Monegy High Yield Bond Fund Unit Traded Fund (UTF)

Transcription

1 A copy of this preliminary prospectus has been filed with the securities regulatory authorities in each of the provinces and territories of Canada but has not yet become final for the purpose of the sale of securities. Information contained in this preliminary prospectus may not be complete and may have to be amended. The securities may not be sold until a receipt for the prospectus is obtained from the securities regulatory authorities in each of the provinces and territories of Canada. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and only by persons permitted to sell these securities. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended or any state securities laws and may not be offered or sold in the United States or to U.S. persons except pursuant to an exemption from the registration requirements of those laws. See Plan of Distribution. PRELIMINARY PROSPECTUS Initial Public Offering March 31, 2016 Monegy High Yield Bond Fund Unit Traded Fund (UTF) Maximum $ ( Class A Units and/or Class T Units) Monegy High Yield Bond Fund (the Fund ) is a closed-end investment fund established under the laws of the Province of Ontario that proposes to issue convertible Class A Units (the Class A Units ) and traded Class T Units (the Class T Units and, together with the Class A Units, the Units ) of the Fund at a price of $10.00 per Class A Unit and Class T Unit (the Offering ). The Class T Units are designed for fee-based and/or institutional accounts. The Class A Units will not be listed on a stock exchange, but will be convertible into Class T Units on a weekly basis. The Fund uses the Unit Traded Fund (UTF) structure. See Unit Traded Fund Structure. The investment objectives of the Fund are to provide holders of Units (the Unitholders ) with a high level of total return through a combination of: (i) monthly cash distributions; and (ii) the opportunity for capital appreciation, by investing in a portfolio comprised primarily of High Yield (as defined below) fixed income securities issued by U.S. corporations (the Portfolio ) actively managed by Monegy, Inc. (the Portfolio Manager or Monegy ). See Investment Objectives. BMO Nesbitt Burns Inc. (the Manager or BMONBI ), as manager of the Fund, will be responsible or arrange for the management and administration of the Fund. Monegy will act as the portfolio manager of the Fund and will be responsible for implementing the investment strategies of the Fund. See Organization and Management Details of the Fund. The Manager will pay all fees and all expenses of the Offering exceeding 0.50% of the gross proceeds of the Offering. As a result, the net asset value per Unit immediately following the Closing will be at least $9.95. Price: $10.00 per Class A Unit or Class T Unit Minimum purchase: 100 Class A Units or Class T Units

2 Price to the Public (1) Net Proceeds to the Fund (2)(3) Per Class A Unit... $10.00 $10.00 Per Class T Unit $10.00 $10.00 Total Minimum Offering (4)... $10,000,000 $10,000,000 Total Maximum Offering (4)... $ $ Notes: (1) The Offering price was established by negotiation between the Manager and the Agents (as defined below). (2) No compensation will be paid by the Fund to the Agents. The Manager will pay a fee to the Agents equal to $0.45 per Class A Unit and $0.20 per Class T Unit issued. See Plan of Distribution and Fees and Expenses. (3) Before deducting the expenses of the Offering. The Manager will pay all fees and all expenses of the Offering exceeding 0.50% of the gross proceeds of the Offering. As a result, the net asset value per Unit immediately following the Closing will be at least $9.95. See Use of Proceeds and Fees and Expenses. (4) There will be no Closing unless at least 1,000,000 Units are sold. If subscriptions for a minimum of 1,000,000 Units have not been received within 90 days following the date of issuance of a receipt for the final prospectus, the Offering may not continue without the consent of the securities authorities and those who have subscribed for Units on or before such date. Class A Units are intended to be purchased under the Offering by investors who intend to hold their Class A Units for at least thirty-six (36) months with the understanding that an Early Exchange Fee (as defined below) will apply if the Class A Units are converted or redeemed prior to the Automatic Conversion Date (as defined below). Thirty-six (36) months after the Closing the Class A Units will automatically convert into Class T Units and trade on the Toronto Stock Exchange (the TSX ). See Attributes of the Securities. There is currently no market through which the Units may be sold and purchasers may not be able to resell securities purchased under this prospectus. The Fund has applied to list the Class T Units on the TSX. Listing will be subject to the Fund fulfilling all the initial listing requirements of the TSX, including distribution of the Units to a minimum number of public holders. The Class A Units will not be listed on a stock exchange; however, holders of Class A Units may convert Class A Units into Class T Units on a weekly basis and it is expected that liquidity for the Class A Units will be primarily obtained by means of conversion into Class T Units and the sale of those Class T Units on the TSX. See Plan of Distribution and Attributes of the Securities Conversion of Class A Units. There is no assurance that the Fund will be able to achieve its investment objectives. The Class T Units may trade at a discount to the Net Asset Value per Class T Unit. The terms and conditions attaching to Class T Units have been designed to attempt to reduce or eliminate a market value discount from the NAV per Class T Unit by way of the Fund s mandatory market purchase program, as described under Attributes of the Securities Mandatory Market Purchase Program. In addition, the Fund may enter into a total return swap ( Swap ) in respect of the Class T Units which the Manager anticipates will cause the Class T Units to trade closer to the NAV per Class T Unit. See Attributes of the Securities Total Return Swap. See Risk Factors for a discussion of certain factors that should be considered by prospective investors in the Units including with respect to the Fund s use of leverage. The Fund is not a trust company and, accordingly, is not registered under the trust company legislation of any jurisdiction. Units are not deposits within the meaning of the Canada Deposit Insurance Corporation Act (Canada) and are not insured under provisions of such legislation or any other legislation. See Risk Factors. BMO Nesbitt Burns Inc., CIBC World Markets Inc., National Bank Financial Inc., Scotia Capital Inc., Canaccord Genuity Corp., GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Global Securities Corporation, Industrial Alliance Securities Inc., Laurentian Bank Securities Inc., Mackie Research Capital Corporation, Manulife Securities Incorporated and PI Financial Corp. (collectively, the Agents ) conditionally offer the Units on a best efforts basis, subject to prior sale, if, as and when issued by the Fund and accepted by the Agents in accordance with the conditions contained in the Agency Agreement (as defined below), and subject to the approval of certain legal matters on behalf of the Fund and the Manager by Blake, Cassels & Graydon LLP and on behalf of the Agents by McCarthy Tétrault LLP. See Plan of Distribution. BMONBI is one of the Agents in connection with the Offering. BMONBI is also the promoter of the Fund, may provide leverage to the Fund, will administer the operations of the Fund pursuant to the Management Agreement (as defined below) and will receive fees therefor and may enter into the Recirculation Agreement (as defined below) with the Fund. BMO Asset Management Inc. ( BMOAM ) will provide fund accounting and valuation services to the Fund and Monegy will provide portfolio advisory services to the Fund. Each of BMONBI, BMOAM and Monegy is ii -

3 an affiliate of Bank of Montreal. Accordingly, the Fund may be considered a connected issuer of BMONBI under applicable securities legislation by virtue of BMONBI s relationship with the Fund. See Relationship between the Fund and Agents. Subscriptions for Units will be received subject to acceptance or rejection in whole or in part and the right is reserved to close the subscription books at any time without notice. Closing of the Offering is expected to occur on or about, 2016 (the Closing Date ), or such later date as the Fund and the Agents may agree, but in any event not later than 90 days after the issuance of a receipt for the final prospectus of the Fund. Registrations and transfers of Units will be effected through the book-entry only system administered by CDS Clearing and Depository Services Inc. Beneficial owners will not have the right to receive physical certificates evidencing their ownership. See Plan of Distribution and Attributes of the Securities - Registration of Units iii -

4 TABLE OF CONTENTS PROSPECTUS SUMMARY...1 SUMMARY OF FEES AND EXPENSES...7 Fees and Expenses Payable by the Manager...7 Fees and Expenses Payable by the Fund...8 Fees and Expenses Payable Directly by Unitholders...8 INFORMATION FROM THIRD-PARTY SOURCES...10 FORWARD LOOKING STATEMENTS...10 GLOSSARY OF TERMS...11 OVERVIEW OF THE LEGAL STRUCTURE OF THE FUND...15 INVESTMENT OBJECTIVES...15 UNIT TRADED FUND STRUCTURE...15 INVESTMENT STRATEGIES...16 Investment Process...16 Use of Derivatives...17 Currency Hedging...17 Leverage...17 U.S. High Yield Bond Fund...18 Indicative Portfolio...20 OVERVIEW OF THE SECTOR THAT THE FUND INVESTS IN...24 INVESTMENT RESTRICTIONS...29 FEES AND EXPENSES...30 Fees and Expenses Payable by the Manager...30 Fees and Expenses Payable by the Fund...30 Fees and Expenses Payable by Unitholders...31 RISK FACTORS...32 DISTRIBUTION POLICY...36 PURCHASES OF UNITS...37 Method to Purchase Units...37 REDEMPTION OF UNITS...38 Annual Redemption of Class T Units...38 Monthly Redemption...38 Exercise of Redemption Right...39 Resale of Units Tendered for Redemption...39 Suspension of Redemptions...39 INCOME TAX CONSIDERATIONS...40 Status of the Fund...40 Taxation of the Fund...41 Taxation of Unitholders...43 Tax Implications of the Fund s Distribution Policy Page

5 Taxation of Registered Plans...44 ORGANIZATION AND MANAGEMENT DETAILS OF THE FUND...44 The Manager...44 Directors and Certain Executive Officers of the Manager...45 The Portfolio Manager...46 Brokerage Arrangements...47 Conflicts of Interest...48 Independent Review Committee...48 The Trustee...49 The Custodian...50 Fund Accounting...50 Auditor...50 Transfer Agent and Registrar...51 Promoter...51 Accounting and Reporting...51 CALCULATION OF NET ASSET VALUE...51 Calculation of Net Asset Value and NAV per Unit...51 Valuation Policies and Procedures of the Fund...51 Reporting of Net Asset Value...52 ATTRIBUTES OF THE SECURITIES...52 Description of the Securities Distributed...52 Conversion of Class A Units...53 Registration of Units...54 Voting Rights in the Portfolio Securities...54 Mandatory Market Purchase Program...54 Total Return Swap...55 Take-over Bids...55 UNITHOLDER MATTERS...56 Meetings of Unitholders...56 Matters Requiring Unitholder Approval...56 Amendments to the Declaration of Trust...56 Reporting to Unitholders...57 Exchange of Tax Information...57 TERMINATION OF THE FUND...57 USE OF PROCEEDS...58 PLAN OF DISTRIBUTION...58 RELATIONSHIP BETWEEN THE FUND AND AGENTS...59 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS...59 PROXY VOTING DISCLOSURE FOR PORTFOLIO SECURITIES HELD...59 MATERIAL CONTRACTS

6 EXPERTS...60 PURCHASERS STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION...60 INDEPENDENT AUDITOR S REPORT... F-1 MONEGY HIGH YIELD BOND FUND STATEMENT OF FINANCIAL POSITION... F-2 MONEGY HIGH YIELD BOND FUND NOTES TO THE STATEMENT OF FINANCIAL POSITION... F-3 CERTIFICATE OF THE FUND, THE MANAGER AND THE PROMOTER...C-1 CERTIFICATE OF THE AGENTS...C

7 PROSPECTUS SUMMARY The following is a summary of the principal features of the offering (the Offering ) and should be read together with the more detailed information and financial data and statements contained elsewhere in this prospectus. Unless otherwise indicated, all references to dollar amounts in this prospectus are to Canadian dollars. Issuer: Unit Traded Fund Structure: Offering: Monegy High Yield Bond Fund (the Fund ) is a closed-end investment fund established as a trust under the laws of the Province of Ontario pursuant to a declaration of trust (the Declaration of Trust ) dated as of, See Overview of the Legal Structure of the Fund. The Fund uses the Unit Traded Fund (UTF) structure which has been developed to accomplish two goals: (i) to enable the Fund to invest substantially all of the gross proceeds from the Offering in the Portfolio; and (ii) to encourage the Class T Units to trade in the market at a price not less than 98.5% of their net asset value throughout the life of the Fund. See Unit Traded Fund Structure. The Offering consists of convertible Class A Units (the Class A Units ) and traded Class T Units (the Class T Units and, together with the Class A Units, the Units ) of the Fund at a price of $10.00 per Class A Unit and Class T Unit (the Offering ). The Class T Units are designed for fee-based and/or institutional accounts. The Class A Units will not be listed on a stock exchange but will be convertible into Class T Units on a weekly basis. Class A Units are intended to be purchased under the Offering by investors who intend to hold their Class A Units for at least thirty-six (36) months with the understanding that an Early Exchange Fee (as defined below) will apply if the Class A Units are converted or redeemed prior to the Automatic Conversion Date. Class A Units will be automatically converted into Class T Units on, 2019 (the Automatic Conversion Date ), with no Early Exchange Fee. Holders of Class T Units cannot convert Class T Units into Class A Units. While on Closing the NAV per Unit of each class will be the same, after the closing of the Offering the NAV per Unit of each class will not be the same as a result of different distributions payable and management fees charged to each class of Units. See Attributes of the Securities, Plan of Distribution and Fees and Expenses. Maximum Issue: Minimum Issue: Price: $ ( Units). $10,000,000 (1,000,000 Units). $10.00 per Class A Unit and Class T Unit. Minimum Subscription: 100 Class A Units or Class T Units ($1,000). Investment Objectives: Investment Strategies: The investment objectives of the Fund are to provide holders of Units (the Unitholders ) with a high level of total return through a combination of: (i) monthly cash distributions; and (ii) the opportunity for capital appreciation, by investing in a portfolio comprised primarily of High Yield fixed income securities issued by U.S. corporations (the Portfolio ) actively managed by Monegy, Inc. (the Portfolio Manager or Monegy ). See Investment Objectives. The Portfolio will be actively managed by Monegy, and will be comprised primarily of High Yield fixed income securities (bonds and debentures) issued by U.S. corporations. The Fund aims to provide access to the High Yield fixed income markets that would otherwise be difficult for retail investors to obtain directly. Monegy s investment process seeks to provide long term outperformance over full credit

8 cycles, while minimizing default risk, and providing downside protection. Monegy aims to avoid defaults and major principal losses through rigorous initial screening and a strong sell discipline while focusing on higher quality issuers with solid fundamentals. Monegy seeks to deliver high yield returns with less realized volatility than the broader High Yield market. Monegy s investment process combines quantitative portfolio screening tools with traditional fundamental credit analysis to construct highly diversified high yield portfolios on a bottom-up basis, with a top-down sector overlay aimed at minimizing undue sector or issuer concentrations. While the Portfolio Manager will invest primarily in High Yield fixed income securities, the Portfolio Manager may use derivatives such as options, futures, forward contracts, swaps and other derivative instruments for both hedging and non-hedging purposes to, among other things, seek to: (i) protect the Fund against potential losses; (ii) reduce the impact of volatility on the Fund; and (iii) gain exposure to securities without buying the securities directly. The Portfolio Manager will have the discretion to invest up to 10% of the NAV of the Fund in securities of mutual funds or exchange traded funds managed by BMONBI or other mutual fund managers. See Investment Strategies. Currency Hedging: Leverage: The Portfolio will include securities denominated primarily in U.S. dollars. The Portfolio Manager will hedge substantially all of the U.S. dollar exposure back to the Canadian dollar, however, it is not intended that the interest and other distributions on the Portfolio Securities will be hedged back to the Canadian dollar. See Investment Strategies Currency Hedging. The Fund may use various forms of leverage, including through borrowings and margin facilities, in an amount not exceeding 33.3% of the Total Assets, for the purposes of purchasing additional securities for the Portfolio. Accordingly, at the time such leverage is incurred, the maximum amount of leverage that the Fund could employ is 1.50:1 (total long positions (including leveraged positions) divided by the net assets of the Fund). If at any time the amount of leverage employed to purchase additional securities exceeds the threshold, the Portfolio Manager will cause the leverage to be reduced to below such threshold as soon as reasonably practicable. The amount of leverage, if any, used by the Fund will vary from time to time based on the Portfolio Manager s assessment of market conditions and cash flow requirements. Initially, the Fund is expected to employ leverage of approximately 30% of the Total Assets. The Fund may also (but is not required to) borrow up to 5% of the value of the Total Assets for various purposes, including to effect market purchases of Class T Units, maintain liquidity and fund redemptions. See Investment Strategies Leverage and Risk Factors. Distribution Policy: The Fund will not have a fixed distribution but intends to pay monthly cash distributions based on, among other things, the actual and expected returns on the Portfolio. The Manager will annually determine in of each year the indicative distribution amounts for the year based upon the prevailing market conditions and an estimate of distributable cash flow from the Portfolio for such year. The Fund intends to make monthly distributions to Unitholders of record on the last Business Day of each month. Distributions will be paid on a Business Day designated by the Manager that will be on or about the 15th day of the following month. The monthly distributions are initially targeted to be $0.05 per Class A Unit ($0.60 per annum per Class A Unit) representing an annual yield of 6.0% on the $10.00 per Class A Unit issue price and $ per Class T Unit ($0.70 per annum per Class T Unit)

9 representing an annual yield of 7.0% on the $10.00 per Class T Unit issue price. The initial cash distribution is anticipated to be payable to Unitholders of record on, 2016, based on an anticipated closing date of, In order for the Fund to maintain a stable NAV per Unit while making the initial targeted monthly distribution (assuming an offering size of $50 million and expenses are as disclosed herein), the Portfolio would be required to generate a return of approximately 6.47% per annum with respect to the Class A Units and 6.38% per annum with respect to the Class T Units through interest and other income or distributions on the Portfolio Securities, capital appreciation or a combination of the foregoing. Based on the anticipated composition of the Portfolio, initial leverage of 30% of the Total Assets and the expected interest and other income or distributions on the Portfolio Securities, the Portfolio is expected to generate net cash flow that exceeds the initial targeted distribution level for the Class A Units and the Class T Units. If the return on the Portfolio and the increase in the value of the Portfolio is less than the amount necessary to fund the monthly distributions and all expenses of the Fund and if the Manager chooses nevertheless to ensure that the monthly distributions are paid to Unitholders, this will result in a portion of the capital of the Fund being returned to Unitholders and, accordingly, the Net Asset Value per Unit would be reduced. If in any taxation year, after the monthly distributions, there would remain in the Fund additional net income or net realized capital gains, the Fund will, after December 15 but on or before December 31 of the calendar year in which such taxation year ends and before the end of any other taxation year of the Fund, be required to pay or make payable such net income and net realized capital gains as one or more year-end special distributions to Unitholders as is necessary to ensure that the Fund will not be liable for income tax on such amounts under Part I of the Tax Act (after taking into account all available deductions, credits and refunds). The amount of distributions may fluctuate from month to month and there can be no assurance that the Fund will make any distribution in any particular month or months or that the indicative distribution target will be met. The Fund intends that the monthly distributions will be paid in cash. However, year-end special distributions may be paid in cash and/or Units from time to time. See Investment Objectives, Risk Factors and Distribution Policy. Termination: Use of Proceeds: The Fund does not have a fixed termination date and may be terminated by Extraordinary Resolution of the Unitholders. The Manager may, in its discretion, terminate the Fund without the approval of Unitholders if, in the opinion of the Manager, the NAV of the Fund is reduced as a result of redemptions or otherwise so that it is no longer economically feasible to continue the Fund and/or it would be in the best interests of the Unitholders to terminate the Fund. Upon termination, the net assets of the Fund will be distributed to Unitholders on a pro rata basis based on relative NAV per Unit. The Fund will issue a press release at least 15 days and not more than 90 days prior to a termination date. See Termination of the Fund. The Fund will use substantially all of the gross proceeds of the Offering to acquire the Portfolio Securities. See Use of Proceeds. Redemption of Units: Commencing in 2019, Class T Units (and, in 2019, Class A Units) may be surrendered annually for redemption during the period from until 5:00 p.m. (Toronto time) on the last Business Day in of each year (the Annual Redemption Notice Period ) subject to the Fund s right to suspend redemptions in certain circumstances. Class T Units (and, in 2019, Class A Units) properly surrendered for redemption during the Annual Redemption Notice

10 Period will be redeemed on the second last Business Day in of each year (the Annual Redemption Date ) and the Unitholder will receive payment on or before the 15th Business Day following the Annual Redemption Date. Redeeming Unitholders will receive a redemption price per Class T Unit equal to the Net Asset Value per Class T Unit on the Annual Redemption Date, less any costs and expenses incurred by the Fund in order to fund such redemption, including brokerage costs, if any. Conversion of Class A Units into Class T Units: A holder of Class A Units may convert such Class A Units into Class T Units on a weekly basis and it is expected that liquidity for the Class A Units will be obtained primarily by means of conversion into Class T Units and the sale of such Class T Units through the facilities of the TSX. Class A Units may be converted in any week on the first Business Day of such week ( Conversion Date ) by delivering a notice and surrendering such Class A Units by 5:00 p.m. (Toronto time) at least five Business Days prior to the applicable Conversion Date. For each Class A Unit so converted, a holder will receive that number of Class T Units that is equal to the NAV per Class A Unit as of the close of trading on the Conversion Date divided by the NAV per Class T Unit as of the close of trading on the Conversion Date. No fractions of a Class T Unit will be issued upon any conversion of Class A Units and any fractional amounts will be rounded down to the nearest whole number of Class T Units. Any conversion of Class A Units into Class T Units prior to the Automatic Conversion Date will be subject to an early exchange fee payable by the Unitholder (the Early Exchange Fee ) per Class A Unit converted equal to: (i) 3% of NAV per Class A Unit from Closing until and including the last Business Day of the 12 th month following Closing; (ii) 2% of NAV per Class A Unit from the first Business day of the 13 th month following Closing until and including the last Business Day of the 24 th month following Closing; and (iii) 1% of NAV per Class A Unit from the first Business Day of the 25 th month following Closing until the Automatic Conversion Date. Immediately prior to conversion, the Fund will redeem such number of Class A Units as is necessary to pay the Early Exchange Fee from the redemption proceeds. The Early Exchange Fee will be remitted by the Fund, on behalf of the holder, to the Manager. Class A Units will be automatically converted into Class T Units on, 2019 (the Automatic Conversion Date ). No Early Exchange Fee will apply when Class A Units are automatically converted into Class T Units on the Automatic Conversion Date. Based on counsel s understanding of the current administrative position of the CRA, a conversion of Class A Units into Class T Units will not constitute a disposition of such Class A Units for the purposes of the Tax Act. The redemption of any Class A Unit in order to pay an Early Exchange Fee will generally result in a capital gain (or capital loss) for the redeeming Unitholder. An amount equal to the Early Exchange Fee paid by a Unitholder on a conversion of Class A Units into Class T Units will be added to the cost of the Class T Units received on the conversion. See Income Tax Considerations Taxation of Unitholders. Mandatory Market Purchase Program: To seek to enhance liquidity and provide market support for the Class T Units, the Declaration of Trust provides that the Fund will undertake a mandatory market purchase program pursuant to which the Fund will offer to purchase any Class T Units offered in the market at a price that is 98.5% or less of the latest NAV per Class T Unit. Pursuant to the mandatory market purchase program, the Fund will purchase up to a maximum amount in any rolling 10 trading day period of 10% of the number of Class T Units outstanding at the beginning of such 10 trading day period, subject to a limit of 2% of the number of Class T Units outstanding each day and subject to the terms set out in the Declaration of Trust. See

11 Attributes of the Securities Mandatory Market Purchase Program. Risk Factors: An investment in the Fund involves risks. In addition to the considerations set out elsewhere in this prospectus, the following are certain risk factors and considerations related to the Fund which prospective investors should consider before purchasing Units: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv) (xvi) (xvii) (xviii) (xix) (xx) (xxi) (xxii) (xxiii) (xxiv) (xxv) no assurance of achieving investment objectives; risks relating to fluctuations in the value of Portfolio Securities and performance of the Portfolio; general risks of investing in debt securities; high-yield securities; risks relating to use of leverage; illiquid securities; concentration risk; reliance on the Manager and the Portfolio Manager; volatility in the trading price of Class T Units; risks relating to redemptions and market purchases; Class A Units will not be listed on any exchange; risks associated with multiple classes of units; risks relating to market disruptions; risks relating to global financial developments; tax related risks; cybersecurity risk; risks relating to ownership interest; loss of investment risk; changes in legislation and regulatory environment; the possibility that Portfolio Securities may be cease-traded; lack of prior operating history of the Fund; risks relating to the status of the Fund; potential conflicts of interest; risks relating to the nature of the Units; and the Fund is not a trust company. See Risk Factors. Income Tax Considerations: A Unitholder who is an individual resident in Canada will generally be required to include in computing income for a particular taxation year of the Unitholder the amount of the

