Healthcare Special Opportunities Fund : Management Report of Fund Perfonrmance

Healthcare Special Opportunities Fund

Management Report of Fund Performance

December 31, 2021

Class A units and Class U units of Healthcare Special Opportunities Fund

Healthcare Special Opportunities Fund For the Year ended December 31, 2021

All figures are reported in Canadian dollars unless otherwise noted.

This management report of fund performance contains financial highlights but does not contain either the complete interim financial report or annual financial statements of the investment fund. You can get a copy of the financial statements at your request and at no cost, by contacting LDIC Inc. in one of the methods below.

Unitholders may contact LDIC Inc. to request a copy of the investment fund's proxy voting policies and procedures, proxy voting disclosure record or quarterly portfolio disclosure by calling 416-362-4141, by writing to us at 10 Alcorn Avenue, Suite 205, Toronto, ON, M4V 3A9 or by visiting our website at www.ldic.ca(email [e-mail]), or SEDAR atwww.sedar.com.

Investment Objectives and Strategies

The Fund's investment objective is to provide holders of Units ("Unitholders") with long-term total return through distributions and capital appreciation of the Fund's investment portfolio (the "Portfolio") by investing in equity and debt securities of issuers that derive a significant portion of their revenue or earnings from medical and healthcare products and/or services. Such issuers may include, but will not be limited to, issuers operating in the following healthcare industry sub-sectors: (i) healthcare services, financials and insurance; (ii) healthcare products and technology; (iii) healthcare facilities and real estate investment trusts; and (iv) retirement lifestyle, wellness and entertainment (collectively, the "Healthcare Issuers").

The Fund has been created to invest in an actively managed Portfolio comprised primarily of publicly traded issuers and private issuers that derive a significant portion of their revenue or earnings from medical and healthcare products and/or services. The Fund will be invested primarily in publicly traded healthcare equity securities (the "Public Portfolio"), but may also invest up to 20% of the Fund's total assets in private equity investments (the "Private Portfolio"). It is expected that the Public Portfolio will be comprised of securities of 20 to 30 large, mid, and small capitalization publicly-listed Healthcare Issuers based in developed markets.

Through the Private Portfolio, LDIC Inc. ("LDIC" or the "Manager") will seek to enhance returns by investing in "late-stage" private equity investments in healthcare and healthcare related businesses. "Late-Stage" means an investment in a revenue-generating or soon-to-be revenue-generating business that is expected to go public or achieve another liquidity event within 12 to 24 months following the initial investment. The goal of the Manager is to provide investors with exposure to a limited number of investments in the Private Portfolio that it believes have potential for significant upside because the Fund will be investing at "pre-Initial Public Offering" prices. The Fund expects to make Private Portfolio investments at a point where the capital will be used to grow revenues of the healthcare business investee company. The healthcare business investee company may then seek to raise additional capital in public markets, or in some instances consider a sale of the business to a strategic or financial buyer.

Risk

An investment in the Fund involves risks. Certain risk factors relating to the Fund and the Units are listed below. Additional risks and uncertainties not currently known to the Manager or Industry Advisor, or that are currently considered immaterial, may also impair the operations of the Fund. An investment in the Fund isappropriate only for investors who have the capacity to absorb a loss on their investment and who can withstand the effect of potentially having no distribution being paid in any period. As the value of the Units of the Fund will be based upon the value of the Portfolio, risks relating to the Portfolio will affect investors in the Fund. The following are certain risk factors and considerations related to the Fund which prospective investors should consider before purchasing Units:

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No assurance on achieving investment objective Loss of investment

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No guaranteed return Equity securities risk

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Illiquid securities and private securities

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Fluctuations in value of securities underlying portfolio Fluctuations in Net Asset Value

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Risk related to healthcare issuers Regulatory risk

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Risks related to healthcare issuers operating in the real estate sector Sensitivity to interest rate fluctuations

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Use of derivative instruments Portfolio concentration risk

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Reliance on the manager and industry advisor Trading at a discount and risks relating to redemptions Taxation of the Fund

Further details on these risks can be found in the Funds' prospectus filed on SEDARwww.sedar.com

Result of Operations

For the year ended December 31, 2021, the Class A units increased in value from $13.61 to $13.81. The Class U units increased in value from $17.74 CAD to $17.91 CAD and showed a return of 3.5% for Class A and 3.0% for Class U.

The Class A units are listed for trading on the Toronto Stock Exchange under ticker symbol of MDS.UN. As at December 31, 2021, 69.7% of the fund is invested in healthcare, 7.7% of the fund invested in consumer discretionary and 9.2% is in cash.

The Fund had a net gain on financial instruments of $2,010,701 for the year ended December 31, 2021 compared to a net gain of $2,493,374 for the prior year. The total operating expenses increased in 2021 by $105,347 mainly due to less recoveries of performance fee expense by $85,815 compared to the prior year. There was an increase in the net assets per unit of $0.48 from operations for Class A, whereas there was a decrease in net assets per unit of $0.80 from operations for Class U for the year ended December 31, 2021. Overall, the Fund had an increase in Net Assets attributable to holders of redeemable units from operations of $1,250,741.

