BRIDGING CREDIT FUND LP

Transcription

1 This offering memorandum (the offering memorandum ) constitutes an offering of these securities only in the provinces and territories of Canada and therein only by persons permitted to sell such securities and to those persons to whom they may be lawfully offered for sale. These securities do not trade on any exchange or market. The issuer is not a reporting issuer or SEDAR filer. No securities regulatory authority has assessed the merits of these securities or reviewed this offering memorandum. Any representation to the contrary is an offence. See Risk Factors. This offering memorandum is not, and under no circumstances is it to be construed as, a prospectus or advertisement or a public offering of these securities. No person is authorized to give any information or make any representation not contained in this offering memorandum in connection with the offering of these securities and, if given or made, any such information or representation may not be relied upon. OFFERING MEMORANDUM Private Placement Continuous Offering October 7, 2013 BRIDGING CREDIT FUND LP 77 King Street West, Suite 2925, P.O. Box 322, Toronto, Ontario, M5K 1K7 inquiries@bridgingfinance.ca Minimum Purchase: $100,000 Subscription Price: $100 Per Unit Initial Target Minimum Yield: 6.5% Per Annum 1 The Partnership: Bridging Credit Fund LP ( Bridging LP or the Partnership ), a limited partnership established under the laws of the Province of Ontario, proposes to issue transferable limited partnership units in three classes: Class A, Class F and Class I each issuable in series (together, the Units ). Units will be offered on a continuous basis at a subscription price of $100 per Unit on each Valuation Date (as defined herein). See The Partnership and Details of the Offering. Investment Objective: The Partnership s investment objective is to achieve superior risk-adjusted returns with minimal volatility and low correlation to most traditional asset classes. Investment Strategy: To achieve its investment objective, the Partnership intends to invest in an actively managed portfolio (the Portfolio ) comprised of (i) asset-based loans primarily to Canadian and U.S. based companies that have good quality collateral ( Asset-Based Investments ) and (ii) factored accounts receivable and inventory financing primarily to Canadian and U.S. based companies and financing of Canadian federal and provincial tax credits ( Factoring Investments ). The Portfolio will include only Asset-Based Investments that are fully collateralized based on liquidation values and/or potential cash flow events. The Portfolio strategy involves a fundamental analysis that identifies companies with strong management teams that are overlooked by the general financing community and targets diversification through asset type, investment size and industry. For Asset-Based Investments, the Portfolio strategy emphasizes liquidation values over reliance on future cash flows. Factoring Investments will be well diversified by industry, sector and size according to underwriting standards determined by Bridging Finance Inc. (the Manager ) on behalf of the Partnership. Each investment follows a rigorous documentation process that is managed by the independent credit function of the Manager. The Partnership may also make incidental investments in assets such as promissory notes, convertible debentures, warrants and other equity sweeteners issued in connection with the primary investments. Management of the Partnership: Bridging GP Inc. (the General Partner ) is the general partner of the Partnership and has coordinated the organization and registration of the Partnership and established the Investment Guidelines (defined herein) of the Partnership. The Partnership has retained the Manager to provide portfolio management, administrative and other services to the Partnership. The Manager will assist with the identification of prospective Canadian and U.S. companies and the 1 The initial Target Minimum Yield is applicable for the remainder of the 2013 fiscal year and the Target Minimum Yield may fluctuate from year to year, based on changes to the Prime Rate, as described under Fees and Expenses Payable by the Partnership Performance Fee and Fees and Expenses Payable by the Partnership Floating Target Minimum Yield.

2 negotiation of the terms of Asset-Based Investments and Factoring Investments and will monitor the Portfolio to ensure compliance with the Investment Guidelines. See The General Partner and the Manager. There is no market through which the Units may be sold and none is expected to develop. You will be restricted from selling your securities for an indefinite period. See Resale Restrictions. THESE SECURITIES ARE SPECULATIVE IN NATURE. The purchase of Units involves significant risks. There is no assurance of a return on a Subscriber s initial investment. There is no market through which the Units may be sold and purchasers may not be able to resell Units purchased by way of private placement pursuant to this Offering (defined herein). No market for the Units is expected to develop. An investment is appropriate only for investors who have the capacity to absorb a loss of some or all of their investment. Investors who are not willing to rely on the discretion of the General Partner, which has limited operating history and is expected only to have nominal assets, should not purchase Units. There is no guarantee that an investment in the Partnership will earn a specified rate of return or any return in the short or long term. The amount of quarterly distributions may fluctuate from quarter to quarter and there can be no assurance that the Partnership will pay any distributions in any particular quarter or quarters, and if they do occur there can be no assurance that such distributions will be sufficient to satisfy a Limited Partner s tax liability for the year arising from his or her status as a Limited Partner of the Partnership. If the Partnership s annual return is less than the amount necessary to fund the quarterly distributions, the Partnership may not pay the targeted distributions despite the Target Minimum Yield (defined herein) risk protection as described herein. Limited partners of the Partnership ( Limited Partners ) must rely on the discretion of the Manager for the management of the Portfolio. There can be no assurance that the Manager, on behalf of the Partnership, will be able to identify a sufficient number of investments to permit the Partnership to commit its Available Funds (defined herein). The business activities of Canadian and U.S. companies may be adversely affected by factors outside the control of those companies. Other risk factors associated with an investment in the Partnership include: Limited Partners could lose their limited liability in certain circumstances; and the General Partner has only nominal assets. Investors should consult their own professional advisors to assess the income tax, legal and other aspects of the investment. See Risk Factors. You have two business days to cancel your agreement to purchase these securities. If there is a misrepresentation in this offering memorandum, you have the right either to sue for damages or to cancel the agreement. See Right of Action for Damages or Rescission. The General Partner or its agent will have the right, in its sole and absolute discretion, to reject any offer to purchase, in whole or in part, for any reason and the right is reserved to close the offering books at any time without notice. The First Closing (defined herein) for the Partnership is expected to take place on or about September 30, Following the First Closing, additional Subscriptions (defined herein) will be accepted effective on the last Business Day (defined herein) of each calendar month and on such other dates as the Manager may in its sole discretion prescribe. Completed and executed Subscription Agreements and Power of Attorney Forms (defined herein), including all applicable account opening documentation, must be received not less than three (3) Business Days prior to the applicable Closing Date or such later date as the Manager determines. The Manager or other agents as appointed by the General Partner and FundSERV, as applicable, will hold subscription cheques and proceeds received from Subscribers prior to the First Closing until all closing conditions of the Offering have been satisfied, at which time the First Closing will take place. If any Closing, including the First Closing, does not occur, subscription cheques and proceeds relating to such Closing will be returned, without interest or deduction, to the investors. Subject to applicable securities legislation, distributions will be automatically reinvested in additional Units of the same Class of Units at the Net Asset Value of such Class of Units on the date of distribution, unless a Limited Partner elects, by written notice to the Manager, to receive such distributions in cash. The Partnership intends to make quarterly distributions on the Class A Units, the Class F Units and the Class I Units out of net income, net realized capital gains and, in certain cases, capital of the Partnership. See Distribution Policy. Units may be redeemed by Limited Partners at their Net Asset Value per Unit (as defined herein) on the last Business Day (as defined herein) of June or December of each year, provided that the request for redemption is submitted at least 120 days prior to such date. Units held for less than twelve months may be surrendered for redemption upon the same terms, subject to an early redemption penalty equal to 2% of the aggregate Net Asset Value per Unit of the Units being surrendered. The redemption penalty is payable to the Partnership. See Redemption of Units.

