capital, Inc. - FORM 10-K

Attached files

file	filename
EX-32.2 - CFO EXHIBIT 32.2 - MacKenzie Realty Capital, Inc.	exhibit32cfo.htm
EX-32.1 - CEO EXHIBIT 32.1 - MacKenzie Realty Capital, Inc.	exhibit32ceo.htm
EX-31.2 - CFO EXHIBIT 31.2 - MacKenzie Realty Capital, Inc.	exhibit31cfo.htm
EX-31.1 - CEO EXHIBIT 31.1 - MacKenzie Realty Capital, Inc.	exhibit31ceo.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K


☑		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2020
OR
☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission file number: 000-55006

MACKENZIE REALTY CAPITAL, INC.

(Exact Name of Registrant as Specified in its Charter)


Maryland		45-4355424
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)


89 Davis Road Orinda, California		94563
(Address of Principal Executive Offices)		(Zip Code)

Registrant's Telephone Number, Including Area Code: (925) 631-9100

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name Of Each Exchange On Which Registered
None		None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.0001 per share par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐ Accelerated filer ☐Non-accelerated filer ☑ (Do not check if a smaller reporting company) Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☑

There is no established market for the Registrant's shares of common stock. The Registrant is currently conducting an ongoing public offering of its shares of common stock pursuant to a Registration Statement on Form N-2, which shares are currently being offered and sold at a price of $10.25 per share.

The number of the issuer's Common Stock outstanding as of September 21, 2020 was 12,852,386.91.

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PART I		Page
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	20
Item 3.	Legal Proceedings	20
Item 4.	Mine Safety Disclosures	20

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 8.	Financial Statements and Supplementary Data	36
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	36
Item 9A.	Controls and Procedures	36
Item 9B.	Other Information	37

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	37
Item 11.	Executive Compensation	41
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	41
Item 13.	Certain Relationships and Related Transactions, and Director Independence	42
Item 14.	Principal Accountant Fees and Services	43

PART IV
Item 15.	Exhibits and Financial Statement Schedules	45
Item 16.	Form 10-K Summary	45
	Signatures

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PART I

Item 1. BUSINESS

Organization

MacKenzie Realty Capital, Inc. (the “Parent Company,” together with its subsidiaries as discussed below, the “Company,” “we,” “us,” or “our”) is an externally managed non-diversified real estate investment trust (“REIT”), as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”).

Our investment objective is to generate both current income and capital appreciation through investments in real estate companies (as defined below). We are advised by MCM Advisers, LP (the “Adviser” or “MCM Advisers”). MacKenzie Capital Management, LP (“MacKenzie” or the “Administrator”) provides us with non-investment management services and administrative services necessary for us to operate.

The Parent Company filed its initial registration statement in June 2012 with the Securities and Exchange Commission ("SEC") to register the initial public offering (“IPO”) of 5,000,000 shares of its common stock. The IPO commenced in January 2014 and concluded in October 2016. The Parent Company filed a second registration statement with the SEC to register a subsequent public offering of 15,000,000 shares of its common stock. The second offering commenced in December 2016 and concluded on October 28, 2019. The Parent Company filed a third registration statement with the SEC to register a public offering of 15,000,000 shares of its common stock that was declared effective by the SEC on October 31, 2019. The third offering commenced shortly thereafter and is continuing.

The Parent Company’s wholly owned subsidiary, MRC TRS, Inc., (“TRS”) was incorporated under the general corporation laws of the State of California on February 22, 2016, and operates as a taxable REIT subsidiary. TRS started its operation on January 1, 2017, and the financial statements of TRS have been consolidated with the Parent Company’s consolidated financial statements beginning with the quarter ended March 31, 2017. On December 20, 2017, a wholly owned subsidiary of TRS, MacKenzie NY Real Estate 2 Corp. (“MacKenzie NY 2”), was formed for the purpose of making certain limited investments in New York companies, and its financial statements have been consolidated with the Parent Company.

While we remain a BDC, our investments generally range in size from $10,000 to $3 million. However, we may make smaller or larger investments from time to time on an opportunistic basis. We focus primarily on real estate-related securities. We purchase most of our securities (i) directly from existing security holders, (ii) through established securities markets, and (iii) in the case of unregistered, privately offered securities, directly from issuers. We invest primarily in debt and equity securities issued by U.S. companies that primarily own commercial real estate that are either illiquid or not listed on any exchange.

While we remain a BDC, we generally seek to invest in interests of real estate-related limited partnerships and REITs. Under normal market conditions, we invest at least 80% of our total assets in common stocks and other equity or debt securities issued by real estate companies, including REITs and similar REIT-like entities. A real estate company is one that (i) derives at least 50% of its revenue from the ownership, construction, financing, management or sale of commercial, industrial or residential real estate and land; or (ii) has at least 50% of its assets invested in such real estate. We will not invest in general partnerships, joint ventures, or other entities that do not afford limited liability to their security holders. However, limited liability entities in which we invest may hold interests in general partnerships, joint ventures, or other non-limited liability entities. We generally favor purchasing securities issued by entities that have (i) completed the initial offering of their securities, (ii) operated for a period of at least two years, and typically more than five years, from the completion of their initial offering, and (iii) fully invested their capital in real properties or other real estate-related investments.

While we remain a BDC, we may also acquire or originate (i) loans secured by real property (i.e., we may originate such loans or we may purchase outstanding loans secured by real estate), (ii) securities of issuers that own mortgages secured by income producing real property, and (iii) using no more than 20% of our available capital, securities of issuers that own assets other than real estate.

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At our board meeting on August 28, 2020, our Board of Directors approved the proposal to withdraw of our BDC election, while continuing our REIT status. Therefore, on October 23, 2020, our stockholders will be asked to approve the withdrawal of our BDC election. If this proposal is approved, the Company will, effective upon receipt by the SEC of the Company’s application for withdrawal, no longer be regulated as a BDC or subject to the regulatory provisions of the 1940 Act. Withdrawal of our election to be regulated as a BDC will not affect our registration under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”), and we will continue to file periodic reports on Form 10-K, Form 10-Q, and Form 8-K, and file proxy statements and other reports required under the Exchange Act. Following withdrawal of our election to be regulated as a BDC, the application and presentation of our financial statements under accounting principles generally accepted in the United States of America (“GAAP”) could change.

The Company has undertaken several steps to meet the requirements for withdrawal of its election to be regulated as a BDC, including (i) preparing a plan of operations in contemplation of such a change to the status of the Company, (ii) evaluating potential investments in real estate assets that will allow the Company to transition to direct real estate asset investments, (iii) reviewing the potential adjusted investment strategy with potential capital providers, and (iv) consulting with outside counsel as to the requirements for withdrawing its election as a BDC.

If this proposal is approved, the Company expects to continue operating as a BDC for a period of time in which it focuses on identifying and investing in real estate assets. During this transition period, the Company may liquidate some of its securities portfolio. The Company expects that it will elect to withdraw the election within 30 days of stockholder approval and will immediately begin to transition away from a securities portfolio. By the end of the first year after withdrawal of its election, the Company anticipates that its securities portfolio will comprise less than 20% of its assets.

Investment Strategy

While we remain a BDC, our investment objective is to generate current income and capital appreciation through debt and equity real estate-related investments. Our Independent Directors (as defined in Part II, Item 10 of this Annual Report on Form 10-K) review our investment policies with frequency, at least annually, to confirm that our policies are in the best interests of our stockholders. Each such determination and the basis thereof are contained in the minutes of our Board of Directors meetings.

We seek to accomplish our objective by rigorously analyzing the net asset value (“NAV”) of and risks associated with potential security acquisitions, and by acquiring securities at significant discounts to their NAV. Although we may acquire any type of security by any method, we anticipate our acquisitions will generally be accomplished in the following ways:

•

Tender offers. We acquire shares of non-traded REITs ("NTRs") and other real estate companies via registered and non-registered tender offers (e.g., offers to purchase securities directly from the existing holders). This is generally our preferred acquisition method, as it allows us to name the price at which we are willing to buy such securities. By purchasing securities at significant discounts to NAV, we believe we reduce the risk of a loss of capital due to a decline in NAV while increasing total returns when the discount is realized. Also, by purchasing seasoned securities that are several years old, we reduce our anticipated holding period and potentially increase our annualized rate of return.

•	Direct loans and private placements. We may occasionally make direct loans to private real estate companies and arrange for private placements of equity issued directly to us by private real estate companies.

•

Purchases of small-cap REITs on the open market. We believe that small-capitalization REITs (typically less than $250 million) are largely ignored by institutional investors and by Wall Street analysts, and as a result they often trade for significant discounts to their NAV. While these REITs tend to be highly illiquid with very small trading volumes, our smaller size allows us to focus on these REITs and to purchase their securities in meaningful quantities. Like shares of NTRs that we purchase at discounts to NAV, we believe these acquisitions can provide superior risk-adjusted returns.

Opportunistic property acquisitions. If our stockholders approve the withdrawal of our BDC election, we may expand our investment strategy to include acquisition of distressed real properties. Like our other investments, we would expect to hold distressed properties and infuse funds as necessary to extract unrealized value.

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Our Corporate Information

Our offices are currently located at 89 Davis Road, Suite 100, Orinda, CA 94563 and our telephone number is (925) 631-9100 or (800) 854-8357. We relocated to our current address from 1640 School Street, Moraga, CA 94556 in June 2018.

Investments

While we remain a BDC, we engage in various investment strategies to achieve our overall investment objectives. The strategy we select depends upon, among other things, market opportunities, the skills and experience of the Adviser's investment team and our overall portfolio composition. We generally seek to acquire securities that produce ongoing distributable income for investors, yet with a primary focus on purchasing such securities at a discount from what the Adviser estimates to be the actual value of the real estate underlying the securities.

Types of Investments

We target the following real estate-related investments.

•	Real Estate-Related Limited Partnerships. Limited partnerships which may be public or private, and which were formed primarily to own real property. They may actively operate the property, they may develop the property, or they may passively own property operated by a third party.

•	REITs. Corporations or trusts that are formed to own real property and are exempted from federal corporate income tax if they distribute at least 90.0% of their net income in the form of dividends to their stockholders.

•

Other Real Estate-Related Investments. May include equity interests in LLCs, tenancies-in-common, mortgages, loans, bonds, or any security whose underlying value derives from real estate. We may invest in other real estate-related investment entities or, if our shareholders approve the withdrawal of our BDC election, direct ownership of real property. We do not invest in general partnerships, joint ventures, or other entities that do not afford limited liability to their security holders. However, limited liability entities in which we invest may hold interests in general partnerships, joint ventures, or other non-limited liability entities.

Targeted Securities

Our Adviser has advised on a significant number of investments in the real estate industry. We leverage this prior investing experience to target attractive investments in the real estate industry. Securities to be acquired by us generally consist of the following:

•

Securities Issued by Owners of Real Property. We acquire securities issued by limited partnerships, REITs or other investment entities that have invested directly or indirectly in real property, real estate joint ventures, or other real property-based investments. We buy securities issued by entities owning a variety of property types, including apartments, shopping centers, office buildings, nursing homes, mini-warehouses, and hotels.

•

Direct Real Property Obligations, Derivatives, and Other Securities. We may also acquire (i) individual mortgages secured by real property (i.e., originate, or purchase outstanding loans secured by real estate), (ii) securities of issuers that own mortgages secured by income-producing real property, and (iii) using no more than 20.0% of our capital available for investment, securities of issuers that own assets other than real estate.

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We generally acquire securities in one of two ways:

•

Securities Issued Previously Pursuant to a Registration Statement. In general, we seek to acquire securities originally registered by the issuer with the SEC. These target securities are typically public limited partnership interests and shares in REITs issued by national real estate syndicators and companies. These issuers typically have hundreds or thousands of limited partners or stockholders and own numerous real property assets.

•

Securities Issued in Private Transactions. We may acquire securities that are or were privately placed by issuers that (i) are limited partnerships, REITs, or other real estate-related entities, (ii) have sold their securities in private offerings to only a limited number of investors who have met suitability standards that are generally higher than those imposed by public partnerships, and (iii) have invested in only a single parcel or a few parcels of real property.

Investment Selection

Our Adviser's investment team is responsible for all aspects of our investment process. The current members of the investment team are C.E. Patterson, Glen Fuller, Chip Patterson, Robert Dixon, Paul Koslosky, and Christine Simpson. The investment strategy involves a team approach, whereby potential transactions are screened by various members of the investment team.

Our process for acquiring targeted real estate-related securities typically involves three steps: (i) identifying securities of the type we may be interested in acquiring; (ii) evaluating the securities to estimate their value to us, and (iii) either acquiring securities on national markets or locating securities holders who may be interested in selling such securities on secondary markets. Different circumstances may require different procedures, or different combinations of procedures, and we adjust our acquisition strategy to fit the circumstances. Nonetheless, the typical stages of our investment selection process are as follows:

Deal Generation/Origination

We source investments through long-standing relationships with industry contacts, brokers, commercial and investment bankers, entrepreneurs, services providers such as lawyers and accountants, as well as current and former clients, portfolio companies and investors. Our Adviser's investment team supplements these lead generators by also utilizing broader marketing efforts, such as advertisements in real estate periodicals, newspapers and other publications, attendance at prospective borrower industry conventions, active calling efforts to smaller private equity firms and sponsors, web presence and search tools.

Screening

In screening potential investments, the Adviser's investment team utilizes a value-oriented investment philosophy and commits resources to managing downside exposure.

Due Diligence

In conducting due diligence, the Adviser uses publicly available information as well as information from its relationships with former and current management teams, consultants, competitors and investment bankers. Our Adviser's due diligence typically includes:

•	review of historical and prospective financial information and regulatory disclosures;

•	research relating to the company's management, industry, markets, products and services and competitors;

•	verification of collateral; and

•	asset and business value appraisals by third party advisers.

Upon the completion of due diligence and a decision to proceed with an investment, the investment professionals leading the investment present the investment opportunity to the Adviser's investment team, which then determines whether to pursue the potential investment. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and independent accountants prior to the closing of the investment, as well as other outside third-party advisers, as appropriate. Any fees and expenses incurred by the Adviser to oversee due diligence investigations undertaken by third parties are subject to reimbursement by us, if not otherwise reimbursed by the prospective borrower, which reimbursements are in addition to any management or incentive fees payable by us under the advisory agreement amended and restated effective October 1, 2017, and subsequently amended October 23, 2018 (the "Investment Advisory Agreement”).

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Managerial Assistance

We offer and provide significant managerial assistance to our portfolio companies, and must continue to do so while we remain a BDC. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. We may receive fees for these services. The Adviser provides such managerial assistance on our behalf to portfolio companies that request this assistance.

Monitoring

Our Adviser monitors our investments on an ongoing basis. Our Adviser has several methods of evaluating and monitoring the performance and fair value of the portfolio companies in which we invest, which include the following:

•	Assessment of success in adhering to business plans and compliance with covenants;

•	Periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments;

•	Comparisons to other portfolio companies in the industry, if any;

•	Attendance at and participation in our board meetings; and

•	Review of monthly and quarterly consolidated financial statements and financial projections for portfolio companies.

Valuation Procedures

We determine our NAV consistent with accounting principles generally accepted in the United States of America (“GAAP”) and the 1940 Act. Securities for which market quotations are readily available on an exchange will be valued at the closing price on the day closest to the valuation date. Where a security is traded but in limited volume, we may instead utilize the weighted average closing price of the security over the prior 10 trading days. To value securities that do not trade on a national exchange, we may use published secondary market trading information.

Securities for which reliable market data are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Adviser or Board of Directors, does not accurately measure fair value, which we expect will represent a substantial portion of our portfolio, are valued as follows: (i) the securities are initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; and (iii) the Board of Directors reviews these preliminary valuations and, where appropriate and necessary, valuations by third-party valuation firms, and uses such valuations, as adjusted by the Board if appropriate, to determine the fair value of the securities.

Securities for which market data are not readily available or for which a pricing source does not accurately measure value may include the following:

•	private placements and restricted securities that do not have an active trading market;

•	securities whose trading has been suspended or for which market quotes are no longer available;

•	debt securities that have recently gone into default and for which there is no current market;

•	securities whose prices are stale;

•	securities affected by significant events; and

•	securities that the Adviser believes were priced incorrectly.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.

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Competition

While we remain a BDC, we compete for investments with investment funds (including private equity funds). Additionally, because competition for investment opportunities generally has increased among alternative investment vehicles, such as hedge funds, those entities have begun to make non-traditional investments, including investments in real estate companies. As a result of these new entrants, competition for investment opportunities in real estate and real estate-related companies may intensify. Many of these entities have greater financial and managerial resources than we do or may not be subject to comparable regulation. We believe the experience and contacts of the Adviser, our responsive and efficient investment analysis and decision-making processes, the investment terms we offer, and our willingness to make smaller investments allows us to successfully compete with these competitors. For additional information concerning the competitive risks we face, see "Risk Factors — Risk Relating to Our Business and Structure — We may face increasing competition for investment opportunities."

Staffing

We do not currently have any employees. Our day-to-day investment operations are managed by the Adviser. Our Adviser may hire additional investment professionals, based upon its needs. We also entered into an administration agreement with MacKenzie (the “Administration Agreement”), under which we reimburse MacKenzie for our allocable portion of overhead and other expenses incurred by it in performing its obligations, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief financial officer, our chief compliance officer (or "CCO"), and any administrative support staff.

Board Approval of the Investment Advisory Agreement

Our investment advisory and administrative services agreements were approved by our board of directors in May 2012, and, following amendments, re-approved most recently in October 2018. Such approvals were made in accordance with, and on the basis of an evaluation satisfactory to our board of directors as required by Section 15(c) of the 1940 Act and applicable rules and regulations thereunder, including a consideration of, among other factors, (i) the nature, quality, and extent of the advisory and other services to be provided under the agreements, (ii) the investment performance of the personnel who manage investment portfolios with objectives similar to ours, to the extent available, (iii) comparative data with respect to advisory fees or similar expenses paid by other BDCs with similar investment objectives, to the extent available and (iv) information about the services to be performed and the personnel performing such services under each of the agreements.

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Item 1A. RISK FACTORS

Investing in our common stock involves significant risks. In addition to the other information contained in the Registration Statement and any accompanying prospectus supplement, stockholders should consider carefully the following information regarding our common stock. The risks set out below may not be the only risks we face, but are the risks of which we are presently aware. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. In such case, our NAV and the price of our common stock could decline, and stockholders may lose all or part of their investment.

Risks Relating to Our Business and Structure

Our investment portfolio is recorded at fair value, as determined by our Board of Directors and, as a result, there will be uncertainty as to the value of our portfolio investments.

Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by us in accordance with our written valuation policy. Our Board of Directors has final responsibility for overseeing, reviewing and approving, in good faith, our estimate of fair value. Typically, there is no public market for the securities of the privately held companies in which we invest. As a result, we value these securities quarterly at fair value based on input from management and our audit committee, with the oversight, review and approval of our Board of Directors.

The determination of fair value and consequently, the amount of unrealized gains and losses in our portfolio, are to a certain degree, subjective and dependent on a valuation process approved by our Board of Directors. Certain factors that may be considered in determining the fair value of our investments include external events, such as private mergers, sales and acquisitions involving comparable companies. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. Our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determinations may cause our NAV on a given date to materially understate or overstate the value that we may ultimately realize on one or more of our investments. As a result, investors purchasing our common stock based on an overstated NAV would pay a higher price than the value of our investments might warrant. Conversely, investors selling shares during a period in which the NAV understates the value of our investments receive a lower price for their shares than the value of our investments might warrant.

Our financial condition and results of operations depend on our ability to effectively manage and deploy capital.

Our ability to achieve our investment objective depends on our ability to effectively manage and deploy capital, which depends, in turn, on the Adviser's ability to identify, evaluate and monitor, and our ability to finance and invest in, companies that meet our investment criteria.

Accomplishing our investment objective on a cost-effective basis is largely a function of the Adviser's handling of the investment process, its ability to provide competent, attentive and efficient services and our access to investments offering acceptable terms. In addition to monitoring the performance of our existing investments, the Adviser's investment team is also called upon, from time to time, to provide managerial assistance to some of our portfolio companies. These demands on their time may distract them or slow the rate of investment.

Even if we grow and build upon our investments, failure to manage our growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects. The results of our operations depend on many factors, including the availability of opportunities for investment, readily accessible short- and long-term funding alternatives in the financial markets and economic conditions. Furthermore, if we cannot successfully operate our business or implement our investment policies and strategies as described herein, it could negatively impact our ability to pay dividends.

We are dependent upon the Adviser's key personnel for our success.

We depend on the diligence, skill and network of business contacts of the investment professionals of the Adviser. The investment professionals at the Adviser evaluate, negotiate, structure, close and monitor our investments. Our success depends on the continued service of our investment team and the other senior investment professionals available to the Adviser. We cannot assure you that unforeseen business, medical, personal or other circumstances would not lead any of the members of the investment team to terminate their relationship with us, and we do not purchase any "key man" insurance to cover the Adviser's personnel. The loss of one or more of the investment team or other senior investment professionals who serve on the Adviser's investment team could have a material adverse effect on our ability to achieve our investment objectives as well as on our financial condition and results of operations. In addition, we can offer no assurance that the Adviser will continue indefinitely as our investment adviser.

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We expect the Adviser’s investment team to dedicate significant time to our activities. The members of the Adviser's investment team are and may in the future become affiliated with entities engaged in business activities similar to those conducted by us or other business activities that could divert their time and attention, and which may create conflicts of interest in allocating their time.

Our success depends on the ability of the Adviser to attract and retain qualified personnel in a competitive environment.

Our growth requires that the Adviser retains and attracts new investment and administrative personnel in a competitive market. Its ability to attract and retain personnel with the requisite credentials, experience and skills depends on several factors including its ability to offer competitive wages, benefits and professional growth opportunities. Many of the entities, including investment funds (such as private equity funds and mezzanine funds) and traditional financial services companies, with which the Adviser competes for experienced personnel have greater resources than the Adviser.

We are dependent on MacKenzie Capital Management's key personnel for our success.

We depend on the skill, experience, and care of the professionals at MacKenzie to record, administer, and manage our business, including our stockholder records and financial records, prepare and file reports to our stockholders, SEC reports and our tax returns. We cannot assure you that these key personnel will not terminate their relationship with MacKenzie. The loss of one or more of these professionals could have a material adverse effect on our ability to achieve our business objectives.

There are significant potential conflicts of interest generated from the Adviser's activities that could impact our investment returns.

The Adviser's investment team presently manages 30 private funds. In addition, our executive officers and directors, as well as the current and future members of the Adviser, may serve as officers, directors or principals of other entities that operate in the same or a related line of business as we do. Accordingly, they may have obligations to investors in those entities, the fulfillment of which obligations may not be in the best interests of us or our stockholders. Any affiliated investment vehicle formed in the future and managed by the Adviser or its affiliates may, notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes targeted by us. As a result, the Adviser may face conflicts in allocating investment opportunities between us and such other entities. It is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Adviser or an investment manager affiliated with the Adviser. In any such case, when the Adviser identifies an investment, it will be forced to choose which investment fund should make the investment. The Adviser has mitigated this risk by adopting an allocation policy designed to equitably distribute such investment opportunities consistent with the requirements of the 1940 Act.

We may participate in investments that are sourced by the Adviser for other investors.

If the Adviser forms other investment entities in the future or accepts advisory engagements with existing investment entities, we may co-invest on a concurrent basis with such other entities, subject to compliance with our Charter, the 1940 Act, applicable regulations, regulatory guidance and our allocation procedures. Those investments may be selected by the Adviser to satisfy the objectives of the co-investor, might not be ideally suited for us, and therefore might not be in the best interests of us or our stockholders.

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The Adviser's compensation could impact our investment returns.

We pay management and incentive fees to the Adviser and reimburse the Adviser for certain expenses it incurs. As a result, investors in our common stock invest on a "gross" basis and receive dividends on a "net" basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments.

There are significant potential conflicts of interest with our Administrator that could impact our investment returns.

Under the Administration Agreement with MacKenzie, MacKenzie granted us a royalty-free license to use the name "MacKenzie" for so long as the Adviser or one of its affiliates remains our investment adviser. In addition, we pay MacKenzie, an affiliate of the Adviser, our allocable portion of overhead and other expenses incurred by MacKenzie in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the compensation of MacKenzie's chief financial officer and any administrative support staff. These arrangements create conflicts of interest that our Board of Directors must continue to monitor.

There are significant potential conflicts of interest generated from related party transactions that could impact our investment returns.

In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related party transactions. Related party transactions carry with them the risk that the terms could benefit the related parties, to our detriment. To ensure that we do not engage in any transactions with any persons affiliated with us that are prohibited by the 1940 Act, we have implemented certain written policies and procedures, described in our prospectus contained in the Registration Statement, under "Certain Relationships and Transactions."

