Download - Fisgard Capital Offering Memorandum
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OFFERING MEMORAND
Fisgard Capital Corporation
3378 Douglas Street,Victoria BC V8Z 3L3
General Inquiries 250.382.9255
Toll Free Phone 866.382.9255
Toll Free Fax 866.384.1498
Email [email protected]
Web www.fsgard.com
Fisgard is an investment or people o all ages and fnancial m
It is an investment or young people, working people, and re
An investment or the average person and
Cover_Mar10.indd 1 4/15
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Form45106F2
OfferingMemorandumforNonQualifyingIssuers
Date: March31,2010
TheIssuer
Name: FisgardCapitalCorporation
HeadOffice: 3378DouglasStreet
VictoriaBC V8Z 3L3
Phone: (250)3829255or18663829255
Fax: (250)3829295or18663841498
Email: [email protected]
Currentlylistedorquoted? No
Reportingissuer? No
SEDARfiler? No
THEOFFERING
Securitiesoffered: 225,000,000ClassB(5yearmaturity)NonVotingshares
75,000,000ClassF(1yearmaturity)NonVotingshares
(theShares,anyoneofwhichisaShare)
Pricepersecurity: $1.00perShare
Minimum/Maximum offering: Minimumofferingof$0/Maximumofferingof$300,000,000ofwhich$230,790,910has
alreadybeensubscribedforasofMarch31,2010.
Paymentterms: Tobearrangedonapersubscriptionbasis.
Proposedclosing
date(s):
Closings
will
take
place
periodically
at
the
Issuers
discretion.
IncomeTaxconsequences: Thereareimportanttaxconsequencestothesesecurities.Seeitem6,IncomeTax
Consequences.
Sellingagent? No
ResaleRestrictions Youwillberestrictedfromsellingyoursecuritiesforanindefiniteperiod.
Seeitem10,ResaleRestrictions.
PurchasersRights Youhavetwo(2)businessdaystocancelyouragreementtopurchasethesesecurities.
IfthereisamisrepresentationinthisOfferingMemorandum,youhavetherighttosue
fordamagesortocanceltheagreement.Seeitem11,PurchasersRights.
NosecuritiesregulatoryauthorityhasassessedthemeritsofthesesecuritiesorreviewedthisOfferingMemorandum.Any
representationtothecontraryisanoffence.Thisisariskyinvestment.Seeitem8,RiskFactors.
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TABLEOFCONTENTS
Item1 UseofNetProceeds 3
Item
2
Business
of
Fisgard
Capital
Corporation
3
Item3 Directors,Management,PromotersandPrincipalHolders 9
Item4 CapitalStructure 10
Item5 SecuritiesOffered 12
Item6 IncomeTaxConsequences 18
Item7 CompensationPaidtoSellersandFinders 21
Item8 RiskFactors 21
Item9 ReportingObligations 25
Item10 ResaleRestrictions 25
Item11 PurchasersRights 26
Item12 FinancialStatements 28
FinancialStatements(Contents) 29
1.AuditorsReport 30
2.BalanceSheet 31
3.StatementofOperationsandRetainedEarnings 32
4.StatementofCashFlows 33
5.NotestotheFinancialStatements 34
Item13 DateandCertificateoftheIssuer 37
Schedule A SubscriptionAgreement 38
ScheduleB SubscriptionAgreement(Ontario) 47
Notes 55
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Item1UseofNetProceeds
1.1 NetProceedsThenetproceedsoftheofferingthatwillbeavailabletotheIssueraftertheofferingareasfollows:
Assumingmin.offering Assumingmax.offering
A Amounttoberaisedbythisoffering $0 $300,000,000
B
Sellingcommissions
and
fees
$0
$
21,000,000
C Estimatedofferingcosts(e.g.legal,accounting,audit) $0 $ 50,000
D Netproceeds:D=A(B+C) $0 $278,950,000
Notes:
1. This assumes the Issuer pays the maximum permitted commission. The Issuer may pay anaggregateofupto7%ofsubscriptionproceedstosellersofShares.
1.2 UseofNetProceedsAdetailedbreakdownofhowtheIssuerwillusethenetproceedsisasfollows:Descriptionofintendeduseofnetproceeds
listedin
order
of
priority
Assumingmin.offering Assumingmax.offering
Investinmortgagessecuredbyrealestatepropertylocated
inCanada.Fromtimetotimefunds
notinvestedinmortgageswillbeplacedinshortterm
CanadianDepositInsuranceCorporationinsured
investments(e.g.bankdeposits,GICs)
$0 $273,928,900
YearlyManagementFees1 $0 $5,021,100
1.3 ReallocationTheIssuerintendstospendtheavailablefundsasstated.TheIssuerwillreallocatefundsonlyforsoundbusinessreasons.
1.4 Working Capital Deficiency The Issuer has no working capital deficiency and, as a result of theIssuersbusiness,doesnotanticipateeverhavingaworkingcapitaldeficiency.
Item2BusinessofFisgardCapitalCorporation
2.1 StructureFisgardCapitalCorporationwascontinuedunderthelawsofBritishColumbiaonMarch13,2000andwasoriginallyincorporatedundertheCanadianfederaljurisdictiononApril11,1994.Itwasregistered
extraprovinciallyinAlbertaonNovember16,2001,inOntarioonApril28,2003,inManitobaonJuly10,2003,
inSaskatchewanonFebruary13,2006andinNorthwestTerritoriesonMay9,2007.
The Issuer may register extraprovincially in the future to conduct business in other Canadian
jurisdictionsas
may
be
approved
by
the
Issuers
directors.
1
Seeitem2.6,MaterialAgreements,ManagementServicesAgreement
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2.2 BusinessTheIssuercurrentlyqualifiesand,underitsArticlesofIncorporation,isrequiredtoremainqualifiedasaMortgageInvestmentCorporation(MIC)undertheIncomeTaxAct(Canada)(theTaxAct).Thiseffectively
enablestheIssuertooperateasataxfreeflowthroughconduitofprofittoitsshareholderssinceitdoesnotpay
incometaxesonnetearningsfromwhichdividendsarepaid.
TheIssuersbusinessobjectiveistoobtainasecurestreamofincomebyoptimizingitsinvestmentportfoliowithinthe
MICcriteriamandatedbytheTaxAct.Thesecriteriaprovide,amongotherthings,thatoneoftheprimaryinvestmentsa
MICmaymakeismortgageloanssecuredbyresidentialrealestate.TheTaxActsMICcriteriaarediscussedinfurther
detailbelow
(under
this
same
heading).
TheIssuersprimarybusinessisearningincomethroughinvestinginresidentialmortgages.Thereisanestablishedneed
forrealestatemortgagefinancingthatisnotreadilyprovidedbybanks,trustcompanies,creditunionsandother
traditionallenders.Shorttermmortgagefinancingisacontinuingneedofindividuals,buildersandrealestatedevelopers
and,becauseoftheirneedforflexibilityandquickresponse,theyoftenrequiretheservicesofprivatelendersand
organizationssuchastheIssuer.TheIssuersprimaryrevenuesourcehasbeen,andwillcontinuetobe,interestearned
onmortgageinvestments.MortgagesmaygenerateadditionalrevenuefortheIssuer,includingbonuses,duediligence
charges,administrativesetupfees,renewal(mortgageextension)anddischargefees,mortgageguaranteesand
mortgagestandbyfees.
TheTaxActsMICcriteriapermitrevenuesourcesotherthanmortgages,including,amongotherthings,equity
investmentsin
real
estate
and
investments
in
stocks
and
securities
of
Canadian
companies.