3 TABLE OF CONTENTS FORWARD LOOKING STATEMENTS... 1 ELIGIBILITY FOR INVESTMENT... 1 HOW TO PURCHASE UNITS... 1 GLOSSARY... 2 OFFERING SUMMARY... 5 USE OF PROCEEDS FOR THE OFFERING... 9 THE PARTNERSHIP... 9 FEES AND EXPENSES PAYABLE BY THE PARTNERSHIP THE GENERAL PARTNER AND THE MANAGER THE INVESTMENT SELECTION PROCESS CERTAIN INCOME TAX CONSIDERATIONS DETAILS OF THE OFFERING VALUATION OF INVESTMENTS DISTRIBUTION POLICY REDEMPTION OF UNITS SUMMARY OF THE PARTNERSHIP AGREEMENT RISK FACTORS CONFLICTS OF INTEREST PROMOTER EXPERTS ADMINISTRATOR ENGLISH LANGUAGE RESALE RESTRICTIONS RIGHTS OF ACTION FOR DAMAGES OR RESCISSION ALBERTA CERTIFICATE... 41

4 FORWARD LOOKING STATEMENTS Certain statements included in this offering memorandum constitute forward looking statements, including those identified by the expressions anticipate ; believe ; plan ; estimate ; expect ; may ; will ; intend ; and similar expressions to the extent they relate to the Partnership, the General Partner or the Manager. These forward looking statements are not historical facts but reflect the Partnership s, the General Partner s and/or the Manager s current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These risks and uncertainties include, but are not limited to, changes in the global economy, general economic and business conditions, existing governmental regulations, supply and demand and other market factors, including those set out under Risk Factors. In light of the many risks and uncertainties surrounding the financing sector, the forwardlooking statements contained in this offering memorandum may not be realized. See Risk Factors. The forwardlooking statements contained herein are expressly qualified in their entirety by this cautionary statement. Forwardlooking statements are made as of the date hereof, or such other date specified in such statements, and none of the General Partner, on its own behalf and on behalf of the Partnership, the Manager or any other person assumes any obligation to update or revise such forward-looking statements to reflect new information, events or circumstances, except as required by law. ELIGIBILITY FOR INVESTMENT The Units do not constitute qualified investments for trusts governed by registered retirement savings plans, registered retirement income funds, deferred profit sharing plans, registered education savings plans, tax-free savings accounts or registered disability savings plans for purposes of the Tax Act. HOW TO PURCHASE UNITS The Units are being offered for sale on a private placement basis in reliance on the accredited investor and minimum amount investment exemptions from the prospectus requirements of applicable Canadian securities laws. As a result, resale of the Units will be restricted in the manner provided by applicable securities laws. See Resale Restrictions. The Manager has made arrangements to offer the Units through the investment fund order system FundSERV. Class A Units are available to all qualified investors. Class F Units are available only to (i) qualified investors who participate in fee-based programs through their registered dealer and whose registered dealer has signed a Class F agreement with the Manager, (ii) investors for whom the Manager does not incur distribution costs and (iii) other investors approved by the Manager in its sole discretion. A registered dealer s participation in the Class F program is subject to terms and conditions set by the Manager. Class F Units have no load. Instead of paying sales charges, investors pay an annual fee to their registered dealers for ongoing financial planning advice and other services. See Details of the Offering How to Purchase Units. Class I Units are available only to institutional investors approved by the Manager in its sole discretion. The minimum subscription by an investor is $100,000 for accredited investors (or such lesser amount, as determined by the General Partner in its sole discretion) and $150,000 for investors purchasing under the minimum amount investment exemption. Following the required initial minimum investment in the Partnership, Limited Partners may make additional investments in the Partnership of not less than $25,000 provided that, at the time of the subscription for additional Units, the Limited Partner is an accredited investor. Limited Partners who are not accredited investors, but previously invested in, and continue to hold Units having an aggregate initial acquisition cost or current Net Asset Value equal to $150,000, will also be permitted to make subsequent investments in the Partnership of not less than $25,000. See Details of the Offering. To acquire Units in the Partnership, an investor must deliver not less than three (3) Business Days prior to the Closing a duly completed and signed Subscription Agreement and Power of Attorney Form (defined herein), together with a cheque in the amount of the purchase price payable to Bridging Credit Fund LP. For Units purchased from a qualified dealer on the FundSERV network, an investor must deliver, not less than three (3) Business Days prior to the Closing, a duly completed and signed Subscription Agreement and Power of Attorney Form, together with payment by electronic or manual settlement. No certificates for Units will be issued to investors. Investors who purchase Units will receive only a customer confirmation from the registered dealer from or through whom the Units are purchased. 1

5 GLOSSARY When used in this offering memorandum (the offering memorandum ), the following terms have the following meanings ascribed thereto: Administrator means Commonwealth Fund Services Ltd., in its capacity as administrator of the Partnership, or its successor. Administration Agreement means the valuation and recordkeeping services agreement dated August 13, 2013, pursuant to which the Administrator was retained. affiliate means an affiliated entity within the meaning of Ontario Securities Commission Rule Asset-Based Investments means asset-based loans primarily to Canadian and U.S. based companies that have good quality collateral. Auditor means Ernst & Young LLP, Chartered Accountants, of Ernst & Young Tower, 222 Bay Street, P.O. Box 251, Toronto, Ontario, M5K 1J7. Available Funds means all funds available from the sale of Units of the Partnership. Business Day means any day except Saturday, Sunday or a statutory holiday in Toronto, Ontario or any other day on which the TSX is not open for trading. Capital Contribution means, with respect to each Limited Partner, as of a specified date, the aggregate amount of cash received by the Partnership from such Limited Partner pursuant to its Commitment up to and including such specified date. Class means a class of limited partnership units established by the Partnership Agreement, issuable in series. Class A Units means Class A limited partnership units of the Partnership. Class F Units means Class F limited partnership units of the Partnership. Class I Units means Class I limited partnership units of the Partnership. Closing means any closing of the sale of Units of the Partnership to investors pursuant to the Offering and includes the First Closing. Closing Date means the date a Closing takes place. Commitment means, with respect to each Limited Partner, the aggregate amount of cash agreed to be contributed as capital to the Partnership by such Limited Partner, to be calculated as the Subscription Price for the purchase of Class A Units, Class F Units or Class I Units, as applicable, as specified in the subscription agreement(s) between such Limited Partner and the General Partner. CRA means the Canada Revenue Agency. Determination Date has the meaning given to such term under Fees and Expenses Payable by the Partnership Performance Fee. Extraordinary Resolution means a resolution passed by 66 2 / 3% or more of the votes cast at a duly constituted meeting of the Limited Partners called for the purpose of considering such resolution, at which a quorum (as described in Section 15.7 of the Partnership Agreement) is present or, alternatively, a written resolution signed in one or more counterparts by (i) Limited Partners holding 66 2 / 3% of the Net Asset Value of the Partnership attributable to the Class A Units; (ii) Limited Partners holding 66 2 / 3% of the Net Asset Value of the Partnership attributable to the Class F Units; and (iii) Limited Partners holding 66 2 / 3% of the Net Asset Value of the Partnership attributable to the Class I Units. 2