Our incentive fee structure and the formula for calculating the management fee may incentivize the Adviser to pursue speculative investments, use leverage when it may be unwise to do so, or refrain from deleveraging when it would otherwise be appropriate to do so.

The incentive fee payable by us to the Adviser may create an incentive for the Adviser to pursue investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to the Adviser is calculated based on a percentage of our return on invested capital. In addition, the base management fee is based on "Gross Invested Capital", including capital invested in leveraged assets. This may encourage the Adviser to use leverage to increase the aggregate amount of and the return on our investments, even when it may not be appropriate to do so, and to refrain from de-levering when it would otherwise be appropriate to do so. Under certain circumstances, the use of leverage may increase the likelihood of default, which would impair the value of our common stock. In addition, the Adviser receives the incentive fee based, in part, upon net capital gains realized on our investments. This could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

The incentive fee payable by us to the Adviser also may induce the Adviser to invest on our behalf in instruments that have a deferred interest feature, even if such deferred payments would not provide cash necessary to enable us to pay current dividends to our stockholders. Under these investments, we would accrue interest over the life of the investment but would not receive the cash income from the investment until the end of the term. Our net investment income used to calculate the income portion of our investment fee, however, includes accrued interest. Thus, a portion of this incentive fee would be based on income that we have not yet received in cash.

Although we do not currently expect to do so, we may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, to the extent we so invest, will bear our ratable share of any such investment company's expenses, including management and performance fees. We will also remain obligated to pay management and incentive fees to the Adviser with respect to the assets invested in the securities and instruments of other investment companies. With respect to each of these investments, each of our stockholders will bear his or her share of the management and incentive fee of the Adviser as well as indirectly bearing the management and performance fees and other expenses of any investment companies in which we invest.

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A general increase in interest rates will likely have the effect of making it easier for the Adviser to receive incentive fees, without necessarily resulting in an increase in our net earnings.

Any general increase in interest rates typically leads to higher investment returns on our investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase in the amount of incentive fees payable to the Adviser under the Advisory Agreement without any increase in performance on the part of the Adviser.

Our Adviser has the right to resign on 120 days' notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.

Our Adviser has the right, under the Advisory Agreement, to resign at any time upon not less than 120 days' written notice, whether we have found a replacement or not. If the Adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 120 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay dividends are likely to be adversely affected and the value of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Adviser and its affiliates. Even if we retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.

Regulations governing our operation as a BDC affect our ability to raise additional capital and the way in which we do so. As a BDC, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.

We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as "senior securities," up to the maximum amount permitted by the 1940 Act. However, we have no current intention to borrow money for investment purposes, although if we withdraw our BDC election and purchase real estate assets, we would like use leverage to do so. Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200.0% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If we were to issue senior securities and the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for dividends to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. If we issue preferred stock, the preferred stock would rank "senior" to common stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest. If our Stockholders approve the withdrawal of our BDC election, we will no longer be subject to the limits and restrictions described in this paragraph.

We have and may continue to sell common stock at a price below NAV under certain circumstances.

While we are a BDC, we may not issue and sell our common stock at a price below NAV per share unless our Board of Directors determines that such sale is in the best interests of the Company and its stockholders, and our stockholders approve such sale. Our Board of Directors has so determined on numerous occasions, but has respected the prohibition against issuing stock at a price that, in the determination of our Board of Directors, does not closely approximate the market value of such securities (less any distributing commission or discount). If we continue to raise funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock for a price below NAV, then the percentage ownership of our stockholders at that time will decrease, and you may experience dilution.

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We may borrow money, which would magnify the potential for gain or loss on amounts invested and will increase the risk of investing in us.

The use of leverage magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in our securities. We may borrow from and issue senior debt securities to banks, insurance companies and other lenders in the future, however we have no current intention to borrow for investment purposes unless we withdraw our election to be treated as a BDC. Holders of these senior securities would have fixed dollar claims on our assets that would be superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it would in the absence of leverage. Similarly, any decrease in our income would cause net income to decline more sharply than it would in the absence of leverage. Such a decline could also negatively affect our ability to make dividend payments on our common stock. Leverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, as the management fee payable to the Adviser is based on our Gross Invested Capital, including amounts invested in leveraged assets, the Adviser has a financial incentive to incur leverage which may not be consistent with our stockholders' interests. In addition, our common stockholders will bear the burden of any increase in expenses that results from leverage, including any increase in the management fee payable to the Adviser.

If we remain a BDC, we are required to meet an asset coverage ratio, defined generally under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 200.0% after each issuance of senior securities. If this ratio declines below 200.0% we may not be able to incur additional debt and could be required by law to sell a portion of our investments to repay some debt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make distributions. The amount of any leverage that we employ would depend on the Adviser's and our Board of Directors' assessment of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to obtain credit at all or on terms acceptable to us.

Any debt facility into which we may enter would likely impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a REIT under the Code.

We may experience fluctuations in our quarterly results.

We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of portfolio dividend and fee income, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. Results for any period should not be relied upon as being indicative of performance in future periods.

Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.

Under the Maryland General Corporation Law (or "MGCL") and our Charter, our Board of Directors is authorized to classify and reclassify any authorized but unissued shares of stock into one or more classes of stock, including preferred stock. Prior to issuance of shares of each class or series, the Board of Directors will be required by the MGCL and our Charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the Board of Directors could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. The cost of any such reclassification would be borne by our common stockholders. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock. For example, holders of preferred stock would vote separately from the holders of common stock on a proposal to cease operations as a BDC. In addition, the 1940 Act provides that holders of preferred stock are entitled to vote separately from holders of common stock to elect two preferred stock directors. The issuance of preferred shares convertible into shares of common stock may also reduce the net income and NAV per share of our common stock upon conversion, provided, that we are only permitted to issue such convertible preferred stock to the extent we comply with the requirements of Section 61 of the 1940 Act, including obtaining common stockholder approval. These effects, among others, could have an adverse effect on your investment in our common stock. We currently have no plans to issue preferred stock.

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Our Board of Directors may change our investment objectives, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.

Our Board of Directors has the authority to modify or waive our investment objectives, current operating policies, investment criteria and strategies without prior notice and without stockholder approval. Stockholders will receive notice within 60 days if the Board of Directors decides to change our investment objective. The principal investment strategies are not fundamental and may be changed without prior notice. We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, NAV, operating results and value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay dividends and cause shareholders to lose all or part of their investment.

There is a risk that our stockholders may not receive dividends or that our dividends may not grow over time.

We may make dividends on a quarterly basis to our stockholders only out of assets legally available for distribution. Our assets would be "legally available" if, after giving effect to the dividend, (i) we would be able to pay any outstanding debt, and (ii) our total assets would be greater than the sum of our total liabilities plus the amount needed to satisfy any preferential rights upon dissolution held by any stockholders who have preferential rights on dissolution superior to those receiving the dividend, if we were to be dissolved at the time of distribution. We plan on making dividends only from income and gains on our portfolio, do not plan to borrow to make distributions, and do not intend to make distributions from our offering proceeds, though we are not prohibited from borrowing for dividends or distributing up to approximately 5.0% of our offering proceeds.

We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. In addition, so long as we remain subject to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions.

Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

We are subject to applicable local, state and federal laws and regulations. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect. Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy to avail ourselves of new or different opportunities. Such changes could result in material differences to our strategies and plans and may result in our investment focus shifting from the areas of expertise of the Adviser's investment team to other types of investments in which the investment team may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.

We incur significant costs as a result of being a public company.

As a public company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Securities Exchange Act of 1934 ("1934 Act"), as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, and other rules implemented by the SEC.

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Loss of our status as a REIT would have significant adverse consequences.

If we lose our REIT status in any taxable year, we would be subject to federal income tax (including any applicable minimum tax) on our taxable income computed in the usual manner for corporate taxpayers without any deduction for distributions to our stockholders. Unless entitled to relief under specific statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status, assuming we had previously been treated as a REIT. To renew our REIT qualification at the end of such a four-year period, we would be required to distribute all current and accumulated earnings and profits before the end of the period and the funds available for satisfying our obligations and for distribution to our stockholders could be significantly reduced. In addition, we would be subject to the built-in gain tax based upon the values at the time of REIT election.

As a REIT, we may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

Since we contemplate investing in real estate through partnerships and other REITs, we may have to recognize taxable income attributable to those investments prior to the time we receive cash distributions with respect to such investments. As indicated above, in order to benefit from REIT taxation, we need to distribute at least 90.0% of our REIT taxable income. If we do not receive cash representing such income at the same time as we recognize such income, we may have difficulty making distributions necessary to benefit from REIT taxation.

We may in the future choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive.

We may in the future elect to pay dividends in our own stock, as opposed to cash. In such case or in the event you participate in the dividend reinvestment plan (our "DRIP"), you may be required to pay tax in excess of the cash you receive from us.

Risks Related to Our Investments

We have not yet identified all portfolio companies in which we will invest.

We have not yet identified all additional potential investments for our portfolio. As a result, you will be unable to evaluate any future portfolio company investments prior to purchasing our shares. Additionally, our stockholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our shares.

The achievement of our investment objectives cannot be guaranteed.

While we remain a BDC, we may not be successful in locating real estate-related securities suitable for purchase. We may not be able to purchase securities at an acceptable price. Even if suitable securities are located at an acceptable price, our performance is affected by many factors that are beyond the control of the Adviser, including unpredictable economic and financial events. Accordingly, we do not guarantee our dividends or the return of your capital. For example, a review of the performance of prior funds sponsored by the Adviser reveals that not all such funds were successful, or will be successful, in producing their targeted returns.

The indirect ownership of real properties involves numerous risks.

While we remain a BDC, our investments are primarily in entities that directly or indirectly own real property, real estate joint ventures, or other real property-based investments. As a result, an investment in us is subject to all risks inherent in real estate investments. Among these are the following:

•	the operation of real property is subject to the general competitive conditions in the relevant real estate markets, which have suffered in the recent economic crisis;

•	downturns in local economies, overbuilding and other general economic conditions may adversely affect the operations of real property, especially with the current economic conditions;

•	indebtedness secured by a portfolio of real properties may bear a variable interest rate that could result in increased debt service payments (and reduced cash flow) if interest rates rise;

•	the lack or uncertainty of availability or high cost of financing, especially in current markets, may adversely affect the ability of the real estate owners to sell their properties and the terms of any such sales;

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the availability and cost of financing or refinancing is uncertain, especially in current markets, and may adversely affect the ability of the real estate owners to sell their properties and the terms of any such sales (for example, some of the REITs in which previous funds have invested have struggled to refinance their existing indebtedness, resulting in a depressed stock price, and, in some cases, causing issuers to file for bankruptcy protection);

•	the real properties may be damaged and suffer losses which are not adequately insured;

•	property tax reform, rent control, and other regulatory and governmental action may adversely affect the value of the real properties; and

•	energy shortages and allocations and increased energy prices in the areas where the real properties are located may adversely affect their operations or otherwise reduce their value.

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Investment in mortgage loans or issuers that own or originate mortgage loans involves numerous risks.

We may make investments in mortgage loans or in issuers that own or originate mortgage loans. As a result, an investment in the Company is subject to all risks inherent in mortgage loans. Among these are the following:

•

We are at risk of defaults by the borrowers on those mortgage loans. These defaults may be caused by many conditions beyond the control of us or the Adviser, including interest rate levels and local and other economic conditions affecting real estate values. Our Adviser will not know whether the values of the properties securing the mortgage loans will remain at the levels existing on the dates of origination of those mortgage loans. If the values of the underlying properties drop, our risk will increase because of the lower value of the security associated with such loans;

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If an issuer in which we invest relies on originating, holding, or servicing mortgage loans for a significant portion of its income, defaults on such mortgage loans could impair the value of the issuer itself and consequently put our investment in such issuer at risk (for example, previous funds managed by the Adviser suffered losses investing in mortgage companies or originators);

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Fixed-rate, long-term mortgage loans could yield a return that is lower than the then-current market rates if interest rates rise. If interest rates decrease, we could be adversely affected to the extent that mortgage loans are prepaid because we may not be able to generate equivalent returns upon reinvestment of the funds;

•	Declines in real estate values may induce mortgagors to voluntarily default on their loans, increasing the risk of foreclosure and loss of capital (for example, some of the hotel REITs have just "walked away" from the hotels they owned);

•	Issuers may file for bankruptcy if they cannot meet the demands of their debt service, and bankruptcy judges have wide latitude to modify the terms of indebtedness, which could result in lower than expected returns on our investment; and

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Delays in liquidating defaulted mortgage loans could reduce our or an issuer's investment returns. If there are defaults under those mortgage loans, we or the issuer may not be able to repossess and sell the underlying properties quickly. The resulting time delay could reduce the value of our or the issuer's investment in the defaulted mortgage loans. An action to foreclose on a property securing a mortgage loan is regulated by state statutes and regulations and is subject to many of the delays and expenses of other lawsuits if the defendant raises defenses or counterclaims. Further, given the recent economic events, foreclosure actions may flood the courthouses, causing further delays in prosecuting such actions. In the event of default by a mortgagor, these restrictions, among other things, may impede our or an issuer's ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us or the issuer on the mortgage loan. For example, previous funds managed by the Administrator have invested in a mortgage where the borrower defaulted. The Administrator began foreclosure proceedings in July 2007, but did not get a foreclosure sale set until December 2009 due to various circumstances beyond the control of our Adviser. Thereafter, the foreclosure was further delayed by a bankruptcy filing that has yet to be resolved.

We do not participate in the management of the real estate owned by our portfolio companies.

While we remain a BDC, the issuers of the securities held by us typically have exclusive management and control of the operation of their real estate portfolios, and we therefore typically rely exclusively on the management capabilities of such issuers, regardless of whether the Adviser agrees with the decisions of such issuers. If the Adviser decides that an action taken by an issuer is contrary to our interests, we may take legal action to protect our interests. We could be forced to bear the costs of a challenge or lawsuit, which could be substantial, and there can be no certainty that legal action undertaken to halt any such actions would be successful.

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Information on our target securities may be difficult to obtain.

Complete and current information regarding securities to be acquired and properties owned by issuers of such securities (particularly properties which may be performing poorly) may in many cases (particularly in the case of securities of companies not registered with the SEC) not be available to the Adviser or, even if available, it may not be economical for the Adviser to obtain such information. As a result, we may purchase securities with less than adequate information. Further, the information that is obtained may not be reliable. For example, prior funds sponsored by the Administrator invested in a company that filed for bankruptcy protection. The investors in those funds lost all their invested capital. The company had falsely stated that none of its loans were cross‑collateralized (meaning that one failed property or development would not impair the value of the other properties). The company had several loans go into default, thereby impairing the value of all its remaining properties.

Investments in publicly traded securities present market risks that are less prevalent with private securities.

Publicly traded investments such as REITs present certain market risks that are not present when investing directly in real estate or in private partnerships that own real estate. The trading price of public securities can change in response to various factors, not all of which relate to the real estate owned by the entities. A "bear market" can cause all publicly traded securities to trade at lower prices, even if the fundamental economic factors driving the value of real estate remain unchanged. If the trading price of a public entity is adversely affected by such factors, it can be subject to takeover attempts by opportunistic investors who see the ability to acquire assets below NAV. Because we may not be a significant holder of such securities, there may be little or nothing that we or the Adviser can do to prevent the sale of such entities at prices that are below the estimated NAV of the real estate owned by the entities, which would adversely affect our performance.

Investments in privately held securities may present more risks than investments in publicly held securities.

Privately held partnerships and companies, unlike public entities, are not required to file periodic reports with the SEC or state securities regulators. As a result, the Adviser's evaluation of a possible investment in a private entity may be based on incomplete or misleading information. In addition, as privately held entities generally have significantly fewer investors than public companies, a private issuer may be more concerned about a possible takeover. The private issuer may therefore be more reluctant to approve a transfer of securities to us or admit us as a record owner, which would result in the loss of rights associated with record ownership, including voting rights.

Accurate valuation of illiquid real estate-related securities is difficult.

Our Adviser uses techniques to value our target securities that necessarily involve reliance on both objective and subjective criteria and assumptions and predictions that may or may not be realized. As a result, despite the Adviser's analysis, there is no assurance that any investment by us will be on terms that reflect the true economic value of the securities purchased.

We compete with other entities and persons to purchase real estate-related securities.

The market for the real estate-related securities sought by us is limited and generally inefficient, and competition for these securities may reduce the availability and increase the prices of the securities. For example, in recent years, at least two new competitors have entered the marketplace buying some of the same type of securities that we target for acquisition.

Lack of Diversification.

Some of our investments and target portfolio companies are private partnerships or other privately held entities that invest in only a single parcel of real property. Due to such issuers' lack of diversification, the value of their securities may be more volatile than securities issued by entities with larger, more diverse portfolios.

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We are susceptible to claims under Federal and state securities laws.

Due in part to the diverse and relatively risky nature of our acquisition procedures, we may be more susceptible to investigations, litigation, or other proceedings under securities laws. Any such investigation, litigation, or other proceeding undertaken by state or Federal regulatory agencies or private parties could necessitate the expenditure of material amounts of our capital for legal and other costs. Moreover, the dedication of human and capital resources of the Adviser and MacKenzie to such proceedings could limit MacKenzie's effectiveness in managing the Company, even if we are ultimately successful in its defense. If and to the extent that claims or suits for rescission are brought and successfully concluded for acts or omissions constituting offenses under Federal or applicable state securities laws, we could be materially and adversely affected, jeopardizing our ability to operate successfully.

Our purchase of securities may be subject to complex tender offer rules.

Because of the nature of the market for real estate-related securities, we expect to buy securities from time to time through tender offers. Federal securities laws impose obligations and requirements upon a party who undertakes a tender offer. Sanctions and penalties could be imposed on us if we do not fully comply with these complex requirements. Further, because of the perceived hostile nature of tender offers, some issuers may respond by taking legal action against us and our affiliates. We could be forced to bear some of the costs of a suit, which could be substantial, and there can be no certainty that we would be successful in fighting such a suit. Likewise, we may participate in legal actions against issuers to force them to provide investor lists when their governing documents so require, but the issuers refuse to comply.

Issuers of securities we own may vote to change the structure of the portfolio company or propose a "roll-up."

In recent years, general partners of portfolio company targets have successfully consolidated several related limited partnerships into larger entities (these consolidations are sometimes referred to as "roll-ups"). The new entities have usually been in the form of infinite-life REITs or master limited partnerships, and often are listed to trade on one of the stock exchanges. In other cases, limited partners have been asked to approve the conversion of their partnership interests into common stock of a new corporation or into unsecured debentures. In most roll-ups to date, the sponsoring general partners used an estimated market price for shares of the new entity to determine the exchange value for the limited partnership units. Shares of the new entities may fall below the exchange value and historically have often traded substantially below the exchange value. If the Adviser decides that a roll-up proposed by a portfolio company is contrary to our interests, we may take legal action to protect our interests. We could be forced to bear the costs of a suit, which could be substantial, and there can be no certainty that legal action undertaken to halt a roll-up by a portfolio company would be successful.

Our Adviser may experience a substantial delay in identifying and locating suitable investments for us.

It may take time for the Adviser to identify suitable securities for investment. Moreover, once suitable securities are identified, a considerable delay may be experienced in consummating their purchase. In such event, corresponding delays would be experienced by us before distributions and allocations are received from our investments.

We may temporarily invest our cash reserves in volatile securities.

Our Adviser may at times make the decision to invest some of our cash reserves into publicly traded REITs. This action has risk associated with it as the market for such publicly traded assets may be volatile. In the past few years, some such investments made by other funds managed by the Adviser have declined dramatically in value, making it impossible to recover the cash reserves unless and until the market price of the securities returns to previous levels. In some cases, REITs have ceased operations, resulting in a loss of capital for such funds.

We may use leverage, including margin accounts.

We may utilize short-term borrowing and may acquire securities or make distributions through use of brokerage margin account loan agreements. Utilization of margin loans involves the risk of losses greater than the equity involved. Any such borrowing is subject to the leverage limitations under the 1940 Act that are described above. If our stockholders approve the withdrawal of our BDC election, we will no longer be subject to the limits and restrictions described in this paragraph.

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The FDIC deposit insurance limits may be exceeded.

Our cash deposits with banks are insured by the Federal Deposit Insurance Corporation up to $250,000 per account. We may at times exceed such limits in our deposit accounts, which could subject us to a loss of any amount over such limit if the deposit institution were to fail.

The tax consequences of an investment in us depends on the activities and reporting positions taken by the entities in which we invest.

We have little or no control over the reporting activities of the issuers of securities we buy. Our Adviser does not prepare and typically does not review income tax information returns of the issuers of securities in which we invest. These issuers have made and will make a number of decisions on such tax matters as the expensing or capitalizing of particular items, the proper period over which capital costs may be depreciated or amortized, the allocation of acquisition costs between real property, improvements and personal property, and many other items. An IRS audit of an issuer's information return may result in the disallowance of certain deductions and may cause audits of your individual returns. An opinion of counsel generally is not available with respect to these issues, either because they involve factual determinations, or because they involve legal doctrines not fully developed under existing case law.

Our taxable gain or loss will likely be measured by the issuer's tax basis in the real property, rather than by our purchase price for its securities.

Some of our investments are and will be made through partnerships and other REITs. The Federal income tax basis of the real estate held by those entities may be based upon their purchase price paid, as opposed to the purchase price we paid to acquire those securities. Thus, there is a risk that we may have to report more income or gain on such entities disposition of real estate than the amount of income or gain we would have reported if we purchased the real property directly.

An issuer of securities in which we invest could be deemed a "publicly traded partnership."

Some of our investments are and will be made through partnerships. If interests in a partnership are traded on an established exchange or readily tradable on a secondary exchange (or substantial equivalent) the partnership is treated as a publicly traded partnership. As such, the partnership might be treated as a C corporation, resulting in its income being subject to double level taxation. In addition, the real estate held within the partnership would no longer be considered in the calculation of our REIT asset test.

The lack of liquidity in our investments may adversely affect our business.

We invest in many companies whose securities are not publicly traded, and whose securities are subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. Our investments are usually subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.

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Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as "follow-on" investments, in order to (i) increase or maintain in whole or in part our equity ownership percentage; (ii) exercise warrants, options or convertible securities that were acquired in the original or a subsequent financing; or (iii) attempt to preserve or enhance the value of our investment. We may elect not to make follow-on investments or otherwise lack funds to make those investments. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we do not want to increase our concentration of risk, we prefer other opportunities, we are subject to BDC requirements that would prevent such follow-on investments, or the follow-on investment would affect our REIT tax status.

Our portfolio may lack diversification among portfolio companies, subjecting us to a risk of significant loss if one or more of these companies fail to perform.

Our portfolio may hold a limited number of portfolio companies. We do not have fixed guidelines for diversification, and our investments may be concentrated in relatively few companies. As our portfolio is less diversified than the portfolios of some larger funds, we are more susceptible to failure if a single investment fails. Similarly, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment.

We do not intend to concentrate our portfolio on any specific geographic area, however, we may be subject to a risk of significant loss if there is a downturn in an area in which a number of our investments are concentrated.

We do not intend to concentrate our portfolio on any specific geographic areas. However, a downturn in an area in which we are invested could significantly impact the aggregate returns we realize. Some of our portfolio companies hold assets that are heavily concentrated in a single state. In the table below, we list such investments if they represent 5.0% or higher of the total fair value of our portfolio as of June 30, 2020.

States	Investments (Fair Value)		% of total Fair Value
California	$	15,410,949		16.4	%
Connecticut	$	11,613,141		12.4	%
Arizona	$	10,949,688		11.7	%
Florida	$	7,720,911		8.2	%

We may not realize gains from our equity investments.

We may invest in warrants or other equity securities. Investments in equity securities involve significant risks, including the risk of further dilution as a result of additional issuances, inability to access additional capital and failure to pay current dividends. Investments in preferred securities involve special risks, such as the risk of deferred distributions, credit risk, illiquidity and limited voting rights. In addition, we may from time to time make non-control, equity investments in portfolio companies. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the value of the equity interests we receive may not appreciate and, in fact, may decline. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we realize on the disposition may not be sufficient to offset other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We often seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.

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Risk related to our plan to withdraw our election to be treated as a BDC

Following withdrawal of our BDC election, we will no longer be subject to regulation by the 1940 Act.

On October 23, 2020, our stockholders will be asked to approve the proposal to withdraw our election to be regulated as a BDC under the 1940 Act. If our stockholders approve the withdrawal of our BDC election, we will, effective upon receipt by the SEC of our application for withdrawal, no longer be regulated as a BDC and will no longer be subject to the regulatory provisions of the 1940 Act, which is designed to protect the interests of investors in investment companies, including certain laws and regulations related to insurance, custody, capital structure, composition of the Board of Directors, affiliated transactions, leverage limitations, and compensation arrangements.