12 Fund s net income, including the taxable portion of the net realized capital gains of the Fund, paid or payable to the Unitholder in that particular year, whether paid in cash or Units. To the extent that amounts payable to Unitholders are designated by the Fund as taxable capital gains, those amounts will be treated as taxable capital gains realized by such Unitholders. To the extent so designated by the Fund, foreign source income earned by, and foreign tax paid by, the Fund will be treated as foreign source income of, and foreign tax paid by, Unitholders for purposes of determining whether Unitholders are entitled to claim a foreign tax credit for their share of such foreign tax paid by the Fund. To the extent that distributions to a Unitholder who holds Units as capital property exceed the Unitholder s share of the Fund s net income and net realized capital gains for the taxation year of the Fund, the excess will not be included in the Unitholder s income but will reduce the adjusted cost base of the Unitholder s Units, and if a negative adjusted cost base results, the Unitholder will be considered to realize a capital gain equal to such negative amount. A Unitholder who disposes of Units held as capital property (on redemption or otherwise) will generally realize a capital gain (or capital loss) to the extent that the proceeds of disposition of the Units exceed (or are less than) the adjusted cost base of such Units and any reasonable costs of disposition. Each investor should satisfy himself or herself as to the federal, provincial and territorial tax consequences of an investment in the securities offered hereby by obtaining advice from his or her tax advisor. See Income Tax Considerations. Eligibility for Investment: Organization and Management of the Fund: In the opinion of Blake, Cassels & Graydon LLP, counsel to the Fund, and McCarthy Tétrault LLP, counsel to the Agents, provided that the Fund qualifies as a mutual fund trust within the meaning of the Tax Act, the Units, if issued on the date hereof, would be qualified investments for trusts governed by registered retirement savings plans, registered retirement income funds, deferred profit sharing plans, registered disability savings plans, registered education savings plans and tax-free savings accounts. Unitholders planning to hold their Units in a tax-free savings account, registered retirement savings plan or registered retirement income fund should consult their own tax advisor regarding whether the Units would be prohibited investments for purposes of the Tax Act for such plan trusts. See Income Tax Considerations - Taxation of Registered Plans. Manager BMO Nesbitt Burns Inc. will act as the manager of the Fund and will perform or arrange for the performance of management and administration services for the Fund. The principal office of the Manager is located at 1 First Canadian Place, 100 King Street West, 3 rd Floor Podium, P.O. Box 150, Toronto, Ontario, M5X 1H3. See Organization and Management Details of the Fund The Manager. Portfolio Manager Monegy, Inc. will be retained as the portfolio manager of the Fund and will be responsible for implementing the investment strategies of the Fund. Monegy is the boutique high yield asset management specialist within BMO Global Asset Management, and is ultimately owned by the Bank of Montreal. Monegy has been managing high yield bond and loan portfolios for 16 years, and offers investors a broad suite of fund vehicles, including separate accounts for investments over $50 million, mutual funds, pooled funds or collective investment trusts. As of February 29, 2016, Monegy had US$1.8 billion in total assets under management. See Organization and Management Details of the Fund - The Portfolio Manager

13 Promoter The Manager may be considered a promoter of the Fund within the meaning of the securities legislation of certain provinces or territories of Canada by reason of its initiative in organizing the Fund. See Organization and Management Details of the Fund Promoter. Trustee at its location in Toronto, Ontario, is the trustee of the Fund. See Organization and Management Details of the Fund The Trustee. Custodian, at its principal offices in Toronto, Ontario, will act as custodian (the Custodian ) of the assets of the Fund. See Organization and Management Details of the Fund The Custodian. Valuation Agent BMO Asset Management Inc., at its principal office in Toronto, Ontario, has been retained as the valuation agent of the Fund (the Valuation Agent ) to provide fund accounting and valuation services to the Fund. See Organization and Management Details of the Fund Fund Accounting. Transfer Agent and Registrar CST Trust Company, at its principal offices in Toronto, Ontario, will be appointed the registrar, transfer agent and distribution agent for the Units pursuant to a registrar, transfer agency and distribution agency agreement to be entered into as of the Closing Date. See Organization and Management Details of the Fund Transfer Agent and Registrar. Auditor The auditor of the Fund is PricewaterhouseCoopers LLP, Chartered Professional Accountants, Licensed Public Accountants, located in Toronto, Ontario. See Organization and Management Details of the Fund Auditor. Agents: BMO Nesbitt Burns Inc., CIBC World Markets Inc., National Bank Financial Inc., Scotia Capital Inc., Canaccord Genuity Corp., GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Global Securities Corporation, Industrial Alliance Securities Inc., Laurentian Bank Securities Inc., Mackie Research Capital Corporation, Manulife Securities Incorporated and PI Financial Corp. (collectively, the Agents ) conditionally offer the Units on a best efforts basis, subject to prior sale, if, as and when issued by the Fund and accepted by the Agents in accordance with the conditions contained in the Agency Agreement, and subject to the approval of certain legal matters on behalf of the Fund and the Manager by Blake, Cassels & Graydon LLP and on behalf of the Agents by McCarthy Tétrault LLP. SUMMARY OF FEES AND EXPENSES The following tables contain a summary of the fees and expenses payable by the Manager, the Fund and the Unitholders. The fees and expenses payable by the Fund and the Unitholders will reduce the value of the Unitholders investment in the Fund. For further particulars, see Fees and Expenses. Fees and Expenses Payable by the Manager Type of Fee Amount and Description

14 Fees Payable to the Agents: Expenses of the Offering: $0.20 per Class T Unit (2.0%) and $0.45 per Class A Unit (4.5%). The Agents fees will be paid by the Manager. In addition to the Agents fees, the Manager will pay all expenses of the Offering exceeding 0.50% of the gross proceeds of the Offering. The Manager estimates the expenses of the Offering to be approximately $550,000. Fees and Expenses Payable by the Fund Type of Fee Expenses of the Offering: Management Fees: Operating Expenses: Market Purchases: Amount and Description The Fund will bear the expenses incurred in connection with the Offering, estimated to be $550,000, subject to a maximum of 0.50% of the gross proceeds of the Offering. The Fund will pay to the Manager an annual management fee (the Management Fee ) with respect to the Units equal to 1.0% per annum of the NAV of the Class T Units and 2.0% per annum of the NAV of the Class A Units, as applicable, accrued and calculated daily and payable monthly in arrears, plus applicable taxes. The Fund will pay for all ordinary expenses incurred in connection with its operation and administration estimated to be $200,000 per annum plus applicable taxes. Notwithstanding the foregoing, if the gross proceeds of the Offering are less than $20 million, then the maximum amount payable by the Fund in respect of such expenses will be not greater than 1% of the gross proceeds of the Offering (the Expense Cap ); however, if, at any time, as a result of subsequent offerings of securities by the Fund, the Net Asset Value of the Fund exceeds $20 million, then the Expense Cap will be eliminated. The Fund will also be liable for the costs of all Portfolio transactions which it may incur from time to time, the cost of leverage and for any extraordinary expenses incurred from time to time. Ordinary expenses will include mailing and printing expenses; fees payable to the Custodian, Valuation Agent, Trustee, auditor, legal advisors and other parties engaged by the Fund to perform certain financial, record keeping, reporting and general administrative services; out-of-pocket expenses of the Manager; regulatory filing, stock exchange and licensing fees; and fees payable to members of the independent review committee. In connection with any market purchases of Class T Units by the Fund (as discussed under Attributes of the Securities Mandatory Market Purchases ), the Fund will pay to the Manager the following amounts, if any, as partial compensation for the fees and expenses the Manager paid in connection with the Offering: if the purchase is made at a discount to the then current NAV of the Class T Units purchased, the Fund will pay to the Manager an amount (inclusive of taxes) equal to such discount. The maximum amount that the Manager may be paid in respect of any market purchase is 3.0% of the NAV of the Class T Units purchased. Such amounts will only be paid if the Class T Units purchased by the Fund are cancelled and will not be paid by the Fund once the Manager has received, together with any Early Exchange Fees and Class T Monthly Redemption Fees, an aggregate amount equal to the fees and expenses paid by it in relation to the Offering and any future offering. To the extent that a purchase is made at a price that is greater than a 3.0% discount to the then current NAV per Class T Unit, the amount of the balance will be accretive to the NAV of the Fund. Fees and Expenses Payable Directly by Unitholders Type of Fee Amount and Description Early Exchange and Monthly Redemption Fee: Any conversion of Class A Units into Class T Units prior to the Automatic Conversion Date and any monthly redemption of Class A Units will be subject to the Early Exchange Fee payable by the Unitholder per Class A Unit converted or redeemed, as the case may be,

15 equal to: (i) 3% of NAV per Class A Unit from Closing until and including the last Business Day of the 12 th month following Closing; (ii) 2% of NAV per Class A Unit from the first Business day of the 13 th month following Closing until and including the last Business Day of the 24 th month following Closing; and (iii) 1% of NAV per Class A Unit from the first Business Day of the 25 th month following Closing until the Automatic Conversion Date. Any monthly redemption of Class T Units will be subject to a redemption fee (the Class T Monthly Redemption Fee ) equal to 3.0% of the NAV of the Class T Units redeemed. No fee is payable by a Unitholder who redeems a Class T Unit on an Annual Redemption Date or for conversion of Class A Units into Class T Units on the Automatic Conversion Date. In the case of a conversion of a Class A Unit, immediately prior to conversion the Fund will redeem such number of Class A Units as is necessary to pay the Early Exchange Fee. The Early Exchange Fee or the Class T Monthly Redemption Fee, as applicable, will be remitted by the Fund, on behalf of the Unitholder, to the Manager. However, no redemption fee will be payable by Unitholders, nor will any fee be payable by the Fund, upon a termination of the Fund by the Manager. No redemption fee will be payable by Unitholders once the Manager has received, together with any fees in respect of market purchases, an aggregate amount equal to the fees and expenses paid by it in relation to the Offering or any future offering. See Fees and Expenses - Fees and Expenses Payable by Unitholders and Termination of the Fund

16 INFORMATION FROM THIRD-PARTY SOURCES Certain information contained in this prospectus is taken from third party sources. Additionally, certain of the information contained in this prospectus relating to publicly traded securities and the issuers of those securities is taken from and based solely upon information published by such issuers. None of the Manager, the Portfolio Manager, the Fund, or any of the Agents has independently verified the accuracy or completeness of any such information and investors should use caution in placing reliance on such information. FORWARD LOOKING STATEMENTS Certain statements in this prospectus are forward looking statements, including those identified by the expressions anticipate, believe, plan, estimate, expect, intend and similar expressions to the extent they relate to the Fund, the Manager, the Portfolio Manager or the Agents. Forward-looking statements are not historical facts but reflect the current expectations of the Manager or the Portfolio Manager regarding future results or events. Such forward-looking statements reflect the Manager s or the Portfolio Manager s current beliefs and are based on information currently available to it. Forward looking statements involve significant risks and uncertainties. A number of factors could cause actual results or events to differ materially from current expectations. Some of these risks, uncertainties and other factors are described in this prospectus under the heading Risk Factors. Although the forward-looking statements contained in this prospectus are based upon assumptions that the Manager, the Portfolio Manager and the Agents believe to be reasonable, none of the Manager, the Portfolio Manager, the Fund or the Agents can assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements contained herein were prepared for the purpose of providing prospective investors with information about the Fund and may not be appropriate for other purposes. None of the Fund, the Manager, the Portfolio Manager or the Agents assume any obligation to update or revise them to reflect new events or circumstances, except as required by law

17 GLOSSARY OF TERMS In this prospectus, the following terms shall have the meanings set forth below, unless otherwise indicated Act has the meaning ascribed thereto under Plan of Distribution. affiliate has the meaning ascribed thereto in the Business Corporations Act (Ontario). Agency Agreement means the agency agreement dated as of, 2016 among the Fund, the Manager, the Portfolio Manager and the Agents. Agents means, collectively, BMO Nesbitt Burns Inc., CIBC World Markets Inc., National Bank Financial Inc., Scotia Capital Inc., Canaccord Genuity Corp., GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Global Securities Corporation, Industrial Alliance Securities Inc., Laurentian Bank Securities Inc., Mackie Research Capital Corporation, Manulife Securities Incorporated and PI Financial Corp. Annual Redemption Date means the second last Business Day in of each year commencing in Annual Redemption Notice Period has the meaning ascribed thereto under Redemption of Units. Automatic Conversion Date means, Benchmark Index has the meaning ascribed thereto under Investment Strategies U.S. High Yield Bond Fund. BMOAM means BMO Asset Management Inc. BMONBI means BMO Nesbitt Burns Inc., in its capacity as manager of the Fund. Broad High Yield Index has the meaning ascribed thereto under Investment Strategies U.S. High Yield Bond Fund. Business Day means any day on which the TSX is open for business. Capital Gains Refund has the meaning ascribed thereto under Income Tax Considerations Taxation of the Fund. Cash Equivalents means (i) cash on deposit with the Custodian or a broker; (ii) an evidence of indebtedness that has a remaining term to maturity of 365 days or less and that is issued, or fully and unconditionally guaranteed as to principal and interest, by (A) any of the Federal or Provincial Governments of Canada, (B) U.S. federal, state or local governments, (C) U.S. government agencies or (D) a Canadian financial institution (provided that in the case of (A), (B) or (C), such evidence of indebtedness has a rating of at least R-1 (mid) by DBRS Limited or the equivalent rating from another designated rating organization); or (iii) other cash cover as defined in NI CDS means CDS Clearing and Depository Services Inc. CDS Participant means a participant in CDS. Class A Meeting has the meaning ascribed thereto under Unitholder Matters Meetings of Unitholders. Class A Monthly Redemption Amount has the meaning ascribed thereto under Redemption of Units. Class A Units means the units of the Fund designated as Class A Units. Class T Meeting has the meaning ascribed thereto under Unitholder Matters Meetings of Unitholders. Class T Monthly Redemption Amount has the meaning ascribed thereto under Redemption of Units. Class T Monthly Redemption Fee has the meaning ascribed thereto under Fees and Expenses Fees and Expenses Payable by Unitholders. Class T Units the means the units of the Fund designated as Class T Units. Closing means the closing of the Offering on the Closing Date. Closing Date means the date of the Closing, which is expected to be on or about, 2016 or such later date as the Fund and the Agents may agree, but in any event not later than 90 days after the issuance of a receipt for the final prospectus of the Fund. Closing Market Price means, in respect of a security on a particular date, the closing price of such security on the TSX on such date (or such other stock exchange on which such security is listed) or, if there was no trade on the relevant date, the

18 average of the last bid and the last asking prices of the security on the TSX on such date (or such other stock exchange on which the security is listed). Counterparty has the meaning ascribed thereto under Attributes of the Securities Total Return Swap. CRA means the Canada Revenue Agency. Custodian means, the custodian of the assets of the Fund, and its successors or assigns. Custodian Agreement means the custodian agreement entered into on or prior to the Closing Date between the Fund and the Custodian as it may be amended from time to time. Declaration of Trust means the declaration of trust of the Fund dated, 2016 establishing the Fund under the laws of the Province of Ontario. DFA Rules has the meaning ascribed thereto under Risk Factors Tax Matters Affecting the Fund. Early Exchange Fee has the meaning ascribed thereto under Fees and Expenses Fees and Expenses Payable by Unitholders. Extraordinary Resolution means a resolution passed by the affirmative vote of at least 66 2 / 3 % of the votes cast either in person or by proxy, at a meeting of Unitholders called for the purpose of considering such resolution or in writing pursuant to the Declaration of Trust. Fund means Monegy High Yield Bond Fund, a trust established under the laws of the Province of Ontario pursuant to the Declaration of Trust. High Yield in respect of a security means the security is rated below investment grade (lower than BBB by S&P or lower than Baa by Moody s, or comparably rated by other designated rating organizations), or unrated but determined by the Portfolio Manager to be of comparable quality, provided that a determination by the Portfolio Manager that a security is High Yield shall be conclusive for purposes herein and provided that if a security receives different ratings from S&P or Moody s, the Portfolio Manager will use the lower rating. High Yield Fund has the meaning ascribed thereto under Investment Strategies U.S. High Yield Bond Fund. Indicative Portfolio means the portfolio of securities that would have been included in the Portfolio had the Fund been in existence on February 29, IRC means the independent review committee of the Fund. Management Agreement has the meaning ascribed thereto under Organization and Management Details of the Fund The Manager. Management Fee has the meaning ascribed thereto under Fees and Expenses Management Fee. Manager means BMONBI, in its capacity as the registered investment fund manager of the Fund. Market Price in respect of a security on a date means the weighted average trading price on the TSX (or such other stock exchange on which such security is listed), for the 10 trading days immediately preceding such date. Monegy means Monegy, Inc. Monthly Redemption Date means the second last Business Day of each month other than the month of the Annual Redemption Date. Moody s means Moody s Investor Service, Inc. NAV means net asset value. Net Asset Value of the Fund or NAV of the Fund on a particular date will be equal to (i) the Total Assets, less (ii) the aggregate fair value of the liabilities of the Fund. Net Asset Value per Class A Unit or NAV per Class A Unit means, on any date, the number obtained by dividing the NAV of the Fund attributable to the Class A Units on such date by the total number of Class A Units outstanding on such date

19 Net Asset Value per Class T Unit or NAV per Class T Unit means, on any date, the number obtained by dividing the NAV of the Fund attributable to the Class T Units on such date by the total number of Class T Units outstanding on such date. Net Asset Value per Unit or NAV per Unit means, for a class of Units on any date, the number obtained by dividing the NAV of the Fund on such date attributable to the class of Units by the total number of Units of that class outstanding on such date. NI means National Instrument Investment Funds of the Canadian Securities Administrators, as it may be amended from time to time. NI means National Instrument Independent Review Committee for Investment Funds of the Canadian Securities Administrators, as it may be amended from time to time. Non-Portfolio Income has the meaning ascribed thereto under Income Tax Considerations Taxation of the Fund. Offering means the offering of a minimum of 1,000,000 Units and a maximum of Units at a price of $10.00 per Class A Unit and Class T Unit, as contemplated in this prospectus. Ordinary Resolution has the meaning ascribed thereto under Unitholder Matters Matters Requiring Unitholder Approval. plan trust has the meaning ascribed thereto under Income Tax Considerations Status of the Fund. Portfolio has the meaning ascribed thereto under Investment Objectives. Portfolio Issuer means an issuer of Portfolio Securities. Portfolio Management Agreement has the meaning ascribed thereto under Organization and Management Details of the Fund The Portfolio Manager. Portfolio Manager means Monegy, Inc., in its capacity as the portfolio manager of the Fund. Portfolio Securities means the securities held in the Portfolio. Recirculation Agreement has the meaning ascribed thereto under Redemption of Units Resale of Units Tendered for Redemption. Redemption Notice has the meaning ascribed thereto under Redemption of Units Exercise of Redemption Right. S&P means Standard & Poor s, a division of The McGraw-Hill Companies, Inc. Securities Act means Securities Act (Ontario), R.S.O. 1990, c. S.5, as it may be amended from time to time. Sharpe Ratio means the average return earned in excess of the risk-free rate per unit of volatility or total risk. SIFT Rules means the provisions of the Tax Act providing for a tax on certain income earned by a SIFT partnership or distributed by a SIFT trust, as those terms are defined in the Tax Act. substituted property has the meaning ascribed thereto under Income Tax Considerations Taxation of the Fund. Swap has the meaning ascribed thereto under Attributes of the Securities Total Return Swap. Tax Act means the Income Tax Act (Canada) and the regulations thereunder, as they may be amended from time to time. Tax Proposals has the meaning ascribed thereto under Income Tax Considerations. Termination Date has the meaning ascribed thereto under Termination of the Fund. Total Assets means the aggregate fair value of the assets of the Fund as determined in accordance with the terms of the Declaration of Trust. Trustee means, in its capacity as trustee of the Fund. TSX means the Toronto Stock Exchange. Unitholder means, unless the context requires otherwise, a holder of a Unit. Units means, collectively, the Class A Units and the Class T Units

20 U.S. means the United States of America. U.S. Securities Act has the meaning ascribed thereto under Plan of Distribution. Valuation Agent means BMOAM, the valuation agent of the Fund, and its successors and assigns. Valuation Day means any day that the TSX is open for trading. Valuation Time has the meaning ascribed thereto under Calculation of Net Asset Value Calculation of Net Asset Value and NAV per Unit. $ means Canadian dollars, unless otherwise indicated

21 OVERVIEW OF THE LEGAL STRUCTURE OF THE FUND Monegy High Yield Bond Fund (the Fund ) is a closed-end investment fund established as a trust under the laws of the Province of Ontario pursuant to a declaration of trust (the Declaration of Trust ) dated, BMO Nesbitt Burns Inc. (the Manager or BMONBI ) is the investment fund manager and will be responsible for, or arranging for, the management and administration of the Fund. See Organization and Management Details of the Fund. The principal office of the Fund is located at 1 First Canadian Place, 100 King Street West, 3rd Floor Podium, P.O. Box 150, Toronto, Ontario M5X 1H3. The Fund is not a mutual fund as defined under the securities legislation of the provinces and territories of Canada. Consequently, the Fund is not subject to the various policies and regulations that apply to mutual funds under such legislation. The Fund is subject to the provisions of National Instrument Investment Funds ( NI ) applicable to non-redeemable investment funds. INVESTMENT OBJECTIVES The investment objectives of the Fund are to provide holders of Units (the Unitholders ) with a high level of total return through a combination of: (i) monthly cash distributions; and (ii) the opportunity for capital appreciation, by investing in a portfolio comprised primarily of High Yield fixed income securities issued by U.S. corporations (the Portfolio ) actively managed by Monegy, Inc. (the Portfolio Manager or Monegy ). UNIT TRADED FUND STRUCTURE The Fund uses the Unit Traded Fund (UTF) structure which has been developed to accomplish two goals: (i) to enable the Fund to invest substantially all of the gross proceeds from the Offering in the Portfolio; and (ii) to encourage the Class T Units to trade in the market at a price not less than 98.5% of their net asset value throughout the life of the Fund. Using the Unit Traded Fund structure, the Fund will not be responsible for paying any of the compensation to the Agents relating to the Offering and will not bear expenses of the Offering that exceed 0.50% of the gross proceeds of the Offering. As a result, the net asset value per Unit immediately following the Closing will be at least $9.95. The Unit Traded Fund structure also includes a mandatory market purchase program pursuant to which the Fund will purchase and cancel Class T Units that are trading in the market at 98.5% or less of their net asset value (up to a maximum of 10% of the Fund s outstanding Class T Units over any 10 trading day period, subject to a limit of 2% of the number of Class T Units outstanding each day and subject to the terms set out in the Declaration of Trust). In addition, the Fund may enter into a Swap. Pursuant to the Swap, the Counterparty may purchase through the facilities of the TSX, from time to time, up to 10% of the number of Class T Units outstanding at the time the Swap is entered into and the Manager anticipates that such purchases will cause the Class T Units to trade closer to the NAV per Class T Unit. Commencing in 2019, Class T Units may also be surrendered annually for redemption at a price equal to 100% of their net asset value. Class A Units are intended to be purchased under the Offering by investors who intend to hold their Class A Units for at least thirty-six (36) months with the understanding that an Early Exchange Fee will apply if the Class A Units are converted or redeemed prior to the Automatic Conversion Date. Class A Units will be automatically converted into Class T Units on, 2019 (the Automatic Conversion Date ) based on their relative NAV per Unit at the time. No Early Exchange Fee is payable with respect to the automatic conversion of the Class A Units on the Automatic Conversion Date. Though Class A Units are intended for investors who expect to hold their Class A Units until the Automatic Conversion Date, investors may, at their option, convert some or all of their Class A Units into Class T Units on a weekly basis before the end of the thirty-six (36) month period, as well as redeem some or all of their Class A Units under the monthly redemption right. In either case, the Early Exchange Fee will be payable by the Unitholder to the Manager. In the case of a conversion of Class A Units, immediately prior to conversion the Fund will redeem such number of Class A Units as is necessary to pay the Early Exchange Fee. In the case of a monthly redemption of Class A Units, the Fund will deduct the Early Exchange Fee from the redemption proceeds otherwise payable to the redeeming Unitholder. The Early Exchange Fee will be remitted by the Fund, on behalf of the Unitholder, to the Manager. See Fees and Expenses