6 Factoring Investments means factored accounts receivable and inventory financing primarily to Canadian and U.S. based companies and Canadian federal and provincial tax credit financing investments. First Closing means the first closing of the sale of Units of the Partnership to an investor pursuant to the Offering. General Partner means Bridging GP Inc., a wholly-owned subsidiary of the Manager, and its successors as provided in the Partnership Agreement. Hurdle Rate means the Target Minimum Yield plus 2% per annum, subject to a maximum of 10% per annum, determined on the first Business Day of each fiscal year and applicable for the entire fiscal year. Investment Guidelines means the investment policies and restrictions set forth in the Partnership Agreement as described herein. Limited Partners means holders of Units of the Partnership whose names and other prescribed information appear on the record of limited partners maintained by the Partnership pursuant to the Limited Partnerships Act (Ontario). Management Agreement means the management agreement dated October 7, 2013 among the Partnership, the General Partner and the Manager, as amended from time to time. Management Fee means the management fee, plus applicable taxes, payable by the Partnership to the Manager pursuant to the Management Agreement. Manager means BridgingFinance Inc. or its successors or such other affiliated entity as is acceptable to the Partnership. Master Series has the meaning given to such term under Summary of the Partnership Agreement Units. Net Asset Value and Net Asset Value per Unit have the meanings given to those terms under the heading Valuation of Investments Valuation Principles. NI means National Instrument Investment Fund Continuous Disclosure. Offering means the private placement of Units of the Partnership pursuant to this offering memorandum and the Partnership Agreement and the applicable Subscription Agreement and Power of Attorney Forms. Offering Expenses means expenses related to the Offering and each Closing, including the costs of creating and organizing the Partnership, the costs of printing and preparing this offering memorandum, legal and audit and accounting expenses of the Partnership, FundSERV setup costs, travel, distribution, courier, sales and marketing expenses and legal and other reasonable expenses incurred by the General Partner and Manager and other incidental expenses. Partnership means Bridging Credit Fund LP, a limited partnership formed under the law of the Provinces of Ontario. Partnership Agreement means the second amended and restated limited partnership agreement of Bridging Credit Fund LP dated October 7, 2013 between the General Partner, Natasha Sharpe, and Canada Inc. as initial limited partners, and each person who becomes a Limited Partner thereafter, as amended from time to time. Performance Fee means the performance fee, plus applicable taxes, payable by the Partnership to the Manager pursuant to the Management Agreement. Portfolio means an actively managed portfolio comprised of Asset-Based Investments and Factoring Investments. Prime Rate means the annual rate of interest equivalent to the prime business rate as set by the Bank of Canada from time to time, as published on the Bank of Canada website at Prior High NAV has the meaning given to such term under Fees and Expenses Payable by the Partnership Performance Fee. 3

7 Short-Term Securities means: (i) obligations issued or guaranteed by the Government of Canada or any province of Canada or any agency or instrumentality thereof with less than 12 months to maturity; (ii) term deposits, guaranteed investment certificates or banker s acceptances of or guaranteed by any Canadian chartered bank or any other financial institution, the short-term debt or deposits of which have been rated at least investment grade by Standard & Poor s rating service, a division of the McGraw Hill Companies, Inc., Moody s Investors Services, Inc. or DBRS Limited, or a money market mutual fund with similar constraints; and (iii) commercial paper rated at least investment grade by Standard & Poor s rating service, a division of the McGraw Hill Companies, Inc., Moody s Investors Services, Inc. or DBRS Limited, in each case maturing within 365 days after the date of acquisition, or for which the Manager believes that there will be a liquid market for the resale thereof within such 365 day period. Subscriber means a person or other entity that subscribes for Units under the Offering. Subscription Agreement and Power of Attorney Form means the subscription agreement and power of attorney form between each investor and the Partnership in the form provided by the Partnership in connection with this Offering. Subscription Price means the amount paid to the Partnership for the issue of a Unit of the Partnership. Target Minimum Yield means the Prime Rate plus 3.5% per annum, subject to a maximum of 8% per annum, determined on the first Business Day of each fiscal year and applicable for the entire fiscal year. Tax Act means the Income Tax Act (Canada), as amended from time to time, and includes the regulations thereunder. Total Return per Unit has the meaning given to such term under Fees and Expenses Payable by the Partnership Performance Fee. TSX means Toronto Stock Exchange. Units means Class A Units, Class F Units and Class I Units. Valuation Date means the last Business Day of each month and any other such day or days as determined by the Manager from time to time. 4

8 OFFERING SUMMARY The information set forth below should be read together with and is qualified by the more detailed information contained elsewhere in this offering memorandum (the offering memorandum ) and the information contained in the Partnership Agreement and the Subscription Agreement and Power of Attorney Forms. Certain capitalized terms used but not defined in this summary and in the body of this offering memorandum are defined under Glossary. Issuer: Securities Offered: Bridging Credit Fund LP ( Bridging LP or the Partnership ) Class A Limited Partnership Units Class F Limited Partnership Units Class I Limited Partnership Units Units of a Class will be issued in series, with a new series of a Class issued on each date that new Units are issued. The first series of each Class issued at the First Closing (or at subsequent Closing if no Units of a particular Class are issued at the First Closing) shall be designated by the Manager as the master series in respect of the applicable class (the Master Series ). At the end of each fiscal year of the Partnership, each series of Units of a Class may be re-designated and converted into the Master Series or a new series (after payment of any Management Fees and Performance Fees for that fiscal year of the Partnership). Such conversion will be effected at the relative Net Asset Value per Unit of the series of such Class being converted; provided, however, that no re-designation and conversion shall occur with respect to a series of a Class unless the Net Asset Value per Unit of that series of that Class at the end of such fiscal year is higher than the Prior High NAV and a Performance Fee is payable in respect of that series of such Class at the end of such fiscal year. FundSERV: Price Per Unit: Investor Eligibility: Minimum Initial Subscription: Payment Terms: The Manager has made arrangements to offer the Units through the investment fund order system, FundSERV. Units will be offered at a subscription price of $100 per Unit on each Valuation Date. To subscribe, the investor must qualify as an accredited investor as defined by the provincial securities regulatory authority in the province or territories in which the investor resides or must meet the minimum amount investment exemption from prospectus requirements of applicable Canadian securities laws. Each Subscriber is also required to provide a fully executed Subscription Agreement and Power of Attorney Form, which must be delivered in original form to the Manager. See Details of Offering. The minimum subscription by an investor is $100,000 for accredited investors (or such lesser amount, as determined by the General Partner in its sole discretion) and $150,000 for investors purchasing under the minimum amount investment exemption. Payable on or before Closing. Year End: December 31 General Partner: Manager: Administrator: Bridging GP Inc. (the General Partner ) has coordinated the organization and registration of the Partnership and has established the Investment Guidelines of the Partnership. The Partnership has retained Bridging Finance Inc. (the Manager ) to provide portfolio management, administrative and other services to the Partnership. The Manager will assist with the identification of prospective Canadian and U.S. companies and the negotiation of the terms of Asset-Based Investments and Factoring Investments and will monitor the Portfolio to ensure compliance with the Investment Guidelines. Commonwealth Fund Services Ltd. will act as the administrator of the Partnership. The Administrator is unrelated to the Manager. 5