We may be unable to identify and complete acquisitions of real assets following withdrawal of our BDC election.

Our ability to identify and complete acquisitions of real assets on favorable terms and conditions are subject to the following risks:

•	we may be unable to acquire a desired asset because of competition from other investors with significant capital, including publicly traded REITs and institutional investment funds;

•	competition from other investors may significantly increase the purchase price of a desired real asset or result in less favorable terms;

•	we may not complete the acquisition of a desired real asset even if we have signed an agreement to acquire such real asset because such agreements are subject to customary conditions to closing, including completion of due diligence investigations to our satisfaction;

•	we may be unable to finance acquisitions of real assets on favorable terms or at all.

We may not be able to sell our real asset investments quickly.

Investments in real assets are relatively illiquid compared to other investments. Accordingly, we may not be able to sell real asset investments when we desire or at prices acceptable to us in response to changes in economic or other conditions.

We may be dependent on external property managers

Following the withdrawal of our BDC election, we may acquire real estate properties, and we may have to rely on property managers for the operation and management of the real estate properties.

Our Adviser has limited experience in direct property acquisitions and management

Our Adviser’s experience mostly relates to acquisition of investment securities. Its affiliate, Lemon Creek Advisers, LP will advise us on our real estate purchases, but it has less experience in the management and operation of real estate properties than many more established REIT advisers.

Following withdrawal of our BDC election, we will be dependent upon key personnel of Lemon Creek Advisers, LP for our future success.

Following withdrawal of our BDC election, we anticipate entering into a co-Advisory Agreement with Lemon Creek Advisers, LP to provide full advisory services to us for real asset investments. We will be dependent on the diligence, expertise and business relationships of the management of Lemon Creek to implement our strategy of investing in real estate assets. The departure of one or more investment professionals of Lemon Creek could have a material adverse effect on our ability to implement this strategy and on the value of our common shares. There can be no assurance that we will be successful in implementing our strategy following withdrawal of our BDC election.

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Risk related to the current COVID-19 Pandemic

The current COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, has and could continue to materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.

Our operating results depend, in large part, on generating revenues from leases to residential or commercial tenants, which in turn requires tenants to generate sufficient income to pay their rents in a timely manner. The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, may adversely affect our portfolio companies’ returns and profitability and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our investments. The spread of COVID-19 could result in further increases in unemployment, and tenants that experience deteriorating financial conditions as a result of the pandemic may be unwilling or unable to pay rent in full on a timely basis. In some cases, the companies in which we have invested may have to restructure tenants’ rent obligations, and they may not be able to do so on terms as favorable to us as those currently in place. Numerous state, local, federal, and industry-initiated efforts may also affect property owners' ability to collect rent or enforce remedies for the failure to pay rent. This may lead to reduction or cancellation of dividends, which will in turn effect our ability to pay our expenses and to pay dividends to our shareholders. Until such time as the virus is contained or eradicated and commerce and employment return to more customary levels, we may experience material reductions in our operating revenue.

The full effects of the COVID-19 pandemic are highly uncertain and cannot be predicted.

The World Health Organization has declared the COVID-19 outbreak to be a pandemic, and the President of the United States declared it a national emergency. Globally, population movement and trade have been restricted. Within the United States, various state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. We do not yet know the duration of the pandemic or all of its future effects, but it has already had negative effects on global health and the world economy. The full effects of the pandemic and its duration is unknown.

Item 1B. Unresolved Staff Comments

None.

Item 2. PROPERTIES

We do not own any real estate or other physical properties. We use the office space of the Administrator located at 89 Davis Road, Suite 100, Orinda, CA 94563 and reimburse the cost to the Administrator pursuant to the Administration agreement. We believe that the office facilities of the Administrator are suitable and adequate for our business as it is currently conducted.

Item 3. LEGAL PROCEEDINGS

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our securities are currently not listed on any exchange, and we do not intend to list our securities on any securities exchange until at least 2024. Therefore, we do not expect a public market for them to develop in the foreseeable future. Therefore, a stockholder may not be able to sell our stock at a time or price acceptable to the stockholder, if at all.

We are currently offering shares of our common stock on a continuous basis at a current offering price of $10.25 per share. We may not generally issue and sell our common stock at a price below NAV per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV per share of our common stock if our Board of Directors determines that such sale is in the best interests of the Company and our stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount).

Holders

As of September 21, 2020, we had 12,852,386.91 shares of common stock outstanding, held by a total of 2,915 stockholders.

Dividends and Taxable Income

We pay quarterly dividends to stockholders to the extent that we have income from operations available. Our quarterly dividends, if any, will be determined by our Board of Directors after a review and distributed pro-rata to holders of our shares; we declare dividends on a monthly basis, but pay each quarter. Any dividends to our stockholders will be declared out of assets legally available for distribution. In no event are we permitted to borrow money to make dividends if the amount of such dividend would exceed our annual accrued and received revenues, less operating costs. Dividends in kind are not permitted, except as provided in our Charter.

We have elected to be treated as a REIT under the Code. As a REIT, we are not subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we distribute at least 90% of our REIT taxable income to the stockholders and meet certain other conditions. To the extent that we satisfy the annual distribution requirement but distribute less than 100% of the taxable income, we will either be subject to U.S. federal corporate income tax on our undistributed taxable income or 4% excise tax on catch-up distributions paid in the subsequent year. We are also subject to tax on built-in gains we realize during the first five years following REIT election.

We have a dividend reinvestment plan (“DRIP”) that provides for reinvestment of our dividends and other distributions on behalf of stockholders for any individual stockholder who elects to participate in the DRIP, provided that the DRIP is permitted by the state in which the stockholders resides. We can offer no assurance that we will achieve results that will permit the payment of any cash dividends and, if we issue senior securities, we are prohibited from paying dividends if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if dividends are limited by the terms of any of our borrowings.

On March 31, 2020, after assessing the impacts of the Covid-19 pandemic, the Company’s board of directors unanimously approved the suspension of regular quarterly dividends to the Company’s stockholders, effective immediately.

During the years ended June 30, 2020 and 2019, we issued 317,840.42 and 334,007.67 shares of our common stock, respectively, in connection with the DRIP.

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The following tables reflect the dividends per share that the Company has declared on its common stock during the years ended June 30, 2020 and 2019.

	Dividends
During the Quarter Ended	Per Share		Amount
September 30, 2019	$	0.175	$	1,983,801
December 31, 2019		0.175		2,096,915
March 31, 2020		0.120		1,461,875
	$	0.470	$	5,542,591

	Dividends
During the Quarter Ended	Per Share		Amount
September 30, 2018	$	0.175	$	1,571,551
December 31, 2018		0.206		1,994,972
March 31, 2019		0.175		1,794,012
June 30, 2019		0.175		1,877,100
	$	0.731	$	7,237,635

Recent Sale of Unregistered Securities

On May 20, 2020, the Company formed an operating partnership, MacKenzie Realty Operating Partnership, LP (the “OP”) to acquire all the membership interests of Addison Property Owner, LLC (the “Property Owner”) in exchange for 516,144 Class A limited partnership units in the OP (the “OP Units”). The OP Units were issued and sold at a stated value of $10.25 per OP Unit. The OP Units have a conversion right pursuant to which the holders may convert such OP units to shares of the Company on a 1:1 basis (or into cash at the election of the Company), subject to the terms and conditions of the limited partnership agreement of the OP and the terms of the contribution agreement under which the OP Units were issued. The OP Units are entitled to distributions of cash equal to distributions made to holders of the number of shares of the Company into which the OP Units are convertible.

The private placement of the OP Units is exempt from registration under the Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D thereunder.

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Issuer Purchases of Equity Securities

The following table presents information with respect to the Company’s purchases of its common stock during the year ended June 30, 2020 and 2019:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans

During the year ended June 30, 2020:
August 13, 2019 through September 16, 2019		70,114.03	$	9.00		70,114.03		-
November 18, 2019 through December 19, 2019		102,739.90	$	9.00		102,739.90		-
February 14, 2020 through March 18, 2020		178,344.44	$	9.19		178,344.44		-
		351,198.37				351,198.37

During the year ended June 30, 2019:
August 17, 2018 through September 17, 2018		31,570.04	$	9.00		31,570.04		-
November 14, 2018 through December 18, 2018		19,944.93	$	9.00		19,944.93		-
February 14, 2019 through March 18, 2019		78,252.02	$	9.00		78,252.02		-
May 14, 2019 through June 21, 2019		133,347.94	$	9.00		133,347.94		-
		263,114.93				263,114.93

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Item 6. SELECTED FINANCIAL DATA

The selected financial data below reflects our operations for our fiscal years ended June 30, 2020 ("Fiscal 2020"), June 30, 2019 ("Fiscal 2019"), June 30, 2018 ("Fiscal 2018"), June 30, 2017 ("Fiscal 2017") and June 30, 2016 (“Fiscal 2016”). The selected financial data have been derived from audited consolidated financial statements. The data should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

	For the Year Ended
Consolidated statement of operations data:	June 30, 2020		June 30, 2019		June 30, 2018		June 30, 2017		June 30, 2016
Total investment income	$	8,729,941	$	11,879,290	$	6,978,365	$	4,770,584	$	2,636,405
Total operating expenses	$	5,261,084	$	6,248,532	$	4,747,735	$	3,035,978	$	1,828,418
Income tax (expense) benefit	$	-	$	13,348	$	(3,431)	$	(800)	$	1,412
Net investment income	$	3,468,857	$	5,644,106	$	2,227,199	$	1,733,806	$	809,399
Net realized gain on sale of investments	$	1,799,988	$	1,204,050	$	2,691,773	$	1,596,367	$	2,809,740
Net unrealized gain (loss) on investments	$	(16,994,397)	$	(3,962,649)	$	5,846,839	$	2,023,069	$	(16,668)
Net increase (decrease) in net assets resulting from operations	$	(11,725,552)	$	2,885,507	$	10,765,811	$	5,353,242	$	3,602,471
Weighted average common Shares outstanding		12,198,040		9,951,816		7,440,841		5,183,166		3,073,448

Per Share data:
Net investment income per Share	$	0.28	$	0.57	$	0.30	$	0.33	$	0.26
Net realized gain on sale of investments per Share	$	0.15	$	0.12	$	0.36	$	0.31	$	0.91
Net unrealized gain (loss) on investments	$	(1.39)	$	(0.40)	$	0.79	$	0.39	$	(0.01)
Net increase (decrease) in net assets resulting from operations per Share	$	(0.96)	$	0.29	$	1.45	$	1.03	$	1.16
Dividend paid per Share	$	0.470	$	0.731	$	0.950	$	0.885	$	0.935

Consolidated statement of assets and liabilities data:	June 30, 2020		June 30, 2019		June 30, 2018		June 30, 2017		June 30, 2016

Investments at fair value	$	93,705,145	$	103,245,148	$	74,584,506	$	47,885,527	$	39,176,772
Cash and cash equivalents	$	8,957,393	$	1,278,668	$	8,442,249	$	11,849,712	$	2,350,435
Total assets	$	104,166,764	$	108,353,254	$	89,566,296	$	62,504,852	$	42,315,221
Total liabilities	$	941,043	$	5,237,873	$	3,970,977	$	2,515,327	$	1,983,030
Total net assets	$	103,225,721	$	103,115,381	$	85,595,319	$	59,989,525	$	40,332,191
Net asset value per Share at end of the year	$	8.04	$	9.44	$	10.07	$	9.84	$	9.94
Shares outstanding at end of the year		12,836,608.02		10,926,319.99		8,496,141.57		6,096,772.85		4,057,319.49

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements by MacKenzie Realty Capital, Inc. contained herein, other than historical facts, may constitute "forward-looking statements." These statements may relate to, among other things, future events or our future performance or financial condition. In some cases, you can identify forward-looking statements by terminology such as "may," "might," "believe," "will," "provided," "anticipate," "future," "could," "growth," "plan," "intend," "expect," "should," "would," "if," "seek," "possible," "potential," "likely" or the negative of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For a discussion of factors that could cause our actual results to differ from forward-looking statements contained herein, please see the discussion under the heading "Risk Factors" above.

We may experience fluctuations in our operating results due to a number of factors, including the return on our equity investments, the interest rates payable on our debt investments, the default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Overview

We are an externally managed non-diversified closed-end management investment company. We are currently treated as a BDC under the 1940 Act, but our Board of Directors has recommended to our shareholders that we withdraw our election to be regulated as a BDC. We generally invest in equity or debt securities issued by real estate companies, including REITs and similar REIT-like entities. Our objective is to generate both current income and capital appreciation through real estate-related investments. We have elected to be treated as a REIT under the Code and as a REIT, which means we are not subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we distribute at least 90% of our REIT taxable income to the stockholders and meet certain other conditions. To the extent that we satisfy the annual distribution requirement but distribute less than 100% of our taxable income, we will be subject to an excise tax on our undistributed taxable income.

We are managed by the Adviser, and MacKenzie provides the non-investment management services and administrative services necessary for us to operate.

Investment income

We generate revenues in the form of capital gains and dividends on dividend-paying equity securities or other equity interests that we acquire, in addition to interest on any debt investments that we hold. Further, we may generate revenue in the form of commitment, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. Any such fees are generated in connection with our investments and recognized as earned.

Expenses

Our primary operating expenses include the payment of: (i) base management fees and investment advisory fees (which include the Portfolio Structuring Fee) to the Adviser; (ii) our allocable portion of overhead and other expenses incurred by MacKenzie in performing its obligations under the Administration Agreement; and (iii) other operating expenses as detailed below. Our investment advisory fees compensate our Adviser for its work in identifying, evaluating, negotiating, closing, monitoring and servicing our investments the Investment Advisory Agreement. Our expenses must be billed to and paid by us, except that a sponsor may be reimbursed for actual cost of goods and services used by us and certain necessary administrative expenses. We bear all other expenses of our operations and transactions, including:

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•	the cost of calculating our NAV, including the cost of any third-party valuation services;

•	the cost of effecting sales and repurchases of our shares and other securities;

•	interest payable on debt, if any, to finance our investments;

•	fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence reviews of prospective investments and third-party advisory fees;

•	transfer agent and safekeeping fees;

•	fees and expenses associated with marketing efforts;

•	federal and state registration fees, any stock exchange listing fees in the future;

•	federal, state and local taxes;

•	Independent Directors' fees and expenses;

•	brokerage commissions;

•	fidelity bond, directors and officers errors and omissions liability insurance, and other insurance premiums;

•	direct costs and expenses of administration and sub-administration, including printing, mailing, long distance telephone and staff;

•	fees and expenses associated with independent audits and outside legal costs;

•	costs associated with our reporting and compliance obligations under the 1934 Act, the 1940 Act and applicable federal and state securities laws; and

•

all other expenses incurred by either MacKenzie or us in connection with administering our business, including payments under the Administration Agreement that are based upon our allocable portion of overhead and other expenses incurred by MacKenzie in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our chief compliance officer and our chief financial officer and any administrative support staff.

In addition, we will bear organization and offering expenses in connection with our current public offering up to $1,650,000. Any additional amounts with respect to shares being sold pursuant to the third public offering will be paid by our Adviser except to the extent the full 10.0% in broker fees are not incurred. In such case, the difference will be available to be paid or reimbursed by the Company to brokers for marketing expenses or other non‑cash compensation.

Critical Accounting Policies

In addition to the discussion below, our critical accounting policies are discussed in Note 2 of our consolidated financial statements, which are part of this Annual Report beginning on page F-1.

Revenue Recognition

Distributions received from investments are evaluated by management and recorded as dividend income or a return of capital (reduction of investment) on the ex-dividend date. Operational dividends or distributions received from portfolio investments are recorded as investment income. Distributions resulting from the sale or refinance of an investee's underlying assets are compared to the estimated value of the remaining assets and are recorded as a return of capital or as investment income as appropriate.

Realized gains or losses on investments are recognized in the period of disposal, distribution, or exchange and are measured by the difference between the proceeds from the sale or distribution and the cost of the investment. Investments are disposed of on a first-in, first-out basis. Net change in unrealized gain (loss) reflects the net change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gains or losses.

Fair Value Measurements

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observables used in measuring investments at fair value. Market price is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observables and a lesser degree of judgment used in measuring fair value.

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Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level I – Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded equity securities. The Company does not adjust the quoted price for these investments even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Level II – Price inputs are quoted prices for similar financial instruments in active markets; quoted prices for identical or similar financial instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets. Investments which are generally included in this category are publicly traded equity securities with restrictions.

Level III – Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair values for these investments are estimated by management using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, financial condition, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant judgment by management. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had an active market for these investments existed.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management's assessment of the significance of a particular input to the fair value measurement, in its entirety, requires judgment and considers factors specific to the investment.

Valuation of Investments

The Company's consolidated financial statements include investments that are measured at their estimated fair values in accordance with GAAP. Our valuation procedures are summarized below:

Securities for which market quotations are readily available on an exchange will be valued at such price as of the closing price on the day closest to the valuation date. Where a security is traded but in limited volume, we may instead utilize the weighted average closing price of the security over the prior 10 trading days. We may value securities that do not trade on a national exchange by using published secondary market trading information. When doing so, we first confirm that GAAP recognizes the trading price as the fair value of the security.

Securities for which reliable market data are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Adviser or Board of Directors, does not represent fair value, which we expect will represent a substantial portion of our portfolio, shall each be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; and (iii) the Board of Directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the Adviser and, where appropriate and necessary, the respective third‑party valuation firms. The recommendation of fair value will generally be based on the following factors, as relevant:

•	the nature and realizable value of any collateral;

•	the portfolio company's ability to make payments;

•	the portfolio company's earnings and discounted cash flow;

•	the markets in which the issuer does business; and

•	comparisons to publicly traded securities

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Securities for which market data is not readily available or for which a pricing source is not sufficient may include the following:

•	private placements and restricted securities that do not have an active trading market;

•	securities whose trading has been suspended or for which market quotes are no longer available;

•	debt securities that have recently gone into default and for which there is no current market;

•	securities whose prices are stale;

•	securities affected by significant events; and

•	securities that the Adviser believes were priced incorrectly.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements will express the uncertainty of such valuations, and any change in such valuations, on our consolidated financial statements.

Portfolio Investment Composition

The following table summarizes the composition of our investments at cost and fair value as of June 30, 2020 and 2019:

	June 30, 2020				June 30, 2019
Asset Type	Cost		Fair Value		Cost		Fair Value
Publicly Traded Companies	$	8,454,348	$	7,244,654	$	2,186,682	$	2,151,006
Non Traded Companies		42,474,614		32,808,076		33,844,099		35,641,290
LP Interests		53,713,785		53,618,425		61,157,573		65,413,799
Investment Trust		49,901		33,990		49,901		39,053
Total	$	104,692,648	$	93,705,145	$	97,238,255	$	103,245,148

Determination of NAV

We determine the NAV of our investment portfolio at the end of each quarter by subtracting our total liabilities from the fair value of our gross assets. We value our assets and determine our NAV consistent with GAAP and the 1940 Act, and report our NAV in our periodic reports filed with the SEC under the 1934 Act. Our valuation procedures are summarized above under the “Critical Accounting Policies” section.

Our NAV as of June 30, 2020, was $8.04 per share compared to $9.44 per share at June 30, 2019, a $1.40 per share decrease of approximately 14.8%. The net decrease was due to (i) net unrealized loss of $1.39 per share, and (ii) a dividend to stockholders of $0.45 per share (on a weighted average basis). The decreases were partly offset by increases resulting from (i) net investment income of $0.28 per share, (ii) net realized gain on sale of investments of $0.15 per share, and (iii) redemption of shares below NAV resulting in gain of $0.01 per share.

Results of Operations

COVID-19 pandemic

Considerable uncertainty still surrounds the COVID-19 pandemic and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level. However, measures taken to limit the impact of the COVID-19 pandemic, including social distancing and other restrictions on travel, congregation, and business operations have already resulted in significant negative economic impacts, including steep declines in certain stock market segments and in the traded prices for certain real-estate related assets. As a result of these impacts, we have experienced a large decrease in fair values of some of our investments as of June 30, 2020. In addition, some of the companies in which we have invested have cancelled their quarterly dividends and distributions for the current and future quarters. While these cancellations did not have a significant impact on the Company’s total investment income for the quarter ended June 30, 2020, the Company anticipates these cancellations will have a larger impact in future quarters. The long-term impact of the COVID-19 pandemic on the United States and world economies remains uncertain, but may result in a world-wide economic downturn, the duration and scope of which cannot currently be predicted.

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MacKenzie and our Adviser have taken numerous steps, and will continue to take further actions, to address the COVID-19 pandemic. They implemented business continuity plans and the management team is in place to respond to changes in the global environment quickly and effectively. To protect the health and safety of their team members, they successfully transitioned almost their entire workforce to remote work environments. They are working closely with our clients to support them as necessary and as seamlessly as possible.

The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response and assessing potential impacts to our financial position and operating results. This includes the evaluation and implementation of certain efforts to help us mitigate the impact that reduced revenues from distributions and capital events may have on our 2020 financial results. We are focusing on maintaining a strong balance sheet and liquidity position and searching for opportunistic investments. In anticipation of reduced revenues and uncertain future economic conditions, the board of directors discontinued dividends starting March 2020 and share redemptions starting May 2020.

Investment income

Investment income is made up of dividends, distributions from operations, distributions from sales/capital transactions, interest and other investment income. Distributions from sales and capital transactions are treated as realized gain from capital transactions for the purposes of calculating the subordinated advisory fees.

Dividend and distribution income:

Dividend and distribution income for Fiscal 2020 was $8.38 million compared to $11.51 million for Fiscal 2019. This decrease of $3.13 million or 27.2% was due to decreases in distribution income from sales and liquidating transactions and dividend income during Fiscal 2020. The decreases were partly offset by an increase in distribution income from operations. During Fiscal 2020, the Company received distribution income from sales and liquidating transactions of $1.70 million compared to $6.07 million during Fiscal 2019, resulting in a decrease of $4.37 million. During Fiscal 2020, the Company received total dividends of $2.06 million compared to $2.32 million during Fiscal 2019, resulting in a decrease of $0.26 million. During Fiscal 2020, the Company received $4.62 million of distribution income from operations compared to $3.12 million during Fiscal 2019, resulting in an increase of $1.50 million.

Dividend and distribution income for Fiscal 2019 was $11.51 million compared to $6.52 million for Fiscal 2018. This increase of $4.99 million or 76.5% was attributed two factors; (i) larger amounts of sales distributions received during Fiscal 2019 and (ii) an increase in our investment portfolio since June 30, 2018. During Fiscal 2019, the Company received sales and liquidating distributions of $6.07 million from six investments compared to $2.80 million from seven investments during Fiscal 2018, resulting in additional $3.27 million of sales distribution income in Fiscal 2019. The remaining increase of $1.72 million was due to a net increase in our overall investment portfolio by $33.72 million (excluding the decrease in debt securities) in cost basis since June 30, 2018.

Interest and other income:

Interest and other income for Fiscal 2020 and 2019 remained comparable at $0.35 million and $0.37 million, respectively.

Interest and other income for Fiscal 2019 and 2018 were $0.37 million compared to $0.46 million, respectively. This decrease of $0.09 million was mainly due to maturity of a debt security towards the end of Fiscal 2018. The debt security earned interest for most of Fiscal 2018.

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Operating Expenses

Base management fee:

The base management fee for Fiscal 2020 was $2.55 million compared to $2.21 million for Fiscal 2019. The increase of $0.34 million was due to the increase in the Gross Invested Capital during Fiscal 2020. The Gross Invested Capital as of June 30, 2020 was $128.61 million compared to $109.26 million as of June 30, 2019.

The base management fee for Fiscal 2019 was $2.21 million compared to $1.73 million for Fiscal 2018. The increase was due to the increase in the Gross Invested Capital during Fiscal 2019. The Gross Invested Capital as of June 30, 2019 was $109.26 million compared to $84.96 million as of June 30, 2018.

Portfolio structuring fee:

The portfolio structuring fee for Fiscal 2020 was $0.59 million compared to $0.71 million for Fiscal 2019. The decrease of $0.12 million or 16.9% was due to smaller amount of capital raised during Fiscal 2020. During Fiscal 2020, the Company issued new shares with total gross proceeds of $19.51 million (excluding the DRIP shares) as compared to $23.24 million (excluding the DRIP shares) during Fiscal 2019

The portfolio structuring fee for Fiscal 2019 and 2018 remained comparable at $0.71 million and $0.69 million, respectively. The fee remained comparable as the gross proceeds from new shares issued (excluding the DRIP shares) during Fiscal 2019 and 2018 remained comparable at $23.24 million and $23.01 million, respectively.

Subordinated incentive fee:

Subordinated incentive fees are calculated in accordance with the Investment Advisory Agreement. The subordinated incentive fee has two parts—the Income Fee and the Capital Gains Fee. The Capital Gains Fee is based on realized gains including distributions received from sales/capital transactions and the Income Fee is based on net investment income.