22 INVESTMENT STRATEGIES The Portfolio will be actively managed by Monegy, and will be comprised primarily of High Yield fixed income securities (bonds and debentures) issued by U.S. corporations. The Fund aims to provide access to the High Yield fixed income markets that would otherwise be difficult for retail investors to obtain directly. The Portfolio Manager expects that the Portfolio, once fully invested, will generally consist of approximately different issuers. Monegy s investment process seeks to provide long term outperformance over full credit cycles, while minimizing default risk, and providing downside protection. Monegy aims to avoid defaults and major principal losses through rigorous initial screening and a strong sell discipline while focusing on higher quality issuers with solid fundamentals. Monegy seeks to deliver high yield returns with less realized volatility than the broader High Yield market. Monegy s investment process combines quantitative portfolio screening tools with traditional fundamental credit analysis to construct highly diversified high yield portfolios on a bottom-up basis, with a top-down sector overlay aimed at minimizing undue sector or issuer concentrations. While the Portfolio Manager will invest primarily in High Yield fixed income securities, the Portfolio Manager may use derivatives such as options, futures, forward contracts, swaps and other derivative instruments for both hedging and nonhedging purposes to, among other things, seek to: (i) protect the Fund against potential losses, (ii) reduce the impact of volatility on the Fund; and (iii) gain exposure to securities without buying the securities directly. The Portfolio Manager will have the discretion to invest up to 10% of the NAV of the Fund in securities of mutual funds or exchange traded funds managed by BMONBI or other mutual fund managers. Investment Process Monegy believes that investors are best served by taking a defensive strategic approach to high yield investing, whereby Monegy aims to participate in most of the upside potential over full credit cycles, while limiting downside exposure and risk of default by avoiding or divesting those issuers with the highest risk of default, avoiding issuers where Monegy believes that the Fund could not be adequately compensated for the risk borne, and by balancing any residual risk through highly diversified portfolios with a high Sharpe Ratio. This focus on risk adjusted returns has resulted in a long term track record with strong absolute returns, material high yield index outperformance, and below market levels of volatility or capital loss. Monegy will seek to provide high yield returns with investment grade-like risk which will allow the Fund to take a higher overall allocation to the High Yield asset class to capture spread pickup over investment grade, without, in Monegy s opinion, a material increase in portfolio risk. Monegy s investment process consists of a quantitative bottom-up approach complemented by fundamental analysis and a top-down overlay. Quantitative measures bring efficiency to the process in both selection of assets and monitoring. Monegy will use this transparent and repeatable process to construct, monitor and maintain the Portfolio in the following manner: High Yield Universe Screen-Out Highest Risk & Lowest Return Quantitatively Narrow Selection Through Fundamental Analysis Highly Diversified Bottom-Up Portfolios

23 1. Quantitative screen. A quantitative screen is applied to all potential High Yield and crossover issuers, resulting in a finite measure of default risk for each issuer. This provides Monegy with a granular, unbiased view of risk that is both objective and timely. With a bias to issuers with publicly traded equity, Monegy analysts are responsible for verifying model inputs, updating data to reflect changes to an issuer s capital structure and performing sensitivity analysis on model inputs. Issuers with a default probability that exceeds Monegy s tolerance level are eliminated from consideration at this stage. 2. Rank by risk adjusted return. The measure of issuer default risk is combined with security specific information reflecting its position within the capital structure (recovery in the event of default) to produce an expected loss for each security. The expected loss is then combined with return information (e.g. credit spreads) to provide a riskadjusted return measure for each potential investment. The universe of possible investments can then be ranked on the basis of risk/return from the most attractive to the least attractive. Securities with unattractive expected returns per unit of risk are eliminated from further consideration at this stage. 3. Fundamental Credit Analysis. Securities that meet Monegy s initial screens are then examined in detail by Monegy s credit analysts who will focus on company fundamentals, including the issuer s competitive position, industry dynamics, cash flow, asset mix, liquidity position, debt coverage, degree of leverage, and management. Monegy s analysts also access information from external sources including credit agency reports, third party research, company calls, news feeds, etc. to form their view for a particular issuer / security. Special attention is paid to position in the capital structure, covenants and trading liquidity. Where it is determined that the issuer/security is not a suitable investment, it will be eliminated from further consideration at this stage. Monegy favours investments which typically exhibit positive cash flow, a managed debt profile and steady to improving credit profile. 4. Build high Sharpe Ratio portfolios. Monegy will construct, from the bottom up, highly diversified portfolios that typically comprise 150 to 200 unique issuers with optimized risk adjusted returns. Position size reflects the relative attractiveness on a ranked risk adjusted return basis, where the maximum sized position is typically 1%. The Portfolio Manager is also responsible for taking a top down view of the portfolio and ensuring that undue industry concentrations do not occur. Portfolio positioning is tailored according to the Portfolio Manager s judgment, seasoned over multiple credit cycles. While Monegy will not override its model with respect to default risk, it does not purchase all securities that pass the quantitative screens. The fundamental overlay and Portfolio Manager s review will ultimately determine the securities to be purchased. 5. Maintain high Sharpe Ratio portfolios. The entire process is re-run on at least a weekly basis to facilitate disciplined monitoring. In addition, weekly, monthly and quarterly portfolio reviews are conducted by the portfolio management team. Credit analysts use the quantitative tools, as well as data from the market, to point them to situations where risk is changing and then focus a significant amount of time reviewing these issuers / securities. Monegy s bias is to quickly sell and replace positions where risk has materially increased or where Monegy no longer feels the Fund is being appropriately paid for risk. Use of Derivatives The Fund may invest in or use derivative instruments for hedging purposes consistent with its investment objectives and investment strategies and, subject to its investment restrictions, as a substitute for purchasing or selling securities directly. For example, the Portfolio Manager may use interest rate swaps with the intention of offsetting or reducing the impact of security price fluctuations or currency futures to attempt to reduce the impact of adverse changes in exchange rates. No assurance can be given that the Fund will be hedged from any particular risk from time to time. Currency Hedging The Portfolio will include securities denominated primarily in U.S. dollars. The Portfolio Manager will hedge substantially all of the U.S. dollar exposure back to the Canadian dollar, however, it is not intended that the interest and other distributions on the Portfolio Securities will be hedged back to the Canadian dollar. Leverage The Fund may use various forms of leverage, including through borrowings and margin facilities, in an amount not exceeding 33.3% of the Total Assets, for the purposes of purchasing additional securities for the Portfolio. Accordingly, at the time such

24 leverage is incurred, the maximum amount of leverage that the Fund could employ is 1.50:1 (total long positions (including leveraged positions) divided by the net assets of the Fund). If at any time the amount of leverage employed to purchase additional securities exceeds the threshold, the Portfolio Manager will cause the leverage to be reduced to below such threshold as soon as reasonably practicable. The amount of leverage, if any, used by the Fund will vary from time to time based on the Portfolio Manager s assessment of market conditions and cash flow requirements. Initially, the Fund is expected to employ leverage of approximately 30% of the Total Assets. The Fund may also (but is not required to) borrow up to 5% of the value of the Total Assets for various purposes, including to effect market purchases of Class T Units, maintain liquidity and fund redemptions. U.S. High Yield Bond Fund In managing the Portfolio, the Portfolio Manager will employ substantially the same investment strategy as it employs in managing the BMO U.S. High Yield Bond Fund and employed in the predecessor fund (the High Yield Fund ). As at February 29, 2016, the High Yield Fund had assets under management of approximately US$660 million. The following table sets out the annualized return (gross of fees) for the High Yield Fund and its benchmark, The Bank of America Merrill Lynch U.S. High Yield BB/B Rated, Constrained Index (the Benchmark Index ), for the periods indicated below as at February 29, The table below also sets out the performance for a broad high yield index, The Bank of America Merrill Lynch U.S. High Yield Bond Index ( Broad High Yield Index ), highlighting the relative performance between high quality high yield strategies and the broader High Yield market. Performance of the High Yield Fund, the Benchmark Index and the Broad High Yield Index for the given periods is calculated in US$, gross of management fees and all other expenses. 1 Year 3 Year 5 Year 10 Year Since Inception (1) High Yield Fund -4.31% 1.96% 4.65% 5.17% 5.30% Benchmark Index -6.19% 1.61% 4.50% 6.18% 6.35% Broad High Yield Index -8.54% 0.64% 3.90% 6.45% 6.61% Source: Monegy and Bloomberg. Notes: (1) November 1, As illustrated in the following graph, Monegy s average annual realized default rate across all strategies managed by Monegy since September 1, 2000 is only 0.13% as compared to the Moody s Trailing 12-month U.S. Issuer Based Speculative Grade Default Rate of 4.60%. In addition to low default rates over 16 years, the holdings, at the time of default, were minimal as a result of a high level of portfolio diversification. Monegy attributes the low default rate to its rigorous initial credit screening process, both quantitative and fundamental, as well as to a strong sell discipline driven by efficient ongoing portfolio monitoring

25 The information above is historical and is not intended to be, nor should it be construed to be, a forecast or indication as to the future performance of the Fund. This information is provided for illustrative purposes only. There can be no assurance that the performance of the Fund will equal or exceed the performance of the High Yield Fund. While the Portfolio Manager will employ substantially the same investment strategies with respect to the Portfolio as it employs in managing the High Yield Fund, the investments of the Fund and the High Yield Fund will not be identical and may differ significantly from time to time and the two funds will differ in some respects, including that the Fund will be able to use leverage. Past performance does not guarantee future results

26 Indicative Portfolio The indicative portfolio is illustrative of the securities that the Portfolio Manager would have included in the Portfolio had it existed on February 29, 2016 (the Indicative Portfolio ). The following charts show the Indicative Portfolio s exposure by credit rating and sector positioning relative to the Benchmark Index

27

28 The graph below sets out the industry breakdown for the Indicative Portfolio: The following charts illustrate the spread distribution, maturity distribution and default probability distribution for the Indicative Portfolio:

29

30 The following chart sets out the top ten issuers included in the Indicative Portfolio: The information contained above is historical and is not intended to be, nor should it be construed to be, an indication as to the securities that will comprise the Portfolio. There can be no assurance that the portfolio composition referenced above will be met. The Portfolio may or may not include securities of issuers considered in compiling the foregoing analysis and will include securities of issuers that were not included in compiling this analysis. The Portfolio Manager will actively manage the Portfolio to seek to meet the Fund s investment objectives and therefore the composition of the Portfolio will vary from time to time based on the Portfolio Manager s assessment of market conditions. OVERVIEW OF THE SECTOR THAT THE FUND INVESTS IN A high yield bond (non-investment grade bond, speculative grade bond or junk bond) is a bond that is rated below investment grade at the time of purchase. These bonds have a higher risk of default or other adverse credit events, but typically pay higher yields than better quality bonds as compensation for the higher risk. As illustrated by the chart below, High Yield bonds typically offer higher interest rates than government treasury bills of stable states or high-grade corporate debt and also provide the potential for capital appreciation in the event of a rating upgrade, an economic upturn or improved performance at the issuing company

31 Yield Opportunities Around the World Source: Bloomberg, BofA Merrill Lynch Global Research as of March 14, S&P LSTA Loan Data as of March 14, The following charts illustrate the risk/return profile of High Yield bonds versus other investments. As shown in the chart immediately below, High Yield bonds have generated on average higher yields with lower volatility than certain equity market indexes. Risk/Return Profile versus Alternatives (January 1992 December 2015) 11% 10% Russell % S&P 500 Annualized Return 8% 7% 6% 5% High Yield Bonds ML US Corp US 10Y Tres High Yield Loans* MSCI Emerging Markets 4% 3% US 3 Mth T-Bill 2% 0% 5% 10% 15% 20% 25% Annualized Standard Deviation Source: Bloomberg, Credit Suisse, S&P LSTA. High Yield Bonds: The Broad High Yield Index. High Yield Loans Monthly returns Credit Suisse Leverage Loan Index from January 1, 1992 to December 31, S&P All Loans from January 1, 1998 to December 31,

32 In addition, as can been seen below, High Yield has tended to outperform other fixed income assets classes when interest rates have risen, which the Portfolio Manager believes can be attributed to the lower relative interest rate sensitivity (lower duration), as well as the higher proportion of yield compensating for credit risk that allows for some spread compression to offset modest increases in the risk free interest rate. In addition, as periods of tightening monetary policy tend to occur when macroeconomic conditions are improving, credit spreads should generally be expected to fall, resulting in rising prices for High Yield bonds, assuming no other changes. The chart below illustrates the performance of U.S. High Yield bonds relative to other asset classes for years where the 5-year treasury rate increased on a year-over-year basis. High yield debt is typically issued by companies for purposes such as mergers or buyouts, or to meet expanding capital needs across various sectors therefore providing investors exposure to the diversified global economy. As illustrated below, the High Yield market has grown significantly since 2008 and by 2015 there was approximately U.S.$2 trillion of High Yield debt outstanding, issued by approximately 1100 issuers including Dole Food Company, Inc., Royal Caribbean International, Chiquita Brands International Inc., Hertz Global Holdings Inc., Tempur-Pedic International Inc., The Goodyear Tire & Rubber Company, T Mobile International AG, Jaguar Land Rover Limited and Victoria s Secret. The Portfolio Manager believes that this market includes a diverse issuer base and provides good trading liquidity

33 Global High Yield Supply Source: BofA Merrill Lynch Global Research, Federal Reserve, Altman/NYU, Fitch, Bloomberg. Prior to 1997, US data was used as a proxy for total High Yield bonds as a result of data limitations. The Portfolio Manager believes that active strategies can outperform certain passive investment strategies. By way of example, as shown in the chart below, the High Yield Fund outperformed and exhibited lower volatility than a high yield bond exchange traded fund. This outperformance was generally attributed to a lower concentration in commodity sectors and CCC rated bonds. High Yield Fund vs. JNK ETF (December 31, 2014 February 29, 2016) Source: Monegy, Bloomberg, BofA Merrill Lynch. JNK: SPDR Barclays High Yield Bond ETF (net of fees). High Yield Fund (Series F Class, net of fees, $CAD hedged)

34 In addition and as illustrated in the three charts below, the Portfolio Manager believes that the overall fundamentals of the High Yield market are currently mixed with high levels of leverage as compared to previous years and flat or negative growth for issuers in this sector. Nevertheless, the Portfolio Manager believes that most issuers have taken advantage of low interest rates by extending maturity of their bonds therefore limiting near term maturities. The Portfolio Manager believes that a complex market creates conditions that are ideal for active managers that are able to recognize and take advantage of inefficiencies as they arise. As a result, the Portfolio Manager believes that investors in the High Yield market may benefit from a portfolio actively managed by an experienced and specialized portfolio manager. Market Leverage 8.0 Net Leverage (Net Debt/LTM EBITDA, x) HY Leverage Ratio Ex Commodities Leverage Ratio Maturity Schedule (December 31, 2015) $ Billion BB B CCC or worse Market EBITDA Growth YoY % Growth HY EBITDAs, YOY Pct Change HY Ex-Energy EBITDAs, YOY Pct Change Source: BAML Global Research; HY Market Leverage Stats,

35 INVESTMENT RESTRICTIONS The Fund is subject to certain investment restrictions including investment restrictions set out in NI that are applicable to non-redeemable investment funds. In addition, the investment activities of the Fund will be conducted in accordance with the following investment restrictions which provide that the Fund will not: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) invest more than 10% of the Total Assets in the securities of any single issuer, other than securities issued or guaranteed by the Government of Canada or a province or territory thereof or securities issued or guaranteed by the U.S. Government or its agencies and instrumentalities; invest directly or indirectly (a) less than 70% of the Total Assets in High Yield securities of US issuers; and (b) more than 30% of the Total Assets in High Yield securities of non-us issuers; invest more than 10% of the NAV of the Fund in securities of mutual funds or exchange traded funds managed by BMONBI or other mutual fund managers; borrow to purchase additional securities if, immediately following the borrowing, the aggregate amount of leverage employed by the Fund to purchase additional securities exceeds 33.3% of the Total Assets; use derivative instruments other than (i) for the purposes of hedging in a manner consistent with the Fund s investment objectives and investment strategies, (ii) as a substitute for purchasing or selling securities directly consistent with the Fund s other investment restrictions and (iii) to support the trading price of the Class T Units; engage in securities lending; purchase securities of an issuer if, as a result of such purchase, the Fund would be required to make a takeover bid that is a formal bid for purposes of the Securities Act or the equivalent provision of applicable securities laws of any other jurisdiction; purchase securities from, sell securities to, or otherwise contract for the acquisition or disposition of securities with the Manager or any of its affiliates, any officer, director or shareholder of the Manager, any person, trust, firm or corporation managed by the Manager or any of its affiliates or any firm or corporation in which any officer, director or shareholder of the Manager may have a material interest (which, for these purposes, includes beneficial ownership of more than 9.9% of the voting securities of such entity) unless, with respect to any purchase or sale of securities, any such transaction is either: (i) effected through normal market facilities, pursuant to a non-pre-arranged trade, and the purchase price approximates the prevailing Market Price; or (ii) approved by the IRC; invest in or hold (i) securities of or an interest in any non-resident entity, an interest in or a right or option to acquire such property, or an interest in a partnership which holds any such property if the Fund (or the partnership) would be required to include any significant amounts in income pursuant to section 94.1 of the Tax Act, (ii) an interest in a trust (or a partnership which holds such an interest) which would require the Fund (or the partnership) to include significant amounts in income in connection with such interest pursuant to the rules in section 94.2 of the Tax Act, or (iii) any interest in a non-resident trust (or a partnership which holds such an interest) other than an exempt foreign trust for the purposes of section 94 of the Tax Act; invest in any security that would be a tax shelter investment within the meaning of section of the Tax Act; invest in any security of an issuer that would be a foreign affiliate of the Fund for purposes of the Tax Act;

36 (l) (m) (n) enter into any arrangement (including the acquisition of securities for the Portfolio) where the result is a dividend rental arrangement for the purposes of the Tax Act (including any amendment to such definition); make any investment or conduct any activity that would result in the Fund failing to qualify or ceasing to qualify as a mutual fund trust for purposes of the Tax Act or acquire any property that would be taxable Canadian property of the Fund as such term is defined in the Tax Act (if the definition were read without reference to paragraph (b) thereof) (or any amendment to such definition); and make or hold any investments that would result in the Fund itself being a SIFT trust for purposes of the SIFT Rules. If a percentage restriction on investment or use of assets or borrowing or financing arrangements set forth above as an investment restriction is adhered to at the time of the transaction, later changes to the market value of the investment or Net Asset Value of the Fund will not be considered a violation of the investment restrictions (except for the restrictions in paragraphs (i) and (n) above which must be complied with at all times and which may necessitate the selling of investments from time to time). If the amount of leverage employed to purchase additional securities exceeds 33.3% of Total Assets at any time, the Portfolio Manager will cause such leverage to be reduced to bring the aggregate amount of leverage to purchase additional securities to or below 33.3% of Total Assets as soon as reasonably practicable. If the Fund receives from an issuer subscription rights to purchase securities of that issuer, and if the Fund exercises those subscription rights at a time when the Fund s holdings of securities of that issuer would otherwise exceed the limits set forth above, the exercise of those rights will not constitute a violation of the investment restrictions if, prior to the receipt of securities of that issuer on exercise of those rights, the Fund has sold at least as many securities of the same class and value as would result in the restriction being complied with. Notwithstanding the foregoing, for the first 120 days following a closing of any follow-on offering, the Fund may hold cash, cash equivalents or securities acquired pursuant to an exchange option and will comply with its investment restrictions in respect of such securities (other than the restrictions in paragraphs (a), (b) and (c) above which shall not be applicable during such period). Unitholder approval by way of Extraordinary Resolution is required to change the investment restrictions and investment objectives of the Fund. See Unitholders Matters Matters Requiring Unitholder Approval. Fees and Expenses Payable by the Manager Agents Fees FEES AND EXPENSES The Agents fees of $0.20 per Class T Unit (2.0%) and $0.45 per Class A Unit (4.5%) will be paid by the Manager. Offering Expenses In addition to the Agents fees, the Manager will pay all expenses of the Offering exceeding 0.50% of the gross proceeds of the Offering. Fees and Expenses Payable by the Fund Offering Expenses The Fund will bear the expenses incurred in connection with the Offering, estimated to be $550,000, subject to a maximum of 0.50% of the gross proceeds of the Offering. Management Fee Pursuant to the terms of the Management Agreement, the Fund will pay to the Manager an annual management fee (the Management Fee ) with respect to the Units equal to 1.0% per annum of the NAV of the Class T Units and 2.0% per annum of the NAV of the Class A Units, as applicable, accrued and calculated daily and payable monthly in arrears, plus

37 applicable taxes. The Portfolio Manager will be compensated for its services to the Fund by the Manager or an affiliate of the Manager without any further cost to the Fund. Operating Expenses The Fund will pay for all ordinary expenses incurred in connection with its operation and administration. It is expected that such ongoing expenses will include, without limitation, mailing and printing expenses for periodic reports to Unitholders and other Unitholder communications including marketing and advertising expenses; fees payable to the registrar, transfer agent and distribution agent; fees payable to the Custodian, the Valuation Agent, and/or other parties engaged by the Fund for performing certain financial, record keeping, reporting and general administrative services; fees payable to the Trustee for acting as trustee of the Fund, any reasonable out-of-pocket expenses incurred by the Manager or its agents in connection with their ongoing obligations to the Fund; any additional fees payable to the Manager for performance of extraordinary services on behalf of the Fund; fees payable to the auditor and legal advisers; regulatory filing, stock exchange and licensing fees; any expenditures incurred upon the termination of the Fund; and fees payable to the members of the independent review committee. The Fund will pay for all ordinary expenses incurred in connection with its operation and administration estimated to be $200,000 per annum plus applicable taxes. Notwithstanding the foregoing, if the gross proceeds of the Offering are less than $20 million, then the maximum amount payable by the Fund in respect of such expenses will be not greater than 1% of the gross proceeds of the Offering (the Expense Cap ); however, if, at any time, as a result of subsequent offerings of securities by the Fund, the Net Asset Value of the Fund exceeds $20 million, then the Expense Cap will be eliminated. The Fund will also be liable for the costs of all Portfolio transactions which it may incur from time to time, the cost of leverage and for any extraordinary expenses incurred from time to time. Such expenses will also include expenses of any action, suit or other proceedings in which or in relation to which the Manager or any other party is entitled to indemnity by the Fund. Market Purchases In connection with any market purchases of Class T Units by the Fund, the Fund will pay to the Manager the following amounts as partial compensation for the fees and expenses the Manager paid in connection with the Offering: if the purchase is made at a discount to the then current NAV of the Class T Units purchased, the Fund will pay to the Manager an amount (inclusive of taxes) equal to such discount. The maximum amount that the Manager may be paid in respect of any market purchase is 3.0% of the NAV of the Class T Units purchased. Such amounts will only be paid if the Class T Units purchased by the Fund are cancelled and will not be paid by the Fund once the Manager has received, together with any Early Exchange Fees and Class T Monthly Redemption Fees, an aggregate amount equal to the fees and expenses paid by it in relation to the Offering and any future offering. To the extent that a purchase is made at a price that is greater than a 3.0% discount to the then current NAV per Class T Unit, the amount of the balance will be accretive to the NAV of the Fund. Fees and Expenses Payable by Unitholders Early Exchange and Redemption Fees Any conversion of Class A Units into Class T Units prior to the Automatic Conversion Date and any monthly redemption of Class A Units will be subject to an early exchange fee payable by the Unitholder (the Early Exchange Fee ) per Class A Unit converted or redeemed, as the case may be, equal to: (i) 3% of NAV per Class A Unit from Closing until and including the last Business Day of the 12 th month following Closing; (ii) 2% of NAV per Class A Unit from the first Business day of the 13 th month following Closing until and including the last Business Day of the 24 th month following Closing; and (iii) 1% of NAV per Class A Unit from the first Business Day of the 25 th month following Closing until the Automatic Conversion Date. Any monthly redemption of Class T Units will be subject to a redemption fee (the Class T Monthly Redemption Fee ) equal to 3.0% of the NAV of the Class T Units redeemed. No fee is payable by a Unitholder who redeems a Class T Unit on an Annual Redemption Date or for conversion of Class A Units into Class T Units on the Automatic Conversion Date. In the case of a conversion of a Class A Unit, immediately prior to conversion the Fund will redeem such number of Class A Units as is necessary to pay the Early Exchange Fee. In the case of a monthly redemption, the Early Exchange Fee or the Class T Monthly Redemption Fee, as applicable, will be remitted by the Fund, on behalf of the Unitholder, to the Manager. However, no redemption fee will be payable by Unitholders, nor will any fee be payable by the Fund, upon a termination of

