THE RISK OF LOSS IN TRADING INSTRUMENTS ON IRESE CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD BE AWARE OF ALL THE POINTS CONTAINED WITHIN THIS RISK DISCLOSURE STATEMENT.

IRESE has attempted to write this risk disclosure statement in plain English so that you have a good understanding of the risks of trading on IRESE’s Internet-based, direct access, Real Estate Notes ("Instruments") trading system and the risks in trading the instruments offered on IRESE. However, no matter how plain this statement is, it and the other information provided by IRESE in its Rules, Real Estate Notes Investor Agreements and Terms of Use cannot disclose all potential risks and considerations related to derivatives trading. Therefore, you should only trade on IRESE if you understand the nature of the transactions you are entering into and your exposure to risk. Trading in Instruments is simply not appropriate for many members of the public, and you should carefully consider whether trading Instruments is appropriate for you given your experience, objectives, financial resources, and other relevant circumstances.

There are numerous risks associated not only with the Instruments contracts traded through IRESE but also with the trading system itself. Moreover, because IRESE allows direct participation by you, you must ensure that you carefully read and understand this Risk Disclosure Statement, the description of IRESE Instruments (the “Instruments”) you may trade—including when a particular Instrument defaults and how IRESE recovers any money on Instruments — and all other IRESE rules.

INHERENT RISKS IN TRADING THE INSTRUMENTS OFFERED ON IRESE

The Instruments traded on IRESE have a high degree of risk. Please read and understand Real Estate Notes that trade on IRESE.

Real estate investments are one of the largest asset classes in the United States, along with stocks and bonds. However, investments in real estate are not very liquid, as compared to stocks or bonds. For example, real estate bond investors facing liquidity issues and valuation challenges.

Mortgage bankers are seeking to explore a new way to securitize its loan portfolio and mortgage brokers are seeking better financing terms for the property owners.

IRESE provides mortgage bankers and brokers with financial tools that allow them to offer Mortgage Financing via Real Estate Notes. The product allows investors to invest in fraction of an individual mortgage by picking and choosing a risk profile based on individual loan criteria. Doing so, investors manage and diversify risk and develop an optimal investment portfolio.

Investors will benefit from returns associated with investing in fixed income secured by real estate and the ability to diversify their investment portfolios across many loans. Investor trading on the Exchange provides ongoing liquidity.

REMEMBER: YOU MAY SUSTAIN A TOTAL LOSS OF THE FUNDS USED TO ESTABLISH A POSITION IN THE IRESE MARKET

The unique nature of IRESE Instruments may be confusing to many investors who are familiar with more traditional bonds. Unlike traditional bonds which are first written and sold by a member of the market in which the bonds are traded, the IRESE system originates all the Instruments traded on its market.

Other risks associated with the unique nature of the IRESE Market include a potential lack of liquidity for IRESE Instruments. Other bond markets have professional traders who ensure that there are always competitive offers to buy and sell bonds. IRESE may not have such liquidity providers for some or all of its instruments. Therefore, there is a possibility that you could hold a position in an Instrument from IRESE and be unable to liquidate your position in the Instrument or the portion of the position that you no longer want to hold in the time frame you wish to liquidate it. Additionally, there is a chance that no one will offer to sell you or bid to buy from you an Instrument you want to take a position in or to liquidate due to current market conditions or otherwise. Lack of liquidity in the market could also preclude you from selling large blocks of Instruments at once. If IRESE lacks liquidity in the Instruments you want to trade for any reason, you may be unable to trade at your desired time or price. If that occurs, you may be forced to hold them until they mature, possibly preventing you from hedging the risk to which you are exposed.

RISKS INHERENT IN TRADING THROUGH THE INTERNET

Trading through the Internet involves many interrelated systems, including hardware, software, telephony, cable, and power generation, all of which are subject to failure or malfunction that may adversely affect your ability to trade. If you have spent any time at all on the Internet, you may have experienced problems with computer crashes, failure of your Internet service provider’s access system, site crashes, and many other problems. Therefore, please realize that during any time which you cannot access IRESE for whatever reason, you will not be able to enter, cancel, or modify orders. Additionally, although IRESE and its systems provider(s) have taken precautions, such as redundant systems, to prevent such an occurrence, if the IRESE system suffers a catastrophic failure, there is a chance your orders and their priority in the order queue could be lost. IRESE is not responsible or liable for any effect on your ability to trade caused by any malfunction of the Internet, computing systems, or their related components.

THIRD PARTY SERVICE PROVIDERS

IRESE will provide you with information from Third Party Service Providers (“TPSP”) that relates to the instruments traded on IRESE. Such information includes, but is not limited to, website links, quotes, pricing feeds, and any other information provided on the IRESE website (collectively the “Service”). Even though IRESE is providing the Service to you via its website, IRESE does not endorse, warrant, or guarantee the accuracy or reliability of the information provided by the Service.

IRESE operates as an Exempt Board of Trade under the Commodity Exchange Act, as amended, and the regulations of the Commodity Futures Trading Commission. As such, IRESE is a self-regulatory organization, largely responsible for regulating its own activities, including the operation of its market, its Contracts, its sales practices (including promotional material), and its method of managing and protecting your funds and the funds of other members.

THIS BRIEF STATEMENT CANNOT OF COURSE DISCLOSE ALL THE RISKS AND OTHER ASPECTS OF THE IRESE MARKET.