There was neither Income Fee nor the Capital Gains Fee for Fiscal 2020, as the net investment income for Fiscal 2020 and the cumulative realized capital gains as of June 30, 2020 were below the threshold of 7% of Contributed Capital per annum.

There was no Income Fee for Fiscal 2019, as the net investment income for Fiscal 2019 was below the threshold of 7% of Contributed Capital per annum. The Capital Gains Fee for Fiscal 2019 was $1.79 million as the cumulative realized capital gains as of June 30, 2019, were over the threshold of 7% of Contributed Capital per annum.

The Income Fee and the Capital Gains Fee for Fiscal 2018 were $0.28 million and $0.81 million, respectively. As of June 30, 2018, the net investment income from the Effective Date of the amended investment advisory agreement through June 30, 2018, together with the cumulative net realized gains exceeded the threshold of 7% of the Company’s Contributed Capital per annum resulting in the Income Fee and Capital Gains Fee for that period.

Administrative cost and Transfer agent reimbursements:

Costs reimbursed to Mackenzie for Fiscal 2020 and 2019 were $0.68 million and $0.57 million, respectively. The increase was primarily due to an increase in the allocable portion of overhead and other expenses incurred by MacKenzie since June 30, 2019, as a result of increase in the Company’s operating activities.

Costs reimbursed to Mackenzie for Fiscal 2019 and 2018 were $0.57 million and $0.43 million, respectively. The increase was primarily due to an increase in the allocable portion of overhead and other expenses incurred by MacKenzie since June 30, 2018, as a result of increase in the Company’s operating activities.

Effective November 1, 2018, transfer agent services are also provided by MacKenzie in-house and the costs incurred by MacKenzie in providing the services are reimbursed by the Company. No fee (only cost reimbursement) is being paid by the Company to MacKenzie for this service, but the Company is reimbursing MacKenzie for the cost of certain software purchased to implement the service. This service was previously provided by a third party and the cost incurred were expensed under other general and administrative expenses.

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Transfer agent cost reimbursement paid to MacKenzie for Fiscal 2020 was $0.08 million. Transfer agent cost reimbursement paid to MacKenzie for Fiscal 2019 was $0.02 million and transfer agent service fees paid to the third party for Fiscal 2019 during the period MacKenzie did not provide the service was $0.03 million. Transfer Agent services fees paid to the third party for Fiscal 2018 was $0.04 million.

Amortization of deferred offering costs:

Amortization of deferred offering costs for Fiscal 2020 and Fiscal 2019 were $0.88 million and $0.56 million, respectively. The increase of $0.32 million or 57.1% was primarily due to amortization of the remaining unamortized deferred offering costs relating to the second public offering after the offering concluded in October 2019. According to our accounting policy, offering costs are capitalized as deferred offering costs as incurred by the Company and subsequently amortized to expense over a twelve-month period. Any deferred offering costs that have not been amortized upon the expiration or earlier termination of an offering will be accelerated and expensed upon such expiration or termination.

Amortization of deferred offering costs for Fiscal 2019 and Fiscal 2018 were $0.56 million and $0.37 million, respectively. The increase of $0.19 or 51.4% was primarily due to increase in the offering costs during Fiscal 2019. Deferred offering cost incurred during Fiscal 2019 was $0.71 million as compared to $0.42 million during Fiscal 2018.

Other operating expenses:

Other operating expenses includes professional fees, directors’ fees, legal expenses, audit fees, printing and mailing and other general and administrative expenses. Other operating expenses for Fiscal 2020 and 2019 were $0.48 million and $0.40 million, respectively. The increase of $0.08 million or 20.0% was mainly due to increases in the Company’s professional fees. The Company incurred additional professional fees during Fiscal 2020 in the process of restructuring and taking control of one of its investments.

Net realized gain on sale of investments

Total net realized gains for Fiscal 2020 was $1.80 million realized from sales and liquidations of three non-traded REIT securities with realized gains of $0.20 million, three limited partnership interests with net realized gains of $0.41 million and four publicly traded securities with realized gains of $1.19 million.

Total net realized gains for Fiscal 2019 was $1.20 million realized from sales and liquidation of twelve non-traded REIT securities with net realized gains of $3.24 million. The realized gains were offset by a realized loss of $2.03 million from sales of twenty-one publicly traded securities and $0.01 million from the liquidation of four limited partnership interests.

Total net realized gains for Fiscal 2018 was $2.69 million realized from (i) sales and liquidation of eight non-traded REITs with net realized gains of $3.06 million, and (ii) sales and liquidation of four partnership interests with net realized gains of $0.53 million. The realized gains were offset by a realized loss of $0.84 million from sales of twenty-one publicly traded securities and $0.06 million from the liquidation of Coastal Realty Business Trust, Series H2-A.

Net unrealized gain (loss) on investments

During Fiscal 2020, the Company recorded net unrealized loss of $16.99 million, which were net of the reclassification adjustment of $1.19 million of realized gains. The reclassification adjustment was the accumulated unrealized gains as of June 30, 2019, that were realized during Fiscal 2020. Accordingly, the net unrealized loss excluding the realized gains reclassification adjustment was $15.80 million, which resulted from fair value depreciations of $11.42 million of non-traded REIT securities, $3.17 million of limited partnership interests and $1.21 million of publicly traded securities. The significant declines in fair value during Fiscal 2020 were mainly due to the COVID-19 pandemic resulting in steep declines in certain domestic stock market segments and in the traded prices for other financial assets as discussed above.

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During Fiscal 2019, the Company recorded net unrealized loss of $3.96 million, which were net of the reclassification adjustment of $2.40 million of realized gains. The reclassification adjustment was the accumulated unrealized gain as of June 30, 2018, that was realized during Fiscal 2019. Accordingly, the net unrealized loss excluding the realized gains reclassification adjustment were $1.56 million, which resulted from fair value depreciation of $2.05 million of limited partnership interests and $0.03 million of publicly traded securities offset by fair value appreciation of $0.52 million of non-traded REIT securities. The large fair value depreciation in limited partnership interests mostly resulted from distributions of sales proceeds by two partnerships (The Weatherly, LTD and The Weatherly Building, LLC) following the sales of underlying properties. The Company recorded $3.3 million of distribution income from sales transactions, which is a part of the investment income discussed above, from these two partnerships during Fiscal 2019.

During Fiscal 2018, the Company recorded net unrealized gains of $5.85 million, which were net of the reclassification adjustment of $1.91 million of realized gains. The reclassification adjustment was the accumulated unrealized gain as of June 30, 2017, that was realized during Fiscal 2018. Accordingly, the net unrealized gains excluding the realized gains reclassification adjustment were $7.76 million, which resulted from fair value appreciation of $5.19 million of limited partnership interests and $2.59 million of non-traded REIT securities offset by fair value depreciation of $0.02 million of publicly traded securities.

Income tax provision (benefit)

The Parent Company did not record any income tax expenses for Fiscal 2020, 2019, or 2018, as we have elected to be treated as a REIT for tax purposes beginning with the tax year ended December 31, 2014. As a REIT, the Parent Company is not subject to federal income taxes on amounts that it distributes to the stockholders, provided that, on an annual basis, it distributes at least 90% of its REIT taxable income to the stockholders and meets certain other conditions.

The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax year ended December 31, 2019, 2018, and 2017. Therefore, the Company did not incur any tax expense or excise tax for those periods. In addition, during tax year ended December 31, 2019, we intend to pay dividends sufficient to avoid incurring income taxes. Therefore, the Company did not record any income tax provisions during the years ended June 30, 2020, 2019, and 2018.

The income tax provision (benefit) amounts in the consolidated statements of operation for the years ended June 30, 2020, 2019 and 2018, relate to the Company’s built-in gain tax adjustments and TRS’ income tax provisions as follows:

	Year Ended
	June 30, 2020		June 30, 2019			June 30, 2018

MacKenzie Realty Capital, Inc - built-in gain tax adjustments	$	-	$	(13,348	)	$	(3,292	)
MRC TRS, Inc - income tax expenses		-		-			6,723

Total Income Tax Provision (Benefit)	$	-	$	(13,348	)	$	3,431

The built-in gain tax adjustment amounts are the differences between the actual and the estimated tax liabilities on the built-in gains realized during the year. Prior to the effective date of its REIT election, the Parent Company had net unrealized built-in gains of $239,595, for which the Parent Company recorded an estimated tax liability of $95,431 as of December 31, 2013. Accordingly, in each subsequent period, the Parent Company only recorded the difference between the actual and estimated tax on the built-in gains it realized during the year as income tax expense or benefit. All unrealized built-in gains after December 31, 2018 were not taxable as the five-year period following the REIT election date ended on December 31, 2018. Therefore, the remaining deferred tax liabilities of $13,348 on the unrealized built-in gains were reversed as of June 30, 2019.

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TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates. However, for the years ended June 30, 2020 and 2019, TRS did not have any taxable income; therefore, TRS did not record any income tax provisions. For the year ended June 30, 2019, it recorded an income tax provision of $6,723.

Liquidity and Capital Resources

Capital Resources

We offered to sell up to $150 million of shares under our second public offering which ended on October 28, 2019. In September 2019, we filed our third registration statement with the SEC for the public offering of 15 million shares with total potential gross proceeds of $153.75 million. The third registration statement was declared effective by the SEC on October 31, 2019 and the public offering commenced shortly thereafter. As of June 30, 2020, the Company has raised total gross proceeds of $118.88 million from the issuance of shares under three public offerings, $42.46 million from the IPO, which concluded in October 2016, and $67.99 million from the second public offering and $8.43 million from our third public offering. In addition, we have raised $11.16 million from the issuance of shares under the DRIP. Of the total capital raised from the public offerings as of June 30, 2020, we have used $9.46 million to repurchase shares under the Company’s share repurchase program. We do not have any current plans to issue any preferred equity. We plan to fund future investments with the net proceeds raised from our third offering and any future offerings of securities and cash flows from operations, as well as interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less. We may also fund a portion of our investments through borrowings from banks and issuances of senior securities. We currently do not have any plans to borrow money on a long-term basis or issue debt securities; however, from time to time we may draw on the margin line of credit on a temporary basis to bridge our investment purchases and sales or capital raising. As of June 30, 2020, we were selling our shares on a continuous basis at a price of $10.25 which may be below NAV per share from time to time, as approved by our stockholders.

Our aggregate borrowings (if any), secured and unsecured, are expected to be reasonable in relation to our net assets and will be reviewed by the Board of Directors at least quarterly. The maximum amount of such borrowing is limited by the 1940 Act.

Our primary uses of funds are investing in portfolio companies, paying cash dividends to holders of our common stock (from investment income and realized capital gains), making payments to any lenders or senior security holders, paying operating expenses. If all shares registered in our current public offering are sold, we will receive investable cash totaling approximately $133.76 million, of which approximately $7.37 million has been received as of June 30, 2020.

The Company finished the quarter ended June 30, 2020 with substantial liquidity, including $8.96 million in cash and cash equivalents, and only $0.94 million of liabilities. However, the Company has historically relied upon distributions and capital gains from its investments to fund dividends. During and following the outbreak of COVID-19, we do not believe we can rely on our traditional sources of cash flow. Therefore, in anticipation of uncertain future economic conditions, our board of directors discontinued dividends starting March 2020 and share redemptions starting May 2020. The Company intends to continue to qualify as a REIT and to meet the associated testing requirements, including paying out at least 90% of its taxable income.

Cash Flows:

Fiscal 2020

For Fiscal 2020, we experienced a net increase in cash of $7.68 million. During this period, we generated cash of $9.41 million from our financing activities and used $1.73 million in our operating activities.

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The net cash outflow of $1.73 million from operating activities was primarily due to the cash outflow of $45.08 million from purchases of investments offset by cash inflows of $8.01 million from sales of investments, $31.37 million from distributions received from our investments that are considered return of capital and $3.97 million from investment income, net of the Company’s operating expenses.

The net cash inflow of $9.41 million from financing activities resulted from the sale of shares under our second and third public offering with gross proceeds of $18.93 million (adjusted for $0.58 million of decrease in capital pending acceptance) offset by cash outflows of $4.53 million from payments of cash dividends, $3.19 million from share redemptions, and $1.80 million from payments of selling commissions and fees.

Fiscal 2019

For Fiscal 2019, we experienced a net decrease in cash of $7.16 million. During this period, we generated $15.06 million of cash from our financing activities and used $22.22 million in operating activities.

The net cash outflow of $22.22 million from operating activities was primarily due to the cash outflow of $107.88 million from purchases of investments offset by cash inflows of $62.87 million from sales of investments, $19.02 million from distributions received from our investments that are considered return of capital and $3.77 million from investment income, net of the Company’s operating expenses.

The net cash inflow of $15.06 million from financing activities resulted from the sale of the Company’s shares under the second public offering with gross proceeds of $23.27 million (adjusted for the $0.02 million of change in capital pending acceptance) offset by cash outflows of $2.37 million from share redemptions, $3.79 million from payments of cash dividends and $2.05 million from payment of selling commissions and fees.

Fiscal 2018

For Fiscal 2018, we experienced a net decrease in cash of $3.41 million. During this period, we generated $15.23 million of cash from our financing activities and used $18.64 million in operating activities.

The net cash outflow of $18.64 million from operating activities was primarily due to the cash outflow of $79.22 million from purchases of investments offset by cash inflows of $39.60 million from sales of investments, $17.19 million from distributions received from our investments that are considered return of capital and $3.79 million from investment income, net of the Company’s operating expenses.

The net cash inflow of $15.23 million from financing activities resulted from the sale of the Company’s shares under the second public offering with gross proceeds of $21.84 million (adjusted for the $1.16 million of change in capital pending acceptance) offset by cash outflows of $1.45 million from share redemptions, $2.98 million from payments of cash dividends and $2.18 million from payment of selling commissions and fees.

Contractual Obligations

We have entered into two contracts under which we have material future commitments, the Advisory Agreement, under which the Adviser serves as our investment adviser, and the Administration Agreement, under which MacKenzie furnishes us with certain non-investment management services and administrative services necessary to conduct our day-to-day operations. Each of these agreements is terminable by either party upon proper notice. Payments under the Advisory Agreement in future periods (after the up-front payment of the portfolio structuring fee during the IPO) are (i) a percentage of the value of our Gross Invested Capital; and (ii) incentive fees based on our income and our performance above specified hurdles (except in the year of liquidation). Payments under the Administration Agreement will occur on an ongoing basis as expenses are incurred on our behalf by MacKenzie. However, if MacKenzie withdraws as our administrator, it is liable for any expenses we incur as a result of such withdrawal.

We have entered into an agreement with MacKenzie, the Investor Service Agreement, effective November 1, 2018. Pursuant to the agreement, transfer agent services are provided by MacKenzie in-house and the costs incurred by MacKenzie in providing the services are reimbursed by the Company. No fee (only cost reimbursement) is paid by the Company to MacKenzie for this service.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Borrowings

We do not have any current plans to borrow money or issue preferred securities. If we do borrow money, we expect to be subject to various customary covenants and restrictions on our operations, such as covenants which would (i) require us to maintain certain financial ratios, including asset coverage, debt to equity and interest coverage, and a minimum net worth, and/or (ii) restrict our ability to incur liens, additional debt, merge or sell assets, make certain investments and/or distributions or engage in transactions with affiliates.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our portfolio primarily consists of equity and debt securities issued by smaller U.S. companies that primarily own commercial real estate that are either illiquid or not listed on any exchange, and our investments in these securities are considered speculative in nature. Our investments do and will often include securities that are subject to legal or contractual restrictions on resale that adversely affect the liquidity and marketability of such securities. As a result, we are subject to risk of loss which may prevent our stockholders from achieving price appreciation, dividend distributions and a return of their capital.

At June 30, 2020, financial instruments that subjected us to concentrations of market risk consisted principally of equity investments, which represented approximately 90% of our total assets as of that date. As discussed in Note 3 – Investments to our financials statement, these investments primarily consist of securities in companies with no readily determinable market values and as such are valued in accordance with our fair value policies and procedures. Our investment portfolio also includes shares of publicly traded REITs, which are valued at recently quoted trading prices. Our investment strategy represents a high degree of business and financial risk due primarily to the general illiquidity of our portfolio company investments. We may make short-term investments in cash equivalents, U.S. government securities and other high-quality investments that mature in one year or less, pending investments in portfolio companies made according to our principal investment strategy.

Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and notes to the consolidated financial statements are set forth beginning on page F-1 in this Annual Report on Form 10-K and are incorporated herein by reference.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the 1934 Act) as of the end of the period covered by this report as required by paragraph (b) of Rule 13a-15 or 15d-15 of the 1934 Act. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed by us in the reports we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rules 13a-15(f) and 15d-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP.

Our internal control over financial reporting includes those policies and procedures that:

1.	Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and the dispositions of our assets;

2.	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and

3.	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

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Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management's assessment of the effectiveness of our internal control system as of June 30, 2020, was based on the framework for effective internal control over financial reporting described in Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, as of June 30, 2020, our system of internal control over financial reporting was effective at the reasonable assurance level.

This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to Section 989G of the Dodd-Frank Wall Street and Consumer Protection Act, which exempts non-accelerated filers from the auditor attestation requirement of section 404 (b) of the Sarbanes-Oxley Act.

Changes in Internal Control over Financial Reporting

There were no changes to the Company’s internal control over financial reporting (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that occurred during the year ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. OTHER INFORMATION

None.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors and Executive Officers

Our business and affairs are managed under the direction of our Board of Directors. Accordingly, our Board provides broad supervision over our affairs, including supervision of the duties performed by the Adviser and MacKenzie. Certain employees of MacKenzie are responsible for our day-to-day operations. The names, ages and addresses of our Directors and specified executive officers, together with their principal occupations and other affiliations during the past five years, are set forth below. Each Director and officer holds office for a one-year term to which he or she is elected and until his successor is duly elected and qualifies, or until he resigns or is removed in the manner provided by law. Our Board consists of a majority of Independent Directors. The Director who is an "interested person" (as defined in the 1940 Act) is referred to as an "Interested Director," a director who is not an Interested Director is referred to herein as an "Independent Director." The address for all officers and Directors is 89 Davis Road, Suite 100, Orinda CA 94563. None of our Directors or officers serves as a director for any other company which (i) has a class of securities registered under section 12 of the 1934 Act, (ii) is subject to section 15(d) of the 1934 Act, or (iii) is registered as an investment company under the 1940 Act, and we only have one investment portfolio.

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Board of Directors

Name and Age	Position(s) Held with the Company	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years
Charles “Chip” Patterson†, 49	Chairman of the Board, Interested Director	Since 2019	Mr. Chip Patterson, an MRC Executive Officer since May of 2012, is managing director, general counsel, and senior vice president of MCMA and the Manager, and a director of their general partner, and a beneficial owner of all three companies, all since 2005. Mr. Patterson graduated magna cum laude from the University of Michigan Law School with a J.D. degree and with high distinction and Phi Beta Kappa from the University of California at Berkeley with a B.A. degree in Political Science. Prior to joining the Manager in July 2003, he was a securities and corporate finance attorney with the national law firm of Davis Wright Tremaine LLP. Prior to law school, Chip Patterson taught physics, chemistry, and math at the high school level for three years. He also has prior experience in sales, retail, and banking, and is a licensed California Real Estate Broker.
Tim Dozois, 58	Director	Since 2012	Mr. Dozois was Vice President, Secretary and Corporate Counsel for Pendrell Corporation, a NASDAQ listed company specializing in intellectual property solutions, from June of 2010 until early 2018. He is now sole owner of Conseiller LLC. From January 1996 until March of 2010, Mr. Dozois was an equity partner of Davis Wright Tremaine LLP, a Seattle-based national law firm, where he specialized in private securities work and structured financings, with an emphasis on the acquisition, financing and management of real property assets. He has nearly 30 years of experience supporting leading corporations in securities law compliance, mergers, acquisitions, and real estate acquisition, financing, and management. Mr. Dozois received his B.S. in Financial Management from Oregon State University and his J.D. from the University of Oregon School of Law, where he was Order of the Coif.
Tom Frame, 78	Director	Since 2012	Mr. Frame was a co-founder of TransCentury Property Management and solely founded Paradigm Investment Corporation. TransCentury began in May of 1973 and has syndicated and managed over 10,000 residential units. During the last 35 years, Mr. Frame has been a principal in the acquisition, financing, restoration, and sale of over $500,000,000 in residential and commercial real estate. Paradigm was founded in June 1986 to sponsor and manage private, closed end "mutual funds." The last of the funds successfully liquidated in December of 2000. Mr. Frame received a BA degree from the University of Kansas in Mathematics in June 1964, a Juris Doctor degree from the San Francisco Law School in June 1975, and an MBA with honors from Pepperdine University in April 1986. Mr. Frame is currently managing his own investments which include residential units, commercial property, and a portfolio of securities.

† As a principal of both MacKenzie and the Adviser, Mr. Patterson is an Interested Director.

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Executive Officers

Our current officers are listed in the chart below. As affiliated persons of MacKenzie and/or the Adviser, the officers are "interested persons," as that term is defined in Section 2(a)(19) of the 1940 Act. The address for all officers is 89 Davis Road, Suite 100, Orinda, CA 94563.

Name and Age	Position(s) Held with the Company	Term of Office and Length of Time Served	Principal Occupation(s) During Past 5 Years
Robert Dixon, 49	Chief Executive Officer and President	Since 2012	Robert E. Dixon has been the senior vice president and co-chief investment officer of MacKenzie and the Adviser since 2005, and a director of their general partner, and a beneficial owner of all three companies since 2005. Robert Dixon served as an officer and director of Sutter Holding Company, Inc. from March 2002 until 2005. Mr. Dixon has been president of Sutter Capital Management since its founding. Mr. Dixon received his Master of Business Administration degree from Cornell University in 1998 and has held the Chartered Financial Analyst® designation since 1996. Mr. Dixon received his bachelor's degree in economics from the University of California at Los Angeles in 1992.
Paul Koslosky, 58	Chief Financial Officer and Treasurer	Since 2012	Mr. Koslosky has been the chief financial officer and treasurer for the Adviser and MacKenzie since 2004. He owns a beneficial interest in each MacKenzie, the Adviser and their general partner. He is responsible for accounting and reporting for MacKenzie, the funds it manages, and other related business interests. Mr. Koslosky graduated from California State University, Hayward in 1983 with a Bachelor of Science degree in Business Administration. Prior to joining MacKenzie in 1997, he spent five years with Zellerbach Paper Company, a billion-dollar paper distributor, as staff accountant and, eventually, financial reporting manager. He worked for Doric Development, an Alameda, California real estate developer with numerous related business interests. At Doric he served as accounting manager responsible for the accounting and reporting for commercial development and construction. From 1995 to 1997 he served as controller at Doric.
Glen Fuller, 47	Chief Operating Officer	Since 2012	Mr. Fuller has been senior vice president and secretary of MacKenzie since 2000 and the Adviser since 2000, and a director of their general partner, and a beneficial owner of all three companies since 2000. Prior to becoming senior vice president of MacKenzie, he was with MacKenzie for two years as a portfolio manager and research analyst. Prior to joining MacKenzie, Mr. Fuller spent two years running the over the counter trading desk for North Coast Securities Corp. (previously Morgan Fuller Capital Group) with responsibility for both the proprietary and retail trading desks. Mr. Fuller was also the registered options principal and registered municipal bond principal for North Coast Securities Corp., a registered broker-dealer. Mr. Fuller previously held his NASD Series 7, general securities registration. Mr. Fuller has a Bachelor of Arts in Management.
Chip Patterson, 49	General Counsel and Secretary	Since 2012	Mr. Patterson is a managing director and general counsel of MCMA and our Manager, where he has been employed since 2003. He is a director of their general partner and a beneficial owner of all three companies. Chip Patterson graduated magna cum laude from the University of Michigan Law School with a J.D. degree and with high distinction and Phi Beta Kappa from the University of California at Berkeley with a B.A. degree in Political Science. Prior to joining the Manager in July 2003, he was a securities and corporate finance attorney with the national law firm of Davis Wright Tremaine LLP. Prior to law school, Chip Patterson taught physics, chemistry, and math at the high school level for three years. He also has prior experience in sales, retail, and banking, and is a licensed California Real Estate Broker.
Jeri Bluth, 45	Chief Compliance Officer	Since 2012	Ms. Bluth has been the Chief Compliance Officer for MacKenzie and the Adviser since 2009. She owns a beneficial interest in each MacKenzie and the Adviser. Mrs. Bluth oversees compliance for all the funds advised by the Adviser, and she oversees the Company's compliance with its Code of Ethics, Bylaws, Charter, and applicable rules and regulations. Mrs. Bluth began her career with MacKenzie Patterson Fuller, Inc. in July of 1996 in the Investor Services Department. During Mrs. Bluth's career with MacKenzie, she graduated from St. Mary's College of California in June 2001, with a Bachelor of Arts degree in Business Management.
Christine Simpson, 55	Chief Portfolio Manager	Since 2012	Mrs. Simpson has been employed by MacKenzie and its affiliates since 1990, and has been the Adviser's Senior Vice President of Research and Trading since 2005. Mrs. Simpson is responsible for handling the day-to-day operations of The Adviser's research department. During Mrs. Simpson's career with MacKenzie, she graduated: with a Bachelor of Arts degree in Business Management from St. Mary's College of California in October 2004 (with honors), with a Master of Science degree in Financial Analysis and Investment Management in September 2006, and a Master’s in Business Administration in June 2008.