38 the Fund by the Manager. No redemption fee will be payable by Unitholders once the Manager has received, together with any fees in respect of market purchases, an aggregate amount equal to the fees and expenses paid by it in relation to the Offering or any future offering. RISK FACTORS In addition to the considerations set out elsewhere herein, the following are certain considerations relating to an investment in Units which prospective investors should consider before investing in Units. Additional risks and uncertainties not currently known to the Manager or the Portfolio Manager, or that are currently considered immaterial, may also impair the operations of the Fund. No Assurance of Achieving Investment Objectives There is no assurance that the Fund will be able to achieve its investment objectives. The funds available for distribution to Unitholders will vary according to, among other things, the levels of interest and other income or distributions paid on the Portfolio Securities and the value of the Portfolio Securities. There is no assurance that the Portfolio will earn any return. No assurance can be given as to the amount of interest and other income or distributions in future years. No assurance can be given that the NAV per Unit will be preserved or appreciate. It is possible that, due to declines in interest and other income or distributions paid on, and the market value of, the Portfolio Securities, the Fund will have insufficient assets to achieve in full its investment objectives. Risks Relating to Fluctuations in Value of the Portfolio Securities and Performance of the Portfolio The NAV per Unit will vary as the value of the Portfolio Securities varies. The Fund, the Manager and the Portfolio Manager have no control over the factors that affect the value of the Portfolio Securities, including factors that affect the markets generally, such as general economic and political conditions and fluctuations in interest rates, and factors unique to each issuer whose securities are included in the Portfolio and its business, such as changes in management, changes in strategic direction, achievement of strategic goals, mergers, acquisitions and divestitures, changes in distribution policies, operational risk relating to the specific business activities of the issuer, industry competition and other events that may affect the value of its securities. Some global economies are experiencing significantly diminished growth and some are suffering a recession. No assurance can be given that diminished availability of credit and significant devaluations will not adversely affect the markets into which the Fund will invest in the near to medium term. General Risks of Investing in Debt Securities Generally, debt securities will decrease in value when interest rates rise and increase in value when interest rates decline. The NAV of the Fund will fluctuate with interest rate changes and the corresponding changes in the value of the Portfolio Securities. The value of debt securities is also affected by the risk of default in the payment of interest and principal and price changes due to such factors as general economic conditions and the issuer s creditworthiness. Corporate debt securities may not pay interest or their issuers may default on their obligations to pay interest and/or principal amounts. Certain of the debt securities that may be included in the Portfolio are typically unsecured, which will increase the risk of loss in case of default or insolvency of the issuer. High-Yield Securities The Fund will primarily include investments in high-yield bonds or other securities that are not investment grade. Securities in the lower rating categories are subject to greater risk of loss, as to timely repayment of principal and timely payment of interest or other income or distributions than higher-rated securities. They are also generally considered to be subject to greater risk than securities with higher ratings in the case of deterioration of general economic conditions. The yields and prices of lower-rated securities may tend to fluctuate more than those for higher-rated securities. In addition, adverse publicity and investor perceptions about lower-rated securities, whether or not based on fundamental analysis, may be a contributing factor in a decrease in the value and liquidity of the securities. High-yield securities that are rated BB+ or lower by S&P or Ba1 or lower by Moody s are often referred to in the financial press as junk bonds and may include securities of issuers in default. Junk bonds are considered by the ratings agencies to be predominantly speculative and may involve major risk exposures such as: (i) vulnerability to economic downturns and changes in interest rates; (ii)

39 sensitivity to adverse economic changes and corporate developments; (iii) redemption or call provisions which may be exercised at inopportune times; and (iv) difficulty in accurately valuing or disposing of such securities. Use of Leverage One element of the Fund s investment strategy is the utilization of leverage. By adding leverage, the Fund has the potential to enhance returns but this also involves additional risks. There can be no assurance that the leveraging strategy employed for the Fund will enhance returns. The use of leverage may reduce returns (both distributions and capital) to Unitholders. If the Portfolio Securities suffer a substantial decrease in value, the leverage component will magnify the decrease in the value of the Units. If a loan or margin facility is called by a lender, or if assets of the Fund have to be liquidated in order to comply with the terms of the borrowings, the Fund may have to liquidate its assets at a time when market conditions are not favourable, resulting in a loss. The expenses and fees incurred in respect of the leverage may exceed the incremental net capital gains and income generated by the incremental investment for the Portfolio. Illiquid Securities There is no assurance that an adequate market will exist for the securities included in the Portfolio and it cannot be predicted whether the securities included in the Portfolio will trade at a discount to, a premium to, or at their respective par or net asset values. There can be no assurance that the Fund will be able to dispose of its investments in order to honour requests to redeem Units. Concentration Risk The Fund may concentrate its investments in specific industries, commodities or regions. This concentrated focus may constrain the liquidity and the number of investments available to the Fund. In addition, the investments of the Fund may be disproportionately exposed to the risks associated with the industries, commodities or regions in which the Fund concentrates its investments. Reliance on the Manager and the Portfolio Manager Unitholders will be dependent on the ability of the Manager and the Portfolio Manager to effectively manage the Fund and the Portfolio in a manner consistent with the investment objectives, strategies and restrictions of the Fund. The employees of the Manager and the Portfolio Manager who will be primarily responsible for the management of the Fund and the Portfolio have experience in managing funds and/or investment portfolios. There is no certainty that the employees of the Manager or the Portfolio Manager who will be primarily responsible for the management of the Fund and the Portfolio will continue to be employees of their respective firms throughout the term of the Fund. Volatility in Trading Price of Class T Units To seek to enhance liquidity and provide market support for the Class T Units, the Fund will undertake a mandatory market purchase program and may enter into a Swap after the Closing; nevertheless, the Class T Units may trade in the market at a discount to the NAV per Class T Unit, and there can be no assurance that the Class T Units will trade at a price equal to (or greater than) the NAV per Class T Unit. The Fund anticipates that the trading price will in any event vary from the NAV per Class T Unit. The trading price of the Class T Units will be determined by, among other things, the relative demand for and supply of the Class T Units in the market, the performance of the Portfolio and investor perception of the Fund s overall attractiveness as an investment as compared with other investment alternatives. The NAV per Class T Unit and the trading price of the Class T Units is subject to factors beyond the control of the Fund, the Manager or the Portfolio Manager. Risks Relating to Redemptions and Market Purchases The purpose of the monthly and annual redemption rights, the mandatory market purchase program, the UTF structure and any Swap is to prevent the Class T Units from trading at a substantial discount. While the redemption rights provide investors an alternative option of monthly or annual liquidity, there can be no assurance that they will reduce trading discounts. There is a risk that the Fund may experience significant redemptions if Class T Units trade at a discount to the NAV per Class T Unit

40 If a significant number of Class T Units is redeemed or purchased and cancelled, the trading liquidity of the Class T Units could be significantly reduced. In addition, if a significant number of Units is redeemed or purchased and cancelled, the expenses of the Fund would be spread among fewer Units resulting in a potentially lower distribution per Unit. The Manager has the ability to terminate the Fund or a class of Units if, in its opinion, it is no longer economically feasible to continue the Fund or such class of Units and/or it would be in the best interests of the Unitholders to do so. If the Fund were terminated as a result of redemptions and/or market purchases, it may be terminated before the Manager would otherwise have chosen to do so and the return to Unitholders may be less than anticipated. The Manager may also suspend the redemption of Units in the circumstances described under Redemption of Units - Suspension of Redemptions. Class A Units Class A Units will not be listed on any stock exchange. It is expected that liquidity for the Class A Units will be largely obtained by means of conversion into Class T Units and the sale of those Class T Units through the facilities of the TSX. The conversion of Class A Units into Class T Units is available only on the first Business Day of each week and, accordingly, holders of Class A Units wishing to dispose of Class A Units by converting into Class T Units may not be able to do so within a short period of time. Multiple Classes of Units The Management Fee determined with respect to each class of Units is charged against the NAV of such class of Units. However, all other expenses of the Fund generally will be allocated among the various classes of units of the Fund, and a creditor of the Fund may seek to satisfy its claims from the assets of the Fund as a whole, even though claims relate only to a particular class of units of the Fund. Market Disruptions War and occupation, terrorism and related geopolitical risks may in the future lead to increased short-term market volatility and may have adverse long-term effects on world economies and markets generally. Those events could also have an acute effect on individual issuers or related groups of issuers. These risks could also adversely affect securities markets, inflation and other factors relating to the Portfolio Securities. Global Financial Developments Global financial markets have experienced a sharp increase in volatility in the last several years. While central banks as well as global governments have worked to restore growth to the global economies, no assurance can be given that the quantitative easing and financial reforms will continue. No assurance can be given that this stimulus will continue or that, if it continues, it will be successful or that these economies will not be adversely affected by the inflationary pressures resulting from such stimulus or central banks efforts to slow inflation. Further, market concerns about the economies of certain European countries, economic growth in China, military conflicts in the Middle East and Europe, an increase in interest rates and extended periods of historically low oil prices, may adversely impact global markets. Some of these economies have experienced significantly diminished growth and some are experiencing or have experienced a recession. These market conditions and further volatility or illiquidity in capital markets may also adversely affect the prospects of the Fund and the value of the Portfolio Securities. Tax Matters Affecting the Fund The Fund will be subject to certain tax risks generally applicable to investment funds that hold Canadian and/or non- Canadian securities, including the following: As the Fund will be primarily invested in securities of foreign issuers, interest and distributions received by the Fund may be subject to foreign withholding tax and the Fund may be subject to other foreign taxes. See Income Tax Considerations- Taxation of the Fund for a discussion of certain considerations relevant to the Fund and to a Canadian resident Unitholder relating to foreign taxes, if any, withheld from interest and distributions paid to the Fund. If the Fund fails to or ceases to qualify as a mutual fund trust under the Tax Act, the income tax considerations described under the heading Income Tax Considerations would be materially and adversely different in certain respects. There can be no assurance that Canadian federal income tax laws and the administrative policies and assessing practices of the CRA respecting the treatment of mutual fund trusts will not be changed in a manner which adversely affects the Unitholders

41 In determining its income for tax purposes, the Fund will treat gains or losses on the disposition of Portfolio Securities as capital gains and losses. The Fund may use derivative instruments for hedging purposes and as a substitute for purchasing or selling securities directly. Subject to the discussion below regarding the DFA Rules, gains or losses realized on such derivatives will be treated and reported for purposes of the Tax Act on income account except where such derivatives are used to hedge Portfolio Securities held on capital account provided there is sufficient linkage. Designations with respect to the Fund s income and capital gains will be made and reported to Unitholders on this basis. The CRA s practice is not to grant advance income tax rulings on the characterization of items as capital gains or income and no advance income tax ruling has been requested or obtained. If the foregoing dispositions or transactions of the Fund are not on capital account, the net income of the Fund for tax purposes and the taxable component of distributions to Unitholders could increase. The Tax Act contains certain rules (the DFA Rules ) that target certain financial arrangements (referred to as derivative forward agreements ) that seek to reduce tax by converting, through the use of derivative contracts, the return on an investment that would otherwise have the character of ordinary income to a capital gain. The DFA Rules are broadly drafted, and could apply to other agreements or transactions (including certain forward currency contracts). If the DFA Rules were to apply in respect of certain derivatives to be utilized by the Fund, gains realized in respect of the property underlying such derivatives could be treated as ordinary income rather than capital gains. Pursuant to certain rules in the Tax Act, if the Fund experiences a loss restriction event, the Fund (i) will be deemed to have a year-end for tax purposes (which would result in an unscheduled distribution of the Fund s net income and net realized capital gains, if any, at such time to Unitholders so that the Fund would not be liable for income tax on such amounts under Part I of the Tax Act), and (ii) will become subject to the loss restriction rules generally applicable to a corporation that experiences an acquisition of control, including a deemed realization of any unrealized capital losses and restrictions on its ability to carry forward losses. Generally, the Fund would be subject to a loss restriction event if a Unitholder becomes a majority-interest beneficiary, or a group of persons becomes a majority-interest group of beneficiaries, of the Fund, as those terms are defined in the Tax Act. Generally, a Unitholder would be a majority-interest beneficiary of the Fund if it, together with persons and partnerships with whom it is affiliated, owns more than 50% of the fair market value of the Units. Relief from the application of the loss restriction event rules may be available to a trust that qualifies as a mutual fund trust for purposes of the Tax Act and meets certain asset diversification requirements. Proposed amendments to these relieving provisions released on January 15, 2016 would change the relevant conditions, including the asset diversification criteria, certain aspects of which are unclear. The Fund is formed to provide investors with exposure to portfolio investments and is subject to investment restrictions intended to ensure that it will not be a SIFT trust (as defined in the Tax Act). If the Fund were considered to be a SIFT trust within the meaning of the Tax Act, the income tax considerations described under the heading Income Tax Considerations would be materially and adversely different in certain respects. Cybersecurity Risk As part of its undertaking, the Fund, the Manager and the Portfolio Manager as well as their service providers process, store and transmit large amounts of electronic information, including information relating to the transactions of the Fund and personally identifiable information of the Unitholders. Each of the Manager and the Portfolio Manager has procedures and systems in place that it believes are reasonably designed to protect such information and prevent data loss and security breaches. However, such measures cannot provide absolute security. As a result, breach of the Fund s, the Manager s or the Portfolio Manager s or their service providers information systems may cause information relating to the transactions of the Fund and personally identifiable information of the Unitholders to be lost or improperly accessed, used or disclosed. No Ownership Interest Risk An investment in Units does not constitute an investment by Unitholders in the assets included in the Portfolio. Unitholders will not own the assets held by the Fund. It is possible that the proceeds from the sale of Portfolio Securities will be used to satisfy other liabilities of the Fund, which liabilities could include obligations to third party creditors in the event the Fund has insufficient assets, excluding the proceeds from the sale of such Portfolio Securities, to pay its liabilities. Loss of Investment Risk An investment in the Fund is appropriate only for investors who have the capacity to absorb a loss

42 Changes in Legislation and Regulatory Risk There can be no assurance that certain laws applicable to the Fund, including income tax laws and the treatment of trusts under the Tax Act, will not be changed in a manner which adversely affects the Fund or Unitholders. If such laws change, such changes could have a negative effect upon the value of the Portfolio and upon the investment opportunities available to the Fund. Cease Trading of Portfolio Securities If Portfolio Securities are cease-traded at any time by order of a securities regulatory authority or other relevant regulatory authority or other relevant regulator or stock exchange, the Manager may suspend the redemption of Units until such time as the transfer of the Portfolio Securities is permitted by law as described under Redemption of Units Suspension of Redemptions. A Lack of Operating History for the Fund The Fund is a newly organized investment fund with no previous operating history. There is currently no public market for the Units and there can be no assurance that an active public market will develop or be sustained after completion of the Offering. Status of the Fund The Fund will not be a mutual fund as defined under Canadian securities laws and accordingly will not be subject to the Canadian policies and regulations that apply to open-end mutual funds. It is intended that the Fund will be a mutual fund trust for purposes of the Tax Act. If the Fund ceases or fails to qualify as a mutual fund trust for purposes of the Tax Act, certain tax considerations described in this prospectus would be materially and adversely different. Potential Conflicts of Interest The Manager and the Portfolio Manager and their directors and officers and their respective affiliates and associates may engage in the promotion, management or investment management of other accounts, funds or trusts which may invest primarily in the securities held by the Fund. Although officers, directors and professional staff of the Manager and the Portfolio Manager will devote as much time to the Fund as is deemed appropriate to perform their duties, the staff of the Manager or the Portfolio Manager may have conflicts in allocating their time and services among the Fund and the other funds managed by the Manager or the Portfolio Manager. Risks Relating to the Nature of the Units The Units represent a fractional interest in the net assets of the Fund. Units are dissimilar to debt instruments in that there is no principal amount owing to Unitholders. Unitholders will not have the statutory rights normally associated with ownership of shares of a corporation including, for example, the right to bring oppression or derivative actions. Not a Trust Company The Fund is not a trust company and, accordingly, is not registered under the trust company legislation of any jurisdiction. Units are not deposits within the meaning of the Canadian Deposit Insurance Corporation Act (Canada) and are not insured under provisions of such legislation or any other legislation. DISTRIBUTION POLICY The Fund will not have a fixed distribution but intends to pay monthly cash distributions based on, among other things, the actual and expected returns on the Portfolio. The Manager will annually determine in of each year the indicative distribution amounts for the year based upon the prevailing market conditions and an estimate of distributable cash flow from the Portfolio for such year. The Fund intends to make monthly distributions to Unitholders of record on the last Business Day of each month. Distributions will be paid on a Business Day designated by the Manager that will be on or about the 15th day of the following month

43 The monthly distributions are initially targeted to be $0.05 per Class A Unit ($0.60 per annum per Class A Unit) representing an annual yield of 6.0% on the $10.00 per Class A Unit issue price and $ per Class T Unit ($0.70 per annum per Class T Unit) representing an annual yield of 7.0% on the $10.00 per Class T Unit issue price. The initial cash distribution is anticipated to be payable to Unitholders of record on, 2016, based on an anticipated closing date of, In order for the Fund to maintain a stable NAV per Unit while making the initial targeted monthly distribution (assuming an offering size of $50 million and expenses are as disclosed herein), the Portfolio would be required to generate a return of approximately 6.47% per annum with respect to the Class A Units and 6.38% per annum with respect to the Class T Units through interest and other income or distributions on the Portfolio Securities, capital appreciation or a combination of the foregoing. Based on the anticipated composition of the Portfolio, initial leverage of 30% of the Total Assets and the expected interest and other income or distributions on the Portfolio Securities, the Portfolio is expected to generate net cash flow that exceeds the initial targeted distribution level for the Class A Units and the Class T Units. If the return on the Portfolio and the increase in the value of the Portfolio is less than the amount necessary to fund the monthly distributions and all expenses of the Fund and if the Manager chooses nevertheless to ensure that the monthly distributions are paid to Unitholders, this will result in a portion of the capital of the Fund being returned to Unitholders and, accordingly, the Net Asset Value per Unit would be reduced. If in any taxation year, after the monthly distributions, there would remain in the Fund additional net income or net realized capital gains, the Fund will, after December 15 but on or before December 31 of the calendar year in which such taxation year ends, and before the end of any other taxation year of the Fund, be required to pay or make payable such net income and net realized capital gains as one or more year-end special distributions to Unitholders as is necessary to ensure that the Fund will not be liable for income tax on such amounts under Part I of the Tax Act (after taking into account all available deductions, credits and refunds). The amount of distributions may fluctuate from month to month and there can be no assurance that the Fund will make any distribution in any particular month or months or that the indicative distribution target will be met. The Fund intends that the monthly distributions will be paid in cash. However, year-end special distributions may be paid in cash and/or Units from time to time. Any special distributions payable in Units of the relevant class will increase the aggregate adjusted cost base of a Unitholder s Units of that class. Immediately following payment of such a special distribution in Units of a particular class, the number of Units of that class outstanding will be automatically consolidated such that the number of Units of that class outstanding after such distribution will be equal to the number of Units of that class outstanding immediately prior to such distribution, except in the case of a non-resident Unitholder to the extent tax is required to be withheld in respect of the distribution. See Income Tax Considerations. Method to Purchase Units PURCHASES OF UNITS Prospective purchasers may purchase Units through the Agents or any member of a sub-agency group that the Agents may form. The Fund proposes to offer the Units at a price of $10.00 per Class A Unit and Class T Unit. Prospective purchasers may acquire Units by cash payment only. Closing of the Offering will take place on or about, 2016, or such later date as may be agreed upon by the Fund and the Agents, but, in any event, not later than 90 days after a receipt for the final prospectus has been issued. The Offering price of the Units was determined by negotiation between the Agents and the Fund. See Plan of Distribution

44 REDEMPTION OF UNITS Annual Redemption of Class T Units Commencing in 2019, Class T Units (and, in 2019, Class A Units) may be surrendered annually for redemption during the period from until 5:00 p.m. (Toronto time) on the last Business Day in of each year (the Annual Redemption Notice Period ) subject to the Fund s right to suspend redemptions in certain circumstances. Class T Units (and, in 2019, Class A Units) properly surrendered for redemption during the Annual Redemption Notice Period will be redeemed on the second last Business Day in of each year (the Annual Redemption Date ) and the Unitholder will receive payment on or before the 15th Business Day following the Annual Redemption Date. Redeeming Unitholders will receive a redemption price per Class T Unit equal to the NAV per Class T Unit on the Annual Redemption Date, less any costs and expenses incurred by the Fund in order to fund such redemption, including brokerage costs. Monthly Redemption Units may also be surrendered at any time for redemption on the second last Business Day of any month (other than the month of the Annual Redemption Date) (a Monthly Redemption Date ), subject to certain conditions. In order to effect such a redemption, the Units must be surrendered by no later than 5:00 p.m. (Toronto time) on the date which is the last Business Day of the month preceding the month in which the Monthly Redemption Date falls, subject to the Fund s right to suspend redemptions in certain circumstances. Units properly surrendered for redemption within such period will be redeemed on the Monthly Redemption Date and the Unitholder surrendering such Units will receive payment on or before the 15th Business Day following the Monthly Redemption Date. Unitholders surrendering a Class T Unit for redemption on a Monthly Redemption Date will receive a redemption price per Class T Unit equal to the lesser of (i) 95% of the Market Price of a Class T Unit, and (ii) 100% of the Closing Market Price of a Class T Unit on the applicable Monthly Redemption Date (the Class T Monthly Redemption Amount ) less, in each case, any costs and expenses incurred by the Fund in order to fund such redemption, including brokerage costs and the Class T Monthly Redemption Fee. Unitholders surrendering a Class A Unit for redemption on a Monthly Redemption Date will receive a redemption price per Class A Unit equal to the product of (i) the Class T Monthly Redemption Amount, and (ii) a fraction, the numerator of which is the most recently calculated NAV per Class A Unit and the denominator of which is the most recently calculated NAV per Class T Unit (the Class A Monthly Redemption Amount ) less any costs and expenses incurred by the Fund in order to fund such redemptions, including brokerage costs and the Early Exchange Fee. Notwithstanding the foregoing, the Class T Monthly Redemption Amount and the Class A Monthly Redemption Amount shall not be greater than the NAV per Class T Unit or NAV per Class A Unit, as applicable, on the relevant Monthly Redemption Date. Any monthly redemption of Class A Units or Class T Units prior to the Automatic Conversion Date will be subject to the Early Exchange Fee or the Class T Monthly Redemption Fee, as applicable. The Early Exchange Fee or the Class T Monthly Redemption Fee, as applicable, will be deducted by the Fund from the amount otherwise payable to a redeeming Unitholder and will be remitted on behalf of the Unitholder to the Manager. Any monthly redemption of Class A Units will be subject to the Early Exchange Fee payable by the Unitholder per Class A Unit redeemed equal to: (i) 3% of NAV per Class A Unit from Closing until and including the last Business Day of the 12 th month following Closing; (ii) 2% of NAV per Class A Unit from the first Business Day of the 13 th month following Closing until and including the last Business Day of the 24 th month following Closing; and (iii) 1% of NAV per Class A Unit from the first Business Day of the 25 th month following Closing until the Automatic Conversion Date. Any monthly redemption of Class T Units will be subject to a redemption fee payable by the Unitholder (the Class T Monthly Redemption Fee ) equal to 3.0% of the NAV of the Class T Units redeemed. The Fund may, in its discretion, determine what portion, if any, of the amount paid to a redeeming Unitholder on a redemption of Units is an allocation and/or designation to the Unitholder of net realized capital gains of the Fund realized by the Fund to facilitate the redemption of Units. Any such allocation and/or designation will reduce the redemption price otherwise payable to the redeeming Unitholder. Any unpaid distribution payable to Unitholders of record on or before the Monthly Redemption Date or Annual Redemption Date, as applicable, in respect of Units tendered for redemption on such redemption date will also be paid on the same day as the redemption proceeds are paid