Notwithstanding
its
abilitytoinvestinthearrayofinvestmentsallowedundertheTaxAct,itistheIssuerspolicytoinvestitsnonCDIC
(e.g.bankdeposit)holdingsinmortgagessecuredbyCanadianrealestateproperty,primarilyresidentialrealestate
property.AMICsonlypermittedundertakingundertheTaxActcriteriaistheinvestingofitsfunds,anditis
specificallyprohibitedfrommanagingordevelopingrealproperty.
TheIssuersmanager,FisgardAssetManagementCorporation(theManager),islicensedundertheRealEstateAct
(BC)andtheMortgageBrokersAct(BC),andhasmanyyearsofexperience,eitheritselforthroughitspersonnel,asa
realtor,propertymanager,mortgagebroker,builder,propertydeveloper,projectmanagerandtrustee,andinarranging
thefinancingofvariousbusinessenterprises.ThesequalificationsandexperienceplacetheManagerinanadvantageous
positiontoprovideMICrelatedmanagement,administrative,advisory,development,realestatemarketingand
mortgagebrokerageandfinancingservicestotheIssuer,andtheIssuerhasengagedtheManagertodoso.The
Managerspersonnelalsohavesubstantialnetworksofestablishedrelationshipswithexperiencedowners,builders,
developers,appraisers,
property
managers,
bankers,
and
others
active
in
the
real
estate
industry.
The
Issuer
believes
the
ManageristhereforesuitablyqualifiedtolocateandrecommendinvestmentopportunitiesfortheIssuer.TheManager
hasprovidedtheseservicestotheIssuersinceitbeganitsMICactivitiesin1994.Seeitem2.6MaterialAgreementsfor
adiscussionofthemanagementagreementbetweentheIssuerandtheManager.
FromtimetotimetheIssuermaypayreferralfeestoofficers,directorsandemployeesoftheIssuerortheManagerfor
raisinginvestmentcapitaland/orprovidingmortgagesfortheIssuertoinvestin.
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TheTaxActsMICCriteria
Section130.1oftheTaxActsetsoutthecriteriagoverningaMICand,insummary,saysthatinordertoqualifyasa
MICforataxationyearacompanymusthavemetthefollowingcriteriathroughoutthattaxationyear:
1. Itsonlyundertakingwastheinvestingofitsfunds,anditdidnotmanageordeveloprealproperty;2. Itdidnotinvestin:
(a) mortgagesorpropertyoutsideCanada;(b) sharesofcompaniesnotresidentinCanada;or(c) realpropertyorleaseholdinterestsoutsideCanada;
3. Ithadatleasttwenty(20)shareholders,andnooneshareholdertogetherwithrelatedpartiestothatshareholderheldbetweenthemmorethan25%oftheissuedsharesofanyclassofsharesofthecompany;
4. Atleast50%ofthecompanysassetswerecomprisedof:(a) loanssecuredonhousesoronproperty included inahousingproject,asthosetermsaredefined in
theNationalHousingAct(Canada)*;
(b) depositsinsuredbytheCanadaDepositInsuranceCorporation(CDIC)(orQuebecDIC);(c) depositsinacreditunion;and/or(d) cash;
5. No more than 25% of the companys assets consisted of real property (excluding real property acquired byforeclosure);
6. TheMICdidnotexceed,generallyspeaking,a3:1debtequityratio,ora5:1debtequityratioifmorethantwothirds(2/3rds)ofthecompanyspropertyconsistedofResidentialMortgagesand/ordepositssecuredbythe
CanadaDepositInsuranceCorporation(orQuebecDIC)orcredituniondeposits.
*TheNationalHousingAct(Canada)providesthat:housemeansabuildingormovablestructure
intended forhumanhabitationcontainingnotmorethan two familyhousingunits,togetherwith
theland,ifany,onwhichthebuildingormovablestructureissituated;andthathousingproject
meansaprojectconsistingofoneormorehouses,oneormoremultiplefamilydwellings,housing
accommodation
of
the
hostel
or
dormitory
type,
one
or
more
condominium
units
or
any
combinationthereof,togetherwithanypublicspace,recreationalfacilities,commercialspaceand
otherbuildingsappropriatetotheproject,butdoesnotincludeahotel.
Section130.1oftheIncomeTaxActauthorizesaMICtoborrowfundsandleverageitscapitalincertainratiosrelated
tothetypeofassetsheld.ProvidedonehalfofaMICsassetscompriseacombinationofresidentialmortgagesand/or
CDICinsuredinvestmentstheMICisauthorizedtoborrowuptoamaximumofthree(3)timestheamountofits
assets.ProvidedtwothirdsofaMICsassetscompriseacombinationofresidentialmortgagesand/orCDICinsured
investmentstheMICisauthorizedtoborrowuptoamaximumoffive(5)timestheamountofitsassets.
TheIssuerbelievesthatthisleverageopportunityisimportantintermsofitsdividendperformance, andtheIssuerwill
maximizeitsleverageopportunityundertheAct.TheIssuerwillborrowfundswheneverfundsareavailableprovidedit
iseconomical
and
prudent
to
do
so.
These
borrowings
may
take
the
form
of
Lines
of
Credit
from
banks
and
other
lendinginstitutionsand/orpromissorynotesandothertypesofdebtcontractswithindividualsandcompanies,asthe
casemaybe.Itisprobablethatdebtinstrumentswillformpartofafloatingchargeagainsttheassetsandequityofthe
Issuer,andintheeventofliquidationorwindup,willrankinprioritytotheoutstandingsharesoftheIssuer.
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AsaMICundertheTaxActtheIssuerisentitledtodeductfromitsincometheamountoftaxabledividendsitpays
toitsshareholders.TheIssuersArticlesofIncorporationrequireittopayasdividendssubstantiallyallofitsnet
incomeandnetrealizedcapitalgainseveryyear2and,asaresult,theIssueranticipatesthatitwillnotbeliableto
payincometaxinanyyear.TheresultisthattheIssuerisataxfreeconduitofprofittoitsshareholders.Referto
item6,IncomeTaxConsequences.
2.3 DevelopmentofBusinessTheIssuerbeganbusinessinMay1994.SincethattimetheIssuerhasbeenqualifiedasaMICundertheTaxActandhasbeensolelyengagedinraisingcapitalforinvestmentin
mortgagessecured
by
real
estate
property
located
in
Canada,
primarily
in
British
Columbia
and
Alberta.
FromJanuary,2005throughMarch,2010theIssuerraised$194,491,705inequitycapital,bringingtheIssuerstotal
equitycapitalto$230,870,08asatMarch31,2010.TheIssuerhasdistributedadividendeveryquartersince
beginningMICoperationsin1994.Itsaveragenetreturnperyearoverthisperiodonitsfive(5)yeartermClassB
Shareshasbeen8.853%basedoncashdividends.Itsaveragenetreturnperyearonone(1)yeartermClassFShares
hasbeen6.853%basedoncashdividends.
Dividendsfluctuate,andarenotguaranteed.Thefollowingtabledetailstheaverageyearlynetdividendand
historicalcumulativedividendineachoftheyearssincetheIssuermadeitsfirstquarterlydividendpayment
inJanuary1995.