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Section 16(a) Beneficial Ownership Reporting Compliance

Under the federal securities laws, our directors, executive (and certain other) officers and any persons holding more than 10% of our common stock are required to report their ownership of our common stock and any changes in that ownership to us and the SEC. Specific due dates for these reports have been established by regulation, and we are required to report any failure to file by these dates in Fiscal 2020. To our knowledge, based solely on a review of the copies of beneficial ownership reports furnished to us and written representations that no other reports were required, during Fiscal 2020, all of our directors, officers and more than 10% beneficial owners complied with all applicable 1934 Act §16(a) filing requirements.

Code of Ethics

We have adopted a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual's personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code of Ethics.

The Codes of Ethics can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 942-8090. The Codes of Ethics are also available on the EDGAR database on the SEC's internet site at www.sec.gov, and, upon payment of a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.

Audit Committee

The Board of Directors has established an Audit Committee in accordance with 1934 Act §3(a)(58)(A). The Audit Committee operates under a charter approved by our Board of Directors, which contains the responsibilities of the Audit Committee. The Audit Committee's responsibilities include establishing guidelines and making recommendations to our Board of Directors regarding the valuation of our loans and investments, selecting our independent registered public accounting firm, reviewing with such independent registered public accounting firm the planning, scope and results of their audit of our consolidated financial statements, pre‑approving the fees for services performed, reviewing with the independent registered public accounting firm the adequacy of internal control systems, reviewing our annual consolidated financial statements and periodic filings and receiving our audit reports and consolidated financial statements. The audit committee is currently composed of Messrs. Dozois and Frame, neither of whom is an "interested person" of ours as that term is defined in Section 2(a)(19) of the 1940 Act. Mr. Dozois serves as chairman of the audit committee.

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Item 11. EXECUTIVE COMPENSATION

We do not have a compensation committee because our executive officers do not receive any direct compensation from us.

Compensation of Directors

Our Independent Directors receive an annual retainer of $28,000. They also receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting in person and $500 for each telephonic meeting, and also receive $500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each committee meeting. In addition, the chairman of the audit committee receives an annual fee of $1,000 and each chairman of any other committee receives an annual fee of $1,000 for their additional services, if any, in these capacities. No compensation is expected to be paid to directors who are "interested persons" as that term is defined in 1940 Act §2(a)(19).

The following table details the compensation accrued to Directors fees during Fiscal 2020. We maintain no pension, equity participation, or retirement plans for our Directors. However, both Independent Directors have been investing a portion of their compensation into Shares of the Company beginning this fiscal year, and have stated that they intend to continue to do so.

Name & Position	Fiscal Year 2020 Fees ⁽¹⁾
Chip Patterson (Chairman of the Board of Directors)	$	-
Tim Dozois (Independent Director)		34,000
Tom Frame (Independent Director)		34,000
Total Fees	$	68,000

⁽¹⁾ Consists only of directors' fees and does not include reimbursed expenses.

Compensation of Executive Officers

None of our officers receives direct compensation from us. We have not compensated our executive officers in any of the last three fiscal years. We do not provide any bonus, stock options, stock appreciation rights, non-equity incentive plans, non-qualified deferred compensation or pension benefits to our executive officers. Further, we have no agreements with any officer pertaining to change in control payments. All of our officers and staff are employed by MacKenzie or the Adviser, which pay all of their cash compensation.

Compensation Committee Interlocks and Insider Participation

We do not have a separate compensation committee utilized to determine the appropriate compensation payable to our executive officers and Directors. The Audit Committee, however, is responsible for, among other things, annually reviewing and approving the compensation policies for our Directors.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table shows the amount of our common stock beneficially owned and based on a total of 12,852,386.91 shares of our common stock outstanding on September 21, 2020, as of that date, by (1) each of our directors and nominees for director, (2) our executive officers and (3) all directors and executive officers as a group. To our knowledge, no other person owns more than 5% of our common stock. The number of shares beneficially owned by each entity, person, director or executive officer is determined under the rules of the Securities and Exchange Commission (the “SEC”) and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power and also any shares that the individual has the right to acquire within 60 days of September 21, 2020, through the exercise of any instrument. Unless otherwise indicated, each person has the sole investment and voting power, or shares such powers with his spouse, with respect to the shares set forth in the table. Unless known otherwise by us, the beneficial ownership information is based on each beneficial owner’s most recent Form 3, Form 4, Form 5, Schedule 13D or Schedule 13G, as applicable. With respect to the Executive Officers listed below, they are limited partners of MPF Successors, LP, as well as officers of its general partner, which owns 47,262.23 shares in us. Mr. C. E. Patterson and his spouse are the sole beneficial owners of 9,222.29 shares owned in a personal holdings limited partnership, and the executive officers below are also in control of its general partner. Thus, they are all deemed to have voting and dispositive control over such shares and the number of shares owned below is the number of shares owned by MPF Successors, LP and the personal holding partnership. The address of each beneficial owner is 89 Davis Road, Orinda, CA 94563.

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Name and address of Beneficial Owner	Nature of Beneficial Ownership	Number of Shares Owned		Percent of Class
Independent Directors:
Tim Dozois	Directly held		4,111.00		*
Tom Frame	Directly held		5,213.43		*
Interested Director:
Charles "Chip" Patterson	Indirectly held		59,414.57		*
Executive Officers
Robert Dixon	Indirectly held		59,414.57		*
Glen Fuller	Indirectly held		59,414.57		*
Chip Patterson	Indirectly held		59,414.57		*
Paul Koslosky	Indirectly held		59,414.57		*
Directors and Officers as a group (6 person)	Indirectly held		68,739.00		*

* Represents less than 1% of the number of shares outstanding.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

We are managed by MacKenzie, which is owned by three sub-partnerships that are owned in varying percentages by MacKenzie and the Adviser employees and the extended family of Messrs. C.E. Patterson, Chip Patterson, Glen Fuller and Robert Dixon. The general partner of MacKenzie is MCM-GP, Inc., a California corporation owned by the same individuals. The majority of the beneficial interests of MacKenzie are owned by C.E. Patterson, Berniece A. Patterson, Robert Dixon, Glen Fuller, and Chip Patterson, in addition to other family members. Certain non-family employees of MacKenzie own minority interests in MacKenzie that represent in the aggregate less than 10% of the equity in MacKenzie. MacKenzie manages all of our affairs except for providing investment advice.

We are advised by the Adviser, whose investment team members have an average of nearly 20 years of experience investing in real estate-related securities. The Adviser is registered with the SEC and is owned by the same beneficial owners and in the same proportions as MacKenzie. The Adviser is led by its investment team: C.E. Patterson, Founder and Managing Director of the General Partner of MacKenzie and the Adviser; Glen W. Fuller, who serves as Chief Operating Officer and Managing Director of the General Partner of MacKenzie and the Adviser; Chip Patterson, who serves as Managing Director and General Counsel, and Director of the General Partner of MacKenzie and the Adviser; Robert E. Dixon, who serves as Chief Investment Officer and Managing Director of the General Partner of MacKenzie and the Adviser; Paul F. Koslosky, who serves as Chief Financial Officer and Treasurer of the General Partner of MacKenzie and the Adviser; and Christine E. Simpson, who serves as Chief Portfolio Manager and Senior Vice President of Research for the General Partner of MacKenzie and the Adviser.

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We have entered into two affiliated contracts—the Advisory Agreement, under which the Adviser serves as our investment adviser, and the Administration Agreement, under which MacKenzie furnishes us with certain non-investment management services and administrative services necessary to conduct our day-to-day operations. Each of these agreements is terminable by either party upon proper notice. Payments under the Investment Advisory Agreement in future periods (after the up-front payment of the Portfolio Structuring Fee) are (i) a percentage of the value of our Gross Invested Capital; and (ii) incentive fees based on our income and our performance above specified hurdles (except in the year of liquidation). In Fiscal 2020, 2019 and 2018, Management fees accrued to the Adviser under the Advisory Agreement were $2,549,076, $3,996,097 and $2,817,524, respectively. Administration fees accrued and payable under the Administration Agreement for Fiscal 2020, 2019 and 2018, were $680,000, $570,667 and $432,000, respectively. Administration Agreement fees occur on an ongoing basis as expenses are incurred on our behalf by MacKenzie. However, if MacKenzie withdraws as our administrator, it is liable for any expenses we incur as a result of such withdrawal.

The 1940 Act extensively regulates conflicts of interests between BDCs, their directors, investment advisers and their affiliates. For example, the 1940 Act and rules thereunder generally prohibit a BDC's employees, officers, directors, investment adviser and their affiliates from (i) selling securities or property to the BDC, (ii) buying securities or property from the BDC, (iii) borrowing money or property from the BDC, or (iv) entering into joint transactions with the BDC or a company controlled by it. The 1940 Act further prohibits a wider group of persons affiliated with a BDC from entering into such transactions with a BDC unless approved by the BDC's stockholders.

In order to ensure that we do not engage in any transactions with any persons affiliated with us that are prohibited by the 1940 Act, we have implemented certain written policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the issuer in which we invest, us, companies controlled by us and our executive officers and directors. We do not enter into any agreements unless and until we are satisfied that doing so does not violate our Charter or raise concerns under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and exemptive or other relief for such transaction. Our Board of Directors review these procedures on an annual basis. There are no plans to eliminate or amend these procedures, regardless of whether we remain a BDC.

Our directors have been divided into two groups — interested directors and Independent Directors. An interested director is an "interested person" as defined in 1940 Act §2(a)(19). Our only interested director is Charles “Chip” Patterson. Our independent directors are Tim Dozois and Tom Frame.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES:

The following table presents fees incurred for professional services rendered by Moss Adams LLP, the Company's independent registered public accounting firm, for Fiscal 2020, Fiscal 2019, and Fiscal 2018:

Fee Category	Fiscal Year 2020		Fiscal Year 2019		Fiscal Year 2018
Audit Fees	$	133,750	$	123,471	$	115,825
Audit-Related Fees		-		-		-
Tax Fees		-		-		-
All Other Fees		12,500		15,610		15,000
Total Fees	$	146,250	$	139,081	$	130,825

Audit Fees were for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Moss Adams in connection with statutory and regulatory filings or engagements and include quarterly reviews and security counts.

Audit-Related Fees were for assurance and related services that are reasonably related to the performance of the audit or review of the Company's consolidated financial statements and are not reported under "Audit Fees." These services include accounting consultations in connection with acquisitions, consultations concerning financial accounting and reporting standards.

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Tax Fees were for professional services for federal, state and international tax compliance, tax advice and tax planning and include preparation of federal and state income tax returns, and other tax research, consultation, correspondence and advice.

All Other Fees are for services other than the services reported above. These fees were incurred for their review of our registration statements. The amounts incurred during Fiscal 2018 were reimbursed by the Adviser under the Advisory Agreement.

The Audit Committee has concluded the provision of the non-audit services listed above is compatible with maintaining the independence of Moss Adams LLP. Moss Adams LLP did not bill the Adviser or MacKenzie, for any non-audit services in Fiscal 2020, 2019 or 2018.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

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PART IV

Item 15. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Annual Report on Form 10-K:

1.	The Consolidated Financial Statements listed in the Index to Consolidated Financial Statements on Page F-1.

2.	The Exhibits listed in the Exhibit Index below.

Exhibit No. 1		Description of Document

2.1	Contribution Agreement by and between MacKenzie Realty Operating Partnership, LP and the Addison Group, Dated June 8, 2020

3(i)	Articles of Amendment and Restatement (incorporated by reference to Registrant's Post-Effective Amendment No. 3 to Registrant's Registration Statement on Form N-2 (File No. 333-181853), filed on May 14, 2014)

3(ii)	First Amended and Restated Bylaws (incorporated by reference to Registrant's Pre-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-181853), filed on July 19, 2013)

10.1(i)	Amended and Restated Investment Advisory Agreement with MCM Advisers, LP dated as of October 1, 2017 (incorporated by reference to Registrant's Post-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-212804), filed on November 9, 2017)

10.1(ii)	Amendment to the Amended and Restated Investment Advisory Agreement dated as October 1, 2018 (incorporated by reference to Registrant’s Post-Effective Amendment No. 5 to the Registration Statement on Form N-2 (File No. 333-212804), filed on October 29, 2018)

10.1(iii)	Agreement of Limited Partnership of MacKenzie Realty Operating Partnership, LP, Dated May 20, 2020

10.2	Form of Investment Adviser Introducing Agreement (pre-December 2016) (incorporated by reference to the Registration Statement on Form N-2(File No. 333-212804) filed on August 1, 2016)

10.3	Form of Amendment to Pre-December 2016 Investment Adviser Introducing Agreement (incorporated by reference to Registrant's Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 (File No. 333-212804) filed on December 19, 2016)

10.4	Form of Investment Adviser Introducing Agreement (beginning December 2016) (incorporated by reference to Registrant's Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 (File No. 333-212804) filed on December 19, 2016)

10.5	Marketing Services Agreement with Arete Wealth Management, LLC dated December 20, 2016 (incorporated by reference to Registrant's Post-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-212804) filed on December 22, 2016)

10.6	Form of Sales Agent Agreement (pre August 6, 2014) (incorporated by reference to Registrant's Post-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-181853) filed on September 5, 2013)

10.7	Form of Amendment to Sales Agent Agreement (incorporated by reference to Registrant's Post-Effective Amendment No. 4 to the Registration Statement on Form N-2 (File No. 333-181853) filed on August 6, 2014)

10.8	Form of Sales Agent Agreement (for use after August 6, 2014) (incorporated by reference to Registrant's Post-Effective Amendment No. 4 to the Registration Statement on Form N-2 (File No. 333-181853) filed on August 6, 2014)

10.9	Form of Amendment to Sales Agent Agreement (for agreements entered before December 20, 2016) (incorporated by reference to Registrant’s Pre-Effective Amendment No. 2 to the Registration Statement on Form N-2 (File No. 333-212804) filed on December 19, 2016)

10.10	Form of Sales Agent Agreement (beginning December 20, 2016) (incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form N-2(File No. 333-212804) filed on October 6, 2016)

10.11	Form of Investor Services Agreement with ACS Securities Services, Inc. (incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-181853) filed on May 30, 2013)

10.12	Form of Administration Agreement with MacKenzie Capital Management, LP (incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-181853), filed on May 30, 2013)

10.13	Form of Investor Services Agreement with MacKenzie Capital Management, LP dated November 1, 2018 (incorporated by reference to Post-Effective Amendment No. 6 to the Registration Statement on Form N-2 (File No. 333-212804), filed on May 10, 2019)

14	Code of Ethics for Principal Executive Officer and Principal Financial Officer ("Officer Code") (incorporated by referenced to Registrant's Pre-Effective Amendment No. 1 to the Registration Statement on Form N-2 (File No. 333-181853), filed on May 30, 2013)

31.1	Section 302 Certification of Robert Dixon (President and Chief Executive Officer)

31.2	Section 302 Certification of Paul Koslosky (Treasurer and Chief Financial Officer)

32.1	Section 1350 Certification of Robert Dixon (President and Chief Executive Officer)

32.2	Section 1350 Certification of Paul Koslosky (Treasurer and Chief Financial Officer)

All other exhibits for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instruction or are inapplicable and therefore have been omitted.

Item 16. FORM 10-K SUMMARY

None.

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Index to Audited Consolidated Financial Statements

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Statements of Assets and Liabilities as of June 30, 2020 and 2019	F-3

Consolidated Schedule of Investments as of June 30, 2020	F-4

Consolidated Schedule of Investments as of June 30, 2019	F-5

Consolidated Statements of Operations for the Years Ended June 30, 2020, 2019, and 2018	F-6

Consolidated Statements of Changes in Net Assets for the Years Ended June 30, 2020, 2019, and 2018	F-7

Consolidated Statements of Cash Flows for the Years Ended June 30, 2020, 2019, and 2018	F-8

Notes to Consolidated Financial Statements	F-9

F-1

Index to Audited Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of
MacKenzie Realty Capital, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of assets and liabilities of MacKenzie Realty Capital, Inc. (the “Company”), including the consolidated schedules of investments, as of June 30, 2020 and 2019, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended June 30, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Moss Adams LLP

San Francisco, California

September 21, 2020

We have served as the Company’s auditor since 2012.

F-2

Index to Audited Consolidated Financial Statements

MacKenzie Realty Capital, Inc.

Consolidated Statements of Assets and Liabilities

	June 30, 2020		June 30, 2019
Assets
Investments, at fair value
Non-controlled/non-affiliated investments (cost of $48,895,786 and $46,997,608, respectively)	$	38,081,970	$	48,839,999
Affiliated investments (cost of $12,426,110 and $14,699,474, respectively)		12,107,884		15,916,187
Controlled investments (cost of $43,370,752 and $35,541,173, respectively)		43,515,291		38,488,962
Total investments, at fair value (cost of $104,692,648 and $97,238,255, respectively)		93,705,145		103,245,148
Cash and cash equivalents		8,957,393		1,278,668
Accounts receivable		1,087,432		3,170,068
Other assets		138,773		219,050
Deferred offering costs, net		278,021		440,320
Total assets	$	104,166,764	$	108,353,254


Liabilities
Accounts payable and accrued liabilities	$	135,040	$	226,722
Dividend payable		-		1,877,101
Capital pending acceptance		87,739		668,165
Due to related entities		718,264		2,465,885
Total liabilities		941,043		5,237,873

Net assets
Common stock, $0.0001 par value, 80,000,000 shares authorized; 12,836,608.02 and 10,926,319.99 shares issued and outstanding, respectively		1,284		1,093
Capital in excess of par value		116,455,600		99,077,308
Total distributable earnings (distributions in excess of earnings)		(13,231,163)		4,036,980
Total net assets		103,225,721		103,115,381

Total liabilities and net assets	$	104,166,764	$	108,353,254

Net asset value per share	$	8.04	$	9.44

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.

F-3

Index to Audited Consolidated Financial Statements

MacKenzie Realty Capital, Inc.

Consolidated Schedule of Investments

June 30, 2020

Name		Asset Type	Shares/Units	Cost Basis	Total Fair Value	% of Net Assets

American Finance Trust 7.5% PFD	(4)	Publicly Traded Company	34,000.00	$ 610,229	$ 797,980	0.78
American Finance Trust Inc., Class A	(4)	Publicly Traded Company	86,500.00	500,619	686,378	0.66
Apartment Investment & Management Company- Class A	(4)	Publicly Traded Company	26,200.00	999,945	986,168	0.96
Ashford Hospitality Trust, Inc.	(4)	Publicly Traded Company	360,000.00	244,092	260,136	0.25
Bluerock Residential Growth REIT, Inc.	(4)	Publicly Traded Company	70,000.00	513,940	565,600	0.55
CBL & Associates Properties, Inc. - Preferred D	(4)	Publicly Traded Company	188,000.00	1,707,042	169,200	0.16
City Office REIT, Inc. - Preferred A	(4)	Publicly Traded Company	12,196.00	201,436	288,679	0.28
CorEnergy Infrastructure 7.375% PFD A	(4)	Publicly Traded Company	36,031.00	621,401	487,139	0.47
Host Hotels & Resorts Inc	(4)	Publicly Traded Company	24,500.00	237,354	264,355	0.26
Independence Realty Trust, Inc.	(4)	Publicly Traded Company	33,000.00	295,551	379,170	0.37
NexPoint Residential Trust, Inc.	(4)	Publicly Traded Company	8,000.00	294,490	282,800	0.27
One Liberty Properties, Inc.	(4)	Publicly Traded Company	24,500.00	370,318	431,690	0.42
RLJ Lodging Trust	(4)	Publicly Traded Company	42,000.00	243,541	396,480	0.38
The Macerich Company	(4)	Publicly Traded Company	59,943.00	1,018,578	537,689	0.52
VEREIT, Inc	(4)	Publicly Traded Company	58,000.00	294,437	372,940	0.36
WP Carey, Inc.	(4)	Publicly Traded Company	5,000.00	301,375	338,250	0.33
Total Publicly Traded Companies				8,454,348	7,244,654	7.02

Benefit Street Partners Realty Trust, Inc.	(5)	Non Traded Company	239,401.33	3,488,167	2,496,956	2.41
Carter Validus Mission Critical REIT II, Inc. Class A	(5)	Non Traded Company	288,506.00	1,666,123	1,632,944	1.58
CIM Real Estate Finance Trust, Inc.	(5)	Non Traded Company	522,144.54	3,043,423	2,349,650	2.28
CNL Healthcare Properties, Inc.	(5)	Non Traded Company	268,532.71	1,562,429	1,176,173	1.14
Cole Credit Property Trust V, Inc.	(5)	Non Traded Company	55,455.36	693,789	610,009	0.59
Cole Credit Property Trust V, Inc. Class T	(5)	Non Traded Company	1,466.55	18,438	16,132	0.02
Cole Office & Industrial REIT (CCIT II), Inc. Class A	(5)	Non Traded Company	17,792.56	114,700	124,370	0.12
Cole Office & Industrial REIT (CCIT II), Inc. Class T	(5)	Non Traded Company	1,441.84	6,906	10,078	0.01
Corporate Property Associates 18 Global A Inc.	(5)	Non Traded Company	4,695.14	39,627	30,471	0.03
First Capital Real Estate Trust, Inc.	(5)(6)	Non Traded Company	3,792.51	15,161	13,388	0.01
FSP 1441 Main Street	(5)(6)	Non Traded Company	15.73	8,559	39,128	0.04
FSP 303 East Wacker Drive Corp. Liquidating Trust	(5)(6)	Non Traded Company	3.00	30	679	-
FSP Energy Tower I Corp. Liquidating Trust	(2)(5)(6)	Non Traded Company	19.35	7,929	9,810	0.01
FSP Grand Boulevard Liquidating Trust	(5)(6)	Non Traded Company	7.50	8	2,851	-
FSP Satellite Place	(2)(5)(6)	Non Traded Company	19.60	588,176	532,579	0.52
Griffin Capital Essential Asset REIT, Inc.	(5)	Non Traded Company	23,044.28	151,802	144,027	0.14
Griffin-American Healthcare REIT III, Inc.	(5)	Non Traded Company	59,480.45	324,537	312,272	0.30
GTJ REIT, Inc.	(5)	Non Traded Company	1,000.00	11,530	9,280	0.01
Healthcare Trust, Inc.	(5)	Non Traded Company	479,718.92	4,806,568	3,271,683	3.17
Highlands REIT Inc.	(5)(6)	Non Traded Company	23,225,520.45	4,120,660	3,019,318	2.92
HGR Liquidating Trust	(5)(6)	Non Traded Company	73,170.41	244,648	292,682	0.28
Hospitality Investors Trust, Inc.	(5)(6)	Non Traded Company	20,493.11	90,607	20,083	0.02
InvenTrust Properties Corp.	(5)	Non Traded Company	2,235,413.80	2,710,159	2,749,559	2.66
KBS Real Estate Investment Trust II, Inc.	(5)(6)	Non Traded Company	1,365,338.22	3,754,369	2,266,461	2.20
KBS Real Estate Investment Trust III, Inc.	(5)	Non Traded Company	65,717.13	550,359	529,680	0.51
New York City REIT, Inc.	(5)(6)	Non Traded Company	319,024.14	3,800,940	3,110,485	3.01
NorthStar Healthcare Income, Inc.	(5)(6)	Non Traded Company	23,573.29	87,643	35,596	0.03
Phillips Edison & Company, Inc	(5)	Non Traded Company	851,563.96	6,286,760	4,589,930	4.45
SmartStop Self Storage REIT, Inc.	(5)	Non Traded Company	7,304.42	54,166	57,048	0.06
Steadfast Apartment REIT	(5)	Non Traded Company	73,226.79	815,995	741,055	0.72
Strategic Realty Trust, Inc.	(5)	Non Traded Company	321,296.92	1,252,790	649,020	0.63
Summit Healthcare REIT, Inc.	(2)(5)(6)	Non Traded Company	1,409,436.22	1,926,736	1,874,550	1.82
The Parking REIT Inc.	(5)(6)	Non Traded Company	17,989.90	230,880	90,129	0.09
Total Non Traded Companies (1)				42,474,614	32,808,076	31.78

3100 Airport Way South LP	(5)	LP Interest	1.00	355,000	320,253	0.31
5210 Fountaingate, LP	(2)(5)(6)	LP Interest	9.89	500,000	425,796	0.41
Bishop Berkeley, LLC	(3)(5)	LP Interest	4,050.00	4,050,000	3,854,223	3.73
BP3 Affiliate, LLC	(2)(5)(6)	LP Interest	1,668.00	1,668,000	1,668,000	1.62
BR Cabrillo LLC	(5)(6)	LP Interest	346,723.23	104,944	104,017	0.10
BR Everwood Investment Co, LLC	(2)(5)	LP Interest	3,750,000.00	3,750,000	3,750,000	3.63
BR Sunrise Parc Investment Co, LLC	(2)(5)	LP Interest	2,720,911.00	2,720,911	2,720,911	2.64
Britannia Preferred Members, LLC -Class 1	(3)(5)(6)	LP Interest	103.88	2,597,000	3,505,950	3.40
Britannia Preferred Members, LLC -Class 2	(3)(5)(6)	LP Interest	514,858.30	6,826,931	7,089,599	6.87
Capitol Hill Partners, LLC	(3)(5)(6)	LP Interest	190,000.00	1,900,000	1,468,700	1.42
Citrus Park Hotel Holdings, LLC	(3)(5)	LP Interest	5,000,000.00	5,000,000	5,000,000	4.84
Dimensions28 LLP	(3)(5)	LP Interest	10,800.00	10,801,015	10,949,688	10.61
Lakemont Partners, LLC	(2)(5)	LP Interest	1,000.00	941,180	857,160	0.83
MacKenzie Realty Operating Partnership, LP	(3)(5)(6)	LP Interest	1,451,642.63	12,145,905	11,613,141	11.25
MPF Pacific Gateway - Class B	(2)(5)(6)	LP Interest	23.20	6,287	7,164	0.01
Redwood Mortgage Investors VIII	(5)	LP Interest	56,300.04	29,700	12,949	0.01
Satellite Investment Holdings, LLC - Class B	(5)(6)	LP Interest	0.31	22	8,960	0.01
Secured Income, LP	(2)(5)(6)	LP Interest	64,670.00	316,890	261,914	0.25
Total LP Interest				53,713,785	53,618,425	51.94

Coastal Realty Business Trust, REEP, Inc. - A	(3)(5)(6)	Investment Trust	72,320.00	49,901	33,990	0.03
Total Investment Trust				49,901	33,990	0.03


Total Investments				$ 104,692,648	$ 93,705,145	90.77

(1) Investments primarily in non-traded public REITs or their successors.