45 Exercise of Redemption Right An owner of Units who desires to exercise redemption privileges thereunder must do so by causing a participant (a CDS Participant ) in the depository, trading, clearing and settlement systems administered by CDS Clearing and Depository Securities Inc. ( CDS ) to deliver to CDS (at its office in the City of Toronto) on behalf of the owner a written notice (the Redemption Notice ) of the owner s intention to redeem Units. An owner who desires to redeem Units should ensure that the CDS Participant is provided with notice of his or her intention to exercise his or her redemption privilege sufficiently in advance of the relevant notice date so as to permit the CDS Participant to deliver notice to CDS and so as to permit CDS to deliver notice to the transfer agent and registrar of the Fund in advance of the required time. The form of Redemption Notice will be available from a CDS Participant or the transfer agent and registrar. Any expense associated with the preparation and delivery of Redemption Notices will be for the account of the owner exercising the redemption privilege. Except as provided under Suspension of Redemptions, by causing a CDS Participant to deliver to CDS a notice of the owner s intention to redeem Units, an owner shall be deemed to have irrevocably surrendered his or her Units for redemption and appointed such CDS Participant to act as his or her exclusive settlement agent with respect to the exercise of the redemption privilege and the receipt of payment in connection with the settlement of obligations arising from such exercise. Any Redemption Notice delivered by a CDS Participant regarding an owner s intent to redeem which CDS determines to be incomplete, not in proper form or not duly executed shall for all purposes be void and of no effect and the redemption privilege to which it relates shall be considered for all purposes not to have been exercised thereby. A failure by a CDS Participant to exercise redemption privileges or to give effect to the settlement thereof in accordance with the owner s instructions will not give rise to any obligations or liability on the part of the Fund to the CDS Participant or to the owner. Resale of Units Tendered for Redemption Following Closing, the Fund may enter into a recirculation agreement (the Recirculation Agreement ) with BMO Nesbitt Burns Inc. (the Recirculation Agent ) whereby the Recirculation Agent will agree to use commercially reasonable efforts to find purchasers for any Units tendered for redemption prior to the relevant Monthly Redemption Date or the Annual Redemption Date, if applicable. The Fund may, but is not obliged to, require the Recirculation Agent to seek such purchasers. In such event, the amount to be paid to the Unitholder on the Monthly Redemption Date or the Annual Redemption Date, if applicable, will be an amount equal to the proceeds of the sale of the Units, less any applicable commission payable to the Recirculation Agent. Such amount shall not be less than the amount that a Unitholder would have been otherwise entitled to receive. The Recirculation Agreement will provide that the Recirculation Agent will not recirculate Units unless the price achieved by the Recirculation Agent in selling Units tendered for redemption is equal to or in excess of the redemption price to be paid to the redeeming Unitholder net of applicable fees and expenses. A Unitholder is entitled to require the Fund to redeem any Unit surrendered for redemption and is not obligated to have his or her Units recirculated. Suspension of Redemptions The Manager may suspend the redemption of Units or payment of redemption proceeds: (i) during any period when normal trading is suspended on a stock exchange or other market on which securities owned by the Fund are listed and traded, if these securities represent more than 50% by value or underlying market exposure of the Total Assets, without allowance for liabilities, and if these securities are not traded on any other exchange that represents a reasonably practical alternative for the Fund; or (ii) for a period not exceeding 30 days, with the consent of the securities regulatory authorities. The suspension may apply to all requests for redemption received prior to the suspension but as to which payment has not been made, as well as to all requests received while the suspension is in effect. All Unitholders making such requests shall be advised by the Fund of the suspension and that the redemption will be effected at a price determined on the first Business Day following the termination of the suspension. In such circumstances, all such Unitholders shall have the right to withdraw their requests for redemption. The suspension shall terminate in any event on the first day on which the condition giving rise to the suspension has ceased to exist, provided that no other condition under which a suspension is authorized then exists. To the extent not inconsistent with official rules and regulations promulgated by any government body having jurisdiction over the Fund, any declaration of suspension made by the Fund shall be conclusive

46 INCOME TAX CONSIDERATIONS In the opinion of Blake, Cassels & Graydon LLP, counsel to the Fund and the Manager, and McCarthy Tétrault LLP, counsel to the Agents, the following is, as of the date hereof, a summary of the principal Canadian federal income tax considerations generally relevant to investors who acquire Units pursuant to this prospectus. This summary is applicable to a Unitholder who is an individual (other than a trust that is not a plan trust) and who, for the purposes of the Tax Act, is resident or deemed to be resident in Canada, deals at arm s length and is not affiliated with the Fund and holds Units as capital property. Generally, Units will be considered to be capital property to a Unitholder provided the Unitholder does not hold the Units in the course of carrying on a business of trading or dealing in securities and has not acquired them in one or more transactions considered to be an adventure in the nature of trade. Certain Unitholders who might not otherwise be considered to hold their Units as capital property may, in certain circumstances, be entitled to have their Units, and all other Canadian securities owned or subsequently owned by such Unitholders, treated as capital property by making an irrevocable election in accordance with subsection 39(4) of the Tax Act. Unitholders should consult their own tax advisors as to whether an election under subsection 39(4) of the Tax Act is available or advisable in their particular circumstances. This summary does not apply to a Unitholder who has entered or will enter into a derivative forward agreement as that term is defined in the Tax Act with respect to the Units. This summary is based on the assumptions that (i) none of the issuers of the Portfolio Securities will be a foreign affiliate of the Fund or of any Unitholder; (ii) none of the Portfolio Securities will be a tax shelter investment within the meaning of section of the Tax Act; (iii) the Fund will not enter into any arrangement that would result in a dividend rental arrangement within the meaning of the Tax Act (including any amendments to that definition); (iv) the Fund will not acquire any investment that would cause the Fund to become a SIFT trust within the meaning of subsection 122.1(1) of the Tax Act; (v) none of the Portfolio Securities will be property that would be taxable Canadian property within the meaning of the Tax Act (without reference to paragraph (b) thereof); and (vi) none of the Portfolio Securities will be an interest in an offshore investment fund property that would require the Fund to include significant amounts in income in respect of such interest pursuant to section 94.1 of the Tax Act, or an interest in a trust (or a partnership which holds such an interest) that would require the Fund (or the partnership) to include significant amounts in income in connection with such interest pursuant to the rules in section 94.2 of the Tax Act, or an interest in a non-resident trust (or a partnership that holds such an interest) other than an exempt foreign trust as defined in section 94 of the Tax Act. This summary is also based on the advice of the Manager and of the Agents respecting certain factual matters. This summary is based on the facts set out in this prospectus, the current provisions of the Tax Act, counsel s understanding of the current administrative policies and assessing practices of the CRA published in writing by it prior to the date hereof and all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (such proposals referred to hereafter as the Tax Proposals ). This summary does not otherwise take into account or anticipate any changes in law or in the CRA s administrative policy or assessing practice, whether by legislative, governmental or judicial action, nor does it take into account other federal or any provincial, territorial or foreign tax legislation or considerations. There can be no assurance that the Tax Proposals will be enacted in the form publicly announced or at all. This summary is not exhaustive of all possible Canadian federal income tax considerations applicable to an investment in Units and does not describe the income tax consequences relating to the deductibility of interest on money borrowed to acquire Units. Moreover, the income and other tax consequences of acquiring, holding or disposing of Units will vary depending on an investor s particular circumstances including the province or territory in which the investor resides or carries on business. Accordingly, this summary is of a general nature only and is not intended to be legal or tax advice to any investor. Investors should consult their own tax advisors for advice with respect to the income tax consequences of an investment in Units, based on their particular circumstances. Status of the Fund This summary is based on the assumptions that the Fund will qualify at all times as a mutual fund trust within the meaning of the Tax Act and that the Fund will validly elect under the Tax Act to be a mutual fund trust from the date it was established. To qualify as a mutual fund trust: (i) the Fund must be a Canadian resident unit trust for purposes of the Tax Act; (ii) the only undertaking of the Fund must be the investing of its funds in property (other than real property or interests in real property or an immovable or a real right in an immovable); and (iii) the Fund must comply with certain minimum requirements respecting the ownership and dispersal of a particular class of Units. The Manager has advised counsel that it expects the Fund will qualify as a mutual fund trust no later than the Closing Date, that the Fund will elect to be deemed to be

47 a mutual fund trust from the date it was established and that it is expected to qualify as a mutual fund trust at all relevant times. If the Fund were not to qualify as a mutual fund trust at all times, the income tax considerations as described below would in some respects be materially and adversely different. Provided that the Fund qualifies as a mutual fund trust within the meaning of the Tax Act, the Units will be qualified investments under the Tax Act for trusts governed by registered retirement savings plans, registered retirement income funds, deferred profit sharing plans, registered disability savings plans, registered education savings plans and tax-free savings accounts (each a plan trust ). See Income Tax Considerations Taxation of Registered Plans for the consequences of holding Units in plan trusts. Taxation of the Fund The Manager has advised counsel that the Fund will elect to have a taxation year that ends on December 15 of each calendar year. The Fund will generally be subject to tax in each taxation year under Part I of the Tax Act on the amount of its income for the year, including net realized taxable capital gains, less the portion thereof that it claims in respect of the amount paid or payable to Unitholders (i) where the taxation year ends on December 15, in the calendar year in which the taxation year ends, or (ii) where the taxation year ends (or is deemed to end) at any other time, prior to the end of such taxation year. An amount will be considered to be payable to a Unitholder in a calendar year or a taxation year, as applicable, if it is paid in the year by the Fund or the Unitholder is entitled in that year to enforce payment of the amount. Counsel has been advised that it is intended that the Fund will deduct, in computing its income for each taxation year, an amount in respect of distributions to Unitholders sufficient to ensure that the Fund will generally not be liable for income tax under Part I of the Tax Act (after taking into account all other available deductions and all available credits and refunds). The Fund will be entitled for each taxation year throughout which it is a mutual fund trust to reduce (or receive a refund in respect of) its liability, if any, for tax on its net realized capital gains by an amount determined under the Tax Act based on the redemptions of Units during the year (the Capital Gains Refund ). The Capital Gains Refund in a particular taxation year may not completely offset the tax liability of the Fund, if any, for such taxation year which may arise upon the sale or other disposition of a security in the Portfolio in connection with the redemption of Units. With respect to indebtedness, the Fund is required to include in its income for each taxation year all interest that accrues (or is deemed to accrue) to it before the end of the year (or until disposition of the indebtedness in the year), or becomes receivable or is received by it before the end of the year, including on a conversion, redemption or at maturity, except to the extent that such interest was included in computing its income for a preceding taxation year and excluding any interest that accrued prior to the time of the acquisition of the indebtedness by the Fund. To the extent the Fund holds trust units issued by a trust resident in Canada that is not at any time in the relevant taxation year a SIFT trust and held as capital property for purposes of the Tax Act, the Fund will be required to include in the calculation of its income for a taxation year the net income, including net taxable capital gains, paid or payable to the Fund by such trust in the calendar year in which that taxation year ends, notwithstanding that certain of such amounts may be reinvested in additional units of the trust. Provided that appropriate designations are made by such trust, net taxable capital gains realized by the trust and foreign source income of the trust that are paid or payable by the trust to the Fund will effectively retain their character in the hands of the Fund. The Fund will be required to reduce the adjusted cost base of units of such trust by any amount paid or payable by the trust to the Fund except to the extent that the amount was included in calculating the income of the Fund or was the Fund s share of the non-taxable portion of capital gains of the trust, the taxable portion of which was designated in respect of the Fund. If the adjusted cost base to the Fund of such units becomes a negative amount at any time in a taxation year of the Fund, that negative amount will be deemed to be a capital gain realized by the Fund in that taxation year and the Fund s adjusted cost base of such units will be increased by the amount of such deemed capital gain to zero. Each issuer in the Fund s portfolio that is a SIFT trust (which will generally include Canadian resident income trusts, other than certain real estate investment trusts, the units of which are listed or traded on a stock exchange or other public market) will be subject to a special tax in respect of (i) income from business carried on in Canada, and (ii) certain income and capital gains in respect of non-portfolio properties (collectively, Non-Portfolio Income ). Non-Portfolio Income that is distributed by a SIFT trust to its unitholders will be taxed at a rate that is equivalent to the federal general corporate tax rate plus a prescribed amount on account of provincial tax. Non-Portfolio Income that becomes payable by an issuer that is a

48 SIFT trust will generally be taxed as though it were a taxable dividend from a taxable Canadian corporation and will be deemed to be an eligible dividend eligible for the enhanced gross-up and tax credit rules. The Fund will be required to include in its income for a taxation year all dividends received or considered to be received in the year on shares of corporations. In determining the income of the Fund, gains or losses realized upon dispositions of Portfolio Securities will constitute capital gains or capital losses of the Fund in the taxation year realized unless the Fund is considered to be trading or dealing in securities or otherwise carrying on a business of buying and selling securities or the Fund has acquired the securities in a transaction or transactions considered to be an adventure in the nature of trade. The Manager has advised counsel that the Fund will purchase Portfolio Securities with the objective of earning income thereon and participating in the long term capital appreciation of the Portfolio Securities, and will take the position that gains and losses realized on the disposition of Portfolio Securities are capital gains and capital losses. The Manager has also advised counsel that the Fund intends to make an election under subsection 39(4) of the Tax Act, if available, so that all Portfolio Securities that are Canadian securities (as defined in the Tax Act) will be deemed to be capital property to the Fund. The Fund may be subject to the suspended loss rules contained in the Tax Act. A loss realized on a disposition of capital property is considered to be a suspended loss when the Fund acquires a property (a substituted property ) that is the same as or identical to the property disposed of, within 30 days before and 30 days after the disposition and the Fund owns the substituted property 30 days after the original disposition. If a loss is suspended, the Fund cannot deduct the loss from the Fund s capital gains until the substituted property is sold and is not reacquired within 30 days before and after the sale. In general, gains and losses realized by the Fund from derivative transactions will be on income account, except where such derivatives are used to hedge Portfolio Securities held on capital account provided there is sufficient linkage, subject to the DFA Rules discussed below, and the Fund will recognize such gains or losses for tax purposes at the time they are realized by the Fund. The Portfolio will include securities that are not denominated in Canadian dollars. Proceeds of disposition of securities, interest, distributions and all other amounts will be determined for the purposes of the Tax Act in Canadian dollars using the appropriate exchange rates determined in accordance with the detailed rules in the Tax Act in that regard. The Fund may realize gains or losses by virtue of the fluctuation in the value of foreign currencies relative to Canadian dollars. Subject to the discussion in the following paragraph, where currency hedging transactions are sufficiently linked, gains and losses on such transactions will be treated as capital gains and capital losses. The DFA Rules treat what would otherwise be capital gains and capital losses realized in respect of certain derivative contracts as being on income account. The DFA Rules are broadly worded and might be interpreted to apply to other agreements or transactions (including certain forward currency contracts). See Risk Factors-Tax Matters Affecting the Fund. The Fund will derive income or gains from investments in countries other than Canada and, as a result, may be liable to pay tax to such countries. To the extent that such foreign tax paid qualifies as an income or profits tax (for example, withholdings on foreign source interest or distributions) and does not exceed 15% of the amount included in the Fund s income from such investments and has not been deducted in computing the Fund s income, the Fund may designate a portion of its foreign source income in respect of a Unitholder so that such income and a portion of the foreign tax paid by the Fund may be regarded as foreign source income of, and foreign tax paid by, the Unitholder for the purposes of the foreign tax credit provisions of the Tax Act. To the extent that such foreign tax paid by the Fund exceeds 15% of the amount included in the Fund s income from such investments, such excess may generally be deducted by the Fund in computing its income for the purposes of the Tax Act. In computing its income for tax purposes, the Fund may deduct reasonable administrative and other expenses incurred to earn income, generally including interest payable by it on money borrowed to purchase Portfolio Securities. The Fund may generally deduct any costs and expenses paid by the Fund in the course of an issuance or sale of Units and not reimbursed at a rate of 20% per year, pro-rated where the Fund s taxation year is less than 365 days. Any losses of the Fund may not be allocated to Unitholders but may be carried forward and deducted in computing the taxable income of the Fund in accordance with the detailed rules of the Tax Act

49 Taxation of Unitholders A Unitholder will generally be required to include in computing income for a particular taxation year of the Unitholder the amount of the Fund s net income, including net realized taxable capital gains, paid or payable to the Unitholder (whether in cash or in Units) in that particular year including the taxable portion of any amounts paid on a redemption of Units treated as an allocation of net realized capital gains by the Fund. In general, amounts paid or payable by the Fund to a Unitholder after December 15 and before the end of the calendar year are deemed to have been paid or become payable to the Unitholder on December 15. The non-taxable portion of the Fund s net realized capital gains for a taxation year, the taxable portion of which was designated in respect of a Unitholder for such taxation year, paid or payable to the Unitholder for that year will not be included in the Unitholder s income for the year. Any other amount in excess of the Fund s net income for a taxation year paid or payable to the Unitholder for the year, such as a return of capital of the Fund, will generally not be included in the Unitholder s income. Such an amount, however, will generally reduce the adjusted cost base of the Unitholder s Units. To the extent that the adjusted cost base of a Unit would otherwise be less than zero, the negative amount will be deemed to be a capital gain realized by the Unitholder from the disposition of the Unit and the Unitholder s adjusted cost base of the Unit will then be zero. Provided that appropriate designations are made by the Fund, such portion of: (i) the net realized taxable capital gains of the Fund, and (ii) the income of the Fund from foreign sources as is paid or made payable to a Unitholder, will effectively retain its character and be treated as such in the hands of the Unitholder for purposes of the Tax Act. A Unitholder will generally be entitled to foreign tax credits in respect of foreign taxes under and subject to detailed foreign tax credit rules under the Tax Act. Under the Tax Act, the Fund is permitted to deduct in computing its income for a taxation year an amount that is less than the amount of its distributions of income (including taxable capital gains) for the year in order to enable the Fund to utilize, in the year, losses from prior years. Such amount distributed to a Unitholder but not deducted by the Fund will not be included in the Unitholder s income. However, the adjusted cost base of the Unitholder s Units will be reduced by such amount. To the extent that the adjusted cost base of a Unit would otherwise be less than zero, the negative amount will be deemed to be a capital gain realized by the Unitholder from the disposition of the Unit and the Unitholder s adjusted cost base of the Unit will then be zero. As the Fund will pay different amounts of distributions on the Class A Units and the Class T Units, the tax characterization of distributions may vary between the two classes. On the disposition or deemed disposition of a Unit, including a redemption, the Unitholder will generally realize a capital gain (or capital loss) to the extent that the Unitholder s proceeds of disposition, excluding any portion of amounts paid on redemption treated as an allocation of capital gains by the Fund, exceed (or are less than) the aggregate of the adjusted cost base of the Unit and any reasonable costs of disposition (including any Class T Monthly Redemption Fees or Early Exchange Fees paid by the Unitholder on a redemption of Units). For the purpose of determining the adjusted cost base of Units of a particular class to a Unitholder, if additional Units of that class are acquired, the cost of the newly acquired Units will be averaged with the adjusted cost base of all Units of that class owned by the Unitholder as capital property immediately before that time. The cost of Units acquired as a distribution by the Fund to a Unitholder will generally be equal to the amount of the distribution. A consolidation of Units following a distribution paid in the form of additional Units will not be regarded as a disposition of Units and will not affect the aggregate adjusted cost base to a Unitholder of Units. The Fund may, in its discretion, determine what portion, if any, of the amount paid to a redeeming Unitholder on a redemption of Units is an allocation and/or designation to the Unitholder of net realized capital gains of the Fund realized by the Fund to facilitate the redemption of Units. Any such allocation and/or designation will reduce the redemption price otherwise payable to the redeeming Unitholder and, therefore, the Unitholder s proceeds of disposition. Based on counsel s understanding of the CRA s current administrative position, a conversion of Class A Units into Class T Units will not constitute a disposition of such Class A Units for the purpose of the Tax Act. The redemption of any Class A Unit in order to pay an Early Exchange Fee will generally result in a capital gain (or capital loss) for the redeeming Unitholder. An amount equal to the Early Exchange Fee paid by a Unitholder on a conversion of Class A Units into Class T Units will be added to the cost of the Class T Units received on the conversion. One-half of any capital gain realized on the disposition of Units, or paid or payable to the Unitholder out of the Fund s net realized capital gains and so designated by the Fund, will be included in the Unitholder s income as taxable capital gains and

50 one-half of any capital loss realized by a Unitholder will be deducted from taxable capital gains subject to and in accordance with the provisions of the Tax Act. In general terms, net income of the Fund paid or payable to a Unitholder that is designated as net realized taxable capital gains, and taxable capital gains realized by the Unitholder on the disposition of Units may increase the Unitholder s liability, if any, for alternative minimum tax. Tax Implications of the Fund s Distribution Policy When a Unitholder purchases Units, a portion of the price paid may reflect income or capital gains accrued or realized in the Fund but not yet paid or made payable before such purchase. If these amounts are paid or payable by the Fund to such Unitholder as distributions, they must be included in the Unitholder s income for tax purposes subject to the provisions of the Tax Act, even though such amounts may have been earned or realized before the purchase and reflected in the purchase price. This may be the case if Units are purchased near year-end before a final year-end distribution, if any, is made by the Fund and, in particular, where a Unitholder acquires Units in a calendar year after December 15 of such year, such Unitholder may become taxable on income earned or capital gains realized in the taxation year ending on December 15 of such calendar year but that had not been made payable before the Units were purchased. Taxation of Registered Plans Amounts of income and capital gains distributed by the Fund to a plan trust, and capital gains realized by a plan trust on a disposition of Units are generally not taxable under Part I of the Tax Act while retained in the plan trust, provided that the Units are qualified investments for the plan trust. See Income Tax Considerations Status of the Fund. Unitholders should consult their own advisors regarding the tax implications of establishing, amending, terminating or withdrawing amounts from a plan trust. Notwithstanding that the Units will be qualified investments for plan trusts in the circumstances described under Income Tax Considerations Status of the Fund, if Units are a prohibited investment for a registered retirement savings plan, a registered retirement income fund or a tax-free savings account that acquires Units, the annuitant or holder thereof will be subject to a penalty tax as set out in the Tax Act. A prohibited investment includes a unit of a trust (i) that does not deal at arm s length with the annuitant or holder; or (ii) in which the annuitant or holder has a significant interest, which in general terms means the ownership of 10% or more of the fair market value of the trust s outstanding units by the annuitant or holder, either alone or together with persons and partnerships with which the annuitant or holder does not deal at arm s length but does not include units that are excluded property as defined in the Tax Act. Annuitants under registered retirement savings plans and registered retirement income funds and holders of tax-free savings accounts should consult with their own tax advisors in this regard. The Manager ORGANIZATION AND MANAGEMENT DETAILS OF THE FUND The Manager will perform or arrange for the performance of management services for the Fund, will be responsible for the administration of the Fund and will act as the investment fund manager of the Fund pursuant to a management agreement (the Management Agreement ) between the Fund and the Manager. The Manager will be entitled to receive fees as compensation for management services rendered to the Fund. The principal office of the Manager is located at 1 First Canadian Place, 100 King Street West, 3rd Floor Podium, P.O. Box 150, Toronto, Ontario, M5X 1H3. See Duties and Services to be Provided by the Manager and Details of the Management Agreement below and Fees and Expenses