9 Auditors: Investment Objective: Investment Strategy: Investment Guidelines and Restrictions: Use of Proceeds of the Offering: Distributions: Cash Distributions: Redemptions: The auditor of the Partnership is Ernst & Young LLP, Chartered Accountants. The auditor will provide its services to the Partnership. The auditor is unrelated to the Manager. The Partnership s investment objective is to achieve superior risk-adjusted returns with minimal volatility and low correlation to most traditional asset classes. See The Partnership - Investment Objective and Strategies. To achieve its investment objective, the Partnership intends to invest in an actively managed portfolio (the Portfolio ) comprised of (i) asset-based loans primarily to Canadian and U.S. based companies that have good quality collateral ( Asset-Based Investments ) and (ii) factored accounts receivable and inventory financing primarily to Canadian and U.S. based companies and Canadian federal and provincial tax credit financing investments ( Factoring Investments ). The Portfolio will include only Asset-Based Investments that are fully collateralized based on liquidation values and/or potential cash flow events. The Portfolio strategy involves a fundamental analysis that identifies companies with strong management teams that are overlooked by the general financing community and targets diversification through asset type, investment size and industry. For Asset-Based Investments, the Portfolio strategy emphasizes liquidation values over reliance on future cash flows. Factoring Investments will be well diversified by industry, sector and size according to underwriting standards determined by the Manager on behalf of the Partnership. Each investment follows a rigorous documentation process that is managed by the independent credit function of the Manager. The Partnership may also make incidental investments in assets such as promissory notes, convertible debentures, warrants and other equity sweeteners issued in connection with the primary investments. See The Partnership - Investment Objectives and Strategies. The Partnership has developed certain investment policies and restrictions (the Investment Guidelines ) that are described under The Partnership - Investment Guidelines. The Partnership is also subject to a number of general investment restrictions. See The Partnership General Investment Restrictions. This is a blind pool offering. The Partnership will use the net proceeds of the Offering (i) primarily to make Asset-Based Investments and Factoring Investments, and (ii) to fund the ongoing fees, expenses and debt of the Partnership, as described herein. Use of Proceeds for the Offering. Subject to applicable securities legislation, distributions will be automatically reinvested in additional Units of the same series of a Class at the Net Asset Value of such series of a Class of Units on the date of distribution, unless a Limited Partner elects, by written notice to the Manager, to receive such distributions in cash. The Partnership intends to make quarterly distributions on the Class A Units, the Class F Units and the Class I Units out of net income, net realized capital gains and, in certain cases, capital of the Partnership. See Distribution Policy. The Manager may, on behalf of the Partnership, sell investments in the Portfolio at any time if it is of the opinion that it is in the best interests of the Partnership to do so. The Partnership Agreement provides that it will not make distributions of net earnings, if any, unless otherwise determined appropriate by the General Partner, in its discretion. There can be no assurance that any such distributions will occur and if they do occur be sufficient to satisfy a Limited Partner s tax liability for the year arising from his or her status as a Limited Partner of the Partnership. Units may be redeemed by Limited Partners at their Net Asset Value per Unit on the last Business Day of June or December, provided that the request for redemption is submitted at least 120 days prior to such date. Units held for less than twelve months may be surrendered for redemption upon the same terms, subject to an early redemption penalty equal to 2% of the aggregate Net Asset Value per Unit of the Units being surrendered. The redemption penalty is payable to the Partnership. See Redemption of Units. 6

10 Allocations of Net Income or Loss: Dealer Fees: Management Fee: 99.99% of the net income of the Partnership and 99.99% of the net loss of the Partnership will be allocated pro rata among the Limited Partners in proportion to each Limited Partner s Capital Contribution, and 0.01% of the net income of the Partnership and 0.01% of the net loss of the Partnership will be allocated to the General Partner. The Manager will pay a monthly service commission to participating registered dealers, equal to 1/12th of 1.0% of the Net Asset Value of the Class A Units sold by such dealers then outstanding. Payments are calculated and paid monthly to registered dealers from the Manager s own funds. See Fees and Expenses Payable by the Partnership. In consideration for the Manager s services, the Partnership will pay to the Manager the Management Fees attributable to Class A Units, Class F Units and Class I Units as set forth in the following table: Class Class A Units Class F Units Class I Units Management Fee 2% per annum of the Net Asset Value of the Class A Units, plus any applicable taxes. 1% per annum of the Net Asset Value of the Class F Units, plus any applicable taxes. Management Fee determined by agreement between the Manager and Subscriber of Class I Units. Such Management Fees, if any, are calculated on each Valuation Date and are payable and payable monthly. Performance Fee: The Manager may also receive, for each fiscal year of the Partnership, a Performance Fee (as calculated below), calculated on a series-by-series basis, if, in respect of such fiscal year, the Total Return per Unit (as defined below) on the applicable Determination Date (as defined below) exceeds the Target Minimum Yield. The Performance Fee shall be calculated and accrued monthly and be paid annually. The Performance Fees shall be determined on the last Business Day of the applicable fiscal year (the Determination Date ). The Performance Fee may differ for each Class and series of Units. The aggregate Performance Fee payable to the Manager shall be the sum of the amounts calculated on a series-by-series basis. The Total Return per Unit is equal to the percentage appreciation of the Net Asset Value per Unit, without taking into account any accrued Performance Fee but including the amount of any distributions on a per Unit basis. If the Total Return per Unit in any particular fiscal year exceeds the Target Minimum Yield, any return between the Target Minimum Yield and the Hurdle Rate shall be payable to the Manager as a Performance Fee, plus applicable taxes. If the Total Return per Unit in any particular fiscal year exceeds the Hurdle Rate and the Net Asset Value per Unit on the applicable Determination Date exceeds the Prior High NAV, then 20% of the entire return above the Hurdle Rate shall also be payable to the Manager as a Performance Fee, plus applicable taxes. Hurdle Rate means the Target Minimum Yield plus 2% per annum, subject to a maximum of 10% per annum, determined on the first Business Day of each fiscal year and applicable for the entire fiscal year. Prime Rate means the annual rate of interest equivalent to the prime business rate as set by the Bank of Canada from time to time, as published on the Bank of Canada website at determined on the first Business Day of each fiscal year and applicable for the entire fiscal year. Target Minimum Yield means the Prime Rate plus 3.5% per annum, subject to a maximum of 8% per annum, determined on the first Business Day of each fiscal year and applicable for the entire fiscal year. The Prior High NAV per Unit of a series of a Class is the Net Asset Value per Unit of that series of that Class on the most recent Determination Date in respect of which a Performance Fee was paid or payable with respect to such Unit (or if no Performance Fee has yet become 7

11 payable with respect to such Unit, the Net Asset Value per Unit at which such Unit was issued). The initial Target Minimum Yield is 6.5% and will be applicable for the remainder of the 2013 fiscal year. The initial Hurdle Rate is 8.5% and will be applicable for the remainder of the 2013 fiscal year. The Target Minimum Yield is not a guaranteed rate of return on an investment in Units. The Manager may waive or reduce the amount of any Management Fee or Performance Fee to which it is otherwise entitled in its sole and absolute discretion. Floating Target Minimum Yield: Target Minimum Yield Risk Protection: Operating, Ongoing & Other Expenses: Certain Income Tax Considerations: Resale Restrictions: Risk Factors: The Target Minimum Yield of the Partnership is a floating target yield that is adjusted at the beginning of each fiscal year of the Partnership to reflect changes in the Prime Rate. The Target Minimum Yield is equal to the Prime Rate plus 3.5% per annum, subject to a maximum of 8% per annum, and is determined on the first Business Day of each fiscal year and applies for the entire fiscal year. If the Total Return per Unit of a series in any fiscal year is less than the Target Minimum Yield, then the applicable portion of the Management Fee, net of any dealer fees, will be waived by the Manager in respect of such series in order to increase the annual return to the Limited Partners holding Units of such series to not more than the Target Minimum Yield. The Partnership will pay all of the Partnership s administrative and operating expenses, which expenses will include expenses relating to portfolio transactions, taxes, legal, audit and valuation fees and Limited Partner reporting costs. See Fees and Expenses Payable by the Partnership. Income and capital gains realized by the Partnership will be allocated to Limited Partners. There can be no assurance that distributions of cash to Limited Partners by the Partnership will be sufficient to satisfy a Limited Partner s tax liability for the year arising from his or her status as a Limited Partner of the Partnership. A disposition of Units by Limited Partners may trigger capital gains (or capital losses). Upon the dissolution of the Partnership, each Limited Partner will acquire his, her or its pro rata portion of the net assets of the Partnership, in proportion to each Limited Partner s Capital Contribution. A dissolution may trigger capital gains (or capital losses) to Limited Partners; however, if certain requirements in the Tax Act are satisfied, such a distribution may occur on a tax-deferred basis. Each investor should seek independent advice as to the federal and provincial tax considerations of an investment in Units. See Certain Income Tax Considerations. The Units are being offered for sale on a private placement basis in reliance on exemptions from prospectus requirements of applicable Canadian securities laws. As a result, resale of the Units will be restricted in the manner provided by such securities laws. See Resale Restrictions. An investment in Units is speculative and investors should not invest in Units unless they can absorb the loss of some or all of their investment. Investors should consult with their own professional advisors to assess the legal, tax and other aspects of an investment prior to investing in Units. Investors should consider a number of factors in assessing the risks associated with investing in Units, including those generally associated with the investment strategies used by the Manager. See Risk Factors. 8