AverageYearly
CASHDividend
(5yearterm)
AverageYearly
CASHDividend
(1yearterm)
YearYearly Historical Average Historical
Average Cumulative Yearly Cumulative
1995 13.645% 13.645% 11.645% 11.645%
1996 14.448% 14.046% 12.448% 12.046%
1997 10.561% 12.884% 8.561 % 10.884%
1998 10.257% 12.227% 8.257% 10.227%
1999 10.161% 11.814% 8.161% 9.814%
2000
13.425%
12.083
%
11.425
%
10.083
%
2001 12.007% 12.072% 10.007% 10.072%
2002 11.700% 12.025% 9.700% 10.025%
2003 11.763% 11.996% 9.763% 9.996%
2004 11.552% 11.952% 9.552% 9.952%
2005 11.281% 11.891% 9.281% 9.891%
2006 10.974% 11.815% 8.974% 9.815%
2007 10.474% 11.712% 8.474% 9.712%
2008 9.262% 11.537% 7.262% 9.537%
2009
6.000%
11.167%
4.000%
9.167%
2010YTD 5.120% 11.068% 3.120% 9.068%
TherateofreturntheIssuerearnsfromitsmortgageinvestmentsfluctuateswithprevailingmarketdemandfor
shorttermmortgagefinancing.InsomecasestheIssuersmortgageinvestmentsmaynotmeetfinancingcriteriafor
conventionalmortgagesfrominstitutionalsourcesand,asaresult,theseinvestmentsgenerallyearnahigherrateof
returnthanthatnormallyattainablefromconventionalmortgageinvestments.TheIssuerattemptstominimizerisk
bybeingprudentinitscreditdecisionsandinassessingthevalueoftheunderlyingCanadianrealestateproperty
offeredassecurity.
2
SubjecttothedirectorsdiscretiontoestablishreservesfortheIssuer.
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2.4 LongTermObjectivesAsinthepast,overthelongtermtheIssuerintendstoqualifyasaMIC,raiseinvestmentcapital,andinvestsubstantiallyallofitscapitalinCanadianmortgages,exceptforsmallresidualamountsofcapital
maintainedinshorttermCDICinsureddepositsawaitingmortgageplacement.Asinthepast,mostofthemortgages
theIssuerintendstoinvestinwillbeshorttermmortgagessecuredbyresidentialrealestatepropertyinCanada.As
itscapitalbaseexpandstheIssuermayplacesomeofitscapitalinlongertermmortgages.Fromtimetotimethe
Issuermayalsoinvestincommercialmortgages,butthistypeofmortgageisintendedtobetheexceptionrather
thantherule.OvertimetheIssueranticipatesexpandingitsmortgagebasetootherprovincesinCanada,beyondBC
andAlberta.
2.5 ShortTermObjectivesOverthenexttwelve(12)monthstheIssuersobjectiveistoraisefurtherequitycapital,investitpursuanttotheTaxActsMICcriteriawiththeintentofoptimizingreturn(asdescribedinmoredetailabove
underitems2.2,2.3and2.4),andcontinuepayingquarterlydividendstoitsshareholders.TheIssuersgoaloverthe
nexttwelve(12)monthsistoincreaseitssharecapitalbasefromitspresentamountof$230,790,910to
$250,000,000.TheIssuersbusinessplanisnotdependentonattainingthisgoal;itissimplyatarget.TheIssuer
anticipatesthatwhateverfundsareraisedwillbesufficientfortheIssuertocontinueimplementingitsbusinessplan.
TheOfferingMemorandumformrequiresthefollowingtabletobecompletedwithrespecttotheIssuers
objectivesoverthenexttwelve(12)months.Itshouldbenotedhoweverthatthisparticulartableformisnotwell
suitedtotheexpressionoftheIssuersbusiness.
WhatwemustdoandhowwewilldoitTarget
completion
date
or,
ifnotknown,numberof
monthstocomplete
Ourcosttocomplete
WhilethereisnothingtheIssuermustdoto
carryoutitsbusinessplan,sinceitalreadyhasa
substantialcapitalbaseinvestedincompliance
withtheTaxActsMICcriteria,theIssuersgoal
overthenext12monthsistoraiseatotalof
$250,000,000.00 inequitycapital.
12monthsSeeitem1,
UseofAvailableFunds.
2.6 MaterialAgreementsTheIssuerisapartytothefollowingmaterialagreements:ManagementServicesAgreement
TheIssuerandFisgardAssetManagementCorporationhaveenteredintoaManagementServicesAgreementdated
March5,2002underwhichtheManageradministerstheIssuersbusinessaffairsonadaytodaybasis,providesa
businessofficeforandongoingadvicetotheIssuer,raiseinvestmentcapitalfortheIssuer,and,asmayberequired
fromtimetotime,providestheIssuerwithrealestate,mortgageandfinancingservices.
TheManagerandtheIssuerarerelatedcompanies.WayneStrandlundcontrolstheManager(heholdsover50%of
itsvotingshares)andisitssoledirectorandpresident.Heisalsothefounder,apromoterandadirectorofthe
Issuer.HaliStrandlundisWayneStrandlundsdaughter,adirectoroftheManager,andadirectoroftheIssuer,and
theholder
of
25%
of
its
issued
voting
shares.
Rafer
Strandlund,
Wayne
Strandlunds
son,
is
adirector
of
the
Manager
andtheIssuer,andtheholderof25%oftheIssuersissuedvotingshares.
InadditiontoreimbursingtheManagerforitsassociatedcostsandexpenses,theIssuerwillpaythefollowingfees
totheManagerundertheManagementServicesAgreement:
1. InrespectoftheManagersgeneralmanagementandadvisoryservices,amanagementfeeof1.8%peryear,amonthlyfeeequalto0.15%oftheaggregatesumof:a)theloancapitalborrowedbytheMIC,plus
b)thepaidupcapitaloftheMICsissuedandoutstandingshares(together,theAggregateCapital).This
percentagefeewillbereviewedbythepartiesfrom
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timetotime,butinnocasewilltherebeachangeinthefeeunlesstheManagerandthe
Issueragreeinwriting.
2. Inrespectofanypropertymanagement,mortgageoriginationorbrokerage,realestatemarketingorcapitalraisingservices,thesewillbeprovidedonanadhocbasisuponagreementofthepartiesatthe
time,andtheIssuerwillpaytheManagerasagreedbetweenthematthetimetheparticularserviceis
initiated,butinnocasewilltheManagerbepaidafeewhichisgreaterthanfairmarketvalueforthe
service.
TheManagementServicesAgreementisforaninitialtermoften(10)yearsandisautomaticallyrenewablefor
furthertermsoften(10)yearseachaftertheexpirationoftheinitialterm,subjecttotheprovisionsfor
termination.TheIssuermayonlyterminatetheManagementServicesAgreementforcause,uponthe
affirmativevoteofatleast75%oftheIssuersdirectors.TheManagermayterminatetheManagementServices
Agreementasfollows:a)immediatelyuponthewindingup,bankruptcyorreceivershipoftheIssuer,orb)upon
sixty(60)daysnoticetotheIssuer.
ThoughtheIssuerandtheManagerexpresslyagreeintheManagementServicesAgreementthatneitherthe
ManagementServicesAgreementnortherelationshipbetweentheIssuerandtheManagerestablishthe
ManagerasafiduciarytotheIssuer,theManagerhasagreedthatitwillexerciseitspowersanddischargeits
dutiesundertheManagementServicesAgreementhonestly,ingoodfaithandinwhatitreasonablybelieves
tobe
in
the
best
interests
of
the
Issuer.
TheManagerwillbegivenreasonableadvancenoticeof(andagendasifavailable)andhastherighttoattendand
beheardatallmeetingsoftheIssuersshareholders,theIssuersboardofdirectorsandanycommittees
establishedbytheboardofdirectors,andtheManagerwillbeprovidedwithcopiesoftheminutesofany
resolutionspassedatallsuchmeetingswithinareasonabletimeafterthemeeting.
TheIssueracknowledgesintheManagementServicesAgreementthattheManageranditsshareholders,
directorsandofficershave,orwillhave,interestsanddealingsinothercompanies,jointventures,limited
partnershipsand/orMICswhicharepresently,ormayinthefuture,beactivelyengagedinsimilarbusinessesas
theIssuer.TheIssueragreesthatneithertheManagernoritsshareholders,directorsorofficerswillbeliableto
theIssuerforanyconflictofinterestasaresultofsuchotherinterestsordealings,andthatsuchinterestsand
dealingsdonotandwillnotconstituteabreachoftheManagementServicesAgreementevenifcompetitive
withthe
business
of
the
Issuer,
and
even
if
the
business
opportunity
could
have
been
pursued
by
the
Issuer.