(2) Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2020, the Company is deemed to be either “affiliated” with, or in “control” of, these portfolio companies despite that fact that the Company does not have the power to exercise control over the management or policies of such portfolio companies. See additional disclosures in Note 5.

(3) Under the 1940 Act, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2020, the Company is deemed to be in “control” of these portfolio companies despite that fact that the Company does not have the power to exercise control over the management or policies of such portfolio companies. See additional disclosures in Note 5.

(4) Non-qualifying assets under Section 55(a) of the 1940 Act. As of June 30, 2020, the total percentage of non-qualifying assets is 6.95%, and as a business development company non-qualifying assets may not exceed 30% of our total assets.

(5) Investments in illiquid securities, or securities that are not traded on a national exchange. As of June 30, 2020, 83.00% of the Company's total assets are in illiquid securities.

(6) Investments in non-income producing securities. As of June 30, 2020, 36.00% of the Company's total assets are in non-income producing securities.

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.

F-4

Index to Audited Consolidated Financial Statements

MacKenzie Realty Capital, Inc.

Consolidated Schedule of Investments

June 30, 2019

Name		Asset Type	Shares/Units	Cost Basis	Total Fair Value	% of Net Assets

American Finance Trust Inc., Class A	(4)	Publicly Traded Company	197,340.00	$ 2,186,682	$ 2,151,006	2.09
Total Publicly Traded Company				2,186,682	2,151,006	2.09

Benefit Street Partners Realty Trust, Inc.	(5)	Non Traded Company	214,175.77	3,207,614	3,075,563	2.96
BRE Select Hotels Corp. - Preferred A	(5)	Non Traded Company	358,717.00	594,992	670,801	0.65
Carter Validus Mission Critical REIT	(5)	Non Traded Company	315,639.56	1,087,300	1,325,686	1.29
Cole Credit Property Trust IV, Inc.	(5)	Non Traded Company	314,451.92	1,879,482	2,185,441	2.12
Cole Credit Property Trust V, Inc.	(5)	Non Traded Company	8,631.50	116,442	112,123	0.11
Cole Credit Property Trust V, Inc. Class T	(5)	Non Traded Company	395.88	5,492	5,143	-
CNL Healthcare Properties, Inc.	(5)(6)	Non Traded Company	104,158.67	658,615	625,994	0.61
Hines Global REIT, Inc.	(5)	Non Traded Company	17,936.21	120,637	92,013	0.09
Corporate Property Associates 18 Global A Inc.	(5)	Non Traded Company	4,695.14	39,627	37,139	0.04
First Capital Real Estate Trust, Inc.	(5)(6)	Non Traded Company	3,792.51	15,161	18,242	0.02
FSP 1441 Main Street	(5)(6)	Non Traded Company	15.73	8,559	31,245	0.03
FSP 303 East Wacker Drive Corp. Liquidating Trust	(5)(6)	Non Traded Company	3.00	30	600	-
FSP Energy Tower I Corp. Liquidating Trust	(2)(5)(6)	Non Traded Company	19.35	57,567	57,566	0.06
FSP Grand Boulevard Liquidating Trust	(5)(6)	Non Traded Company	7.50	8	8	-
FSP Satellite Place	(2)(5)(6)	Non Traded Company	17.60	546,482	712,585	0.69
Griffin-American Healthcare REIT III, Inc.	(5)	Non Traded Company	686.48	4,494	5,149	-
Griffin Capital Essential Asset REIT, Inc.	(5)	Non Traded Company	21,368.03	140,003	169,021	0.16
GTJ REIT, Inc.	(5)	Non Traded Company	1,000.00	11,620	11,980	0.01
Healthcare Trust, Inc.	(5)	Non Traded Company	305,526.76	3,473,952	3,211,086	3.11
Highlands REIT Inc.	(5)(6)	Non Traded Company	21,255,526.80	3,965,354	3,825,995	3.71
Hospitality Investors Trust, Inc.	(5)(6)	Non Traded Company	1,650.75	11,802	9,327	0.01
InvenTrust Properties Corp.	(5)	Non Traded Company	14,799.52	22,603	26,195	0.03
KBS Real Estate Investment Trust II, Inc.	(5)	Non Traded Company	1,364,838.21	4,776,934	4,831,527	4.69
KBS Real Estate Investment Trust III, Inc.	(5)	Non Traded Company	62,516.45	515,050	593,906	0.58
New York City REIT, Inc.	(5)(6)	Non Traded Company	241,297.69	3,032,703	3,136,870	3.04
NorthStar Healthcare Income, Inc.	(5)(6)	Non Traded Company	23,573.29	87,643	66,477	0.06
Phillips Edison & Company, Inc	(5)	Non Traded Company	777,332.00	5,760,907	6,350,802	6.16
Steadfast Apartment REIT	(5)	Non Traded Company	2,083.29	17,197	26,041	0.03
Steadfast Income REIT	(5)	Non Traded Company	109,471.94	740,163	743,314	0.72
Strategic Realty Trust, Inc.	(5)	Non Traded Company	199,425.07	792,538	853,539	0.83
Summit Healthcare REIT, Inc.	(2)(5)(6)	Non Traded Company	1,406,200.22	1,922,248	2,587,408	2.51
The Parking REIT Inc.	(5)(6)	Non Traded Company	17,989.90	230,880	242,504	0.24
Total Non Traded Company (1)				33,844,099	35,641,290	34.56

3100 Airport Way South LP	(5)	LP Interest	1.00	355,000	387,990	0.37
5210 Fountaingate, LP	(2)(5)	LP Interest	9.89	500,000	552,693	0.54
Addison NC, LLC	(3)(5)(6)	LP Interest	200,000.00	2,000,000	3,600,000	3.49
Addison Property Member, LLC	(3)(5)	LP Interest	731,485.60	7,316,326	7,314,855	7.08
Arrowpoint Burlington LLC	(2)(5)	LP Interest	7.50	750,000	1,088,910	1.06
Bishop Berkeley, LLC	(3)(5)	LP Interest	4,050.00	4,050,000	4,051,013	3.93
BP3 Affiliate, LLC	(2)(5)(6)	LP Interest	1,350.00	1,350,000	1,350,000	1.31
BR Cabrillo LLC	(5)(6)	LP Interest	346,723.32	104,942	131,755	0.13
BR Desota Investment Co, LLC	(2)(5)	LP Interest	4,250,000.00	4,250,000	4,250,000	4.12
BR Quinn35 Investment Co, LLC	(2)(5)	LP Interest	4,000,000.00	4,000,000	4,000,000	3.88
Britannia Preferred Members, LLC -Class 1	(3)(5)(6)	LP Interest	103.88	2,597,000	2,986,550	2.90
Britannia Preferred Members, LLC -Class 2	(3)(5)(6)	LP Interest	514,858.30	6,826,931	7,758,915	7.52
Capitol Hill Partners, LLC	(3)(5)(6)	LP Interest	190,000.00	1,900,000	1,852,500	1.80
CRP I Roll Up, LLC	(5)	LP Interest	4,500,000.00	4,500,000	4,995,000	4.84
CRP III Roll Up, LLC	(5)	LP Interest	6,000,000.00	6,000,000	6,540,000	6.34
Dimensions28 LLP	(3)(5)(6)	LP Interest	10,800.00	10,801,015	10,886,076	10.56
Lakemont Partners, LLC	(2)(5)	LP Interest	1,000.00	1,000,000	1,007,700	0.98
MPF Pacific Gateway - Class B	(2)(5)(6)	LP Interest	23.20	6,287	7,316	0.01
Redwood Mortgage Investors VIII	(5)	LP Interest	56,300.04	29,700	39,410	0.04
Satellite Investment Holdings, LLC - Class A	(5)	LP Interest	22.00	2,200,000	2,200,000	2.13
Secured Income, LP	(2)(5)(6)	LP Interest	64,670.00	316,890	302,009	0.29
The Weatherly Building, LLC	(5)(6)	LP Interest	17.50	118,721	47,846	0.05
The Weatherly, LTD	(5)(6)	LP Interest	60.00	184,761	63,261	0.06
Total LP Interest				61,157,573	65,413,799	63.43

Coastal Realty Business Trust, REEP, Inc. - A	(3)(5)(6)	Investment Trust	72,320.00	49,901	39,053	0.04
Total Investment Trust				49,901	39,053	0.04

Total Investments				$ 97,238,255	$ 103,245,148	100.12

(1) Investments primarily in non-traded public REITs or their successors.

(2) Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2019, the Company is deemed to be either “affiliated” with, or in “control” of, these portfolio companies despite that fact that the Company does not have the power to exercise control over the management or policies of such portfolio companies. See additional disclosures in Note 5.

(3) Under the 1940 Act, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2019, the Company is deemed to be in “control” of these portfolio companies despite that fact that the Company does not have the power to exercise control over the management or policies of such portfolio companies. See additional disclosures in Note 5.

(4) Non-qualifying assets under Section 55(a) of the 1940 Act. As of June 30, 2019, the total percentage of non-qualifying assets is 1.99%, and as a business development company non-qualifying assets may not exceed 30% of our total assets.

(5) Investments in illiquid securities, or securities that are not traded on a national exchange. As of June 30, 2019, 93.30% of the Company's total assets are in illiquid securities.

(6) Investments in non-income producing securities. As of June 30, 2019, 37.23% of the Company's total assets are in non-income producing securities.

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.

F-5

Index to Audited Consolidated Financial Statements

MacKenzie Realty Capital, Inc.

Consolidated Statements of Operations

	Year Ended June 30,
	2020		2019		2018
Investment income
Non-controlled/non-affiliated investments:
Dividend and operational/sales distributions	$	5,012,907	$	8,995,648	$	4,673,414
Interest and other income		353,636		374,121		457,835
Affiliated investments:
Dividend and operational/sales distributions		1,011,245		1,549,329		157,116
Controlled investments:
Dividend and operational/sales distributions		2,352,153		960,192		1,690,000
Total investment income		8,729,941		11,879,290		6,978,365

Operating expenses
Base management fee (note 5)		2,549,076		2,206,227		1,725,173
Portfolio structuring fee (note 5)		588,203		707,589		690,220
Subordinated incentive fee (reversal) (note 5)		-		1,789,870		1,092,351
Administrative cost reimbursements (note 5)		680,000		570,667		432,000
Transfer agent cost reimbursements (note 5)		80,000		23,333		-
Amortization of deferred offering costs		880,138		556,165		374,115
Professional fees		263,868		145,112		206,631
Directors' fees		68,000		64,500		65,000
Printing and mailing		86,507		58,774		38,992
Other general and administrative		65,292		126,295		123,253
Total operating expenses		5,261,084		6,248,532		4,747,735

Net investment income before taxes		3,468,857		5,630,758		2,230,630
Income tax provision (benefit) - (note 2)		-		(13,348)		3,431
Net investment income		3,468,857		5,644,106		2,227,199

Realized and unrealized gain (loss) on investments
Net realized gain (loss)
Non-controlled/non-affiliated investments		1,216,657		1,197,788		2,744,629
Affiliated investments:		583,331		-		-
Controlled investments		-		6,262		(52,856)
Total net realized gain (loss)		1,799,988		1,204,050		2,691,773
Net unrealized gain (loss)
Non-controlled/non-affiliated investments		(12,656,209)		(5,474,933)		4,765,578
Affiliated investments		(1,534,938)		621,817		613,578
Controlled investments		(2,803,250)		890,467		467,683
Total net unrealized gain (loss)		(16,994,397)		(3,962,649)		5,846,839

Total net realized and unrealized gain (loss) on investments		(15,194,409)		(2,758,599)		8,538,612

Net increase (decrease) in net assets resulting from operations	$	(11,725,552)	$	2,885,507	$	10,765,811

Net increase (decrease) in net assets resulting from operations per share	$	(0.96)	$	0.29	$	1.45

Weighted average common shares outstanding		12,198,040		9,951,816		7,440,841

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.

F-6

Index to Audited Consolidated Financial Statements

MacKenzie Realty Capital, Inc.

Consolidated Statements of Changes in Net Assets

	Year Ended June 30,
	2020		2019		2018
Operations
Net investment income	$	3,468,857	$	5,644,106	$	2,227,199
Net realized gain		1,799,988		1,204,050		2,691,773
Net unrealized gain (loss)		(16,994,397)		(3,962,649)		5,846,839
Net increase (decrease) in net assets resulting from operations		(11,725,552)		2,885,507		10,765,811

Dividends
Dividends to stockholders		(5,542,591)		(7,237,635)		(6,759,484)

Capital share transactions
Issuance of common stock		19,505,452		23,244,171		23,007,310
Issuance of common stock through reinvestment of dividends		2,891,349		3,006,069		2,340,042
Redemption of common stock		(3,194,670)		(2,368,035)		(1,454,120)
Selling commissions and fees		(1,823,648)		(2,010,015)		(2,293,765)
Net increase in net assets resulting from capital share transactions		17,378,483		21,872,190		21,599,467

Total increase in net assets		110,340		17,520,062		25,605,794

Net assets at beginning of the period		103,115,381		85,595,319		59,989,525

Net assets at end of the period	$	103,225,721	$	103,115,381	$	85,595,319

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.

F-7

Index to Audited Consolidated Financial Statements

MacKenzie Realty Capital, Inc.

Consolidated Statements of Cash Flows

	Year Ended June 30,
	2020		2019		2018
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	(11,725,552)	$	2,885,507	$	10,765,811
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash from operating activities:
Proceeds from sale of investments, net		8,057,094		57,437,720		43,866,485
Return of capital		31,368,113		19,019,276		17,189,743
Purchase of investments		(45,079,613)		(107,876,237)		(79,216,595)
Net realized gain on investments		(1,799,988)		(1,204,050)		(2,691,773)
Net unrealized (gain) loss on investments		16,994,397		3,962,649		(5,846,839)
Amortization of deferred offering costs		880,138		556,165		374,115
Changes in assets and liabilities:
Accounts receivable		2,082,636		2,708,225		(3,637,478)
Other assets		41,846		180,875		(185,716)
Payment of deferred offering costs		(717,839)		(709,871)		(416,922)
Accounts payable and accrued liabilities		(80,251)		198,907		(53,507)
Income tax payable		-		(37,153)		37,153
Due to related entities		(1,747,621)		658,857		1,219,019
Deferred tax liability		-		(3,518)		(41,845)
Net cash from operating activities		(1,726,640)		(22,222,648)		(18,638,349)

Cash flows from financing activities:
Borrowings on margin loan		-		-		6,012,413
Payments on margin loan		-		-		(6,012,413)
Proceeds from issuance of common stock		19,505,452		23,244,171		23,007,310
Redemption of common stock		(3,194,670)		(2,368,035)		(1,454,120)
Dividends to stockholders		(4,528,343)		(3,793,273)		(2,980,634)
Payment of selling commissions and fees		(1,796,648)		(2,045,661)		(2,184,880)
Change in capital pending acceptance		(580,426)		21,865		(1,156,790)
Net cash from financing activities		9,405,365		15,059,067		15,230,886

Net increase (decrease) in cash and cash equivalents		7,678,725		(7,163,581)		(3,407,463)

Cash and cash equivalents at beginning of the period		1,278,668		8,442,249		11,849,712

Cash and cash equivalents at end of the period	$	8,957,393	$	1,278,668	$	8,442,249

Non-cash financing activities:
Issuance of common stock through reinvestment of dividends	$	2,891,349	$	3,006,069	$	2,340,042

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.

F-8

Index to Audited Consolidated Financial Statements

MacKenzie Realty Capital, Inc.

Notes to Consolidated Financial Statements

June 30, 2020

NOTE 1 – PRINCIPAL BUSINESS AND ORGANIZATION

MacKenzie Realty Capital, Inc. (the "Parent Company," together with its subsidiary as discussed below, the "Company") was incorporated under the general corporation laws of the State of Maryland on January 25, 2012. It is a non-diversified, closed-end investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended ("1940 Act"). MacKenzie Realty Capital, Inc. The Parent Company has elected to be treated as a real estate investment trust ("REIT") as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). The Company is authorized to issue 100,000,000 shares, of which (i) 80,000,000 are designated as Common Stock, with a $0.0001 par value per share; and (ii) 20,000,000 are designated as Preferred Stock, with a $0.0001 par value per share. The Company commenced its operations on February 28, 2013, and its fiscal year-end is June 30.

The Parent Company filed its initial registration statement in June 2012 with the Securities and Exchange Commission ("SEC") to register the initial public offering (“IPO”) of 5,000,000 shares of the its common stock. The IPO commenced in January 2014 and concluded in October 2016. The Parent Company filed a second registration statement with the SEC to register a subsequent public offering of 15,000,000 shares of its common stock. The second offering commenced in December 2016 and concluded on October 28, 2019. The Parent Company filed a third registration statement with the SEC to register a public offering of 15,000,000 shares of its common stock that was declared effective by the SEC on October 31, 2019. The third offering commenced shortly thereafter and is continuing.

The Parent Company’s wholly owned subsidiary, MRC TRS, Inc., (“TRS”) was incorporated under the general corporation laws of the State of California on February 22, 2016, and operates as a taxable REIT subsidiary. TRS started its operation on January 1, 2017, and the financial statements of TRS have been consolidated with the Parent Company beginning with the year ended June 30, 2017. On December 20, 2017, a wholly owned subsidiary of TRS, MacKenzie NY Real Estate 2 Corp., (“MacKenzie NY 2”), was formed for the purpose of making certain limited investments in New York companies. The financial statements of MacKenzie NY 2 have been consolidated with the Company beginning with the quarter ended March 31, 2018.

The Company is externally managed by MacKenzie Capital Management, LP ("MacKenzie") under the administration agreement dated and effective as of February 28, 2013 (the "Administration Agreement"). MacKenzie manages all of the Company's affairs except for providing investment advice. The Company is advised by MCM Advisers, LP (the "Adviser") under the advisory agreement amended and restated effective October 1, 2017, and subsequently amended October 23, 2018 (the "Amended and Restated Investment Advisory Agreement”). The Company pursues a strategy focused on investing primarily in illiquid or non-traded debt and equity securities issued by U.S. companies generally owning commercial real estate. These companies are likely to be non-traded REITs, small-capitalization publicly traded REITs, public and private real estate limited partnerships, limited liability companies, and tenancies-in-common.

As of June 30, 2020, the Company has raised approximately $130.04 million from the public offerings, including proceeds from the Company’s dividend reinvestment plan ("DRIP") of approximately $11.16 million. Of the total capital raised as of June 30, 2020, approximately $9.46 million has been redeemed under the Company’s share repurchase program.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation Policy

The accompanying consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-K and Regulation S-X. The Company follows the accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company’s wholly owned consolidated subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Under the 1940 Act rules, regulations pursuant to Article 6 of Regulation S-X and Topic 946 of the Accounting Standards Codification, as amended (the "ASC"), of the Financial Accounting Standards Board ("FASB"), the Company is precluded from consolidating portfolio company investments, including those in which the Company has a controlling interest, unless the portfolio company is an investment company. An exception to this general principle occurs if the Company owns a controlled operating company whose purpose is to provide services to the Company such as an investment adviser or transfer agent. None of the Company’s investments qualifies for this exception. Therefore, the Company’s portfolio company investments, including those in which the Company has a controlling interest, are carried on the consolidated statements of assets and liabilities at fair value with changes to fair value recognized as “Net Unrealized gain (loss)” on the Consolidated Statements of Operations until the investment is realized, usually upon exit, resulting in any gain or loss on exit being recognized as a realized gain or loss. However, in the event that any controlled subsidiary exceeds the tests of significance set forth in Rules 3-09 or 4-08(g) of Regulation S-X, the Company will include required financial information for such subsidiary in the notes or as an attachment to its consolidated financial statements.

F-9

Index to Audited Consolidated Financial Statements

Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported asset values, liabilities, revenues, expenses and unrealized gains (losses) on investments during the reporting period. Material estimates that are susceptible to change, and actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. These balances are insured by the Federal Deposit Insurance Corporation ("FDIC") up to certain limits. At times the cash balances held in financial institutions by the Company may exceed these insured limits. Cash and cash equivalents are carried at cost which approximates fair value. There were no cash equivalents held as of June 30, 2020, and 2019.

Organization and Deferred Offering Costs

Organization costs include, among other things, the cost of legal services pertaining to the organization and incorporation of the business, incorporation fees and audit fees relating to the IPO and the initial statement of assets and liabilities. These costs are expensed as incurred. Offering costs include, among other things, legal fees and other costs pertaining to the preparation of the registration statements and pre- and post-effective amendments. Offering costs are capitalized as deferred offering costs as incurred by the Company and subsequently amortized to expense over a twelve-month period. Any deferred offering costs that have not been amortized upon the expiration or earlier termination of an offering will be accelerated and expensed upon such expiration or termination.

The offering costs incurred by the Company on the second and third public offering are each limited to $1,650,000 plus the savings realized by the Company to the extent that broker fees incurred are less than 10%. Offering costs incurred in excess of these amounts will be reimbursed by the Adviser as discussed in Note 5. The offering costs incurred in connection with the second public offering through December 31, 2019 and June 30, 2019 were $1,843,071 and $1,685,426, respectively. There were no additional offering costs incurred on the second offering after December 31, 2019 since the offering terminated in October 2019. The offering costs incurred in connection with the third public offering through June 30, 2020 were $560,194. There were no offering costs incurred in connection with the third public offering as of June 30, 2019. These offering costs are deferred and expensed over a twelve-month period beginning from the date the registration was declared effective by the SEC. Since the second public offering concluded in October 2019, $404,273 of the deferred offering costs that had not been amortized as of the conclusion date were fully expensed as of December 31, 2019. Amortization of these deferred costs for the year ended June 30, 2020, 2019 and 2018 were $880,138, $556,165 and $374,115, respectively.

Income Taxes and Deferred Tax Liability

The Parent Company has elected to be treated as a REIT for tax purposes under the Code and as a REIT, the Parent Company is not subject to federal income taxes on amounts that it distributes to the stockholders, provided that, on an annual basis, it distributes at least 90% of its REIT taxable income to the stockholders and meets certain other conditions. To the extent that the Parent Company satisfies the annual distribution requirement but distributes less than 100% of its taxable income, it is either subject to U.S. federal corporate income tax on its undistributed taxable income or 4% excise tax on catch-up distributions paid in the subsequent year. The Parent Company is also subject to tax on built-in gains it realizes during the first five years following REIT election. TRS is a taxable REIT subsidiary of the Company. Therefore, it is subject to federal and state income taxes.