12 USE OF PROCEEDS FOR THE OFFERING The Partnership will use the net proceeds of the Offering (i) primarily to make Asset-Based Investments and Factoring Investments, and (ii) to fund the ongoing fees, expenses and debt of the Partnership, as described herein. The Manager or other agents as appointed by the General Partner and FundSERV, as applicable, will hold subscription cheques and proceeds received from Subscribers prior to the First Closing until all closing conditions of the Offering have been satisfied, at which time the First Closing will take place. If any Closing, including the First Closing, does not occur, subscription cheques and proceeds relating to such Closing will be returned, without interest or deduction, to the investors. The proceeds from the issue of the Units will be paid to the Partnership at Closing and deposited in the Partnership s bank account and managed on behalf of the Partnership by the Manager. Pending the investment of Available Funds, all such Available Funds will be invested in cash or Short-Term Securities. Interest earned by the Partnership from time to time on funds of the Partnership will accrue to the benefit of the Partnership. THE PARTNERSHIP The Partnership was formed pursuant to the provisions of the Limited Partnerships Act (Ontario) on August 8, The business of the Partnership is investing in a diversified portfolio of Asset-Based Investments and Factoring Investments. The General Partner was incorporated under the laws of the Province of Ontario on August 8, The registered office of the Partnership and the General Partner is 77 King Street West, Suite 2925, P.O. Box 322, Toronto, Ontario, M5K 1K7. The head office of the Partnership and the General Partner is 77 King Street West, Suite 2925, P.O. Box 322, Toronto, Ontario, M5K 1K7. The initial limited partners of the Partnership are Natasha Sharpe and Canada Inc. Investment Objective and Strategy The Partnership s investment objective is to achieve superior risk-adjusted returns with minimal volatility and low correlation to most traditional asset classes. To achieve its investment objective, the Partnership intends to invest in an actively managed portfolio (the Portfolio ) comprised of (i) asset-based loans primarily to Canadian and U.S. based companies that have good quality collateral ( Asset-Based Investments ) and (ii) factored accounts receivable and inventory financing primarily to Canadian and U.S. based companies and Canadian federal and provincial tax credit financing ( Factoring Investments ). The Portfolio will include only Asset-Based Investments that are fully collateralized based on liquidation values and/or potential cash flow events. For Asset-Based Investments, the Portfolio strategy emphasizes liquidation values over reliance on future cash flows. The Portfolio strategy involves a fundamental analysis that identifies good companies that are overlooked by the general financing community and targets diversification through asset type, investment size and industry. Factoring Investments will be well diversified by industry, sector and size according to underwriting standards determined by the Manager on behalf of the Partnership. Each investment follows a rigorous documentation process that is managed by the independent credit function of the Manager. The Partnership may also make incidental investments in assets such as promissory notes, convertible debentures, warrants and other equity sweeteners issued in connection with the primary investments. Investment Guidelines The Partnership will follow the Investment Guidelines for the Partnership set forth in the Partnership Agreement. The Investment Guidelines of the Partnership may be changed from time to time by the Manager to adapt to changing circumstances and the Limited Partners shall be provided not less than 60 days prior written notice of any material changes to the Investment Guidelines. For the purposes of the Investment Guidelines listed below, all amounts and percentage limitations will be determined on the date of the relevant investment, and any subsequent change in any applicable percentage resulting from changing Net Asset Values will not require the disposition of any investment from the Portfolio. The Partnership s Investment Guidelines provide, among other things, as follows: The Partnership will seek to achieve superior long-term performance through a strict and disciplined credit selection strategy with an emphasis on preserving capital and income generation. 9

13 The Partnership will principally provide asset-based financial services to Canadian and U.S. based companies. The product offering includes factoring and receivable financing, which entails financing or purchasing select accounts receivable, as well as asset-based lending, namely, financing secured by tangible assets such as inventory, equipment, buildings, and land. The Partnership will seek to identify companies that may require additional financing, which, traditional sources, namely, large financial institutions, are unable to provide. The Portfolio strategy involves a fundamental analysis that identifies companies with strong management teams and provides for diversification through asset type, investment size and industry. The Partnership will target Asset-Based Investments that have an identifiable catalyst that will enable the borrower to deleverage the loan within a reasonable period of time (typically between 6 months and 36 months). Such deleveraging may come from a variety of sources, including projected free cash flow, accelerating earnings, the possibility of equity issuance, improved operations, assets sales, mergers and acquisitions, refinancing or corporate restructuring. The Asset-Based Investments may have varying terms with respect to overcollateralization, seniority or subordination, purchase price, convertibility, interest terms, and maturity, but will consist primarily of nonparticipating positions, those being positions whereby the Partnership does not have any management influence by way of its investment. The industries in which the Partnership will make Asset-Based Investments and Factoring Investments include but are not limited to apparel, financial and professional services, construction, manufacturing, real estate, leasing, food processing, transportation, chemicals, electronics, oilfield services, telecommunications, textiles, furniture, sporting goods, film and television, and industrial products. From time to time, the Partnership may take the following types of collateral as security: common or preferred stock; warrants to purchase common stock or other equity interests; or real estate/property. However, this will not be a focus of the Partnership. The Partnership is not obligated to hedge against fluctuations in the value of its investments as a result of changes in market interest rates, currency changes, or other events, but intends to mitigate such risks through structuring and favourable asset based lending loan terms (including, but not limited to, interest rate floors, availability reserves, and assignment rights). The Manager will have the sole discretion whether to engage in hedging strategies and in what capacity. The Partnership may utilize a variety of financial instruments including, without limitation, derivatives, options, interest rate swaps, caps and floors, futures, and forward contracts, to seek to hedge against declines in the values of the investments of the Portfolio. In furtherance of the Partnership s investment objective, the Partnership may give guarantees and grant security in favour of third parties to secure the Partnership s obligations and the obligations of intermediary vehicles and it may grant any assistance to intermediary vehicles, including, without limitation, assistance in the management and the development of such companies and their portfolio, financial assistance, loans, advances, or guarantees. The Partnership may pledge, transfer, encumber, or otherwise create security over some or all of the Partnership s assets. Investments may be made by the Partnership through intermediary vehicles, including, without limitation, special purposed vehicles or joint ventures, general or limited partnerships, and limited liability companies. The Partnership may hold investments through joint ventures where the Partnership may seek to retain control over management, sale, and financing of the venture s assets or alternatively will have a viable mechanism for exiting the venture, within a reasonable period of time. Unless otherwise provided for in this offering memorandum, an investment into an intermediary vehicle should be treated as if it was a were direct investment made by the Partnership in the assets of the intermediary vehicle and is therefore not subject to the individual investment concentration investment restriction above. The Partnership will seek to reduce risk in the Portfolio by minimizing the concentration in the Partnership of any individual investment. The Partnership may from time to time impose limitations with respect to size, industry, and geography concentration of its Asset-Based Investments, as determined by the General Partner; however, there can be no assurance that such limitations will not be exceeded from time to time. 10