TheManagerwillnotbeliabletotheIssuerinrespectofanylossordamagesufferedbytheIssuer,including
anylossordiminutioninthenetassets(thatis,thevalueoftheIssuersassetslessitsliabilities)oftheIssuer,
unlesssuchlossordamageisadirectresultofgrossnegligence,grosswillfulmisconduct,ordishonestyby
theManagerinrelationtoitsdutiesandresponsibilitiesundertheManagementServicesAgreement.
The Management Services Agreement also provides that the Issuer will indemnify the Manager and its
directors, officers and employees from any claims arising in relation to the Managers duties and
responsibilitiesundertheManagementServicesAgreement.
TrademarkLicenseAgreement
FisgardisatrademarkownedbyStrandlundInvestmentsLtd.andregisteredintheCanadianRegisterof
Trademarksasbeingassociatedwithfinancialservices,andinparticularmortgageinvestmentvehicles.
StrandlundInvestmentsLtd.hasgrantedtheIssueranonexclusivelicensetousetheFisgardtrademark
underaTrademarkLicenseAgreement(theAgreement)betweenStrandlundInvestmentsLtd.andthe
IssuerdatedJanuary1,2000andmodifiedonJanuary1,2003.
UndertheAgreementStrandlundInvestmentsLtd.maysetstandardsandspecificationsastothequalityofthe
financialservicesassociatedwiththeIssuersuseofthetrademark,andanyadvertising
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orotherusebytheIssuerofthetrademark.OnthefirstdayofJanuary,2003andonthefirstdayofeachmonth
thereafterwhilethisTrademarkLicenseAgreementisineffecttheLicenseeshallpaytotheOwneralicensefee.
Thefeeamountsto1/12thof0.15%oftheaggregatesumofborrowingsandissuedandpaidupsharecapitalof
theLicenseecalculatedasofthefirstdayofeachmonth,commencingJanuary1,2003.
TheAgreementisautomaticallyrenewedeveryyearunlessoneofthepartiesprovidesnoticeofterminationtothe
othernotlessthanthirty(30)dayspriortoananniversarydateoftheAgreement.TheAgreementalsoprovidesthat
itwillbeterminateduponcertainadversecircumstancesrelatingtotheIssuer,andthatStrandlundInvestmentsLtd.
mayterminate
it
upon
thirty
(30)
days
notice
to
the
Issuer.
Upon
termination
the
Issuer
must
cease
all
use
of
the
trademark,includingthedeletionofthemarkfromitscorporatename.
Item3Directors,Management,PromotersandPrincipalHolders
3.1 CompensationandSecuritiesHeldThefollowingtablesetsoutthespecifiedinformationabouteachdirector,officerandpromoteroftheIssuerandeachpersonwho,directlyorindirectly,beneficiallyownsorcontrols10%
ormoreofanyclassofvotingsecuritiesoftheIssuer(aprincipalholder).
Nameand
municipalityof
principalresidence
Positionsheld(e.g.,
director,officer,
promoterand/or
principalholder)and
thedateofobtaining
thatposition
Compensationpaidby
Issuerinthemostrecently
Completedfinancialyear
andthecompensation
anticipatedtobepaidinthe
currentfinancialyear
Number,typeand
percentageof
securitiesofthe
issuerheldafter
completionof
minimumoffering
Number,type
andpercentageof
securitiesofthe
issuerheldafter
completionof
maximumoffering
HaliStrandlund
Sidney,BC
President,
January15,2003
Director,
April11,1994
Paidlastyear: $0
Anticipatedthis
year: $0
N/A
120ClassAVoting
Shares(25%)
246,851ClassB
NonVotingShares
WayneStrandlund
Victoria,BC
CEO
September1,2008
Director,
February5,1997
Paidlastyear: $0
Anticipatedthis
year: $0
N/A928,024ClassB
NonVotingShares
GraemeNye
Saanich,BC
PastPresident,
November23,
1994to
January15,2003
Paidlast
year:
$0
Anticipatedthis
year: $0
N/A
120ClassAVoting
Shares(25%)
32,101ClassB
NonVotingShares
RaferStrandlund
Victoria,BC
Director,
February5,1997
ChairmanoftheBoard
September1,2008
Paidlastyear: $0
Anticipatedthis
year: $0
N/A
120ClassAVoting
Shares(25%)
208,792ClassB
NonVotingShares
DawnPaniz
Langford,BC
CFO
September1,2008
Secretary/Treasurer,
January2,2003
Paidlastyear: $0
Anticipatedthis
year: $0
N/A
120ClassAVoting
Shares(25%)
75,552ClassB
NonVotingShares
JasonStrandlund
Langford,BC
DirectorOctober1,2008
Paidlast
year:
$0
Anticipatedthis
Year:$0
N/A268,478
Class
B
NonVotingShares
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3.2 ManagementExperienceTheprincipaloccupationsofthedirectorsandseniorofficersoverthepastfive(5)yearsandtheirexperiencerelevanttotheIssuersbusinessareasfollows:
Name Principaloccupationandrelatedexperience
WayneStrandlund MortgageInvestmentManager&RealEstateAgent
HaliStrandlund MortgageInvestmentManager&RealEstateAgent
RaferStrandlund
MortgageInvestmentManager,CreditUnionAccountManager&
MortgageBroker
DawnPanizGeneralManagerofFisgardAssetManagementCorporationand
RealEstate&MortgageBrokerLicensee
JasonStrandlund MortgageUnderwriter&MortgageBroker
3.3 Penalties,SanctionsandBankruptcy(a) Thefollowingpenaltiesorsanctionshavebeenineffectduringthelastten(10)yearsagainst(i)adirector,
seniorofficer,orcontrolpersonoftheIssuer,or(ii)anissuerinwhichapersonorcompanyreferredtoin
(i)wasadirector,seniorofficerorcontrolpersonatthetime:
None
(b) Thefollowingdeclarationsoforvoluntaryassignmentsinbankruptcy,proposalsunderanybankruptcyorinsolvencylegislation,proceedings,arrangementsorcompromiseswithcreditorsorappointmentsofa
receiver,receivermanagerortrusteetoholdassets,havebeenineffectduringthelastten(10)years
against(i)adirector,seniorofficer,orcontrolpersonoftheIssuer,or(ii)anissuerinwhichapersonor
companyreferredtoin(i)wasadirector,seniorofficerorcontrolpersonatthetime:
None
Item4CapitalStructure
4.1 Share Capital The following table sets out information about the Issuers outstanding securities, includingoptions,warrantsandothersecuritiesconvertibleintoShares.