51 Directors and Certain Executive Officers of the Manager The name and municipality of residence of the directors and certain executive officers of the Manager and their principal occupations are as follows: Name and Municipality of Residence W. DARRYL WHITE Toronto, Ontario PETER HINMAN Toronto, Ontario PATRICK CRONIN Toronto, Ontario JULIE BARKER-MERZ Oakville, Ontario L. JACQUES MÉNARD Montreal, Québec GILLES OUELLETTE Toronto, Ontario CONNIE STEFANKIEWICZ Toronto, Ontario CHARYL GALPIN Toronto, Ontario KERI BUSH Toronto, Ontario Position with the Manager and Principal Occupation Director and Chief Executive Officer of the Manager Chief Financial Officer of the Manager and Chief Financial Officer, BMO Capital Markets Director and President of the Manager Director of the Manager and President, BMO InvestorLine Director and Chairman of the Board of Directors of the Manager and President of BMO Financial Group, Quebec Director of the Manager and Chief Executive Officer, Private Client Group, BMO Financial Group Director of the Manager and Chief Marketing Officer, BMO Financial Group Director of the Manager and Head, Private Client Division of the Manager Chief Compliance Officer of the Manager Each of the foregoing individuals has held his or her current office or has held a senior position with the Manager or an affiliate of the Manager during the five years preceding the date hereof. Ben Iraya, Manager, Subsidiary Governance of the Manager, will act as the corporate secretary of the Fund. Duties and Services to be Provided by the Manager and Details of the Management Agreement Pursuant to the Management Agreement, BMONBI is the manager of the Fund and, as such, is responsible for providing, or arranging for the provision of, managerial, administrative and compliance services to the Fund including engaging the Portfolio Manager. Administrative services include, without limitation: authorizing the payment of operating expenses incurred on behalf of the Fund; preparing financial statements and financial and accounting information as required by the Fund; ensuring that Unitholders are provided with financial statements (including interim and annual financial statements) and other reports as are required by applicable law from time to time; ensuring that the Fund complies with regulatory requirements and applicable stock exchange listing requirements; preparing the Fund s reports to Unitholders and the Canadian securities regulatory authorities; determining the amount of any distributions to be made by the Fund; negotiating contractual agreements with third party providers of services, including custodians, registrars, transfer agents, fund accountants, auditors and printers; and arranging for any payment required on or about the date of termination of the Fund. BMONBI will be required to exercise its powers and discharge its duties as manager of the Fund honestly, in good faith and in the best interests of the Fund and the Unitholders, and, in connection therewith, to exercise the degree of care, diligence and skill that a reasonably prudent manager would exercise in similar circumstances. BMONBI may resign as manager of the Fund upon no less than 30 days notice to the Unitholders. The Manager will be deemed to have resigned if (i) it ceases to be resident in Canada for purposes of the Tax Act; (ii) it has lost any registration, licence or other authorization or cannot rely on an exemption therefrom required by it to perform its services under the Management Agreement; or (iii) it ceases to carry out its functions of managing the Fund in Canada. If the Manager resigns it may appoint its successor but, unless its successor is an affiliate of the Manager, its successor must be approved by the

52 Unitholders. If the Manager is in material default of its obligations under the Management Agreement and such default has not been cured within 30 days after notice of same has been given to the Manager, the Unitholders may remove the Manager and appoint a successor manager. BMONBI will be entitled to fees for its services as Manager under the Management Agreement as described under Fees and Expenses and will be reimbursed for all reasonable costs and expenses incurred by BMONBI on behalf of the Fund. In addition, BMONBI and each of its directors, officers, employees and agents will be indemnified by the Fund for all liabilities, costs and expenses incurred in connection with any action, suit or proceeding that is proposed or commenced or other claim that is made against BMONBI or any of its officers, directors, employees or agents in the exercise of its duties as manager of the Fund, if they do not result from BMONBI s wilful misconduct, bad faith, negligence or breach of its obligations under the Management Agreement or its duties or standard of care described above. To compensate for the fees and any expenses paid by BMONBI in connection with the Offering which will result in the initial NAV per Unit being at least $9.95 per Class A Unit and Class T Unit, if BMONBI is removed from its position by Unitholders prior to the first Annual Redemption Date, the Fund will be required to pay BMONBI a fee equal to the aggregate amount of all redemption fees that would be payable to BMONBI, calculated as if all outstanding Units were redeemed on the Monthly Redemption Date prior to the month in which BMONBI is removed. No such fee will be paid to BMONBI to the extent that a court of competent jurisdiction in a final judgment that has become non-appealable has determined that BMONBI acted with wilful misconduct, bad faith, negligence or breached BMONBI s obligations or its standard of care under the Management Agreement. The administration and management services of BMONBI under the Management Agreement are not exclusive and nothing in the Management Agreement prevents BMONBI from providing similar administrative and management services to other investment funds and other clients (whether or not their investment objectives and strategies are similar to those of the Fund) or from engaging in other activities. The Portfolio Manager Monegy, Inc. will be retained as the portfolio manager of the Fund and will be responsible for implementing the investment strategies of the Fund. Monegy is the boutique high yield asset management specialist within BMO Global Asset Management, and is ultimately owned by the Bank of Montreal. Monegy has been managing high yield bond and loan portfolios for 16 years, and offers investors a broad suite of fund vehicles, including separate accounts for investments over $50 million, mutual funds, pooled funds or collective investment trusts. As of February 29, 2016, Monegy had US$1.8 billion in total assets under management. Its unique style combines the efficiency of quantitative risk/return metrics with the rigor of traditional fundamental credit analysis. A significant portion of its long term outperformance is driven by its low realized default rate and a strong sell discipline that limits downside capture as it reacts in real time to the changing risk and return dynamics of its highly diversified portfolios. Key Personnel of the Portfolio Manager The team that will be primarily responsible for providing portfolio management services to the Fund includes the following personnel: Lori Marchildon, CFA Lori is a portfolio manager with twenty years of experience in the financial industry. She is an Officer of the Portfolio Manager as well as a member of the Investment Policy Committee. Prior to joining the firm in 2001, Lori spent five years with BMO Financial Group's Risk Management Group where she led the design and implementation of a risk framework to address credit risk for trading, underwriting and investment portfolios. Lori's prior experience also includes working as an economist with the federal Department of Finance. Lori has a Masters in Economics from Queen's University, a Bachelor of Arts in Economics from the University of Western Ontario and is a CFA Charterholder. Vincent Huang, CFA Vincent is an associate portfolio manager and also has credit coverage accountability for the energy, utilities, transportation and railroad sectors. He has thirteen years of experience in the investment industry, with prior positions in credit analytics/research for major commercial banks and fixed income portfolio managers. Vincent has an MBA from York University s Schulich School of Business, a Bachelor of Arts in Economics from Beijing University, and is a CFA Charterholder

53 Details of the Portfolio Management Agreement The Portfolio Manager provides services to the Fund pursuant to the provisions of a portfolio management agreement among the Fund, the Manager and the Portfolio Manager (the Portfolio Management Agreement ). The Portfolio Manager is responsible for providing or arranging for the provision of all necessary investment advisory and portfolio management services in respect of the Portfolio and for ensuring that the trading and investment activities of the Portfolio are in compliance with the Fund s investment objectives, investment strategies and investment restrictions. Under the Portfolio Management Agreement, the Portfolio Manager will be required to act at all times on a basis that is fair and reasonable to the Fund, to act honestly and in good faith with a view to the best interests of the Unitholders and, in connection therewith, to exercise the degree of care, diligence and skill that a reasonably prudent portfolio manager would exercise in comparable circumstances. The Portfolio Management Agreement will provide that the Portfolio Manager shall not be liable in any way for any default, failure or defect in any of the securities held by the Fund, nor shall it be liable if it has satisfied the duties and standard of care, diligence and skill set forth above. The Portfolio Manager will, however, incur liability in cases of wilful misconduct, bad faith, negligence, breach of its standard of care or breach of its obligations under the Portfolio Management Agreement. The Portfolio Management Agreement, unless terminated as described below, will continue in effect until the termination date of the Fund. The Manager may otherwise terminate the Portfolio Management Agreement (i) if the Portfolio Manager becomes bankrupt or insolvent or 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 makes a general assignment for the benefit of its creditors or a receiver is appointed in respect of the Portfolio Manager or a substantial portion of its assets; (ii) if the Portfolio Manager is in material breach of the Portfolio Management Agreement and such breach has not been cured within 30 Business Days after notice thereof has been given to the Portfolio Manager by the Fund or the Manager; (iii) if the assets of the Portfolio Manager have become subject to seizure or confiscation by any public or governmental organization; (iv) if the Portfolio Manager has lost any registration, license or other authorization or cannot rely on an exemption therefrom required by the Portfolio Manager to perform the services delegated to the Portfolio Manager under the Portfolio Management Agreement; (v) if the Portfolio Manager has breached the standard of care under the Portfolio Management Agreement or acted with wilful misconduct, bad faith or negligence; or (vi) upon 90 days prior written notice to the Portfolio Manager. Except as set out below, the Portfolio Manager may not terminate the Portfolio Management Agreement or assign the same except to an affiliate of the Portfolio Manager without the approval of the Unitholders. The Portfolio Manager may terminate the Portfolio Management Agreement (i) if the Fund or the Manager is in material breach or default of the provisions thereof and, if capable of being cured, such breach or default has not been cured within 30 Business Days notice of such breach or default to the Fund or the Manager; (ii) on 30 days prior notice to the Manager in the event there is a material change in the investment objectives, investment strategies or investment restrictions of the Fund to which the Portfolio Manager has not previously agreed; (iii) if the Manager has been declared bankrupt or insolvent or has entered into liquidation or winding-up, whether compulsory or voluntary (and not merely a voluntary liquidation for the purposes of amalgamation or reorganization); (iv) if the Manager makes a general assignment for the benefit of creditors or otherwise acknowledges its insolvency; (v) if the assets of the Manager have become subject to seizure or confiscation by any public or governmental organization; or (vi) upon 90 days written notice to the Manager. If the Portfolio Management Agreement is terminated, the Manager will promptly appoint a successor portfolio manager to carry out the activities of the Portfolio Manager until a meeting of the Unitholders is held to confirm such appointment. The Portfolio Manager and each of its directors, officers, employees and agents will be indemnified by the Fund for all liabilities, costs and expenses incurred in connection with any action, suit or proceeding that is proposed or commenced or other claim that is made against the Portfolio Manager or any of its officers, directors, employees or agents in the exercise of its duties as portfolio manager, except those resulting from the Portfolio Manager s wilful misconduct, bad faith, negligence, breach of its standard of care or breach of its obligations under the Portfolio Management Agreement. The Manager is responsible for the payment of the fees of the Portfolio Manager out of the Management Fee. Brokerage Arrangements The Portfolio Manager may use various brokers to effect securities transactions on behalf of the Fund. These brokers may directly provide the Portfolio Manager with research and related services, as outlined below, in addition to executing

54 transactions - often referred to as bundled services. Although each of the funds managed by the Portfolio Manager may not benefit equally from each research and related service received from a broker, the Portfolio Manager will endeavour to ensure that all of such funds receive an equitable benefit over time. The Portfolio Manager maintains a list of brokers that have been approved to effect securities transactions on behalf of the Fund. When determining whether a broker should be added to that list there are numerous factors that are considered including: (a) with respect to trading: (i) level of service; (ii) response time; (iii) availability of securities (liquidity); (iv) account management; (v) idea generation; and (vi) access to alternative markets/liquidity pools; (b) with respect to research: (i) proprietary research reports; (ii) industry knowledge; (iii) access to analysts; and (iv) access to staff; (c) with respect to personnel: (i) back office support; and (ii) sales contacts; and (d) with respect to infrastructure: (i) trade settlement; (ii) confirmations; and (iii) reporting. Approved brokers are monitored on a regular basis to ensure that the value of the goods and services, as outlined above, provides a reasonable benefit as compared to the amount of brokerage commissions paid for the goods and services. In conducting this analysis, the Portfolio Manager considers the use of the goods and services, execution quality in terms of trade impact and the ability to achieve the target benchmark price, as well as the amount of brokerage commissions paid relative to other brokers and the market in general. The selection and monitoring processes are the same regardless of whether the broker is affiliated with the Portfolio Manager or is an unrelated third party. Conflicts of Interest The directors and officers of the Manager and the Portfolio Manager may be directors, officers, or security holders of one or more issuers in which the Fund may acquire securities. The Manager and the Portfolio Manager and their affiliates or associates may be managers or portfolio managers of one or more issuers in which the Fund may acquire securities and may be managers or portfolio managers of funds that invest in the same securities as the Fund. Transactions will only be undertaken by the Manager and the Portfolio Manager where permitted by applicable securities legislation and upon obtaining any required regulatory or IRC approvals. The services of the Manager and the Portfolio Manager are not exclusive to the Fund. The Manager and the Portfolio Manager may in the future act as the manager or portfolio manager to other funds and companies and may in the future act as the manager or portfolio manager to other funds which invest in debt securities and which are considered competitors of the Fund. Independent Review Committee National Instrument Independent Review Committee for Investment Funds ( NI ) requires all publicly offered investment funds, such as the Fund, to establish an independent review committee. The independent review committee is required to be comprised of a minimum of three members, each of whom must be independent of the Manager, entities related to the Manager and the Fund. The mandate of the IRC is to review conflict of interest matters identified and referred to the IRC by the Manager and to give an approval or a recommendation, depending on the nature of the conflict of interest matter. At all times, the members of the IRC are required to act honestly and in good faith and in the best interests of the Fund and, in connection therewith, to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The Manager has established written policies and procedures for dealing with each conflict of interest matter. At least annually, the IRC will review and assess the adequacy and effectiveness of the Manager s written policies and procedures relating to conflict of interest matters and will conduct a self-assessment of the IRC s independence, compensation and effectiveness. The Manager will maintain records of all matters and/or activities subject to the review of the IRC, including a copy of the Manager s written policies and procedures dealing with conflict of interest matters, minutes of IRC meetings, and copies of materials, including any written reports, provided to the IRC. The Manager will also provide the IRC with assistance and information sufficient for the IRC to carry out its responsibilities under NI The members of the IRC are entitled to be compensated by the Fund and reimbursed for all reasonable costs and expenses for the duties they perform as IRC members. In addition, the members of the IRC are entitled to be indemnified by the Fund, except in cases of wilful misconduct, bad faith, negligence or breach of their standard of care

55 The independent review committee report to the Manager and Unitholders will be available without charge on the Fund s website at (under Closed-End Funds ), on SEDAR at or upon request to the Manager by calling toll-free at (English) or (French) or by writing to [email protected]. Compensation for members of the independent review committee in respect of the Fund is currently $4,000 per annum (approximately $5,400 for the chair) and is payable by the Fund. The Manager will appoint Allen Clarke (chair), Thomas Pippy and Douglas Derry to the independent review committee. The following are brief biographies provided by the members of the independent review committee: Allen Clarke (chair) acts as a consultant on financial products and matters of corporate governance. Mr. Clarke was the founder, Chief Executive Officer and Chief Investment Officer of Opus 2 Financial, an investment portfolio company, from 1999 to Prior to this, Mr. Clarke was a Senior Vice-President at AGF Funds and Richardson Greenshields. Mr. Clarke also serves as a member of the independent review committee for BMO ETFs, BMO Mutual Funds and BMO Private Portfolios. In addition, Mr. Clarke serves as an independent review committee member for Canoe GO CANADA! Funds, Coxe Global Agribusiness Income Fund, Star Yield Managers Trust, Star Yield Trust, U.S. Housing Recovery Fund, DoubleLine Income Solutions Trust, First Trust Global DividendSeeker Fund, PineBridge Investment Grade Preferred Securities Fund, Global Water Solutions Fund and Global Alpha Worldwide Growth Fund. Thomas Pippy is a Chartered Professional Accountant, Chartered Accountant and is presently a Professor in the Faculty of Business at Conestoga College. Mr. Pippy s previous positions include Senior Vice President Finance, Mergers and Acquisitions at a major Canadian software company and Vice President and Director of a major Canadian investment dealer. Mr. Pippy is also on the board of directors of BMO Global Tax Advantage Funds Inc., Star Hedge Managers Corp., Star Hedge Managers Corp. II and Durham Radio Inc. He is also a member of the independent review committee of Coxe Global Agribusiness Income Fund, Coxe Commodity Strategy Fund, Star Yield Managers Trust, Star Yield Trust, BMO Principal at Risk Notes Program, Top 20 Dividend Trust, Top 20 U.S. Dividend Trust, Top 20 Europe Dividend Trust, Europe Blue-Chip Dividend & Growth Fund, U.S. Housing Recovery Fund, DoubleLine Income Solutions Trust, First Trust Global DividendSeeker Fund, PineBridge Investment Grade Preferred Securities Fund, Global Water Solutions Fund and Global Alpha Worldwide Growth Fund. Douglas Derry serves on the Board of Directors and Independent Review Committees of certain funds administered within each of the Bank of Montreal and the Scotiabank groups of companies, and on the Board of Directors of various publiclylisted, public interest, and private companies, including AGF Management Limited, Equitable Life of Canada, Poplar Lane Holdings Ltd. and Keewhit Investments Ltd. He serves as an Officer of St. Michael s Hospital (Toronto) Research Institute and is a Trustee of Trinity College School and the Patrick and Barbara Keenan Foundation. He is Past Chair of the Institute of Chartered Accountants of Ontario, The Bishop Strachan School, The Empire Club of Canada, the Empire Club Foundation, the University of Guelph and the University of Guelph Heritage Trust (Vice Chair). Douglas Derry spent many years in financial services as a Senior Partner with PricewaterhouseCoopers LLP. A Fellow of the Institute of Chartered Professional Accountants of Ontario (FCPA), and the Chartered Accountants of Ontario (FCA), Douglas is a graduate of the Richard Ivey School of Business, University of Western Ontario. In 2012 he was awarded the Queen Elizabeth II Diamond Jubilee Medal for his dedicated service to his peers, his community and to Canada. The Trustee is the trustee of the Fund. The Trustee or any successor trustee may resign as trustee of the Fund upon 90 days written notice to the Manager or may be removed by a simple majority vote passed at a meeting of Unitholders called for such purpose or by the Manager. Pursuant to the Declaration of Trust, the Trustee shall be deemed to have resigned if it ceases to (i) be resident in Canada for purposes of the Tax Act; (ii) carry out its functions of managing the Fund in Canada; or (iii) exercise the main powers and discretions of the trustee of the Fund in Canada. If the Trustee has resigned or has been removed, the Manager may appoint a replacement to act as Trustee and such appointment need not be approved by Unitholders unless the Trustee has been removed by Unitholders in which case the Manager will call a meeting of Unitholders for such purpose. Any such resignation or removal shall become effective only on the appointment of a successor trustee. If, after notice of resignation has been

56 received from the Trustee, no successor has been appointed within 90 days of such notice, the Trustee, the Manager or any Unitholder may apply to a court of competent jurisdiction for the appointment of a successor trustee. The Declaration of Trust provides that the Trustee will not be liable in carrying out its duties under the Declaration of Trust unless the Trustee fails to act honestly and in good faith with a view to the best interests of the Unitholders or to exercise the degree of care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances. The Declaration of Trust contains other customary provisions limiting the liability of the Trustee and indemnifying the Trustee in respect of certain liabilities incurred by it in carrying out its duties. The address of the Trustee is. The Trustee is entitled to receive fees from the Fund as described under Fees and Expenses and to be reimbursed by the Fund for all expenses which are reasonably incurred by the Trustee in connection with the activities of the Fund. The Custodian (the Custodian ) will be appointed as the custodian of the Fund s assets pursuant to a custodian agreement between the Manager and the Custodian in respect of the Fund to be entered into prior to the closing of the Offering (the Custodian Agreement ). The Custodian will provide custodial services to the Fund from its offices in Toronto, Ontario. The Custodian may employ sub-custodians as considered appropriate in the circumstances. The Manager or the Custodian may terminate the Custodian Agreement without any penalty: (a) upon at least 90 days written notice or such lesser notice as the other may agree to, or (b) immediately, if (i) any party to the agreement becomes insolvent, or makes an assignment for the benefit of creditors, (ii) a petition in bankruptcy is filed by or against that party and is not discharged within 30 days, or (iii) proceedings for the appointment of a receiver for that party are commenced and not discontinued within 30 days. The Custodian shall exercise the same degree of care, diligence and skill in the safekeeping of the accounts of the Fund and providing the services described under the Custodian Agreement that a reasonably prudent person would exercise in the circumstances, or, if higher, the degree of care, diligence and skill that the Custodian uses in respect of its own property of a similar nature in its custody. The Custodian shall assume the entire responsibility for, and indemnify and hold the Fund and the Manager harmless from, any direct loss suffered or incurred by the Manager, or the Fund, resulting from or caused by reason of the fraud, wilful misconduct, gross negligence, lack of good faith or breach of the Custodian s standard of care provided for under the Custodian Agreement; however, the Custodian shall be without liability for any loss resulting from or caused by: (i) events or circumstances beyond its reasonable control including the nationalization or expropriation of assets and the imposition of currency controls or restrictions; (ii) errors by the Manager or any investment manager in their instructions to the Custodian provided such instructions have been given in accordance with the Custodian Agreement; or (iii) the insolvency of or acts or omissions by a depository or clearing agency that operates a book-based system. In addition to and without derogation from any other indemnity afforded under the Custodian Agreement or otherwise by law, the Fund shall indemnify and hold harmless the Custodian from any loss, damage or expense, including reasonable counsel fees and expenses, arising in connection with the Custodian Agreement except to the extent caused by a breach of the standard of care. Fund Accounting BMO Asset Management Inc. (the Valuation Agent ) is the valuation agent for the Fund and will provide fund accounting and valuation services for the Fund. Auditor The auditor of the Fund is PricewaterhouseCoopers LLP, Chartered Professional Accountants, Licensed Public Accountants. The address of the auditor is PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario M5J 0B

57 Transfer Agent and Registrar CST Trust Company, at its principal offices in Toronto, Ontario, will be appointed the registrar, transfer agent and distribution agent for the Units pursuant to a registrar, transfer agency and distribution agency agreement to be entered into as of the Closing Date. Promoter The Manager may be considered a promoter of the Fund within the meaning of the securities legislation of certain provinces or territories of Canada by reason of its initiative in organizing the Fund. The Manager will not receive any benefits, directly or indirectly, from the issuance of securities offered hereunder other than as described under Fees and Expenses. Accounting and Reporting The Fund s fiscal year will be the calendar year or such other fiscal period permitted under the Tax Act as the Fund elects. The annual financial statements of the Fund shall be audited by the Fund s auditor in accordance with Canadian generally accepted auditing standards. The auditor will be asked to report on the fair presentation of the annual financial statements in accordance with International Financial Reporting Standards ( IFRS ), which is one of the financial reporting frameworks included in Canadian generally accepted accounting principles. The Manager will arrange for the Fund s compliance with all applicable reporting and administrative requirements. The Manager will keep, or arrange for the keeping of, adequate books and records reflecting the activities of the Fund. A Unitholder or his or her duly authorized representative will have the right to examine the books and records of the Fund during normal business hours at the offices of the Manager or such other location as the Manager shall determine. Notwithstanding the foregoing, a Unitholder shall not have access to any information that, in the opinion of the Manager, should be kept confidential in the interests of the Fund. Calculation of Net Asset Value and NAV per Unit CALCULATION OF NET ASSET VALUE The NAV of the Fund on a particular date will be equal to the value of the Total Assets less the aggregate value of the liabilities of the Fund. The NAV per Unit of a class on any day will be obtained by dividing the NAV of the Fund attributable to that class of Units, including an allocation of any net realized capital gains or other amounts payable to Unitholders of that class on or before such date, divided by the number of Units of that class then issued and outstanding. The NAV per Unit of a class will be calculated as of 4:00 p.m. (Toronto time) on each Valuation Day (the Valuation Time ). Such information will be provided by the Manager to Unitholders on request. Valuation Policies and Procedures of the Fund In determining the NAV of the Fund, the following will be taken into account: (a) (b) (c) (d) (e) cash on hand or on deposit, bills and demand notes and accounts receivable, prepaid expenses, dividends receivable and interest declared or accrued and not yet received are valued at the face amount or at what the Valuation Agent considers to be the fair value; money market investments are recorded at their fair value; any security that is listed or dealt in on a stock exchange shall be valued at the closing sale price (or such other value as the Canadian Securities Administrators may permit) last reported at the Valuation Time on the principal stock exchange on which such security is traded, or, if no reliable closing sale price is available at that time, the security shall be fair valued; bonds are valued at bid prices obtained from a recognized pricing service; securities or property which have no available price quotations are valued at the Valuation Agent s best estimate of the fair value;