14 Any unallocated cash will be held by the Partnership until such time as the Partnership identifies attractive investment opportunities or requires additional funding for portfolio management purposes. Any reserve cash held by the Partnership will be used to manage cash flows, pay expenses, and facilitate redemption payments. Such reserve will be held in an interest-bearing account or invested in money market funds, other Short-Term Securities or U.S. Treasury bills. The Partnership may invest up to 10% of the Net Asset Value of the Partnership in assets such as promissory notes, convertible debentures, warrants and other equity sweeteners issued in connection with any Asset- Based Investments or Factoring Investments made by the Partnership. Notwithstanding the foregoing, at the Manager s discretion, the Partnership may invest the entirety of any monies awaiting investment, reinvestment or distribution in fixed income assets. General Investment Restrictions The Available Funds will be invested in accordance with the Partnership s investment objectives and the investment restrictions. The following investment restrictions may not be changed without the approval of the Limited Partners by Extraordinary Resolution: The Partnership shall not invest more than 30% of the Net Asset Value of the Partnership in any one investment. This investment restriction need not be complied with during the initial 12 month period following the date of the Partnership s first investment provided that the Manager endeavours to ensure at all times an appropriate level of diversification of risk within the Portfolio. The Partnership may borrow permanently (either directly or at the level of any intermediary vehicle) for investment purposes, to meet funding commitments in underlying investments, for working capital purposes, and to meet redemption requests of Limited Partners, and secure these borrowings with liens or other security interests in its assets (or the assets of any of its intermediary vehicles), provided that the Portfolio may not, at any point in time, incur a level of borrowing (including any short-term borrowings) in excess of 100% of the Net Asset Value of the Partnership. The Partnership may not use leverage to enhance performance returns. The risk exposure of the Partnership to a single counterparty in over-the-counter derivative transactions may not exceed 30% of the Net Asset Value of the Portfolio. The Partnership will not engage in derivative transactions other than for the purpose of reducing risk (i.e. not for enhancing returns of the Portfolio). Management Fee FEES AND EXPENSES PAYABLE BY THE PARTNERSHIP In consideration for the Manager s services, the Partnership will pay to the Manager the Management Fees attributable to Class A Units, Class F Units and Class I Units as set forth in the following table: Class Class A Units Class F Units Class I Units Management Fee 2% per annum of the Net Asset Value of the Class A Units 1% per annum of the Net Asset Value of the Class F Units Management Fee determined by agreement between the Manager and Subscriber of Class I Units. Such Management Fees, if any, are calculated on each Valuation Date and are payable and payable monthly. Performance Fee The Manager may also receive, for each fiscal year of the Partnership, a Performance Fee (as calculated below), calculated on a series-by-series basis, if, in respect of such fiscal year, the Total Return per Unit on the applicable Determination Date (as defined below) exceeds the Target Minimum Yield, without taking into account any accrued 11

15 Performance Fee but including the amount of any distributions on a per Unit basis. The Performance Fee shall be calculated and accrued monthly and be paid annually. The Performance Fees shall be determined on the last Business Day of the applicable fiscal year (the Determination Date ). The Performance Fee may differ for each Class and series of Units. The aggregate Performance Fee payable to the Manager shall be the sum of the amounts calculated on a series-by-series basis. The Total Return per Unit is equal to the percentage appreciation of the Net Asset Value per Unit, without taking into account any accrued Performance Fee but including the amount of any distributions on a per Unit basis. If the Total Return per Unit in any particular fiscal year exceeds the Target Minimum Yield, any return between the Target Minimum Yield and the Hurdle Rate shall be payable to the Manager as a Performance Fee, plus applicable taxes. If the Total Return per Unit in any particular fiscal year exceeds the Hurdle Rate and the Net Asset Value per Unit on the applicable Determination Date exceeds the Prior High NAV, then 20% of the entire return above the Hurdle Rate shall also be payable to the Manager as a Performance Fee, plus applicable taxes. For this purpose, Hurdle Rate means the Target Minimum Yield plus 2% per annum, subject to a maximum of 10% per annum, determined on the first Business Day of each fiscal year and applicable for the entire fiscal year; Prime Rate means the annual rate of interest equivalent to the prime business rate as set by the Bank of Canada from time to time, as published on the Bank of Canada website at determined on the first Business Day of each fiscal year and applicable for the entire fiscal year; and Target Minimum Yield means the Prime Rate plus 3.5% per annum, subject to a maximum of 8% per annum, determined on the first Business Day of each fiscal year and applicable for the entire fiscal year. The Prior High NAV per Unit of a series of a Class is the Net Asset Value per Unit of that series of that Class on the most recent Determination Date in respect of which a Performance Fee was paid or payable with respect to such Unit (or if no Performance Fee has yet become payable with respect to such Unit, the Net Asset Value per Unit at which such Unit was issued). The initial Target Minimum Yield is 6.5% and will be applicable for the remainder of the 2013 fiscal year. The initial Hurdle Rate is 8.5% and will be applicable for the remainder of the 2013 fiscal year. The Target Minimum Yield is not a guaranteed rate of return on an investment in Units. The Manager may waive or reduce the amount of any Management Fee or Performance Fee to which it is otherwise entitled in its sole and absolute discretion. Floating Target Minimum Yield The Target Minimum Yield of the Partnership is a floating target yield that is adjusted at the beginning of each fiscal year of the Partnership to reflect changes in the Prime Rate. The Target Minimum Yield is equal to the Prime Rate plus 3.5% per annum, subject to a maximum of 8% per annum, and is determined on the first Business Day of each fiscal year and applies for the entire fiscal year. Target Minimum Yield Risk Protection If the Total Return per Unit of a series in any fiscal year is less than the Target Minimum Yield, then the applicable portion of the Management Fee, net of any dealer fees, will be waived by the Manager in respect of such series in order to increase the annual return to the Limited Partners holding Units of such series to not more than the Target Minimum Yield. Offering Expenses The Offering Expenses of the Partnership will be payable by the Partnership. The expenses of the Offering, which include the costs of creating and organizing the Partnership, the costs of printing and preparing this offering memorandum, legal, audit and accounting expenses of the Partnership, FundSERV setup costs, travel, distribution, courier, sales and marketing expenses and other reasonable out-of-pocket expenses incurred by the General Partner and other incidental expenses. Ongoing and Other Expenses The Partnership will also pay for all expenses (inclusive of applicable taxes) incurred in connection with the operation and administration of the Partnership. It is expected that these expenses will include (a) mailing, printing 12