DescriptionofSecurity
Number
authorizedto
beissued
Number
outstanding
asat
March31,2010
Number
outstanding
afterminimum
offering
Number
outstanding
after
maximum
offering
ClassAVotingShares unlimited 480 N/A N/A
ClassBNonVotingShares unlimited 201,205,800 N/A N/A
ClassC
Non
Voting
Shares
unlimited 0 N/A N/A
ClassDNonVotingShares unlimited 0 N/A N/A
ClassENonVotingShares unlimited 0 N/A N/A
ClassFNonVotingShares unlimited 29,585,110 N/A N/A
Options N/A Nil N/A Nil
Warrants N/A Nil N/A Nil
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4.2 LongTermDebtTheIssuerdoesnothaveanylongtermdebt.4.3 NetSalesWithinthelasttwelve(12)monthstheIssuerhasissuedthefollowingsecurities(nosecurities
wereissuedforotherthancash):
DateofissuanceTypeofsecurity
issued
Numberof
securities
issued
PricepersecurityTotalfunds
received
April2009 ClassBShares 1,407,405 $1.00pershare $ 1,407,405
April2009 ClassFShares 1,452,582 $1.00pershare $ 1,452,582
May2009 ClassBShares 1,013,724 $1.00pershare $ 1,013,724
May2009 ClassFShares (656,810) $1.00pershare $ (656,810)
June2009 ClassBShares 3,736,625 $1.00pershare $ 3,736,625
June2009 ClassFShares (4,495,862) $1.00pershare $ (4,495,862)
July2009 ClassBShares 1,111,312 $1.00pershare $ 1,111,312
July2009 ClassFShares (1,510,044) $1.00pershare $ (1,510,044)
August2009 ClassBShares 965,639 $1.00pershare $ 965,639
August2009 ClassFShares 143,917 $1.00pershare $ 143,917
September2009 ClassBShares 3,661,343 $1.00pershare $ 3,661,343
September2009 ClassFShares (1,373,956) $1.00pershare $ (1,373,956)
October2009 ClassBShares 767,722 $1.00pershare $ 767,722
October2009 ClassFShares (245,295) $1.00pershare $ (245,295)
November2009 ClassBShares 890,704 $1.00pershare $ 890,704
November2009 ClassFShares 613,945 $1.00pershare $ 613,945
December2009
Class
B
Shares
3,385,740
$1.00
per
share
$ 3,385,740
December2009 ClassFShares (1,057,086) $1.00pershare $ (1,057,086)
January2010 ClassBShares 766,394 $1.00pershare $ 766,394
January2010 ClassFShares (1,100,998) $1.00pershare $ (1,100,998)
February2010 ClassBShares 1,642,416 $1.00pershare $ 1,642,416
February2010 ClassFShares (437,166) $1.00pershare $ (437,166)
March2010 ClassBShares 2,354,731 $1.00pershare $ 2,354,731
March2010 ClassFShares (868,307) $1.00pershare $ (868,307)
March31,2010 12,168,675 12,168,675
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Item5SecuritiesOffered
5.1 TermsofSecuritiesAdescriptionofthematerialtermsofthesecuritiesbeingofferedinclude:(a) VotingTheholdersofClassBandClassFSharesarenotentitledtonoticeofortoattendorvoteatmeetings
oftheIssuer.
(b) RedemptionTheIssuerinitssolediscretionmayredeemalloranyportionofashareholdersClassBorClassFShares
at
any
time
upon
payment
of
the
Redemption
Amount
(defined
below).
Upon
completion
of
the
redemptionprocesstheredeemedSharesarecancelled.
IfnotalloftheoutstandingSharesofanyclassorclassesofSharesaretoberedeemedtheSharestobe
redeemedmaybeselectedatthediscretionoftheDirectorsandneednotbeselectedeitherinproportionto
thenumberofSharesregisteredinthenameofeachshareholderorfromanyoreveryparticularshareholder.
TheRedemptionAmounttobepaidbytheIssuerinrespectofeachSharetoberedeemedwillbeanamount
equaltothepaidupcapitaloftheShareplustheaggregateofalldividendsdeclaredontheSharebutunpaid
plustheSharesproratashareofanyundistributednetincomeandnetcapitalgains.
(c) CompassionateEarlyRedemptionTheIssuer,throughtheManager,mayconsiderapplicationsforearlyredemption
for
compassionate
reasons,
but
only
under
special
circumstances,
to
the
spouse
of
adeceased
shareholderwhoholdstheIssuersClassB(5year)Shares.
ThedecisionastowhetherornottograntanearlyredemptionisatthesolediscretionoftheManagerand
otherwisedependentupontheIssuersArticleslegallypermittingsuchearlyredemption.
Shouldashareholderpassaway,thesurvivingspousemayapplytotheIssuerforanearlyredemptionofallor
partofthedeceasedsShares,providedthatthedateofapplicationforearlyredemptionisatleastninety(90)
dayspriortotheoriginalredemptiondate.
TheManagermaythenconsiderredeemingtherequestednumberofSharesonorbeforethelastdayofthe
quarterimmediatelyfollowingthequarterinwhichtherequestforcompassionateearlyredemptionismade
bythesurvivingspouse.
Sincethedeceasedshareholderwouldhavebeenearningdividendsatthe5yearrate,butisredeemingearlier
thanfive(5)years,theredemptionamountwillbetheoriginalinvestmentplusaccrueddividendscalculatedasif
theoriginalShareshadbeenClassF(1year)Shares.
(d) RetractionRightsTheClassBandClassFShareshaveretractionrights,meaningtheirholdershavearighttopresentallorsomeoftheirSharestotheIssuerforcancellationandpaymenttotheshareholdersofthe
retractedSharesRedemptionAmounts(RedemptionAmountisdefinedaboveunderRedemption).
ThereareonlycertaindatesonwhichClassBandClassFSharesmayberetracted.TheClassBShares
retractiondateisfive(5)yearsfromthelastdayofthequarterinwhichtheSharesweresubscribedandthe
ClassFSharesretractiondateisone(1)yearfromthelastdayofthequarterinwhichtheShareswere
subscribed.Shares
acquired
by
way
of
re
invested
dividends
have
the
same
retraction
date
as
the
date
upon
whichtheoriginalSharesweresubscribed.
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AshareholderwishingtoretractSharesastheybecomeduemaydosobyprovidingtheIssuerwith
sixty(60)dayswrittennoticeoftheshareholderswishtoretract.IfaShareretractiondateexpires
withouttheSharebeingretracted,thenthenewretractiondatefortheShareis(i)inthecaseofa
ClassBShare,five(5)yearsfromtheexpiredretractiondate;and(ii)inthecaseofaClassFShare,one
(1)yearfromtheexpiredretractiondate.
TheshareholdersrighttoretracttheirSharesissubjecttosection27.1oftheIssuersArticlesof
Incorporationwhichprovidesasfollows:
27.1 The Directors will use their best efforts to ensure that the Company at all
relevant times qualifies as a Mortgage Investment Corporation pursuant to the
IncomeTaxAct(Canada).Without limitingthegeneralityoftheforegoing,inaddition
toanyotherpowerandauthoritytheDirectorsmayhave,andnotwithstandingany
otherprovisionoftheseArticles,theDirectorsmayintheirsolediscretionrejectany
applications for Share Dividends or Share subscriptions, transfers, redemptions or
retractionswhere intheviewoftheDirectorssuchwouldnotbe intheCompanys
best interests as a Mortgage Investment Corporation under the Income Tax Act
(Canada).[Emphasisadded.]
Themostlikelyscenariowherethedirectorswouldusetheirdiscretiontorejectaretractionapplication
iswhere
the
retraction
would
put
the
Issuer
offside
of
the
Tax
Acts
MIC
criteria
regarding
shareholders,
whichrequiresthataMIChaveatleasttwenty(20)shareholders,andnooneshareholdertogetherwith
relatedpartiestothatshareholderholdsbetweenthemmorethan25%oftheissuedSharesofany
classofSharesoftheMIC.
(e) DividendsTheIssuersArticlesofIncorporationrequireittopayoutasdividendssubstantiallyallofitsnetincomeandnetrealizedcapitalgainseveryyear,subjecttothedirectorsdiscretiontoestablish
reservesfortheIssuer.TheIssuerwilldistributedividendsamongthedifferentclassesofissuedShares
suchthatwhenthedividendsareexpressedasapercentagerateofannualizedreturnoncapital
investedtherelativepercentageratesbetweentheclassesofissuedShareswillbeasfollows:
ShareClass RateofReturn
ClassA
Shares
Base
rate
ClassBShares(5YearMaturity) Baserate
ClassFShares(1YearMaturity) Baserateless2.0%
Forexample,ifthebaserateis8%therateforClassBShares(5YearMaturity)willbe8%andthe
rateforClassFShares(1YearMaturity)willbe6%.InvestorswillreceiveaT5taxreturnfor
interestincomeoncashinvestments,includingreinvesteddividends.