58 (f) (g) (h) (i) (j) (k) (l) (m) (n) foreign currency accounts shall be expressed in Canadian dollars on the following basis: (i) investments and other assets shall be valued by applying the applicable exchange rate at the end of the relevant valuation period and (ii) purchases and sales of investments, income and expenses shall be recorded by applying the applicable exchange rate on the dates of such transactions; the Fund s holdings are valued in Canadian dollars before the Valuation Agent calculates the NAV of the security; forward foreign exchange contracts shall be valued as the difference between the value of the contract on the date the contract was originated and the value of the contract at the Valuation Time. Foreign exchange options shall be valued at their current market value. When the contract or option closes or expires, a realized gain or loss shall be recognized; forward contracts and swaps shall be valued as the difference between the value of the contract on the date the contract originated and the value of the contract at the Valuation Time; clearing corporation options shall be valued at the current market value; futures contracts shall be valued as the gain or loss that would be realized if on the valuation date the contract was to be closed out; estimated operating expenses payable by the Fund shall be accrued to the date as of which the NAV is being determined; all other assets shall be valued at the Valuation Agent s best estimate of fair value; and if any investment cannot be valued under the foregoing rules or if the foregoing rules are at any time considered by the Valuation Agent to be inappropriate under the circumstances then, notwithstanding the foregoing rules, the Valuation Agent shall make such valuation as it considers fair and reasonable. The Valuation Agent may also fair value securities in the following circumstances: (a) (b) (c) when there is a halt trade on a security that is normally traded on an exchange; where securities trade on markets that have closed prior to the time of calculation of the NAV of the Fund and for which there is sufficient evidence that the closing price on that market is not the most appropriate value at the time of valuation; and when there are investment or currency restrictions imposed by a country that affect the Fund s ability to liquidate the assets held in that market. In compliance with the requirements for all Canadian investment entities, the Fund will prepare its financial statements in accordance with IFRS as issued by the International Accounting Standards Board. The framework for fair valuation as set out under the relevant sections of IFRS includes the requirement for the measurement and disclosure of fair value. If an asset or liability measured at fair value has a bid price and an ask price, the standard requires valuation to be based on a price within the bid-ask spread that is most representative of fair value. The standard allows the use of midmarket pricing or other pricing conventions that are used by market participants as a practical means for fair value measurements within a bid-ask spread. Reporting of Net Asset Value The NAV per Unit will be made available at no cost daily on a website established for such purpose ( Description of the Securities Distributed ATTRIBUTES OF THE SECURITIES The beneficial interest in the net assets and net income of the Fund is divided into units of such classes as may be determined by the Manager from time to time. Initially, Class A Units and Class T Units have been authorized for issuance and the Fund is authorized to issue an unlimited number of Units of each class. Each Unit entitles the holder to the same rights and obligations as any other Unitholder of the same class and no Unitholder is entitled to any privilege, priority or preference in relation to any other Unitholder, subject to Unitholders of a class being entitled to redemptions based on the trading price of

59 the Class T Units or the Net Asset Value per Unit of the particular class, as the case may be, and distributions being different as described below. Each Unitholder is entitled to one vote for each Unit held except for meetings at which only Unitholders of another class are entitled to vote separately as a class and is entitled to participate equally with respect to any and all distributions made by the Fund on a class of Units, including distributions of net realized capital gains or income, if any. On the redemption of Units, however, the Fund may, in its sole discretion, allocate and/or designate as payable to redeeming Unitholders any net realized capital gains realized by the Fund to facilitate the redemption of Units. Any such allocation and designation will reduce the redemption price otherwise payable to the redeeming Unitholder. The monthly distributions are initially targeted to be $0.05 per Class A Unit ($0.60 per annum per Class A Unit) representing an annual yield of 6.0% on the $10.00 per Class A Unit issue price and $ per Class T Unit ($0.70 per annum per Class T Unit) representing an annual yield of 7.0% on the $10.00 per Class T Unit issue price. On termination or liquidation of the Fund, the Unitholders of record are entitled to receive on a pro rata basis with holders of Units of that class all of the assets of the Fund attributable to that class remaining after payment of all debts, liabilities and liquidation expenses of the Fund. As the Fund will pay different amounts of distributions on the Class A Units and the Class T Units, the tax characterization of distributions may vary between the two classes. The Class T Units are designed for fee-based and/or institutional accounts. The Class A Units will not be listed on a stock exchange, but will be convertible into Class T Units on a weekly basis. Class A Units are intended to be purchased under the Offering by investors who intend to hold their Class A Units for at least thirty-six (36) months with the understanding that an Early Exchange Fee will apply if the Class A Units are converted or redeemed prior to the Automatic Conversion Date. Class A Units will be automatically converted into Class T Units on the Automatic Conversion Date based on their relative NAV per Unit at the time. No Early Exchange Fee is payable with respect to the automatic conversion of the Class A Units on the Automatic Conversion Date. Though Class A Units are intended for investors who expect to hold their Class A Units until the Automatic Conversion Date, investors may, at their option, convert some or all of their Class A Units into Class T Units on a weekly basis before the end of the thirty-six (36) month period, as well as redeem some or all of their Class A Units under the monthly redemption right. In either case, the Early Exchange Fee will be payable to the Manager. In the case of a conversion of Class A Units, immediately prior to conversion the Fund will redeem such number of Class A Units as is necessary to pay the Early Exchange Fee. In the case of a monthly redemption of Class A Units, the Fund will deduct the Early Exchange Fee from the redemption proceeds otherwise payable to the redeeming Unitholder. The Early Exchange Fee will be remitted by the Fund, on behalf of the Unitholder, to the Manager. The Declaration of Trust provides that the Fund may not issue additional Units of a class following completion of the Offering except: (i) for net proceeds per Unit of a class of not less than 100% of the most recently calculated Net Asset Value per Unit of such class prior to the pricing of such issuance; or (ii) by way of Unit distributions. On December 16, 2004, the Trust Beneficiaries Liability Act, 2004 (Ontario) came into force. This statute provides that holders of units of a trust are not, as beneficiaries, liable for any act, default, obligation or liability of the trust if, when the act or default occurs or the liability arises: (i) the trust is a reporting issuer under the Securities Act; and (ii) the trust is governed by the laws of Ontario. The Fund will be a reporting issuer under the Securities Act prior to Closing and the Fund is governed by the laws of Ontario by virtue of the provisions of the Declaration of Trust. Conversion of Class A Units A holder of Class A Units may convert such Class A Units into Class T Units on a weekly basis and it is expected that liquidity for the Class A Units will be obtained primarily by means of conversion into Class T Units and the sale of such Class T Units through the facilities of the TSX. Class A Units may be converted in any week on the first Business Day of such week ( Conversion Date ) by delivering a notice and surrendering such Class A Units by 5:00 p.m. (Toronto time) at least five Business Days prior to the applicable Conversion Date. For each Class A Unit so converted, a holder will receive that number of Class T Units that is equal to the NAV per Class A Unit as of the close of trading on the Conversion Date divided by the NAV per Class T Unit as of the close of trading on the Conversion Date. No fractions of a Class T Unit will be issued upon any conversion of Class A Units and any fractional amounts will be rounded down to the nearest whole number of Class T Units. Any conversion of Class A Units into Class T Units prior to the Automatic Conversion Date will be subject to the Early Exchange Fee payable by the Unitholder per Class A Unit converted equal to: (i) 3% of NAV per Class A Unit from Closing

60 until and including the last Business Day of the 12 th month following Closing; (ii) 2% of NAV per Class A Unit from the first Business day of the 13 th month following Closing until and including the last Business Day of the 24 th month following Closing; and (iii) 1% of NAV per Class A Unit from the first Business Day of the 25 th month following Closing until the Automatic Conversion Date. Immediately prior to conversion, the Fund will redeem such number of Class A Units as is necessary to pay the Early Exchange Fee from the redemption proceeds. The Early Exchange Fee will be remitted by the Fund, on behalf of the holder, to the Manager. Class A Units will be automatically converted into Class T Units on the Automatic Conversion Date. No Early Exchange Fee will apply when Class A Units are automatically converted into Class T Units on the Automatic Conversion Date. Based on counsel s understanding of the current administrative position of the CRA, a conversion of Class A Units into Class T Units will not constitute a disposition of such Class A Units for the purposes of the Tax Act. The redemption of any Class A Unit in order to pay an Early Exchange Fee will generally result in a capital gain (or capital loss) for the redeeming Unitholder. An amount equal to the Early Exchange Fee paid by a Unitholder on a conversion of Class A Units into Class T Units will be added to the cost of the Class T Units received on the conversion. Registration of Units Registration of interests in, and transfers of, the Units will be made only through non-certificated interests issued under the book-entry only system of CDS. On the Closing Date, non-certificated interests representing the aggregate number of Units subscribed for under the Offering will be recorded in the name of CDS, or its nominee, on the register of the Fund maintained by the Transfer Agent. Units must be purchased, converted, transferred and surrendered for redemption only through a CDS Participant. All rights of an owner of Units must be exercised through, and all payments or other property to which such owner is entitled will be made or delivered by, CDS or the CDS Participant through which the owner holds such Units. Upon purchase of any Units, the owner will receive only the customary confirmation from the registered dealer which is a CDS Participant (from or through which the Units were purchased). References in this prospectus to a Unitholder means, unless the context otherwise requires, the owner of the beneficial interest in such Units. The Fund, the Manager and the Agents will not have any liability for (i) records maintained by CDS relating to the beneficial interests in the Units or the book entry accounts maintained by CDS; (ii) maintaining, supervising or reviewing any records relating to such beneficial ownership interests; or (iii) any advice or representation made or given by CDS and made or given with respect to the rules and regulations of CDS or any action taken by CDS or at the direction of the CDS Participants. The ability of a beneficial owner of Units to pledge such Units or otherwise take action with respect to such owner s interest in such Units (other than through a CDS Participant) may be limited due to the lack of a physical certificate. The Fund has the option to terminate registration of the Units through the book-entry only system in which case a certificate for Units in fully registered form will be issued to beneficial owners of such Units or to their nominees. Voting Rights in the Portfolio Securities Unitholders will not have any voting rights in respect of the Portfolio Securities. Mandatory Market Purchase Program To seek to enhance liquidity and provide market support for the Class T Units, the Fund will have a mandatory market purchase program pursuant to which the Fund will, subject to the following exceptions and compliance with any applicable regulatory requirements, be obligated to purchase any Class T Units offered on the TSX if, at any time, the price at which Class T Units are then offered on the TSX is 98.5% or less of the NAV per Class T Unit as at the close of business in Toronto, Ontario on the immediately preceding Business Day. The Manager will publish the NAV per Class T Unit on the Manager s website at (under Closed-End Funds ) each day on which the TSX is open of business. The maximum number of Class T Units to be purchased by the Fund pursuant to such mandatory market purchase program in any rolling 10 trading day period will be 10% of the number of Class T Units outstanding at the beginning of such 10 trading day period, subject to a limit of 2% of the number of Class T Units outstanding each day and subject to the terms set out in the Declaration of Trust. In addition, the Fund will not be obligated to make such purchases if, among other things: (i) the Manager reasonably believes that the Fund would be required to make an additional distribution in respect of the taxation year after the making of such purchase to Unitholders of record on or before December 31 of that year in order that the Fund

61 will generally not be liable to pay income tax; (ii) in the opinion of the Manager, the Fund lacks the cash, debt capacity or other resources to make such purchases; or (iii) in the opinion of the Manager, such purchases would adversely affect the ongoing activities of the Fund or the remaining Unitholders. In addition, the Fund will have the right (but not the obligation), exercisable in its sole discretion, at any time to purchase additional Class T Units in the market, subject to any applicable regulatory requirements and limitations. Given the procedures and rules of the TSX relating to the placement of purchase and sell orders and the filling of such orders, and with the objective of avoiding arbitrage in the market detrimental to Unitholders, the Fund may place bids on the Class T Units at 98.5% of the NAV per Class T Unit even if the trading price is lower. In connection with any market purchases of Class T Units by the Fund, the Fund will pay to the Manager the following amounts as partial compensation for the fees and expenses the Manager paid in connection with the Offering: if the purchase is made at a discount to the then current NAV of the Class T Units purchased, the Fund will pay to the Manager an amount (inclusive of taxes) equal to such discount. The maximum amount that the Manager may be paid in respect of any market purchase is 3.0% of the NAV of the Class T Units purchased. Such amounts will only be paid if the Class T Units purchased by the Fund are cancelled and will not be paid by the Fund once the Manager has received, together with any Early Exchange Fees and Class T Monthly Redemption Fees, an aggregate amount equal to the fees and expenses paid by it in relation to the Offering and any future offerings. To the extent that a purchase is made at a price that is greater than a 3.0% discount to the then current NAV per Class T Unit, the amount of the balance will be accretive to the NAV of the Fund. However, as the purchases made under the mandatory market purchase program are being effected at a maximum of 98.5% of the NAV per Class T Unit (calculated at the latest Valuation Time), they will not be dilutive to the Fund or Unitholders. Total Return Swap The Fund may enter into a total return swap ( Swap ) in respect of the Class T Units with an affiliate of a Canadian chartered bank (the Counterparty ). The Swap is intended to address the discount observed in respect of the trading price of securities of non-redeemable investment funds on the TSX as compared to the net asset value per unit. The Manager expects that the purchases under the Swap will cause the Class T Units to trade closer to their NAV per Class T Unit. Pursuant to the Swap, the Counterparty would agree to make payments to the Fund based on increases in the trading price of the Class T Units (plus amounts equal to all cash distributions actually received on such Class T Units) in respect of which exposure is obtained by the Counterparty during the term of the Swap, above the price paid for such securities in connection with establishing the Counterparty s hedge for such payment. The Fund would conversely make payments to the Counterparty if the trading price of the corresponding number of the Class T Units was below the purchase price of such Class T Units all as determined at the time the Swap is reset or terminates. The Counterparty may hedge its obligations to the Fund by acquiring direct or indirect exposure to the Class T Units. If the Counterparty or an affiliate of the Counterparty hedges its obligations under the Swap, it is anticipated that the Class T Units comprising the hedge will be acquired by the Counterparty or an affiliate of the Counterparty through the facilities of the TSX and that such purchases will cause the Class T Units to trade closer to their NAV per Class T Unit. Pursuant to the Swap, the Counterparty may purchase through the facilities of the TSX, from time to time, up to 10% of the number of Class T Units outstanding at the time the Swap is entered into. Take-over Bids The Declaration of Trust contains provisions to the effect that if a take-over bid is made for the Class T Units and not less than 90% of the aggregate of the Class T Units (but not including any Class T Units held at the date of the take-over bid by or on behalf of the offeror or associates or affiliates of the offeror) are taken up and paid for by the offeror, the offeror will be entitled to acquire the Class T Units held by the Unitholders who did not accept the take-over bid on the terms offered by the offeror. The Declaration of Trust also provides that if, prior to the termination of the Fund, a formal bid (as defined in the Securities Act) is made for all of the Class A Units and such bid would constitute a formal bid for all Class T Units if the Class A Units had been converted to Class T Units immediately prior to such bid and the other offer does not include a concurrent identical take-over bid, including in terms of price (relative to the NAV per Unit of the class), for the Class T Units then the Fund shall provide the holders of Class T Units the right to convert all or a part of their Class T Units into Class A Units and to tender such Units to the offer. In the circumstances described above, the Fund shall by press release provide written notice to the

62 holders of the Class T Units that such an offer has been made and of the right of such holders to convert all or a part of their Class T Units into Class A Units and to tender such units to the offer. Meetings of Unitholders UNITHOLDER MATTERS A meeting of Unitholders may be convened by the Manager by a written requisition specifying the purpose of the meeting and must be convened if requisitioned by Unitholders holding not less than 10% of the Units then outstanding (whether Class A Units or Class T Units) by a written requisition specifying the purpose of the meeting. The Manager may convene a meeting of holders of Class A Units (a Class A Meeting ) or a meeting of holders of Class T Units (a Class T Meeting ) if the nature of the business to be transacted at that meeting is only relevant to Unitholders of the applicable class. Notice of all meetings of Unitholders (whether a meeting of all Unitholders, a Class A Meeting or a Class T Meeting) will be given in accordance with the Declaration of Trust and applicable law. The quorum for a meeting of Unitholders is two or more Unitholders present in person or represented by proxy holding not less than 15% of the Units then outstanding (whether Class A Units and/or Class T Units). In the event that such quorum is not present within one-half hour after the time called for a meeting, the meeting, if convened upon the request of a Unitholder, will be dissolved, but in any other case, the meeting will stand adjourned to such day no more than 14 days later and to such time and place as may be appointed by the chairman of the meeting (which for greater certainty can be at a later time on the date of the originally scheduled meeting), and if at such adjourned meeting a quorum is not present, the Unitholders present in person or by proxy at such adjourned meeting will be deemed to constitute a quorum. The Fund, subject to obtaining any necessary regulatory approvals, does not intend to hold annual meetings of Unitholders. Matters Requiring Unitholder Approval In addition to matters that require Unitholder approval pursuant to NI , the Declaration of Trust provides that the following matters require the approval of Unitholders by resolution passed by at least 66⅔% of the votes cast at a meeting called and held for such purpose (an Extraordinary Resolution ), other than item (e), which requires approval of Unitholders by a simple majority vote at a meeting called and held for such purpose (an Ordinary Resolution ): (a) (b) (c) (d) (e) (f) (g) (h) a change in the investment objectives of the Fund as described under Investment Objectives ; a change in the investment restrictions of the Fund as described under Investment Restrictions ; any change in the basis of calculating fees or other expenses that are charged to the Fund which could result in an increase in charges to the Fund other than a fee or expense charged by a person or company that is at arm s length to the Fund; a change of the manager of the Fund, other than a change resulting in an affiliate of the Manager assuming such position; a change in the trustee of the Fund, other than a change resulting in the Manager or an affiliate of the Trustee or the Manager becoming a trustee of the Fund or the Manager appointing a successor or replacement trustee; a termination of the Fund, other than as described below under Termination of the Fund ; the issuance of additional Units, other than: (i) for net proceeds per Unit of not less than 100% of the most recently calculated Net Asset Value per Unit of the applicable class prior to the pricing of such issuance; or (ii) by way of unit distributions; and an amendment, modification or variation in the provisions or rights attaching to the Units. Amendments to the Declaration of Trust The Manager may, without the approval of or notice to Unitholders, amend the Declaration of Trust for certain limited purposes specified therein, including to: (a) remove any conflicts or other inconsistencies which may exist between any terms of the Declaration of Trust and any provisions of any law or regulation applicable to or affecting the Fund;

63 (b) (c) (d) (e) (f) make any change or correction in the Declaration of Trust which is of a typographical nature or is required to cure or correct any ambiguity or defective or inconsistent provision, clerical omission, mistake or manifest error contained therein; bring the Declaration of Trust into conformity with applicable laws, rules and policies of Canadian securities regulators or with current practice within the securities industry, provided that any such amendment does not adversely affect the rights, privileges or interests of the Unitholders; maintain, or permit the Manager or Trustee to take such steps as may be desirable or necessary to maintain, the status of the Fund as a mutual fund trust for the purposes of the Tax Act or to respond to amendments to the Tax Act or the interpretation thereof; add additional classes of units whose rights and privileges are not greater than the existing classes of units of the Fund; or provide added protection or benefit to Unitholders. Except for changes to the Declaration of Trust which require the approval of Unitholders or changes described above which do not require approval of or prior notice to Unitholders, the Declaration of Trust may be amended from time to time by the Manager upon not less than 30 days prior written notice to Unitholders. Reporting to Unitholders The Fund will furnish to Unitholders such financial statements (including interim unaudited and annual audited financial statements) and other reports as are from time to time required by applicable law to be furnished by the Manager, including prescribed forms needed for the completion of Unitholders tax returns under the Tax Act and equivalent provincial legislation. Exchange of Tax Information There are due diligence and reporting obligations in the Tax Act which were enacted to implement the Canada-United States Enhanced Tax Information Exchange Agreement (the IGA ). As long as Units continue to be registered in the name of CDS, the Fund should not have any U.S. reportable accounts and, as a result, should not be required to provide information to the CRA in respect of its Unitholders. However, dealers through which Unitholders hold their Units are subject to due diligence and reporting obligations with respect to financial accounts they maintain for their clients. Unitholders may be requested to provide information to their dealer to identify U.S. persons holding Units. If a Unitholder is a U.S. person (including a U.S. citizen) or if a Unitholder does not provide the requested information, Part XVIII of the Tax Act will generally require information about the Unitholder s investments held in the financial account maintained by the dealer to be reported to the CRA, unless the investments are held within a plan trust. The CRA is expected to provide that information to the U.S. Internal Revenue Service. Canada is one of over 60 countries that has signed the OECD Multilateral Competent Authority Agreement and Common Reporting Standard ( CRS ) which provides for the implementation of the automatic exchange of tax information. The CRS is similar in form and substance to the IGA. The CRS will be effective in Canada as of July 1, 2017 with the first exchanges of financial account information beginning in However, legislation to implement the CRS in Canada has not yet been released. TERMINATION OF THE FUND The Fund does not have a fixed termination date and may be terminated by Extraordinary Resolution of the Unitholders. However, the Manager may, in its discretion, terminate the Fund or a class of Units without the approval of Unitholders if, in the opinion of the Manager, the NAV of the Fund or the NAV of the relevant class of Units is reduced as a result of redemptions of Units or otherwise so that it is no longer economically feasible to continue the Fund or such class of Units and/or it would be in the best interests of the Unitholders to terminate the Fund. Upon termination of the Fund, the conversion of the assets of the Fund to cash, and the satisfaction of, or provision for, all liabilities of the Fund, the net assets of the Fund will be distributed to Unitholders on a pro rata basis based on relative NAV per Unit. Following such distribution, the Fund will terminate. The Manager may, in its discretion and upon not less than 30 days notice to the

64 Unitholders, extend any date set for termination of the Fund (a Termination Date ) by a period of up to 180 days if the Manager would be unable to convert all of the property of the Fund to cash prior to the original Termination Date and the Manager determines that it would be in the best interests of the Unitholders to do so. The Fund will issue a press release at least 15 days and not more than 90 days in advance of the Termination Date. The Fund will include a description of the entitlement of the Unitholders, which will be based on the NAV of the Fund, in such press release. The Fund will also be terminated in the event of the resignation of the Manager if a replacement manager has not been appointed within 60 days of the date upon which the Manager gives notice to the Trustee of its resignation. Such termination shall occur on the date which is 60 days following the last day of the aforementioned 60 day period. No redemption fee will be payable by a Unitholder, nor will any fee be payable by the Fund, upon a termination of the Fund by the Manager as described above. However, if the Fund is terminated pursuant to an Extraordinary Resolution considered at a meeting convened at the request of a Unitholder prior to the first Annual Redemption Date, the Fund will be required to pay the Manager on the Termination Date a fee equal to the aggregate amount of all redemption fees that would be payable to the Manager, calculated as if all outstanding Units were redeemed on the Monthly Redemption Date prior to the month in which the Fund is terminated. No such fee will be paid to the Manager to the extent that a court of competent jurisdiction in a final judgment that has become non-appealable has determined that the Manager acted with wilful misconduct, bad faith or negligence or breached the Manager s obligations or its standard of care under the Management Agreement. See Fees and Expenses. USE OF PROCEEDS The Manager will pay the Agents fees and all expenses of the Offering exceeding 0.50% of the gross proceeds of the Offering. As a result, the net asset value per Unit immediately following the Closing will be at least $9.95. The Fund will use substantially all of the gross proceeds of the Offering to acquire the Portfolio Securities. PLAN OF DISTRIBUTION Pursuant to an agency agreement dated as of, 2016 (the Agency Agreement ) among BMO Nesbitt Burns Inc., CIBC World Markets Inc., National Bank Financial Inc., Scotia Capital Inc., Canaccord Genuity Corp., GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Global Securities Corporation, Industrial Alliance Securities Inc., Laurentian Bank Securities Inc., Mackie Research Capital Corporation, Manulife Securities Incorporated and PI Financial Corp. (collectively, the Agents ), the Manager, the Portfolio Manager and the Fund, the Agents have agreed to offer the Units for sale, as agents of the Fund, on a best efforts basis, if, as and when issued by the Fund. The Manager will pay a fee equal to $0.20 per Class T Unit and $0.45 per Class A Unit to the Agents and the Agents will be reimbursed for out-of-pocket expenses incurred by them. In addition to the Agents fees, the Manager will pay all expenses of the Offering exceeding 0.50% of the gross proceeds of the Offering. The Agents may form a sub-agency group including other qualified investment dealers and determine the fees payable to the members of such group, which fees will be paid by the Agents out of their fees. While the Agents have agreed to use their best efforts to sell the Units offered hereby, the Agents will not be obligated to purchase Units which are not sold. Subscription amounts received in trust will be held in segregated accounts with a depository who is a registered dealer, bank or trust company until the minimum amount of subscriptions for Units has been obtained. If subscriptions for a minimum of 1,000,000 Units have not been received within 90 days following the date of issuance of a final receipt for this prospectus, the Offering may not continue without the consent of the Canadian Securities Administrators and those who have subscribed on or before such date. Under the terms of the Agency Agreement, the Agents may, at their discretion on the basis of their assessment of the state of the financial markets and upon the occurrence of certain stated events, terminate the Agency Agreement. In the event the minimum Offering is not achieved by the Fund and the necessary consents are not obtained or if Closing does not occur for any reason, subscription proceeds received from prospective purchasers will be returned to such purchasers promptly without interest or deduction. Subscriptions for Units will be received subject to rejection or allotment in whole or in part. The right is reserved to close the subscription books at any time without notice. Closing of the Offering will take place on or about, 2016, or such later date as the Fund and the Agents may agree, but in any event not later than 90 days after the issuance of a receipt for the final prospectus of the Fund. There is currently no market through which the Units can be sold. Accordingly, the Offering price per Unit was determined by negotiation between the Agents and the Manager on behalf of the Fund