Recent Developments

Inflationary fears, rising interest rates and geopolitical crises have sent stocks into a downward spiral thus far in 2022. Energy has been the clear leader in the markets, the remaining sectors have not fared well as risk-offsentiment has taken hold and investor's flight to safety will likely linger on until there is more clarity in the market. Health care has not fared well in early 2022. The S&P 500 Health Care Index has dropped 8% in the first two months of 2022.

The health care sector has been negatively affected by the uncertainty surrounding COVID-19 and the large backlog of surgical cases. A return to normal for health systems has been uneven and delayed. Staffing shortages, supply chain bottlenecks and global uncertainties have put downward pressure on the equity prices of large cap health care companies. In particular, Medtech holdings such as Medtronic, Stryker and Intuitive Surgical have underperformed.

The Fund has allocated a greater weighting to cash than usual while we await better opportunities and a reduction in volatility.

Related Party Transactions

The Manager of the Fund is LDIC Inc. The Manager provides investment and administrative services to the Fund. In consideration for these services the Manager receives a fee based on a percentage of the Net Assets of the Fund calculated daily and payable monthly, as follows:

Class A - 1.25% per annum Class U - 1.25% per annum

The Manager will receive a performance fee (the "Performance Fee") from the Fund in respect of investments in the Private Portfolio including, for the purpose of calculating the Performance Fee, securities of private issuers in the Private Portfolio that have become publicly traded and public securities received on the disposition of securities of a private issuer in the Private Portfolio. The amount of the Performance Fee shall be determined as of the date of disposition (the "Determination Date") for cash proceeds for each such investment. The Performance Fee in respect of each investment will be equal to 20% of the amount by which the cash proceeds of disposition exceed 106% of the Threshold Amount (as defined below) calculated on a cumulative annual basis plus applicable taxes. Where an investment is held for a portion of any year, the calculation of the required 106% return for that year is made on a partial year basis.

The Performance Fee shall be calculated and accrued daily and be paid upon each Determination Date; however, no Performance Fee shall be paid in respect of any dispositions of securities of private issuers in the Private Portfolio unless on the Determination Date the proceeds of disposition of the investment exceed 107% of the original book value of the investment (the "Threshold Amount").

As of December 31, 2021, the Manager of the Fund and certain Directors and Officers of the manager held a total of 307,518 Class A units of the Fund.

Management Fees

The Manager is entitled to be paid a management fee by the Fund at an annual rate of 1.25% of the NAV of the Fund, plus applicable taxes, provided that the management fee payable to the Manager shall not be paid in respect to assets of the Fund invested in the securities of any investment funds (including mutual funds) managed by the Manager or an affiliate of the Manager. The Management Fee payable to the Manager will be calculated and accrued daily and be payable monthly in arrears based on the average NAV for that month. The Management Fee will be paid in cash.

Financial Highlights

The following tables show selected key financial information about the Fund and are intended to help you understand the Fund's financial performance for the year ended December 31, 2021 and for the past four periods ended December 31, as applicable. In the year a fund or a series is established, 'Period' represents inception to December 31 of that year. Per unit data is derived from the Fund's financial statements.

The Fund's Net Assets per unit (1)

Net Assets, beginning of year
Increase (decrease) from operations:
Total revenue
Total expenses
Realized gains (losses) for the year
Unrealized gains (losses) for the year
Total increase (decrease) from
operations (2)
From income (excluding dividends)
From dividends
From capital gains
Return of capital
Total annual distributions (3)
Net Assets, end of year
2021
$
Net Assets, beginning of year	17.74
Increase (decrease) from operations:
Total revenue	0.19
Total expenses	(0.82)
Realized gains (losses) for the year	2.42
Unrealized gains (losses) for the year	(2.59)
Total increase (decrease) from	$
operations(2)	(0.80)
Distributions:
From income (excluding dividends)	-
From dividends	-
From capital gains	-
Return of capital	(0.35)
Total annual distributions(3)	(0.35)
$
Net Assets, end of year	17.91
5

Class A
2021	2020	2019	2018	2017
$	$	$	$	$
13.61	13.33	11.62	10.69	9.16
0.14	0.14	0.12	0.13	0.15
(0.27)	(0.23)	(0.24)	(0.27)	(0.32)
0.12	2.19	0.75	2.70	0.58
0.49	(1.41)	1.27	(1.23)	0.96
$	$	$	$	$
0.48	0.69	1.90	1.33	1.37
-	-	-	-	-
-	-	-	-
-	(0.44)	-	-	-
(0.27)	-	(0.24)	(0.24)	(0.10)
(0.27)	(0.44)	(0.24)	(0.24)	(0.10)
$	$	$	$	$
13.81	13.61	13.33	11.62	10.69
Class U
2020	2019	2018	2017
$	$	$	$
17.14	14.80	13.86	11.90
0.18	0.16	0.17	0.20
(0.26)	(0.21)	(0.44)	(0.28)
2.69	1.05	3.67	1.41
(3.13)	0.90	(2.15)	(0.37)
$	$	$	$
(0.52)	1.90	1.25	0.96
-	-	-	-
-	-	-	-
(0.24)	-	-	-
-	(0.31)	(0.31)	(0.10)
(0.24)	(0.31)	(0.31)	(0.10)
$	$	$	$
17.74	17.14	14.80	13.86