UndertheIssuerscurrentpolicyinvestorsmayelecttoreceivedividendseitherincashorintheform
ofadditionalShares.WhenpayingaShareDividend,ratherthanpayingthedividendincash,the
IssuerpaysthedividendbyissuingtotheinvestorSharesofthesameClassofSharesonwhichthe
dividendisbeingpaid(theDividendShares).DividendShareswillbeissuedatthepriceof$1.00per
DividendShare,
or
such
other
price
per
Dividend
Share
as
the
Issuer
gives
investors
not
less
than
ninety(90)dayspriorwrittennoticeof.
InvestorsmaychangetheirelectionastocashorShareDividendsbygivingtheIssuernoticeoftheir
electionchangenotlessthansixty(60)daysbeforethechangeinelectionistotakeeffect.
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ForDividendSharestheRetractionDatewillbedeemedtobethesamedateastheRetractionDateofthe
SharesoriginallysubscribedandthatgaverisetotheDividendShares.
TheIssuerreservestherighttoamendorcancelitspolicyregardingShareDividends.
(f) PreemptiveRightsExceptasotherwiserequiredby lawtheholdersofClassA,ClassBorClassFSharesare not entitled as such to subscribe for, purchase, or receive any part of any issue of shares, bonds,
debenturesorothersecuritiesoftheIssuer.
(g) Liquidation,Dissolution,orWindingUpIntheeventoftheliquidation,dissolutionorwindingupoftheIssuer,whethervoluntaryorinvoluntary,orintheeventofanyotherdistributionofassetsoftheIssuer
amongitsshareholdersforthepurposeofwindingupitsaffairs,theIssuerwilldistributetheassetsofthe
Issueramongtheshareholdersinthefollowingpriority:
(i) First,allholdersofeveryclassofShareswillreceivethereturnofthepaidupcapitalontheirShares.Ifthereareinsufficientassetstofullyreturnthepaidupcapitaltheassetswillbedistributedamong
alltheshareholdersproratainproportiontotheirpaidupcapital;
(ii) Second,anyremainingassetswillbedistributedamongtheholdersofthedifferentclassesofSharesinthesameproportionsasifitwereadividenddistribution,calculatedonthebasisofthepaidup
capitalon
the
books
of
the
Issuer
prior
to
the
application
of
paragraph
(i).
5.2 SubscriptionProcedurePersonswishingtosubscribeforSharesunderthisOfferingmaydosobycompletingthefollowingthreesteps:
(a) SubscriptionForms InvestorsmustcompletetheappropriateSubscriptionAgreementfortheirrespectivejurisdiction.
(b) Method forPaymentAchequeorbankdraftmadepayable toFisgardCapitalCorporation inanamountequalto$1.00multipliedbythenumberofSharesbeingsubscribed.
(c) Submitting Subscriptions Investors may deliver the completed subscription form and payment toFisgardCapitalCorporationbymailorinpersonto:
FisgardCapitalCorporation
3378DouglasStreetVictoriaBCV8Z3L3
Phone:(250)3829255orTollFree18663829255
Fax:(250)3829295orTollFree18663841498
(d) TwoDay Hold Period An investors subscription funds will be held until midnight on the second (2nd)businessdayaftertheinvestorsignstheSubscriptionAgreement.
(e) AcceptanceofSubscriptionsandClosingsSubscriptionsmaybeacceptedbytheIssuer,subjecttothetermsandconditionsoftheSubscriptionAgreementsignedbytheinvestor.Subscriptionswillbe
receivedsubjecttopriorsaleandsubjecttorejectionorallotment,inwholeorinpart,bytheIssuer
priorto
any
closing.
SubscriptionsmaybeacceptedorrejectedbytheIssuerinitssolediscretion.TheIssuerisnotobligatedto
acceptanysubscriptionnortoacceptsubscriptionsintheordertheIssuerreceivesthem.IftheIssuerrejects
asubscription,thesubscriptionfundsreceivedwillbereturnedtotheInvestor,withoutinterestor
deduction,alongwithnotificationoftherejection.
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ThisOfferingisnotsubjecttoanyminimumsubscriptionlevel,andtherearenoconditionsof
closing;thereforeanyfundsreceivedfromanInvestorareavailabletotheIssuerandneednot
berefundedtotheInvestor.ClosingswilltakeplaceperiodicallyattheIssuersdiscretion.
ThisOfferingmaybenullifiedatthesolediscretionoftheIssuer.Forexample,theIssuermightchoose
tonullifytheOfferingupontheoccurrenceofeventssuchasanymaterialadversechangeinthe
business,personnelorfinancialconditionoftheIssuerortheManager.IfthisOfferingisnullifiedfor
anyreason,theSubscriptionAgreementsandcashfundsreceivedbytheIssuerpriortothenullification
willbe
returned
to
Investors
without
interest
or
deduction
as
if
the
Investors
subscriptions
had
been
rejected(whetherornotthesubscription[s]hadpreviouslybeenacceptedbytheIssuer).
AprospectiveInvestorwillbecomeashareholderuponexecutionofaSubscriptionAgreement,
acceptanceoftheSubscriptionAgreementbytheIssuer,paymentofthesubscriptionprice,
andentryoftheInvestorsnameintheregisterofmembersoftheIssuerasashareholder.
(f) InvestorQualificationsInvestorqualificationsdifferbetweenresidentsofBritishColumbia,NewBrunswick,NovaScotia,NewfoundlandandLabradorandresidentsofAlberta,Manitoba,
NorthwestTerritories,Nunavut,PrinceEdwardIsland,QuebecandSaskatchewan.
InBritishColumbia,NewBrunswick,NovaScotia,NewfoundlandandLabrador,aninvestormay
purchaseSharesif,beforeoratthetimetheinvestorsignstheSubscriptionAgreement,theinvestor
purchasesasprincipal,theinvestorreceivesthisOfferingMemorandumandsignstheRisk
Acknowledgmentform,anddeliversittotheIssuer.
InAlberta,Manitoba,NorthwestTerritories,Nunavut,PrinceEdwardIsland,Quebecand
Saskatchewan,aninvestormaypurchaseSharesiftheinvestormeetstherequirementssetout
aboveforBritishColumbiaresidents,plustheinvestoreither(i)isaneligibleinvestor;or(ii)is
acquiringShareswithanaggregatecostofnotmorethan$10,000.UndertheseAlberta,Manitoba,
NorthwestTerritories,Nunavut,PrinceEdwardIsland,QuebecandSaskatchewancriteria,aneligible
investoris:
(i)apersonorcompanywhose:(a) netassets,aloneorwithaspouse,inthecaseofanindividual,exceed$400,000;or(b) netincomebeforetaxesexceeded$75,000ineachofthetwo(2)mostrecentcalendar
years,andwhoreasonablyexpectstoexceedthatincomelevelinthecurrentcalendar
year,or
(c) netincomebeforetaxesaloneorwithaspouse,inthecaseofanindividual,exceeded$125,000ineachofthetwo(2)mostrecentcalendaryears,andwhoreasonablyexpects
toexceedthatincomelevelinthecurrentcalendaryear;
(ii) a company of which a majority of the voting securities are beneficially owned by eligibleinvestorsoramajorityofthedirectorsareeligibleinvestors;
(iii) ageneralpartnershipofwhichallofthepartnersareeligibleinvestors;(iv) alimitedpartnershipofwhichthemajorityofthegeneralpartnersareeligibleinvestors;(v) atrustorestate inwhichallofthebeneficiariesoramajorityofthetrusteesorexecutorsare
eligibleinvestors;
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(vi) anaccreditedinvestor3;or(vii) apersonwhohasobtainedadviceregardingthesuitabilityoftheinvestmentand,iftheperson
isresidentinajurisdictionofCanada,thatadvicehasbeenobtainedfromaneligibilityadviser.