65 The Fund has applied to list the Class T Units on the TSX. Listing will be subject to the Fund fulfilling all the initial listing requirements of the TSX, including distribution of the Units to a minimum number of public holders. The Class A Units will not be listed on a stock exchange; however, holders of Class A Units may convert Class A Units into Class T Units on a weekly basis and it is expected that liquidity for the Class A Units will be primarily obtained by means of conversion into Class T Units and the sale of those Class T Units on the TSX. Pursuant to policy statements of certain Canadian Securities Administrators, the Agents may not, throughout the period of distribution, bid for or purchase Units. The foregoing restriction is subject to certain exceptions, on the conditions that the bid or purchase not be engaged in for the purpose of creating actual or apparent active trading in, or raising the price of, the Units. Such exceptions include a bid or purchase permitted under applicable by-laws and rules of the relevant self-regulatory authorities relating to market stabilization and passive market making activities and a bid or purchase made for and on behalf of a customer where the order was not solicited during the period of distribution. Pursuant to the first mentioned exception, in connection with the Offering, the Agents may over-allot or effect transactions in connection with their over-allotted position. Such transactions, if commenced, may be discontinued at any time. The Units have not been and will not be registered under the United States Securities Act of 1933, as amended ( U.S. Securities Act ) or any state securities laws and may not be offered or sold in the United States or to U.S. persons (within the meaning of Regulation S under the U.S. Securities Act) except pursuant to an exemption from the registration requirements of those laws. In addition, until 40 days after the commencement of the Offering, any offer or sale of Units in the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than in accordance with an exemption from the registration requirements of the U.S. Securities Act. Further, the Fund has not been registered under the Investment Company Act of 1940, as amended ( 1940 Act ) and any offer or sale of Units in the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the 1940 Act if such offer or sale is made otherwise than in accordance with an exclusion or an exemption from the registration requirements of the 1940 Act. RELATIONSHIP BETWEEN THE FUND AND AGENTS BMONBI is one of the Agents in connection with the Offering. BMONBI is also the promoter of the Fund, may provide leverage to the Fund, will administer the operations of the Fund pursuant to the Management Agreement and will receive fees therefor and may enter into the Recirculation Agreement with the Fund. BMOAM will provide fund accounting and valuation services to the Fund and Monegy will provide portfolio advisory services to the Fund. Each of BMONBI, BMOAM and Monegy is an affiliate of Bank of Montreal. Accordingly, the Fund may be considered a connected issuer of BMONBI under applicable securities legislation by virtue of BMONBI s relationship with the Fund. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS The Manager will receive the fees described under Fees and Expenses for its services to the Fund and will be reimbursed by the Fund for all expenses incurred in connection with the operation and administration of the Fund. PROXY VOTING DISCLOSURE FOR PORTFOLIO SECURITIES HELD The Manager has delegated the proxy voting function to the Portfolio Manager. The Portfolio Manager has adopted written policies relating to how securities held in the Portfolio will be voted; however, to ensure consistency in voting decisions across various investment funds and other accounts managed by the Manager, the policy of the Portfolio Manager must comply with the Manager s proxy voting policies and guidelines (together, the Proxy Voting Guidelines ). In general, these policies require that all proxies will be voted on behalf of the Fund in a manner that is consistent with the best interests of the Fund. In this regard, pursuant to the Proxy Voting Guidelines, on routine matters (such as appointment of auditors, changes in capital structure and increases in authorized stock) the Portfolio Manager will generally cause the Fund to vote the securities within an actively managed investment fund or other account in accordance with the recommendations of management, unless it considers that there are factors that may have a negative impact on the actively managed investment fund or other account. Non-routine matters will generally be voted on a case-by-case basis, favouring shareholder rights, corporate governance, transparency and accountability, and long-term profitability. Where there are contentious issues included in the proxy voting materials for any security held, the particular portfolio manager(s) for the Fund will generally also be involved in the firm-wide proxy voting decision

66 Any proxy decision that pertains to Bank of Montreal shall be made free from any influence by Bank of Montreal or any affiliate or associate thereof and shall represent the business judgment of the Portfolio Manager uninfluenced by consideration other than the best interests of the Fund. A conflict of interest may exist if the Portfolio Manager, its personnel or another related entity has a business relationship with (or is actively soliciting business from) either the company soliciting the proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote. Individual conflicts of interest may also arise if any individual employed by the Portfolio Manager and involved in the proxy vote decision has a direct or indirect material personal relationship or other material interest in either the company soliciting the proxy or in a third party that has a material interest in the outcome of a proxy vote or that is lobbying for a particular outcome of a proxy vote. When the Portfolio Manager becomes aware of any vote that presents a conflict, it will vote such proxy in a manner consistent with, and uninfluenced by considerations other than, the best interests of the Fund. A copy of the Portfolio Manager s proxy voting policies and procedures will be made available to Unitholders on request. The Portfolio Manager s proxy voting guidelines include procedures with respect to: (i) the completion and submission of proxies in a timely fashion; and (ii) subsequent verifications with respect to (i) above, to ensure that securities held by the Fund are voted in accordance with the instructions of the Portfolio Manager. The Portfolio Manager will prepare an annual proxy voting record for the period ending on June 30 of each year. This annual proxy voting record will be made available no later than August 31 of each year and will be made available to any Unitholder on request, at no cost. MATERIAL CONTRACTS The following contracts can reasonably be regarded as material to purchasers of Units: (a) (b) (c) (d) (e) the Declaration of Trust described under Attributes of the Securities ; the Management Agreement described under Organization and Management Details of the Fund - The Manager ; the Portfolio Management Agreement described under Organization and Management Details of the Fund The Portfolio Manager ; the Custodian Agreement described under Organization and Management Details of the Fund The Custodian ; and the Agency Agreement described under Plan of Distribution. Copies of the agreements referred to above after the execution thereof may be inspected during business hours at the principal office of the Manager during the course of distribution of the Units offered hereby. EXPERTS The matters referred to under Income Tax Considerations and certain other legal matters relating to the securities offered hereby will be passed upon on behalf of the Fund and the Manager by Blake, Cassels & Graydon LLP and on behalf of the Agents by McCarthy Tétrault LLP. The auditor of the Fund is PricewaterhouseCoopers LLP, Chartered Professional Accountants, Licensed Public Accountants, Toronto, Ontario. The auditor of the Fund has prepared a report to the Manager dated, 2016, which is included herein. PricewaterhouseCoopers LLP has advised the Fund and the Manager that it is independent with respect to the Fund within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario. PURCHASERS STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two Business Days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces and territories, the securities legislation further provides a purchaser with remedies for rescission or damages if the prospectus and any amendment contains a misrepresentation or is

67 not delivered to the purchaser, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser s province or territory for the particulars of these rights or consult with a legal adviser

68 INDEPENDENT AUDITOR S REPORT To the Manager of Monegy High Yield Bond Fund (the Fund ) We have audited the accompanying statement of financial position of the Fund as at, 2016 and the related notes, which comprise a summary of significant accounting policies and other explanatory information (together the financial statement). Management s responsibility for the statement of financial position Management is responsible for the preparation and fair presentation of this statement of financial position in accordance with those requirements of International Financial Reporting Standards relevant to preparing such a financial statement, and for such internal control as management determines is necessary to enable the preparation of a statement of financial position that is free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on the statement of financial position based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the statement of financial position is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the statement of financial position. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the statement of financial position presents fairly, in all material respects, the financial position of the Fund as at, 2016 in accordance with those requirements of International Financial Reporting Standards, relevant to preparing such a financial statement. Chartered Professional Accountants, Licensed Public Accountants Toronto, Ontario, F-1

69 MONEGY HIGH YIELD BOND FUND STATEMENT OF FINANCIAL POSITION As at, 2016 ASSETS Current Assets Cash... $20 Total Assets $20 Net Assets Attributable to Holders of Redeemable Units (1 Class A Unit and 1 Class T Unit Issued and Outstanding) Class A Units (Note 6)... $10 Class T Units (Note 6)... $10 $20 Net Assets Attributable to Holders of Redeemable Units (per unit) Class A Unit (Note 6)... $10 Class T Unit (Note 6)... $10 Approved by the Manager: The accompanying notes are an integral part of this financial statement F-2

70 (All amounts in C$ unless otherwise stated) 1. General Information MONEGY HIGH YIELD BOND FUND NOTES TO THE STATEMENT OF FINANCIAL POSITION Monegy High Yield Bond Fund (the Fund ) is a closed-end investment fund established as a trust under the laws of the province of Ontario pursuant to a declaration of trust on, BMO Nesbitt Burns Inc., as manager of the Fund (the Manager ), will be responsible for, or arrange for, the management and administration of the Fund and implementing the investment strategies of the Fund. The Manager will appoint Monegy, Inc. as the portfolio manager of the Fund (the Portfolio Manager ). The address of the Fund s registered office is 1 First Canadian Place, 3 rd Floor Podium, Toronto, Ontario, M5X 1H3. The investment objectives of the Fund are to provide holders of Units (the Unitholders ) with a high level of total return through a combination of: (i) monthly cash distributions; and (ii) the opportunity for capital appreciation, by investing in a portfolio comprised primarily of High Yield fixed income securities issued by U.S. corporations (the Portfolio ) actively managed by the Portfolio Manager. High Yield in respect of a security means the security is rated below investment grade (lower than BBB by S&P or lower than Baa by Moody s, or comparably rated by other designated rating organizations), or unrated but determined by the Portfolio Manager to be of comparable quality, provided that a determination by the Portfolio Manager that a security is High Yield shall be conclusive for purposes herein and provided that if a security receives different ratings from S&P or Moody s, the Portfolio Manager will use the lower rating. This financial statement was authorized for issue by the Board of Directors of the Manager on, Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of this financial statement are set out below. 2.1 Basis of Preparation The financial statement of the Fund has been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), relevant to preparing a statement of financial position. The financial statement of the Fund has been prepared under the historical cost convention. The net asset value ( NAV ) is the value of the total assets of the Fund less the value of its total liabilities determined on each valuation day in accordance with Part 14 of National Instrument Investment Fund Continuous Disclosure for the purpose of processing unitholder transactions. Net assets are determined in accordance with IFRS. As of, 2016, the Fund s NAV is equal to its net assets. 2.2 Functional and Presentation Currency The financial statement is presented in Canadian dollars, which is the Fund s functional and presentation currency. 2.3 Financial Instruments The Fund recognizes financial instruments at fair value upon initial recognition, plus transaction costs in the case of financial instruments measured at amortized cost. Regular way purchases and sales of financial assets are recognized at their trade date. Cash is held by counsel in trust. Cash is classified as loans and receivables and is measured at amortized cost subsequent to initial recognition F-3

71 The Fund s obligation for net assets attributable to holders of redeemable units is presented at the redemption amount that is payable if the holder exercises the right to put the units back to the Fund on the Annual Redemption Date (as defined below) or the Monthly Redemption Date (as defined below). 2.4 Redeemable Units The Fund is authorized to issue units which are redeemable at the holder s option, referred to as Class A Units ( Class A Units ) and Class T Units ( Class T Units ). The Class A Units and the Class T Units do not have identical features. Consequently, the Class A Units and the Class T Units are classified as financial liabilities in accordance with the requirements of International Accounting Standard 32, Financial Instruments: Presentation. 3. Fair Value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying values of cash and the Fund s obligation for net assets attributable to holders of redeemable units approximate their fair values due to their short-term nature. 4. Risks associated with financial instruments The Fund s overall risk management program seeks to maximize the returns derived for the level of risk to which the Fund is exposed and seeks to minimize potential adverse effects on the Fund s financial performance. 4.1 Credit risk The Fund is exposed to credit risk, which is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. As at, 2016, the credit risk is considered limited as the cash balance represents a deposit in the trust account of legal counsel to the Fund and the Manager. 4.2 Liquidity risk Liquidity risk is the risk that the Fund will encounter difficulty in meeting obligations associated with financial liabilities. The Fund maintains sufficient cash on hand to fund anticipated redemptions. 5. Capital Risk Management The capital of the Fund is represented by the net assets attributable to holders of Class A Units and Class T Units. The amount of net assets attributable to holders of redeemable units can change. In order to maintain the capital structure, the Fund allows monthly redemptions. Commencing in 2019, Class T Units (and, in 2019, Class A Units) may be surrendered annually for redemption during the period from until 5:00 p.m. (Toronto time) on the last Business Day in of each year (the Annual Redemption Notice Period ) subject to the Fund s right to suspend redemptions in certain circumstances. Class T Units (and, in 2019, Class A Units) properly surrendered for redemption during the Annual Redemption Notice Period will be redeemed on the second last Business Day in of each year (the Annual Redemption Date ) and the Unitholder will receive payment on or before the 15th Business Day following the Annual Redemption Date. Redeeming Unitholders will receive a redemption price per Class T Unit equal to the net asset value per Class T Unit on the Annual Redemption Date, less any costs and expenses incurred by the Fund in order to fund such redemption, including brokerage costs, if any. Units may also be surrendered at any time for redemption on the second last Business Day of any month (other than the month of the Annual Redemption Date) (a Monthly Redemption Date ), subject to certain conditions. In order to effect such a redemption, the Units must be surrendered by no later than 5:00 p.m. (Toronto time) on the date which is the last Business Day of the month preceding the month in which the Monthly Redemption Date falls, subject to the Fund s right to suspend redemptions in certain circumstances. Units properly surrendered for F-4

72 redemption within such period will be redeemed on the Monthly Redemption Date and the Unitholder surrendering such Units will receive payment on or before the 15th day of the month following the Monthly Redemption Date. Unitholders surrendering a Class T Unit for redemption on a Monthly Redemption Date will receive a redemption price per Class T Unit equal to the lesser of (i) 95% of the Market Price of the Class T Unit, and (ii) 100% of the Closing Market Price of the Class T Unit on the applicable Monthly Redemption Date (the Class T Monthly Redemption Amount ) less, in each case, any costs and expenses incurred by the Fund in order to fund such redemption, including brokerage costs and the Class T Monthly Redemption Fee, if any. Market Price in respect of a security on a date means the weighted average trading price on the Toronto Stock Exchange ( TSX ) (or such other stock exchange on which such security is listed), for the 10 trading days immediately preceding such date. Closing Market Price means, in respect of a security on a particular date, the closing price of such security on the TSX on such date (or such other stock exchange on which such security is listed) or, if there was no trade on the relevant date, the average of the last bid and the last asking prices of the security on the TSX on such date (or such other stock exchange on which the security is listed). Unitholders surrendering a Class A Unit for redemption on a Monthly Redemption Date will receive a redemption price per Class A Unit equal to the product of (i) the Class T Monthly Redemption Amount, and (ii) a fraction, the numerator of which is the most recently calculated NAV per Class A Unit and the denominator of which is the most recently calculated NAV per Class T Unit (the Class A Monthly Redemption Amount ) less any costs and expenses incurred by the Fund in order to fund such redemption, including brokerage costs and the Early Exchange Fee. Notwithstanding the foregoing, the Class T Monthly Redemption Amount and the Class A Monthly Redemption Amount shall not be greater than the NAV per Class T Unit or NAV per Class A Unit, as applicable, on the relevant Monthly Redemption Date. Any monthly redemption of Class A Units will be subject to an early exchange fee payable by the Unitholder (the Early Exchange Fee ) per Class A Unit redeemed equal to: (i) 3% of NAV per Class A Unit from Closing until and including the last Business Day of the 12 th month following Closing; (ii) 2% of NAV per Class A Unit from the first Business day of the 13 th month following Closing until and including the last Business Day of the 24 th month following Closing; and (iii) 1% of NAV per Class A Unit from the first Business Day of the 25 th month following Closing until the Automatic Conversion Date. Any monthly redemption of Class T Units will be subject to a redemption fee payable by the Unitholder (the Class T Monthly Redemption Fee ) equal to 3.0% of the NAV of the Class T Units redeemed. The Early Exchange Fee or the Class T Monthly Redemption Fee, as applicable, will be deducted by the Fund from the amount otherwise payable to a redeeming Unitholder and will be remitted by the Fund on behalf of the Unitholder, to the Manager. However, no redemption fee will be payable by Unitholders, nor will any fee be payable by the Fund, upon a termination of the Fund by the Manager. No redemption fee will be payable by Unitholders once the Manager has received, together with any fees in respect of market purchases, an aggregate amount equal to the fees and expenses paid by it in relation to the Offering or any future offerings. On the redemption of Units, the Fund may in its sole discretion, allocate and/or designate as payable to redeeming Unitholders any net realized capital gains realized by the Fund to facilitate the redemption of Units. Any such allocation and designation will reduce the redemption price otherwise payable to the redeeming Unitholder. Any unpaid distribution payable to holders of Units on record on or before the Annual Redemption Date or the Monthly Redemption Date, as applicable, in respect of Units tendered for redemption on such redemption date will also be paid on the same day as the redemption proceeds are paid. 6. Authorized Units The Fund s authorized units issued are as follows: F-5 Units Consideration ($) Price per Unit ($)

73 Class A Units Class T Units The Fund is authorized to issue an unlimited number of classes of units of the Fund. Initially, Class A Units and Class T Units have been authorized for issuance and the Fund is authorized to issue an unlimited number of Units of each class. Each Unit entitles the holder to the same rights and obligations as any other Unitholder and no Unitholder is entitled to any privilege, priority or preference in relation to any other Unitholder, subject to Unitholders of a class being entitled to redemptions based on the Net Asset Value per Unit of the particular class, as the case may be, and the distributions being different as described below. Each Unitholder is entitled to one vote for each Unit held except for meetings at which only Unitholders of another class are entitled to vote separately as a class and is entitled to participate equally with respect to any and all distributions made by the Fund on a class of Units, including distributions of net realized capital gains or income, if any. On the redemption of Units, however, the Fund may in its sole discretion, allocate and/or designate as payable to redeeming Unitholders any net realized capital gains realized by the Fund to facilitate the redemption of Units. Any such allocation and designation will reduce the redemption price otherwise payable to the redeeming Unitholder. The monthly distributions are initially targeted to be $0.05 per Class A Unit ($0.60 per annum per Class A Unit) representing an annual yield of 6.0% on the $10.00 per Class A Unit issue price and $ per Class T Unit ($0.70 per annum per Class T Unit) representing an annual yield of 7.0% on the $10.00 per Class T Unit issue price. On termination or liquidation of the Fund, the Unitholders of record are entitled to receive on a pro rata basis with holders of Units of that class all of the assets of the Fund attributable to that class remaining after payment of all debts, liabilities and liquidation expenses of the Fund. All issued Class A Units and Class T Units are fully paid. In accordance with the objectives outlined in Note 1 and the risk management policies in Note 4, the Fund endeavours to invest the subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions, such liquidity being augmented by shortterm borrowings or disposal of securities held where necessary. Class A Units will be automatically converted into Class T Units on, 2019 (the Automatic Conversion Date ), with no Early Exchange Fee. Holders of Class T Units cannot convert Class T Units into Class A Units. The initial purchases of the Fund s units by a director of the Manager are as follows: Units Consideration ($) Price per Unit ($) Class A Units Class T Units Related Party Transactions As at, 2016, a director of the Manager held all of the issued and outstanding units of the Fund. The Fund will pay to the Manager an annual management fee equal to 1.0% per annum of the NAV of the Class T Units and 2.0% per annum of the NAV of the Class A Units, as applicable, accrued and calculated daily and payable monthly in arrears, plus applicable taxes. 8. Agency Agreement The Fund has engaged BMO Nesbitt Burns Inc., CIBC World Markets Inc., National Bank Financial Inc., Scotia Capital Inc., Canaccord Genuity Corp., GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Global Securities Corporation, Industrial Alliance Securities Inc., Laurentian Bank Securities Inc., Mackie Research Capital Corporation, Manulife Securities Incorporated and PI Financial Corp. (collectively, the Agents ) as agents to offer (the Offering ) Units for sale to the public pursuant to a prospectus dated, 2016 and pursuant to which the Fund has agreed to create, issue and sell a minimum of 1,000,000 Units at $10.00 per Class T Unit and Class A Unit. Prospective purchasers may purchase the Units by cash payment only F-6

74 The Fund will bear the expenses incurred in connection with the Offering subject to a maximum of 0.50% of the gross proceeds of the Offering. The Manager will pay a fee equal to $0.20 per Class T Unit and $0.45 per Class A Unit to the Agents and the Agents will be reimbursed for out-of-pocket expenses incurred by them. In addition to the Agents fees, the Manager will pay all expenses of the Offering exceeding 0.50% of the gross proceeds of the Offering F-7

75 Dated: March 31, 2016 CERTIFICATE OF THE FUND, THE MANAGER AND THE PROMOTER This prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces and territories of Canada. MONEGY HIGH YIELD BOND FUND, BY ITS MANAGER, BMO NESBITT BURNS INC. (SIGNED) W. DARRYL WHITE CHIEF EXECUTIVE OFFICER (SIGNED) PETER HINMAN CHIEF FINANCIAL OFFICER ON BEHALF OF THE BOARD OF DIRECTORS (SIGNED) PATRICK CRONIN DIRECTOR (SIGNED) CHARYL GALPIN DIRECTOR BMO NESBITT BURNS INC., AS PROMOTER (SIGNED) DUNCAN MARKS MANAGING DIRECTOR C-1

76 CERTIFICATE OF THE AGENTS Dated: March 31, 2016 To the best of our knowledge, information and belief, this prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of each of the provinces and territories of Canada. BMO NESBITT BURNS INC. CIBC WORLD MARKETS INC. NATIONAL BANK FINANCIAL INC. SCOTIA CAPITAL INC. (SIGNED) ROBIN G. TESSIER (SIGNED) MICHAEL D. SHUH (SIGNED) TIMOTHY D. EVANS (SIGNED) ROBERT HALL CANACCORD GENUITY CORP. GMP SECURITIES L.P. RAYMOND JAMES LTD. (SIGNED) RON SEDRAN (SIGNED) ANDREW KIGUEL (SIGNED) J. GRAHAM FELL DESJARDINS SECURITIES INC. (SIGNED) NIKOLAS JAVAHERI GLOBAL SECURITIES CORPORATION INDUSTRIAL ALLIANCE SECURITIES INC. LAURENTIAN BANK SECURITIES INC. MACKIE RESEARCH CAPITAL CORPORATION MANULIFE SECURITIES INCORPORATED PI FINANCIAL CORP. (SIGNED) ADAM (SIGNED) FRÉDÉRIC (SIGNED) TYLER (SIGNED) DAVID (SIGNED) DAVID (SIGNED) TRINA GARVIN PAQUETTE WIRVIN KEATING MACLEOD WANG C-2