F-10

Index to Audited Consolidated Financial Statements

The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax years ended December 31, 2019, 2018 and 2017. Therefore, the Parent Company did not incur any tax expense or excise tax for those years. In addition, for the tax year ended December 31, 2020, The Parent Company intends to pay the requisite dividends to stockholders such that The Parent Company would not pay any income taxes on its income. Therefore, The Parent Company did not record any income tax provisions during the years ended June 30, 2020, 2019, and 2018.

The income tax provision (benefit) amounts in the consolidated statements of operation for the years ended June 30, 2019 and 2018, relate to the Parent Company’s built-in gain tax adjustments and TRS’ income tax provisions as follows:

	Year Ended
	June 30, 2020		June 30, 2019		June 30, 2018

MacKenzie Realty Capital, Inc - built-in gain tax adjustments	$	-	$	(13,348)	$	(3,292)
MRC TRS, Inc - income tax expenses		-		-		6,723

Total Income Tax Provision (Benefit)	$	-	$	(13,348)	$	3,431

The built-in gain tax adjustment amounts are the differences between the actual and the estimated tax liabilities on the built-in gains realized during the year. Prior to the effective date of its REIT election, The Parent Company had net unrealized built-in gains of $239,595, for which The Parent Company recorded an estimated tax liability of $95,431 as of December 31, 2013. Accordingly, in each subsequent period, the Parent Company only recorded the difference between the actual and estimated tax on the built-in gains it realized during the year as income tax expense or benefit. All unrealized built-in gains after December 31, 2018 were not taxable as the five-year period following the REIT election date ended on December 31, 2018. Therefore, the remaining deferred tax liabilities of $13,348 on the unrealized built-in gains were reversed as income tax benefit during the year ended June 30, 2019.

TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates. However, for the year ended June 30, 2020 and 2019, TRS did not have any taxable income; therefore, TRS did not record any income tax provisions. For the year ended June 30, 2018, it recorded an income tax provision of $6,723.

The Company follows ASC 740, Income Taxes, (“ASC 740”) to account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to the net unrealized investment gain (losses) on existing investments. In estimating future tax consequences, the Company considers all future events, other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period of enactment. In addition, ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. As of June 30, 2020, and 2019, there were no uncertain tax positions. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof.

Per share Information

Net increase or decrease in net assets resulting from operations per common share is calculated using the weighted average number of common shares outstanding for the periods presented.

Subsequent Events

Subsequent events are events or transactions that occur after the date of the consolidated statements of assets and liabilities but before the date the consolidated financial statements are available to be issued. Subsequent events that provide additional evidence about conditions that existed at the date of the consolidated statements of assets and liabilities are considered in the preparation of the consolidated financial statements presented herein. Subsequent events that occur after the date of the consolidated statements of assets and liabilities that do not provide evidence about the conditions that existed as of the date of the consolidated statements of net assets are considered for disclosure based upon their significance in relation to the Company's consolidated financial statements taken as a whole.

F-11

Index to Audited Consolidated Financial Statements

Fair Value of Financial Instruments

Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The Company believes that the carrying amounts of its financial instruments, consisting of cash, accounts receivable, due to affiliates, interest payable to affiliates and other accrued expenses and liabilities approximate the fair values of such items.

Revenue Recognition

Realized gains or losses on investments are recognized in the period of disposal, distribution, or exchange and are measured by the difference between the proceeds from the sale or distribution and the cost basis (adjusted for return of capital, if any) of the investment. Investments are disposed of on a first-in, first-out basis.

Operational dividends or distributions received from portfolio investments are recorded as investment income. Distributions resulting from the sale or refinance of an investee’s underlying assets are evaluated by management and recorded as either investment income or as a reduction of cost basis (return of capital). Management determines the estimated fair value of the investment after the sale or refinance and compares this estimate to the adjusted cost basis of the investment. If the estimated fair value is higher than the adjusted cost basis, distributions are recorded as investment income. If the estimated fair value is lower than the adjusted cost basis, distributions are first recorded as return of capital to reduce the cost basis down to the estimated fair value. Distributions in excess of those recorded as return of capital are recorded as investment income.

Interest Income

Interest income is derived from the investments in notes and recorded on the accrual basis, which approximates the effective interest method, to the extent amounts are expected to be collected. Accrued interest is evaluated for collectability. When a debt security becomes 90 days or more past due and the Company does not expect the debtor to be able to service all of its debt or other obligations, the debt security will generally be placed on non-accrual status and the Company will cease recognizing interest income on that debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a debt security's status significantly improves with respect to the debtor's ability to service the debt or other obligations, or if a debt security is sold or written off, it will be removed from non-accrual status. As of June 30, 2020 and 2019, the Company did not have any investments that were more than 90 days past due or on non-accrual status. Additionally, the Company is not aware of any material changes to the creditworthiness of the borrowers underlying its debt investments.

Dividends and Distributions

Dividends (and distributions, if any) to common stockholders are recorded on the ex-dividend date. The amount, if any, to be paid as a quarterly dividend (or distribution, if any) is approved quarterly by the Board of Directors and is generally based upon management's estimate of the Company's earnings for the quarter.

Accounts Receivable

Accounts receivable represent dividends, distributions and sales proceeds recognized in accordance with our revenue recognition policy but not yet received as of the date of the consolidated financial statements. The amounts are generally fully collectible as they are recognized based on completed transactions. The Company monitors and adjusts its receivables and those deemed to be uncollectible are written-off only after all reasonable collection efforts are exhausted. All accounts receivable outstanding as of June 30, 2020, and 2019, are deemed fully collectible.

Capital Pending Acceptance

The Company admits new stockholders monthly and subscriptions are effective only upon the Company's acceptance. Any gross proceeds received from subscriptions which are not accepted as of the period-end are classified as capital pending acceptance in the consolidated statements of assets and liabilities. As of June 30, 2020 and 2019, capital pending acceptance were $87,739 and $668,165, respectively.

F-12

Index to Audited Consolidated Financial Statements

Recent Accounting Pronouncements:

In August 2018, the FASB issued guidance which changes the fair value disclosure requirements. The new guidance includes new, eliminated and modified fair value disclosures. Among other requirements, the guidance requires disclosure of the range and weighted average of the significant unobservable inputs for Level 3 fair value measurements and the way they are calculated. The guidance also eliminated the following disclosures: (1) amount and reason for transfers between Level I and Level II, (2) policy for timing of transfers between levels of the fair value hierarchy and (3) valuation processes for Level 3 fair value measurement. The guidance is effective for all entities for fiscal years commencing after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted upon issuance of the guidance. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements.

In May 2020, the SEC adopted rules Release No. 33-10786 (the "SEC Release"), Amendments to Financial Disclosures about Acquired and Disposed Businesses, amending Rule 1-02(w)(2) used in the determination of a significant subsidiary. In part, the SEC Release eliminated the use of the asset test, and amended the income and investment tests for determining whether an unconsolidated subsidiary requires additional disclosure in the footnotes of the financial statements. The SEC Release is effective January 1, 2021, and early adoption is permitted. The adoption of the SEC Release on the Company’s consolidated financial statements is not expected to be material.

Valuation of Investments

The Company's consolidated financial statements include investments that are measured at their estimated fair values in accordance with GAAP. A fair value measurement represents the price at which an orderly transaction would occur between willing market participants at the measurement date. The Company develops fair values for investments based on available inputs which could include pricing that is observed in the marketplace.

Examples of market information that the Company attempts to obtain include the following:

•

Recently quoted trading prices for the same or similar securities;

•

Recent purchase prices paid for the same or similar securities;

•

Recent sale prices received for the same or similar securities;

•

Relevant reports issued by industry analysts and publications; and

•

Other relevant observable and unobservable inputs, including liquidity discounts.

After considering all available indications of the appropriate rate of return that market participants would require, the Company considers the reasonableness of the range indicated by the results to determine an estimate that, in its opinion, is most representative of fair value.

The real estate securities in which the Company invests are, due to the absence of an efficient market, generally illiquid. Establishing fair values for illiquid investments is inherently subjective and is often dependent upon significant estimates and modeling assumptions. If either the volume and/or level of trading activity for an investment has significantly changed from normal market conditions, or price quotations or observable inputs are not associated with orderly transactions, the market inputs used might not be relevant. For example, recently quoted trading prices might not be relevant if a ready market does not exist for the quantity of investments that the Company may wish to sell.

In circumstances where relevant market inputs cannot be obtained, increased analysis and management judgment are required to estimate fair value. This generally requires the Company to establish the use of internal assumptions about future cash flows, including the cash flows of underlying real property, and appropriate risk-adjusted discount rates. Regardless of the valuation inputs used, the objective of fair value measurement is unchanged from what it would be if markets were operating at normal activity levels and/or transactions were orderly; that is, to determine the current exit price.

The Company is under no compulsion to dispose of its investments, and expects to hold them for a substantial period of time. Therefore, estimated values as determined above may not reflect amounts that could be realized upon actual sale at a future date.

F-13

Index to Audited Consolidated Financial Statements

Fair Value Measurements

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level I –

Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded equity securities. The Company does not adjust the quoted price for these investments even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Level II –

Price inputs are quoted prices for similar financial instruments in active markets; quoted prices for identical or similar financial instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets. Investments which are generally included in this category are publicly traded equity securities with restrictions.

Level III –

Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair values for these investments are estimated by management using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, financial condition, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant judgment by management. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had an active market for these investments existed.

NOTE 3 –INVESTMENTS

The following table summarizes the composition of the Company's investments at cost and fair value as of June 30, 2020 and 2019:

	June 30, 2020				June 30, 2019
Asset Type	Cost		Fair Value		Cost		Fair Value
Publicly Traded Companies	$	8,454,348	$	7,244,654	$	2,186,682	$	2,151,006
Non Traded Companies		42,474,614		32,808,076		33,844,099		35,641,290
LP Interests		53,713,785		53,618,425		61,157,573		65,413,799
Investment Trust		49,901		33,990		49,901		39,053
Total	$	104,692,648	$	93,705,145	$	97,238,255	$	103,245,148

F-14

Index to Audited Consolidated Financial Statements

The following table presents fair value measurements of the Company's investments measured at fair value on a recurring basis as of June 30, 2020, according to the fair value hierarchy:

Asset Type	Total		Level I		Level II		Level III
Publicly Traded Companies	$	7,244,654	$	7,244,654	$	-	$	-
Non Traded Companies		32,808,076		-		-		32,808,076
LP Interests		53,618,425		-		-		53,618,425
Investment Trust		33,990		-		-		33,990
Total	$	93,705,145	$	7,244,654	$	-	$	86,460,491

The following table presents fair value measurements of the Company's investments measured at fair value on a recurring basis as of June 30, 2019, according to the fair value hierarchy:

Asset Type	Total		Level I		Level II		Level III
Publicly Traded Companies	$	2,151,006	$	2,151,006	$	-	$	-
Non Traded Companies		35,641,290		-		-		35,641,290
LP Interests		65,413,799		-		-		65,413,799
Investment Trust		39,053		-		-		39,053
Total	$	103,245,148	$	2,151,006	$	-	$	101,094,142

The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the year ended June 30, 2020:

Balance at July 1, 2019	$	101,094,142
Purchases of investments		35,586,486
Proceeds from sales, net		(3,639,699)
Return of capital		(31,368,114)
Net realized gains		608,053
Net unrealized losses		(15,820,377)
Ending balance at June 30, 2020	$	86,460,491

Balance at July 1, 2018	$	67,923,423
Purchases of investments		76,131,760
Transfers from Level III to Level I		(1,991,230)
Proceeds from sales, net		(21,260,960)
Return of capital		(19,019,275)
Net realized gains		3,229,130
Net unrealized losses		(3,918,706)
Ending balance at June 30, 2019	$	101,094,142

The transfers from Level III to Level I category during the year ended June 30, 2020, relates to changes in tradability of the securities in an active market due to two of the Company's investments converting from non-traded REIT shares to publicly traded REIT shares. Transfers are assumed to have occurred at the beginning of the year.

For the year ended June 30, 2020, changes in unrealized loss included in earnings relating to Level III investments still held at June 30, 2020, was $12,445,631. For the year ended June 30, 2019, changes in unrealized loss included in earnings relating to Level III investments still held at June 30, 2019, was $2,008,334.

F-15

Index to Audited Consolidated Financial Statements

The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2020:

Asset Type	Fair Value	Primary Valuation Techniques	Unobservable Inputs Used		Range	Wt. Average

Non Traded Companies	$ 541,858	Direct Capitalization Method	Capitalization rate		6.5% - 7.6%	7.5%
			Liquidity discount		32.0% - 35.0%	32.1%
Non Traded Companies	65,856	Estimated Liquidation Value	Sponsor provided value
			Liquidity discount		12.0% - 78.0%	45.1%
Non Traded Companies	32,200,362	Market Activity	Secondary market industry publication
			Liquidity discount	*	7.5% - 12.5%	7.6%

LP Interests	24,974,379	Direct Capitalization Method	Capitalization rate		3.4% - 6.8%	5.2%
			Liquidity discount		5.0% - 40.0%	15.5%
LP Interests	14,976,861	Discounted Cash Flow	Discount rate		9.0% - 20.0%	11.6%
			Discount term (months)		6.0 - 9.0	7.1
LP Interests	11,724,322	Estimated Liquidation Value	Sponsor provided value
			Underlying property sales contract
			Underlying property appraisal
			Liquidity discount		19.0% - 43.0%	41.5%
LP Interests	1,942,863	Market Activity	Underlying security sales contract
			Secondary market industry publication
			Contributed capital

Investment Trust	33,990	Market Activity	Underlying security sales contract

	$ 86,460,491

* In the past years, the Company valued Level III investments primarily by reference to secondary market activities. However, due to the COVID-19 pandemic, secondary market activities significantly declined during the second quarter of 2020. While the most active of these securities had transactions reported based on new COVID-19 occupancy and financial information, two of the Level III investments only had earlier reported transactions. Therefore, to determine the fair values of these non-traded securities as of June 30, 2020, management reviewed and evaluated multiple data sources as part of management’s Level III valuation process and applied significant subjective judgment about the effects of overall market declines during times of economic turmoil to arrive at these valuations.

Impact of COVID-19 Pandemic

The COVID-19 pandemic has adversely impacted the fair value of our investments as of June 30, 2020, and the values assigned as of this date may differ materially from the values that we may ultimately realize with respect to our investments. The impact of the COVID-19 pandemic may not yet be fully reflected in the valuation of our investments as our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that is often from a time period earlier, generally two to three months, than the quarter for which we are reporting. Additionally, we may not have yet received information or certifications from our portfolio companies that indicate any or the full extent of declining performance or non-compliance with debt covenants, as applicable, as a result of the COVID-19 pandemic. As a result, our valuations at June 30, 2020 may not show the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. In addition, write downs in the value of our investments have reduced, and any additional write downs may further reduce, our net asset value. Accordingly, we may continue to incur additional net unrealized losses or may incur realized losses after June 30, 2020, which could have a material adverse effect on our business, financial condition and results of operations.

F-16

Index to Audited Consolidated Financial Statements

The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2019:

Asset Type	Fair Value	Primary Valuation Techniques	Unobservable Inputs Used	Range	Wt. Average

Non Traded Companies	$ 1,010,852	Direct Capitalization Method	Capitalization rate	6.3% - 6.9%	6.9%
			Liquidity discount	19.0% - 34.0%	20.7%
Non Traded Companies	670,801	Discounted Cash Flow	Discount rate	24.0%
			Discount term (months)	28.0
Non Traded Companies	107,660	Estimated Liquidation Value	Sponsor provided value
			Liquidity discount	12.0% - 70.0%	23.5%
Non Traded Companies	33,851,977	Market Activity	Secondary market industry publication

LP Interests	26,798,895	Direct Capitalization Method	Capitalization rate	4.2% - 7.3%	5.3%
			Liquidity discount	19.0% - 25.0%	19.4%
LP Interests	27,636,406	Discounted Cash Flow	Discount rate	15.0% - 30.0%	17.8%
			Discount term (months)	18.0 - 24.0	19.4
LP Interests	250,178	Estimated Liquidation Value	Sponsor provided value
			Underlying contracted agreement
			Liquidity discount	19.0% - 34.0%	33.2%
LP Interests	10,728,320	Market Activity	Acquisition Cost
			Book value of underlying loans
			Liquidity discount	19.0% - 30.0%	19.4%

Investment Trust	39,053	Direct Capitalization Method	Capitalization rate	6.0%
			Liquidity discount	25.0%
	$ 101,094,142

Unconsolidated Significant Subsidiaries

Our investments are generally in small and mid-sized companies in a variety of industries. In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, we must determine which of our unconsolidated controlled investments are considered “significant subsidiaries,” if any. In evaluating these investments, there are three tests utilized to determine if any of our controlled investments are considered significant subsidiaries: the investment test, the asset test, and the income test. Rule 3-09 of Regulation S-X requires separate audited financial statements for any unconsolidated majority-owned subsidiary in an annual report if any of the three tests exceed 20%. Rule 4-08(g) of Regulation S-X requires summarized financial information in an annual report if any of the three tests exceeds 10%.

As of June 30, 2020, and 2019, none of our investments was considered a significant subsidiary under Rule 3-09 and 4-08(g) with the exception of MacKenzie Realty Operating Partnership, LP, which was determined to be a significant subsidiary under the asset test as the partnership’s total assets exceeded 20% of the Company’s total assets as of June 30, 2020. Under the Rule 3-09, separate audited financial statements are required to be included in the Company’s annual report. However, as disclosed below under Note 5, the partnership was formed in May 2020 and its fiscal year does not end until December 31, 2020. Therefore, separate audited financial statements of this partnership for its year ended December 31, 2020 will be included in the Company’s annual report for the fiscal year ended June 30, 2021. The summarized financial information of the partnership as of June 30, 2020 is as follows:

Total Assets	$	45,517,060
Total Liabilities	$	25,792,551
Total Equity	$	19,724,509

NOTE 4—MARGIN LOANS

The Fund has a brokerage account through which it buys and sells publicly traded securities. The provisions of the account allow the Company to borrow on certain securities held in the account. Amounts borrowed are collateralized by the securities held in the account and bear interest at a negotiated rate payable monthly. Securities pledged to secure margin balances cannot be specifically identified as a portion of all securities held in a brokerage account are used as collateral. As of June 30, 2020, the Company had $2,655,155 of margin credit available for cash withdrawal or the ability to purchase up to $18,770,519 in additional publicly traded securities. As of June 30, 2019, the Company had $18,126 of margin credit available for cash withdrawal or the ability to purchase up to $60,419 in additional publicly traded securities. As of June 30, 2020, and 2019, there was no loan outstanding under this short-term credit line.

F-17

Index to Audited Consolidated Financial Statements

NOTE 5 –RELATED PARTY TRANSACTIONS

Amended and Restated Investment Advisory Agreement:

Under the Amended and Restated Investment Advisory Agreement, the Company will pay the Adviser a fee for its services consisting of three components — a portfolio structuring fee, a base management fee, and a subordinated incentive fee.

The portfolio structuring fee is for the Adviser's initial work performed in identifying, evaluating and structuring the acquisition of assets. The fee equals 3.0% of the gross invested capital (“Gross Invested Capital”), which equals the number of shares issued, multiplied by the offering price of the shares sold ($10.00, regardless of whether or not shares were issued with volume or commission discounts), plus any borrowed funds. These services are performed on an ongoing basis in anticipation of deploying new capital, generally within 15 days of the receipt of capital. Therefore, this fee is expensed in the period the capital is accepted.

The base management fee is calculated based on the Company's Gross Invested Capital plus any borrowing for investment purposes. The base management fees range from 1.5% to 3.0%, depending on the level of Gross Invested Capital.

The subordinated incentive fee has two parts—income and capital gains. The incentive fee components (other than during liquidation) are designed so that neither the income incentive fee nor the capital gains incentive fee is payable to the Adviser unless our stockholders have first received dividends at a rate of at least 7.0% per annum for the relevant measurement period (a fiscal quarter, for the income incentive fee; a fiscal year, for the capital gains incentive fee).

The income incentive fee (the “Income Fee”) is calculated and payable quarterly in arrears as follows: (i) the sum of preliminary net investment income for each fiscal quarter since the effective date of the Amended and Restated Investment Advisory Agreement (October 1, 2017) exceeding 7% of the “Contributed Capital” (which equals the number of shares issued multiplied by the maximum public offering price at the time such shares were sold, regardless of whether or not shares were issued with volume or commission discounts or through the DRIP, as such amount is computed from time to time) on an annualized basis up to 8.75% of Contributed Capital; and (ii) 20.0% of our preliminary net investment income for each fiscal quarter after the effective date exceeding 8.75% of Contributed Capital at an annualized rate; minus (iii) the sum of all previously paid income incentive fees since the effective date, plus (iv) any incremental income incentive fee payable resulting from the reanalysis after calculation of the capital gains incentive fee.

The capital gains incentive fee (the “Capital Gains Fee”) is calculated and payable in arrears as of the end of each fiscal year as follows: (i) the sum of all "capital gains" (calculated as net realized capital gains less unrealized capital depreciation) for each fiscal year after the effective date exceeding 7% of the Contributed Capital on an annualized basis up to 8.75% of Contributed Capital, which thresholds are reduced by (but not below zero) the cumulative preliminary net investment income for each fiscal quarter since the effective date (or, increased, in the case of negative cumulative preliminary net investment income); and (ii) 20.0% of all capital gains for each fiscal quarter after the effective date exceeding 8.75% of Contributed Capital at an annualized rate, which threshold is reduced by (but not below zero) the cumulative preliminary net investment income for each fiscal quarter since the effective date (or, increased, in the case of negative cumulative preliminary net investment income); minus (iii) the sum of all previously paid income incentive fees since the effective date and prior to the end of such fiscal year; less (iv) the aggregate amount of all capital gains incentive fees paid in prior fiscal years ending after the effective date. To the extent that such calculation would result in a capital gains incentive fee that exceeds 20% of all realized capital gains for the measurement period, the capital gains incentive fee shall be capped so that under no circumstance does it exceed 20% of the realized capital gains for the measurement period.

The portfolio structuring fees for the years ended June 30, 2020, 2019, and 2018 were $588,203, $707,589 and $690,220, respectively.

F-18

Index to Audited Consolidated Financial Statements

The base management fee is calculated on a quarterly basis at the end of each quarter based on the quarter ended Gross Invested Capital and is payable in arrears. The base management fees for the years ended June 30, 2020, 2019, and 2018, were $2,549,076, $2,206,227 and $1,725,173, respectively. These base management fees were based on the following quarter ended Gross Invested Capital segregated in three columns based on the fee annual percentages:

Base Management Fee Annual %		3.0%		2.0%		1.5%	Total Gross Invested Capital

For the Year Ended June 30, 2020
Quarter ended:
September 30, 2019	$	20,000,000	$	80,000,000	$	15,998,789	$	115,998,789
December 31, 2019		20,000,000		80,000,000		21,409,289		121,409,289
March 30, 2020		20,000,000		80,000,000		27,070,974		127,070,974
June 30, 2020		20,000,000		80,000,000		28,607,752		128,607,752

For the Year Ended June 30, 2019
Quarter ended:
September 30, 2018	$	20,000,000	$	72,435,844	$	-	$	92,435,844
December 31, 2018		20,000,000		78,322,307		-		98,322,307
March 31, 2019		20,000,000		80,000,000		4,719,872		104,719,872
June 30, 2019		20,000,000		80,000,000		9,263,200		109,263,200

For the Year Ended June 30, 2018
Quarter ended:
September 30, 2017	$	20,000,000	$	47,783,337	$	-	$	67,783,337
December 31, 2017		20,000,000		53,814,885		-		73,814,885
March 31, 2018		20,000,000		58,474,911		-		78,474,911
June 30, 2018		20,000,000		64,961,416		-		84,961,416

For the year ended June 30, 2020, the Company neither incurred the Capital Gains Fee nor the Income Fee. For the year ended June 30, 2019, the Company incurred $1,789,870 of the Capital Gains Fee; however, did not incur the Income Fee. For the year ended June 30, 2018, the Company incurred $277,691 of the Income Fee and $814,660 of the Capital Gains Fee.

Organization and Offering Costs Reimbursement:

As provided in the Amended and Restated Investment Advisory Agreement and the prospectus of the Company, offering costs incurred and paid by the Company in excess of $1,650,000 each on the second and third public offering will be reimbursed by the Adviser except to the extent that 10% in broker fees are not incurred (the “broker savings”). In such case, the broker savings will be available to be paid by the Company for marketing expenses or other non‑cash compensation. As of the offering conclusion date, the broker savings was $399,793 on the second public offering. Accordingly, second offering costs in excess of $2,049,793 were reimbursable by the Adviser to the Company. The cumulative offering costs incurred in connection with the second public offering as of December 31, and June 30, 2019 were $1,843,071 and $1,685,426, respectively, both of which were below the reimbursement threshold of $2,049,793. There were no additional offering costs incurred on the second offering after December 31, 2019. Total offering costs incurred on the third public offering as of June 30, 2020, were $560,194, which was also below the reimbursement threshold. Therefore, there were no amounts reimbursable from the Adviser as of June 30, 2020 and June 30, 2019 on account of either public offering.