InOntarioaninvestormaypurchaseSharesiftheinvestorisanaccreditedinvestorandpurchasesthe
Sharesasprincipal.UnderthisOntariocriteria,anaccreditedinvestoris:
(i) abanklistedinScheduleIorIIoftheBankAct(Canada),oranauthorizedforeignbanklistedinScheduleIIIofthatAct;
(ii) the Business Development Bank incorporated under the Business Development Bank Act(Canada);
(iii) aloancorporationortrustcorporationregisteredundertheLoanandTrustCorporationsActorundertheTrustandLoanCompaniesAct(Canada),orundercomparablelegislationinanyother
jurisdiction;
(iv) acooperativecreditsociety,creditunioncentral,federationofcaissespopulaires,creditunionor
league,
or
regional
caisse
populaire,
or
an
association
under
the
Cooperative
Credit
AssociationsAct(Canada),ineachcase,locatedinCanada;
(v) acompanylicensedtodobusinessasaninsurancecompanyinanyjurisdiction;(vi) asubsidiaryofanycompanyreferredtoinparagraph(i),(ii),(iii),(iv)or(v)wherethecompany
ownsallofthevotingsharesofthesubsidiary;
(vii) apersonorcompanyregisteredundertheSecuritiesAct(Ontario)(theOSA)orsecuritieslegislationinanotherjurisdictionasanadviserordealer,otherthanalimitedmarketdealer;
(viii) theGovernmentofCanadaorofanyjurisdiction,oranycrowncorporation,instrumentalityoragencyofaCanadianfederal,provincialorterritorialgovernment;
(ix) anyCanadianmunicipalityoranyCanadianprovincialorterritorialcapitalcity;(x) anynational, federal,state,provincial,territorialormunicipalgovernmentofor inanyforeign
jurisdiction,oranyinstrumentalityoragencythereof;
(xi) apensionfundthatisregulatedbyeithertheOfficeoftheSuperintendentofFinancialInstitutions(Canada)oraprovincialpensioncommissionorsimilarregulatoryauthority;
(xii) aregisteredcharityundertheIncomeTaxAct(Canada);(xiii) an individualwhobeneficiallyowns,orwhotogetherwithaspousebeneficiallyown,financial
assetshaving
an
aggregate
realizable
value
that,
before
taxes
but
net
of
any
related
liabilities,
exceeds$1,000,000;
(xiv) anyindividualwhosenetincomebeforetaxesexceeded$200,000ineachofthetwo(2)mostrecentcalendaryearsorwhosenetincomebeforetaxescombinedwiththatofaspouse
exceeded$300,000ineachofthoseyears,andwho,ineithercase,hasareasonableexpectation
ofexceedingthesamenetincomelevelinthecurrentcalendaryear;
3
Accreditedinvestorsincludebanks,securitiesdealersandadvisors,governments,individualswhohave(i)netassetsworth
morethan$1,000,000,or(ii)netincomebeforetaxesineachofthelasttwo(2)calendaryearsofmorethan$200,000,ormore
than$300,000whencombinedwiththeirspousesincome,andexpectstoexceedthoseincomelevelsinthecurrentcalendar
year;andacompanyorotherbusinessentitywithnetassetsofatleast$5,000,000.
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(xv) anindividualwhohasbeengrantedregistrationundertheOSAorsecuritieslegislationinanotherjurisdictionasarepresentativeofapersonorcompanyreferredtoinparagraph(vii),
whetherornottheindividualsregistrationisstillineffect;
(xvi) apromoteroftheIssueroranaffiliatedentityofapromoteroftheIssuer;(xvii) aspouse,parent,grandparentorchildofanofficer,directororpromoteroftheIssuer;(xviii) apersonorcompanythat,inrelationtotheIssuer,isanaffiliatedentityorapersonor
companyreferredtoinclause(c)ofthedefinitionofdistributioninsubsection1(1)ofthe
OSA;
(xix) theIssueracquiringsecuritiesofitsownissue;(xx) acompany,limitedpartnership,limitedliabilitypartnership,trustorestate,otherthana
mutualfundornonredeemableinvestmentfund,thathadnetassetsofatleast$5,000,000
asreflectedinitsmostrecentlypreparedfinancialstatements;
(xxi) a person or company that is recognized by the Ontario Securities Commission as anaccreditedinvestor;
(xxii) amutualfundornonredeemable investmentfundthat, inOntario,distributes itssecuritiesonlytopersonsorcompaniesthatareaccreditedinvestors;
(xxiii) amutualfundornonredeemable investmentfundthat, inOntario,distributes itssecuritiesunderaprospectusforwhichareceipthasbeengrantedbytheDirectorundertheOSA;
(xxiv) amanagedaccountifitisacquiringasecuritythatisnotasecurityofamutualfundornonredeemableinvestmentfund;
(xxv) anaccountthatisfullymanagedbyatrustcorporationregisteredundertheLoanandTrustCorporationsAct;
(xxvi) anentityorganizedoutsideofCanadathat isanalogoustoanyoftheentitiesreferredto inparagraphs(i)through(vii)andparagraph(xi)informandfunction;or
(xxvii) apersonorcompanyinrespectofwhichalloftheownersofinterests,directorindirect,legalorbeneficial,arepersonsorcompaniesthatareaccreditedinvestors.
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Item6IncomeTaxConsequences
6.1 Youshouldconsultyourownprofessionaladviserstoobtainadviceonthetaxconsequencesthatapplytoyou.6.2 Noapplicationhasbeenmadeforanadvanceincometaxrulingwithrespecttotheinvestmentdescribedin
thisOfferingMemorandum,norisitintendedthatanyapplicationbemade.
TheIssuerhaspreparedthefollowingcommentarywhichitbelievesisafairandadequatesummaryoftheprincipal
federalincome
tax
consequences
arising
under
the
Tax
Act
to
an
Investor
who
is
an
individual
resident
in
Canada
who
acquiresSharesunderthisOfferingMemorandum.
TheincometaxconsequenceswillnotbethesameforallInvestors,butmayvarydependingonanumberoffactors
includingtheprovinceorprovincesinwhichtheInvestorresidesorcarriesonbusiness,whetherSharesacquiredby
himwillbecharacterizedascapitalproperty,andtheamounthistaxableincomewouldbebutforhisparticipationin
thisOffering.
ThefollowingdiscussionoftheCanadianincometaxconsequencesisofageneralandlimitednatureonly,is
notintendedtoconstituteacompleteanalysisoftheincometaxconsequences,andshouldnotbe
interpretedaslegalortaxadvicetoanyparticularInvestor.Thissummarydoesnotaddressprovincialor
territoriallawsofCanadaoranytaxlawsofanyjurisdictionoutsideofCanada.EachprospectiveInvestor
should
obtain
advice
from
the
Investors
own
independent
tax
advisor
as
to
the
federal
and
provincial
income
taxconsequences ofhisorheracquisitionofShares,assuchconsequencescanvarydependinguponthe
particularcircumstancesofeachInvestor.
ThissummaryisbasedontheIssuersunderstandingofthecurrentprovisionsoftheTaxAct,theRegulationstothe
TaxAct,andthecurrentadministrativeandassessingpracticesofCanadaCustomsandRevenueAgency,Taxation
(CCRA).