16 and other expenses associated with providing periodic reports to Limited Partners; (b) fees payable to the Manager for performing financial, record keeping, Limited Partner reporting and general operating and administrative services; (c) fees payable to the auditors, valuators, legal advisors and service providers (including bookkeeping charges, registrar and transfer agency costs) of the Partnership; (d) fees payable to a custodian; (e) taxes and ongoing regulatory filing fees; (f) any reasonable out-of-pocket expenses incurred by the General Partner or its agents in connection with their ongoing obligations to the Partnership, including expenses in respect of any independent qualified persons retained to review any of investments; (g) expenses relating to portfolio transactions; (h) insurance and safekeeping fees; and (i) expenses of any action, suit or other proceeding in respect of which or in relation to which the Manager or the General Partner are entitled to indemnity by the Partnership. Dealer Fees The Manager will pay a monthly service commission to participating registered dealers, equal to 1/12th of 1.0% of the Net Asset Value of the Class A Units sold by such dealers then outstanding. Payments are calculated and paid monthly to registered dealers from the Manager s own funds. The General Partner THE GENERAL PARTNER AND THE MANAGER The General Partner was incorporated on August 8, 2013 under the laws of the Province of Ontario. The principal business address of the General Partner is 77 King Street West, Suite 2925, P.O. Box 322, Toronto, Ontario, M5K 1K7 and its registered office address is 77 King Street West, Suite 2925, P.O. Box 322, Toronto, Ontario, M5K 1K7. The General Partner is the general partner of the Partnership and has coordinated the organization and registration of the Partnership and established the Investment Guidelines (defined herein) of the Partnership. The name, municipality of residence, position with the General Partner and principal occupation of each of the directors and officers of the General Partner are as follows: Name and Municipality of Residence Natasha Sharpe... Toronto, Ontario Jenny Virginia Coco... Toronto, Ontario Rock-Anthony Coco... Belle River, Ontario Position with the General Partner Director and President Director and Vice-President Director and Vice-President Principal Occupation President of the Manager Chief Executive Officer of Coco Paving Inc. President of Coco Paving Inc. For biographical information for the directors and officers of the General Partner, please see The Manager, below. The Manager The Manager was incorporated on January 8, 2013 under the laws of Canada. The principal business address of the Manager is 77 King Street West, Suite 2925, P.O. Box 322, Toronto, Ontario, M5K 1K7 and its registered office address is 949 Wilson Avenue, Toronto, Ontario, M3K 1G2. The Partnership has retained the Manager to provide portfolio management, administrative and other services to the Partnership. The Manager will assist with the identification of prospective Canadian and U.S. companies and the negotiation of the terms of Asset-Based Investments and Factoring Investments and will monitor the Portfolio to ensure compliance with the Investment Guidelines. The Manager is currently registered with the Ontario Securities Commission as a (restricted) portfolio manager and exempt market dealer under National Instrument Registration Requirements and Exemptions. The activities of the Manager under its (restricted) portfolio manager registration are limited to advising limited partnerships where the Manager or an affiliate of the Manager (as defined 13

17 in NI ) acts as general partner to those limited partnerships and where the objective of such limited partnerships are similar to those of the Partnership. The name, municipality of residence, position with the Manager and principal occupation of certain of the directors and officers of the Manager are as follows: Name and Municipality of Residence Position with the Manager Principal Occupation Natasha Sharpe... Toronto, Ontario Jenny Virginia Coco... Toronto, Ontario Rock-Anthony Coco... Belle River, Ontario David Sharpe... Toronto, Ontario Director and President Director Director Chief Operating Officer and Chief Compliance Officer President of the Manager Chief Executive Officer of Coco Paving Inc. President of Coco Paving Inc. Chief Operating Officer and Chief Compliance Officer of the Manager Kevin Skells... Toronto, Ontario Chief Financial Officer Director, Finance, Coco Group The following is biographical information for such directors and officers: Natasha Sharpe: Natasha is a Director and President of the Manager. Natasha was previously the Chief Credit Officer for Sun Life Financial where she was responsible for creating risk policy for the company s $110-billion global portfolio of managed assets. Prior to that, Natasha spent over 10 years at BMO Financial Group where she led various teams in risk assessment and corporate finance. In 2010, Natasha was named as one of Canada s Top 40 Under 40. Natasha is a director of public, private, and non-profit companies. She holds a PhD and a Masters of Business Administration from the University of Toronto. Jenny Virginia Coco: Jenny is a Director of the Manager. Jenny is the Chief Executive Officer of Coco Paving Inc., a division of the Coco Group. Jenny joined the Coco Group full time in 1987, having spent many summers learning the family business. Jenny oversees the daily management of the Canadian and U.S. Operations, and is largely responsible for the negotiation of acquisitions as well as overseeing Company expansions, including a concrete pipe manufacturing facility and an aggregate dock for the importing of materials, both of which have resulted in a vertical integration that has allowed Coco Paving to obtain a high degree of success in its heavy construction division. Under Ms. Coco s stewardship, Coco Group has successfully integrated five businesses and acquisitions over the last 12 years. She continues to be the liaison for private-public partnerships for the development of highway infrastructure in Ontario. Jenny has also taken an active role in the expansion of the residential and commercial divisions of the company. Jenny received a Masters of Business Administration (Finance) from the University of Windsor. Jenny has been a member of the Integrated Financial Planning Committee for the London Diocese, and has previously served on the Board of Directors of the University of Windsor and the Federal Business Development Bank of Canada. Rock-Anthony Coco: Rocky is a Director of the Manager. Rocky is President of Coco Paving Inc., a division of the Coco Group where he oversees all activities of the Heavy Construction Division from asphalt paving to underground site servicing and concrete paving. Under Rocky s management, Coco Paving Inc. has successfully tendered and completed all MTO projects since 2004 in South Western Ontario on Highway 402 and Highway 401, encompassing over 50 kilometres of highway infrastructure. Rocky is a civil engineering graduate from the University of Windsor in 1987, and gained his license to practice as a Professional Engineer in He has been a President of the Heavy Construction Association of Windsor. David Sharpe: David is Chief Operating Officer and Chief Compliance Officer of the Manager. David is responsible for the oversight of the firm s compliance system and ensuring there are proper operational controls in place for sustainable growth of the organization. Prior to joining BridgingFinance Inc., David was the President of an 14

18 investment management firm and led a TSX-listing in 2012 of 3 closed-end funds with a market capitalization of approximately $1.2 billion. David has close to two decades of financial services industry experience, in roles such as General Counsel, Chief Compliance Officer and Chief Risk Officer for leading financial organizations, and previously was the head of investigations for the Mutual Fund Dealers Association of Canada. David is a lawyer and has been a member of the Law Society of Upper Canada since David has an LLB from Queen s University, an LLM in Securities Law from Osgoode Hall Law School and a Masters of Business Administration from the Richard Ivey School of Business, University of Western Ontario. Kevin Skells: Kevin is Chief Financial Officer of the Manager. Kevin is responsible for providing strategic management of the accounting and finance functions of the Manager including corporate accounting, financial reporting, budgeting, and regulatory financial compliance. Kevin has public company reporting experience through his time at QHR Technologies (TSX-V: QHR) and has been vice-president and controller for a private company. Kevin began his career at a boutique accounting firm. Kevin received a Honours BA in Economics from Wilfrid Laurier University and earned his Chartered Professional Accountant, Chartered Accountant designation in Management Agreement Pursuant to the Management Agreement, the Manager will provide portfolio management, administrative and other services to the Partnership. The Manager will receive the Management Fee and the Performance Fee from the Partnership for the provision of such services and will be entitled to reimbursement for certain expenses incurred on behalf of the General Partner or the Partnership. The Manager may also provide the Partnership with office facilities, equipment and staff as required and the Partnership will reimburse the Manager for the cost thereof. Further, the Manager will retain all commitment fees and monitoring fees collected from borrowers. The Manager has no obligation to the Partnership other than to render services under the Management Agreement honestly and in good faith and in the best interests of the Partnership and to exercise the degree of care, diligence and skill a reasonably prudent person would exercise in comparable circumstances. The Management Agreement provides that the Manager will not be liable in any way to the Partnership if it has satisfied the duties and the standard of care, diligence and skill set forth above. The Partnership has agreed to indemnify the Manager for any losses as a result of the performance of its duties under the Management Agreement. However, the Manager will incur liability in cases of wilful misconduct, bad faith, negligence or disregard of its duties or standards of care, diligence and skill. The Management Agreement, unless terminated as described below, will continue until the termination of the Partnership. The Manager or the Partnership may terminate the Management Agreement if the other party (i) is in breach or default of the provisions of the Management Agreement and, if capable of being cured, such breach or default has not been cured within forty-five (45) days written notice of such breach or default, (ii) has been declared bankrupt or insolvent and has entered into liquidation or winding-up, whether compulsory or voluntary (and not merely a voluntary liquidation for the purposes of amalgamation or reorganization), or (iii) makes a general assignment for the benefit of creditors or otherwise acknowledges its insolvency. In the event that the Management Agreement is terminated as provided above, the General Partner shall determine, in its sole discretion, whether to appoint a successor manager to carry out the activities of the Manager or to carry out such activities itself in which case the General Partner will be entitled to a fee no greater than that payable to the Manager under the Management Agreement. THE INVESTMENT SELECTION PROCESS The industries in which the Partnership will make Asset-Based Investment and Factoring Investments include but are not limited to apparel, financial and professional services, construction, manufacturing, real estate, leasing, food processing, transportation, chemicals, electronics, oilfield services, telecommunications, textiles, furniture, sporting goods, film and television, and industrial products. The Manager will create a term sheet for each potential Asset-Based Investments and Factoring Investments and the Manager s internal investment team will review and approve the term sheet subject to successful due diligence on collateral and/or projected cash flows. For Asset-Based Investments, the Manager considers the following factors: 15