Of the cumulative offering costs incurred on the second public offering by the Company as of December 31, 2019, MacKenzie had paid on behalf of the Company a total of $932,780, all of which was fully reimbursed to MacKenzie as of December 31, 2019. As of June 30, 2019, MacKenzie had paid on behalf of the Company a total of $788,057, of which $116,115 was payable to MacKenzie as of June 30, 2019 and was included as a part of due to related entities in the consolidated statements of assets and liabilities as of June 30, 2019.

F-19

Index to Audited Consolidated Financial Statements

Of the cumulative offering costs incurred on the third public offering by the Company as of June 30, 2020, MacKenzie had paid on behalf of the Company a total of $300,212, of which $52,492 was payable to MacKenzie as of June 30, 2020 and was included as a part of due to related entities in the consolidated statements of assets and liabilities as of June 30, 2020.

During the year ended June 30, 2020, 2019 and 2018, total offering costs paid by MacKenzie on behalf of the Company on its second and third public offerings were $444,935, $550,908, and $237,149, respectively.

Administration Agreement:

Under the Administration Agreement, the Company reimburses MacKenzie for its allocable portion of overhead and other expenses it incurs in performing its obligations under the Administration Agreement, including furnishing the Company with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing the Company with other administrative services, subject to the Independent Directors' approval. In addition, the Company reimburses MacKenzie for the fees and expenses associated with performing compliance functions, and its allocable portion of the compensation of the Company's Chief Financial Officer, Chief Compliance Officer, Director of Accounting and Financial Reporting, and any administrative support staff.

The administrative cost reimbursements for the years ended June 30, 2020, 2019, and 2018, were $680,000, $570,667 and $432,000, respectively. Transfer agent services cost reimbursements for the year ended June 30, 2020 and 2019 were $80,000 and $23,333.

The table below outlines the related party expenses incurred for the years ended June 30, 2020, 2019, and 2018, and unpaid as of June 30, 2020, and 2019.

	Incurred For The Year Ended			Unpaid as of
Types and Recipient	June 30, 2020	June 30, 2019	June 30, 2018	June 30, 2020	June 30, 2019

Base Management fees- the Adviser	$ 2,549,076	$ 2,206,227	$ 1,725,173	$ 657,280	$ 584,737
Portfolio Structuring fee- the Adviser	588,203	707,589	690,220	-	-
Subordinated Incentive fee - the Adviser	-	1,789,870	1,092,351	-	1,789,870
Administrative Cost Reimbursements- MacKenzie	680,000	570,667	432,000	-	-
Transfer agent cost reimbursements - MacKenzie	80,000	23,333	-	-	(30,000)	⁽³⁾
Organization & Offering Cost ⁽²⁾ - MacKenzie	444,935	550,908	237,149	52,492	116,115
Other expenses ⁽¹⁾- MacKenzie				8,492	5,163

Due to related entities				$ 718,264	$ 2,465,885

(1)	Expenses paid by MacKenzie to third parties on behalf of the Company to be reimbursed.

(2)	Offering costs paid by MacKenzie- discussed in Note 5 under organization and offering costs reimbursements. These are amortized over twelve-month period as discussed in Note 2.

(3)	Transfer agent cost reimbursements for the period of November 1, 2018 through March 14, 2019 that MacKenzie refunded in July 2019.

F-20

Index to Audited Consolidated Financial Statements

Controlled or Affiliated Investments:

Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of June 30, 2020, the Company is deemed to be either “affiliated” with, or in “control” of, the below portfolio companies despite the fact that the Company does not have the power to exercise control over the management or policies of these portfolio companies.

June 30, 2020:

Name of issuer and title of issue	Fair Value at June 30, 2019		Gross Additions		Transfers			Gross Reductions ⁽¹⁾			Net Realized Gains (losses)		Net Change in Unrealized Gains/(Losses)			Fair Value at June 30, 2020		Interest/Dividend/Other income Year Ended June 30, 2020

Affiliated Investments:
5210 Fountaingate, LP	$	552,693	$	-	$	-		$	-		$	-	$	(126,897	)	$	425,796	$	-
Arrowpoint Burlington LLC		1,088,910		-		-			(1,333,331	)		583,331		(338,910	)		-		-
BP3 Affiliate, LLC		1,350,000		318,000		-			-			-		-			1,668,000		-
BR Desota Investment Co, LLC		4,250,000		-		-			(4,250,000	)		-		-			-		46,623
BR Everwood Investment Co, LLC		-		3,750,000		-			-			-		-			3,750,000		479,871
BR Quinn35 Investment Co, LLC		4,000,000		-		-			(4,000,000	)		-		-			-		167,768
BR Sunrise Parc Investment Co, LLC		-		2,720,911		-			-			-		-			2,720,911		253,410
BR Westerly Investment Co, LLC		-		4,120,667		-			(4,120,667	)		-		-			-		-
FSP Energy Tower I Corp. Liquidating Trust		57,566		-		-			(49,637	)		-		1,881			9,810		37,438
FSP Satellite Place		712,585		41,693		-			-			-		(221,699	)		532,579		-
Lakemont Partners, LLC		1,007,700		-		-			(58,820	)		-		(91,720	)		857,160		26,135
MPF Pacific Gateway - Class B		7,316		-		-			-			-		(152	)		7,164		-
Secured Income, LP		302,009		-		-			-			-		(40,095	)		261,914		-
Summit Healthcare REIT, Inc.		2,587,408		4,488		-			-			-		(717,346	)		1,874,550		-

	$	15,916,187	$	10,955,759	$	-		$	(13,812,455	)	$	583,331	$	(1,534,938	)	$	12,107,884	$	1,011,245
Controlled Investments:
Addison NC, LLC	$	3,600,000	$	-	$	(2,000,000	)	$	-		$	-	$	(1,600,000	)	$	-	$	-
Addison Property Member, LLC		7,314,855		-		(7,316,326	)		-			-		1,471			-		1,176,187
Bishop Berkeley, LLC		4,051,013		-		-			-			-		(196,790	)		3,854,223		69,034
Britannia Preferred Members, LLC -Class 1		2,986,550		-		-			-			-		519,400			3,505,950		-
Britannia Preferred Members, LLC -Class 2		7,758,915		-		-			-			-		(669,316	)		7,089,599		-
Capitol Hill Partners, LLC		1,852,500		-		-			-			-		(383,800	)		1,468,700		-
Citrus Park Hotel Holdings, LLC		-		5,000,000		-			-			-		-			5,000,000		287,500
Coastal Realty Business Trust, REEP, Inc. - A		39,053		-		-			-			-		(5,063	)		33,990		-
Dimensions28 LLP		10,886,076		-		-			-			-		63,612			10,949,688		485,321
MacKenzie Realty Operating Partnership, LP		-		2,829,579		9,316,326			-			-		(532,764	)		11,613,141		-
Sunlit Holdings, LLC		-		5,000,000		-			(5,000,000	)		-		-			-		334,111

	$	38,488,962	$	12,829,579	$	-		$	(5,000,000	)	$	-	$	(2,803,250	)	$	43,515,291	$	2,352,153

June 30, 2019:

Name of issuer and title of issue	Fair Value at June 30, 2018		Gross Additions		Gross Reductions ⁽¹⁾			Net Realized Gains (losses)		Net Change in Unrealized Gains/(Losses)			Fair Value at June 30, 2019		Interest/Dividend/Other income Year Ended June 30, 2019

Affiliated Investments:
5210 Fountaingate, LP	$	555,728	$	-	$	-		$	-	$	(3,035	)	$	552,693	$	18,124
Arrowpoint Burlington LLC		869,072		-		-			-		219,838			1,088,910		83,333
BP3 Affliliate, LLC		-		1,350,000		-			-		-			1,350,000		-
BR Desota Investment Co, LLC		-		4,250,000		-			-		-			4,250,000		205,560
BR Quinn35 Investment Co, LLC		-		4,000,000		-			-		-			4,000,000		69,056
FSP Energy Tower I Corp. Liquidating Trust		301,373		415,374		(661,307	)		-		2,126			57,566		1,080,192
FSP Satellite Place		499,140		151,169		-			-		62,276			712,585		-
Lakemont Partners, LLC		-		1,000,000		-			-		7,700			1,007,700		4,381
MPF Pacific Gateway - Class B		6,613		-		-			-		703			7,316		-
Secured Income, LP		320,763		-		-			-		(18,754	)		302,009		-
Summit Healthcare REIT, Inc.		2,043,379		193,066		-			-		350,963			2,587,408		88,683

	$	4,596,068	$	11,359,609	$	(661,307	)	$	-	$	621,817		$	15,916,187	$	1,549,329
Controlled Investments:
Addison NC, LLC	$	3,000,000	$	-	$	-		$	-	$	600,000		$	3,600,000	$	-
Addison Property Member, LLC		-		7,316,326		-			-		(1,471	)		7,314,855		598,191
Bandon PV Holdings, LLC		-		5,250,000		(5,256,262	)		6,262		-			-		173,390
Bishop Berkeley, LLC		-		4,050,000		-			-		1,013			4,051,013		23,011
BR Gate Investment Co, LLC		-		3,475,000		(3,475,000	)		-		-			-		-
Britannia Preferred Members, LLC -Class 1		-		2,597,000		-			-		389,550			2,986,550		-
Britannia Preferred Members, LLC -Class 2		2,547,000		5,326,932		-			-		(115,017	)		7,758,915		-
Capitol Hill Partners, LLC		1,919,000		-		-			-		(66,500	)		1,852,500		-
Coastal Realty Business Trust, REEP, Inc. - A		41,222		-		-			-		(2,169	)		39,053		-
Dimensions28 LLP		-		10,801,015		-			-		85,061			10,886,076		165,600

	$	7,507,222	$	38,816,273	$	(8,731,262	)	$	6,262	$	890,467		$	38,488,962	$	960,192

(1)	Gross reductions include sales proceeds and return of capital distributions.

F-21

Index to Audited Consolidated Financial Statements

Of the investments listed above, the Company (or its affiliates) has the power to exercise control over the management or policies of the portfolio companies listed below:

Coastal Realty Business Trust ("CRBT"):

CRBT is a Nevada business trust whose trustee is MacKenzie. Each series of the trust has its own beneficiaries and own assets. The Company owns the following two series of CRBT and is the only beneficiary of such series. Under the terms of the agreement, there are no redemption rights to any of the series participants.

•	CRBT, REEP, Inc.-A has an ownership interest in one of three general partners of a limited partnership which owns one multi-family property located in Frederick, Maryland.

MacKenzie Realty Operating Partnership, LP (the “OP”):

On May 20, 2020, the Company formed an operating partnership, MacKenzie Realty Operating Partnership, LP (the “OP”). Prior to the formation of the OP, the Company had preferred equity interests in Addison NC, LLC (“Addison NC”) and Addison Property Member, LLC (“Addison Member”). Both companies had ownership interests in Addison Property Owner, LLC (“Property Owner”), which owned an office and industrial development real estate property called Addison Corporate Center. On June 8, 2020, the Company and the OP entered into and closed on a Contribution Agreement with Addison Member, Addison NC, the managing members and other affiliates of these two entities (collectively referred to as the “Addison Group”) whereby the Addison Group and the Company agreed to contribute all of their interests in Property Owner to the OP in exchange for partnership Units in the OP (“OP Units”). At closing, the OP issued 516,144 of Class A OP units to the Addison Group.

At closing, the Company also contributed $1,555,861 in cash to the OP, of which $1,311,458 was directly paid to the lender to pay down principal, fees, and reserve deposits in order to secure an extension of Property Owner’s $24.4 million existing mortgage debt (the “Loan”) for up to 2 years, and pursuant to which the lender agreed to the assignment of the membership interests in Property Owner to the OP and to have the Company be the replacement guarantor of the recourse obligations under the Loan. The Loan is secured by the properties owned by Property Owner. In exchange for the cash contributed to the OP and the contribution of the Company’s previously owned indirect equity interest in the Property Owner to the OP, the Company received 1,451,642.63 Class B units in the OP.

At closing, the parties also entered into the Agreement of Limited Partnership of the OP that provides for redemption rights for the contributors (and its permitted transferees) to redeem the Class A OP Units for cash or shares of the Company, at the Company’s election. The OP Units will also receive distributions at the same rate paid to holders of the Company’s common stock.

MPF Pacific Gateway:

MPF Pacific Gateway, which is managed by MacKenzie, is a holding company that owns an investment in a REIT Liquidating Trust. The Company has a 15.82% ownership interest in MPF Pacific Gateway.

NOTE 6 – DEBT GUARANTY

On June 8, 2020, as part of the Contribution Agreement discussed above under Note 5, the Company replaced as the loan guarantor and the maturity date of the Loan was extended to April 30, 2021, with an option to further extend the maturity date to April 30, 2022. Under the Loan Modification Agreement and Replacement Guaranty, the Company guaranteed only the “Recourse Obligations” under the Loan, typically referred to as “Bad Boy Acts” (such as fraud, intentional misrepresentation, willful misconduct, waste, conversion, intentional failure to pay taxes or maintain insurance, filing for bankruptcy, etc.). As of June 30, 2020, the Company has not recorded any debt guaranty obligation since the borrower, Property Owner, was current on the Loan payments and has sufficient cash flow to meet its monthly payments and there have been no inappropriate actions that would give rise to a guaranty obligation. In addition, the appraised value of the collateral was higher than the loan balance of $24.4 million as of June 30, 2020.

F-22

Index to Audited Consolidated Financial Statements

NOTE 7 – FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights of the Company for the years ended June 30, 2020, 2019, 2018, 2017 and 2016.

	For The Year Ended
	June 30, 2020			June 30, 2019			June 30, 2018			June 30, 2017			June 30, 2016
Per Share Data:

Beginning net asset value ("NAV")	$	9.44		$	10.07		$	9.84		$	9.94		$	10.18

Net investment income ⁽¹⁾		0.28			0.57			0.30			0.33			0.26
Net realized gain ⁽¹⁾		0.15			0.12			0.36			0.31			0.91
Net unrealized gain (loss) ⁽¹⁾		(1.39	)		(0.40	)		0.79			0.39			(0.01	)
Net increase in net assets resulting from operations		(0.96	)		0.29			1.45			1.03			1.16

Issuance of common stock above (below) NAV ⁽¹⁾ ⁽⁴⁾		-			(0.21	)		(0.32	)		(0.37	)		(0.68	)
Redemption of common stock below NAV ^{(1) (6)}		0.01			0.02			0.01			0.02			0.05
Dividends to stockholders ^{(1) (5)}		(0.45	)		(0.73	)		(0.91	)		(0.78	)		(0.77	)
Ending NAV	$	8.04		$	9.44		$	10.07		$	9.84		$	9.94

Weighted average common Shares outstanding		12,198,040			9,951,816			7,440,841			5,183,166			3,073,448
Shares outstanding at the end of period		12,836,608			10,926,320			8,496,142			6,096,773			4,057,319
Net assets at the end of period	$	103,225,721		$	103,115,381		$	85,595,319		$	59,989,525		$	40,332,191
Average net assets ⁽²⁾	$	103,170,551		$	94,355,350		$	72,792,422		$	50,160,858		$	31,346,210

Ratios to average net assets
Total expenses		5.10	%		6.62	%		6.52	%		6.05	%		5.83	%
Net investment income		3.36	%		5.98	%		3.06	%		3.46	%		2.58	%
Total rate of return ^{(2) (3)}		(11.37	)%		3.06	%		14.79	%		10.67	%		11.49	%

(1) Based on weighted average number of shares of common stock outstanding for the period.

(2) Average net assets were derived from the beginning and ending period-end net assets.

(3) Total return is based on the net increase (decrease) in net assets resulting from operations divided by average net assets. An individual stockholder’s return may vary from this return based on the time of capital transactions.

(4) Net of sales commissions and dealer manager fees of $1.00 per share as of October 30, 2019 and $1.03 per share thereafter.

(5) Dividends are determined based on taxable income calculated in accordance with income tax regulations which may differ from amounts determined under GAAP.

(6) Amounts based on differences between the actual redemption price and the NAVs preceding the redemptions.

NOTE 8 – SHARE OFFERINGS AND FEES

During the year ended June 30, 2020, the Company issued 1,943,646 shares with gross proceeds of $19,505,452, under the current offering and issued 317,840 shares under the Company's dividend reinvestment plan ("DRIP") with gross proceeds of $2,891,349. For the year ended June 30, 2020, the Company incurred selling commissions and fees of $1,823,648. No selling commissions and fees were incurred for the shares issued under the DRIP.

During the year ended June 30, 2019, the Company issued 2,359,285 shares with gross proceeds of $23,244,171, under the current offering and issued 334,008 shares under the Company's dividend reinvestment plan ("DRIP") with gross proceeds of $3,006,069. For the year ended June 30, 2020, the Company incurred selling commissions and fees of $2,010,015. No selling commissions and fees were incurred for the shares issued under the DRIP.

F-23

Index to Audited Consolidated Financial Statements

NOTE 9 – SHARE REPURCHASE PLAN

Pursuant to the Company's share repurchase program, during the year ended June 30, 2020, the Company made three tender offers to purchase its own shares as noted in the below table:

Period	Total Number of shares Repurchased		Repurchase Price Per Share		Total Repurchase Consideration
During the year ended June 30, 2020:
August 13, 2019 through September 16, 2019		70,114.03	$	9.00	$	631,026
November 18, 2019 through December 19, 2019		102,739.90	$	9.00		924,659
February 14, 2020 through March 18, 2020		178,344.44	$	9.19		1,638,985
		351,198.37			$	3,194,670

During the year ended June 30, 2019, the Company made four tender offers to purchase its own shares as noted in the below table:

Period	Total Number of shares Repurchased		Repurchase Price Per Share		Total Repurchase Consideration
During the year ended June 30, 2019:
August 17, 2018 through September 17, 2018		31,570.04	$	9.00	$	284,130
November 14, 2018 through December 18, 2018		19,944.93	$	9.00		179,505
February 14, 2019 through March 18, 2019		78,252.02	$	9.00		704,268
May 14, 2019 through June 21, 2019		133,347.94	$	9.00		1,200,131
		263,114.93			$	2,368,034

On May 11, 2020, after assessing the impacts of the Covid-19 pandemic, the Company’s board of directors unanimously approved the suspension of the Company’s Share Repurchase Program, effective immediately. As a result, the Company did not repurchase any shares thereafter.

NOTE 10 – STOCKHOLDER DIVIDENDS AND INCOME TAXES

The following table reflects the dividends per share that the Company has declared on its common stock during the year ended June 30, 2020.

	Dividends
During the Quarter Ended	Per Share		Amount
September 30, 2019	$	0.175	$	1,983,801
December 31, 2019		0.175		2,096,915
March 31, 2020		0.120		1,461,875
	$	0.470	$	5,542,591

Of the total dividends paid during the year ended June 30, 2020, $2,891,349 has been reinvested under the Company’s DRIP.

F-24

Index to Audited Consolidated Financial Statements

The following table reflects the dividends per share that the Company has declared on its common stock during the year ended June 30, 2019.

	Dividends
During the Quarter Ended	Per Share		Amount
September 30, 2018	$	0.175	$	1,571,551
December 31, 2018		0.206		1,994,972
March 31, 2019		0.175		1,794,012
June 30, 2019		0.175		1,877,100
	$	0.731	$	7,237,635

Of the total dividends paid during the year ended June 30, 2019, $3,006,069 has been reinvested under the Company’s DRIP.

Income Taxes

While our fiscal year end for financial reporting purposes is June 30 of each year, our tax year end is December 31 of each year. The information presented in this footnote is based on our tax year end for each period presented, unless otherwise specified.

For income tax purposes, dividends paid to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of dividends paid to stockholders for the tax years ended December 31, 2019, (the most recent tax year end completed and filed) and 2018, were as follows:

	December 31, 2019		December 31, 2018
Capital gain	$	2,415,285	$	6,236,421
Ordinary income		3,085,298		-
Return of capital		24,521		-

Total dividends	$	5,525,104	$	6,236,421

The tax character of dividends paid to stockholders since December 31, 2019 (the most recent tax year ended completed and filed) through June 30, 2020, is expected to be ordinary income and capital gains. Because of the difference between our fiscal and tax year ends, the final determination of the tax character of dividends will not be made until we file our tax return for the tax year ending December 31, 2019.

The components of undistributed earnings on a tax basis as of December 31, 2019 (the most recent tax year end completed and filed) and December 31, 2018, were as follows:

	December 31, 2019		December 31, 2018
Undistributed long term capital gain	$	-	$	129,808
Unrealized fair value appreciation		4,813,649		6,802,996
	$	4,813,649	$	6,932,804

The following table presents the aggregate gross unrealized appreciation, depreciation, and cost basis of investments for income tax purposes as of:

	June 30, 2020			June 30, 2019
Aggregate gross unrealized appreciation	$	4,054,329		$	9,058,278
Aggregate gross unrealized depreciation		(12,067,004	)		(827,940	)
Net unrealized appreciation (depreciation)	$	(8,012,675	)	$	8,230,338

Aggregate cost (tax basis)	$	101,717,821		$	95,014,809

F-25

Index to Audited Consolidated Financial Statements

NOTE 11 – QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents selected unaudited quarterly financial data for each quarter during the years ended June 30, 2020, 2019, and 2018.

	Quarter Ended
	September 30, 2019			December 31, 2019			March 31, 2020			June 30, 2020
Net investment income (loss)	$	566,933		$	859,482		$	1,871,946		$	170,496
Net realized gain from sale of investments	$	109,014		$	1,301,005		$	(174,489	)	$	564,458
Net unrealized gain (loss) on investments	$	1,056,774		$	(2,294,778	)	$	(9,855,131	)	$	(5,901,262	)
Net increase in net assets resulting from operations	$	1,732,721		$	(134,291	)	$	(8,157,674	)	$	(5,166,308	)
Net increase in net assets resulting from operations per Share	$	0.15		$	(0.01	)	$	(0.65	)	$	(0.40	)
Weighted average Share outstanding		11,391,769			12,070,832			12,533,824			12,805,995

	Quarter Ended
	September 30, 2018			December 31, 2018			March 31, 2019			June 30, 2019
Net investment income (loss)	$	2,871,700		$	488,253		$	508,911		$	1,775,242
Net realized gain from sale of investments	$	3,637,660		$	(1,604,128	)	$	(812,058	)	$	(17,424	)
Net unrealized gain (loss) on investments	$	(4,645,656	)	$	1,438,916		$	152,181		$	(908,090	)
Net increase in net assets resulting from operations	$	1,863,704		$	323,041		$	(150,966	)	$	849,728
Net increase in net assets resulting from operations per Share	$	0.21		$	0.03		$	(0.01	)	$	0.08
Weighted average Share outstanding		9,004,403		$	9,660,553.21			10,314,925			10,844,984

	Quarter Ended
	September 30, 2017			December 31, 2017			March 31, 2018			June 30, 2018
Net investment income	$	(373,346	)	$	1,066,485		$	2,083,485		$	(549,425	)
Net realized gain from sale of investments	$	848,583		$	849,890		$	53,645		$	939,655
Net unrealized gain (loss) on investments	$	961,773		$	(192,957	)	$	(1,578,694	)	$	6,656,717
Net increase in net assets resulting from operations	$	1,437,010		$	1,723,418		$	558,436		$	7,046,947
Net increase in net assets resulting from operations per Share	$	0.22		$	0.24		$	0.07		$	0.85
Weighted average Share outstanding		6,577,208		$	7,205,816			7,723,757			8,271,765

F-26

Index to Audited Consolidated Financial Statements

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MACKENZIE REALTY CAPITAL, INC.
(Registrant)

By: /s/ Robert Dixon
Robert Dixon
Chief Executive Officer

Date: September 21, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Robert Dixon	Chief Executive Officer	September 21, 2020
Robert Dixon	(Principal Executive Officer)



/s/ Paul Koslosky	Chief Financial Officer	September 21, 2020
Paul Koslosky	(Principal Financial and Accounting Officer)



/s/ C.E. Patterson	Director	September 21, 2020
C.E. Patterson



/s/ Tim Dozois	Director	September 21, 2020
Tim Dozois


/s/ Tom Frame	Director	September 21, 2020
Tom Frame

F-27

MacKenzie Realty Capital, Inc. - FORM 10-K - September 21, 2020

Attached files

MacKenzie Realty Capital, Inc. Reports