19 1. industry overview and competitors; 2. market analysis; 3. management team review; 4. financial analysis including projections and cash flows; 5. stress cases; 6. collateral analysis; 7. key risks and mitigants; and 8. exit strategy. Once an Asset-Based Investment is made, the Manager monitors the investment using key process control procedures that are auditable and replicable by third parties. Documentation prior to making a Factoring Investment includes the written analysis of the risk framework, the completion of a pre-proposal checklist, the completion of a credit approval request, and supplementary information. The key process control document supporting each investment is a comprehensive outline of each of the steps in the investment, monitoring and collateral tracking procedures. For Factoring Investments, the Manager considers the following factors: 1. factorable receivables (and/or government of Canada/provincial tax credits and/or appropriate inventory); 2. appropriate additional security, which can include corporate guarantees, personal guarantees, cross-collateralization with machinery, equipment and/or real estate. The Partnership is not relying primarily on this security for repayment but uses it for enhancement of the collateral position; 3. exit strategy; 4. viability of the business; 5. integrity of management; 6. service delivery of the business; 7. return on capital; and 8. capability to implement action plan. The Manager will report to the General Partner on the operation and performance of the Partnership on a semiannual basis, including with respect to compliance with the Investment Guidelines and material contracts as amended from time to time. CERTAIN INCOME TAX CONSIDERATIONS The following is, as of the date hereof, a summary of the principal Canadian federal income tax considerations with respect to the acquisition, ownership and disposition of Units to an investor who, for the purposes of the Income Tax Act (Canada) (the Tax Act ), is resident in Canada, deals at arm s length with the Partnership, is the initial investor in the Units, has not made a functional currency reporting election under the Tax Act, will hold Units as capital property and has invested for his or her own benefit and not as a trustee of a trust. The determination of whether the Units are capital property to a holder will depend, in part, on the holder s particular circumstances. Generally, Units will be considered to be capital property to a holder if acquired by him or her for investment purposes and not acquired or held in the course of carrying on a business of trading or dealing in securities or as part of an adventure in the nature of trade. This summary is based on the current provisions of the Tax Act, the regulations thereunder and the current published administrative practices and assessing policies of the Canada Revenue Agency (the CRA ) and also takes into account all specific proposals to amend the Tax Act and the regulations thereunder (the regulations ) publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the Proposals ). Except for the foregoing, this summary does not take into account or anticipate any changes in law, whether by legislative, regulatory, administrative or judicial action. Furthermore, this summary does not take into account provincial or foreign income tax legislation or considerations. There can be no assurance that any Proposals will be enacted in the form proposed, if at all. This summary is based on the assumption that the Partnership is not a tax shelter as that term is defined in the Tax Act and an investment in the Partnership is not a tax shelter investment for the purposes of the Tax Act. This 16

20 summary further assumes that at all times, all members of the Partnership are resident in Canada for the purpose of the Tax Act and that they will comply in all respects with the restrictions on investors pursuant to the Partnership Agreement. This summary assumes that not more than 50% of the Units are held by financial institutions. The income and other tax consequences of acquiring, holding or disposing of Units vary according to the status of the investor, the province or territory in which the investor resides or carries on business and, generally, the investor s own particular circumstances. The following description of income tax matters is, therefore, of a general nature only and is not intended to constitute advice to any particular investor. The income tax consequences described in this summary are based on the assumptions that an investor does not undertake or arrange any transaction relating to his or her Units, other than those referred to in this offering memorandum, and that none of the transactions relating to the investor s Units and referred to in this offering memorandum is undertaken or arranged primarily to obtain a tax benefit other than those specifically described herein. Each investor should seek independent advice regarding the tax consequences of investing in Units, based upon the investor s own particular circumstances. Computation of Income or Loss The Partnership is not itself a taxable entity. However, the Partnership is required to compute its income (or loss) in accordance with the provisions of the Tax Act as if it were a separate person resident in Canada. The fiscal year of the Partnership ends on December 31 in each calendar year. In computing the income or loss of the Partnership, deductions will be claimed in respect of all expenses of the Partnership in accordance with and to the extent permitted under the Tax Act. Each Limited Partner will generally be required to include, in computing his or her income or loss for tax purposes for a taxation year, his or her share of the income or loss (including taxable capital gains and allowable capital losses) allocated to such Limited Partner for each fiscal year of the Partnership for such year, whether or not he or she has received or will receive a distribution from the Partnership. Income and loss of the Partnership for tax purposes will be allocated to Limited Partners in accordance with the provisions of the Partnership Agreement. The Partnership is not required to make distributions to Limited Partners in any year, even when income will be allocated to Limited Partners for purposes of the Tax Act. As a result, Limited Partners may be required to pay tax on such income allocation even though the Limited Partner has not received a cash distribution. The Partnership will furnish to each Limited Partner such information as is required by the CRA to assist in declaring the Limited Partner s share of the Partnership s income or loss. However, the responsibility for filing any required tax returns and reporting his or her share of the income or loss of the Partnership falls solely upon each Limited Partner. In general, every member of a partnership must, in accordance with the regulations, file an information return in prescribed form which contains specified information for each taxation year of the partnership. The General Partner has agreed to file the necessary information return, which will be deemed to have been made by each member of the Partnership. In general, a Limited Partner s share of any income or loss of the Partnership from any source or from sources in a particular place will be treated as if it were income or loss of the Limited Partner from that source or from sources in that particular place and any provisions of the Tax Act applicable to that type of income or loss will apply to the Limited Partner. Subject to the at-risk rules discussed below, a Limited Partner s share of the losses, if any, of the Partnership for any fiscal year may be applied against his or her income from any other source to reduce net income for the relevant taxation year and, to the extent it exceeds other income for that year, carried back three years and forward twenty years against taxable income of such other years. A Limited Partner s share of the allowable capital losses of the Partnership may be applied only against taxable capital gains (discussed below) and may be carried back three years or forward indefinitely, subject to the rules in the Tax Act. The Tax Act provides that, notwithstanding the income or loss allocation provisions of the Partnership Agreement, any losses of the Partnership from a business or property allocated to a Limited Partner will be deductible by such Limited Partner in computing his or her income for a taxation year only to the extent that his or her share of the loss does not exceed his or her at-risk amount in respect of the Partnership at the end of the year. In general terms, the at-risk amount of a Limited Partner in respect of the Partnership at a particular time is (i) the adjusted cost base of his or her Units at that time plus (ii) if the particular time is at the end of the fiscal period of the Partnership, his or her share of the income of the Partnership for the fiscal year, less the aggregate of (iii) all amounts owing by the Limited Partner to the Partnership or to a person with whom the Partnership does not deal at arm s length and (iv) 17