ThissummaryoutlinestheCanadianfederalincometaxconsequencestoanInvestorbasedonimportantfacts
andassumptionsassetoutbytheIssuerintheOfferingMemorandumandparticularlyonadditionalfactsand
assumptionsasfollows:
(a) Investorsare,andwillnotceasetobe,individualsresidentinCanada;(b) Investors acquire Shares pursuant to this Offering Memorandum and hold the Shares as capital
property;
(c) InvestorsholdSharesforthepurposeofearningincomeandhaveareasonableexpectationofearningaprofitfromholdingtheShares;and
(d) TheIssuerwillqualifyatallmaterialtimesasaMICforthepurposesoftheTaxAct.ItisincumbentuponprospectiveInvestorstofullyinvestigateandsubstantiatetheexpectationsaboveand,withrespect
totheassumptionstatedin(c)above,itisincumbentonanInvestortoinvestigateandsubstantiatetheinvestors
expectationofearningaprofitfromholdingShares,havingregardtohisexpectedfinancingcostsandanyprojections
the
investors
may
wish
to
obtain
from
the
Issuer.
ThereisnoassurancethattheTaxActandrelatedRegulationswillnotbeamendedinamannerthatfundamentally
alterstheincometaxconsequencestoInvestorswhoacquireordisposeofSharesThissummarydoesnottakeinto
accountanychangesinlaw,whetherbywayoflegislativeorjudicialaction.
TherehasbeennoapplicationforanAdvanceIncomeTaxRulingfromCCRAonanyaspectofthetransactions
proposedintheOfferingMemorandum,norisitintendedthatsuchanapplicationwillbemade.Noopinionfrom
theIssuerslegalcounseloraccountantshasbeengivenwithrespectto
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theseincometaxconsiderations.Theanalysiscontainedhereinisnotallencompassingandshouldnotbeconstruedas
specificadvicetoanyparticularInvestorandisnotasubstituteforcarefultaxplanning,particularlysincecertainofthe
incometaxconsequencesofaninvestmentwillnotbethesameforalltaxpayers.Regardlessoftaxconsequencesa
decisiontopurchasetheSharesofferedshouldbebasedonthemeritsoftheinvestmentassuchandonanInvestors
abilitytobearanylossthatmaybeincurred.
TheIssuer
AsaMIC
the
Issuer
is
subject
to
special
rules
under
the
Tax
Act
that
permit
the
Issuer
to
be
operated,
in
effect,
as
atax
freeflowthroughconduitofitsprofittoitsshareholders.TheincomeoftheIssuerforpurposesoftheTaxAct
includesinterestearnedandthetaxableportionofanynetrealizedcapitalgains.TheIssuerispermittedtodeduct
fromitsnetincomealltaxabledividendsitpaystoitsshareholders,otherthancapitalgainsdividends,andthetaxable
portionofitsnetrealizedcapitalgainsdistributedtoshareholdersascapitalgainsdividendswithintheperiods
prescribedbytheTaxAct.IfandtotheextenttheIssuerhasincomeaftertheseandotherapplicabledeductions,such
incomeissubjecttotheprevailingtaxratesapplicabletoapubliccorporation.
Shareholders
A. Dividends
Taxabledividends,
except
capital
gains
dividends,
received
by
aShareholder
are
taxable
in
the
hands
of
the
Shareholder
asinterestandnotasdividends.CapitalgainsdividendsreceivedbyaShareholderaretreatedascapitalgainsofthe
Shareholder,onehalfofwhichmustbeincludedasataxablecapitalgainincomputingtheShareholderstaxable
income.Asaresultoftherepealofthe$100,000capitalgainsexemption,suchcapitalgainsarenolongereligiblefor
thecapitalgainsexemption.
B. Dispositions
ThecosttoaShareholderofhisShares(plusorminuscertainadjustmentsrequiredundertheTaxAct)willbethe
adjustedcostbaseoftheSharesatanyparticulartime,againstwhichacapitalgainorcapitallosswillbemeasuredona
saleorotherdeemeddispositionoftheShares.
AShareholderwillbeconsideredtohavedisposedofhisShareswhenheassignsorsellshisShares,hisShareisthe
subjectof
agift,
he
dies,
or
where
the
Issuer
is
wound
up
or
otherwise
terminated.
A
Share
which
is
the
subject
of
a
giftorwhichisheldbyaShareholderwhenhediesisgenerallydeemedtobedisposedofforproceedsequaltofair
marketvalueatthattime.However,incertaincircumstancesacapitalgainorcapitallosswillbedeferredwheregift
orbequesttransferstheSharetotheShareholdersspouse.
GenerallyaShareholderwillrealizeacapitalgain(orsustainacapitalloss)equaltotheamountbywhichtheproceeds
receivedordeemedtohavebeenreceivedonthedispositionofaShareexceed,orareexceededby,theadjustedcost
baseoftheShare.
Shareholderswillincludeonehalfofanycapitalgainincomputingtaxableincomeasataxablecapitalgain.Similar
proportionsofacapitallosswillbeallowablecapitallossthatmaybeusedtooffsettaxablecapitalgainintheyear
thatthecapitallossissustained.Totheextenttheallowablecapitallossisnotoffsetagainsttaxablecapitalgainin
thatyear
it
may
be
carried
back
three
(3)
years
and
forward
indefinitely
to
offset
taxable
capital
gain
realized
in
those
years.
C. InterestonMoneyBorrowedtoPurchaseShares
AnInvestorwillgenerallybeentitledtodeductfromhisincomereasonableinterestpaidorpayablewithrespectto
moniesborrowedtoacquireShares,providedhehasareasonableexpectationofprofitfromholdingtheShares.Interest
expensedeductedbyanInvestorwillbeincludedincomputinghiscumulativenetinvestmentlosses.
AfterthedispositionofaSharebyataxpayerreasonableinterestexpenseonmoneyborrowedforthepurposeof
acquiringthatSharewillgenerallycontinuetobedeductibleuntiltheborrowingis
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repaidregardlessofwhetheragainorlosswasrealizedonthedispositionoftheShare,excepttotheextentany
proceedsofdispositionattributabletothatborrowedmoneyareusedtomakepersonalexpendituresbythetaxpayer
orarenototherwiseusedforthepurposeofearningincome.
DeferredIncomePlans(e.g.,RRSPs,RRIFs,DeferredProfitSharingPlans)
A. EligibilityforInvestmentbyDeferredIncomePlans
Aslong
as
the
Issuer
is
qualified
as
aMIC
under
the
Tax
Act
the
Shares
will
be
qualified
investments
for
trusts
governed
byaregisteredretirementsavingsplan(RRSP),deferredprofitsharingplansandregisteredretirementincomefunds,
providedtheIssuerdoesnotholdanydebtofanannuitantorarelatedparty.
B. InterestExpenseRegardingRRSPContributions
InterestandotherborrowingcostsincurredbyaShareholderforthepurposeofmakingacontributiontoanRRSParenot
deductible.Therefore,ifaShareholderholdsSharesinanRRSPtheShareholderwouldnotbeeligibletodeductfromhis
incomeanyinterestexpenseonmoneyborrowedforthepurposeofacquiringtheSharesheldintheRRSP.
C. DistributionsReceivedFromIssuerbyRRSP
Asnoted,
taxable
dividends
are
deemed
to
be
interest
income
to
the
Shareholder,
which,
together
with
one
half
of
capitalgainsdividends,areaddedtotheShareholderstaxableincomeiftheSharesareheldpersonallybythe
Shareholder.SuchdistributionspaidonSharesheldbyanRRSP,however,willnotbesubjecttotaxinthehandsofthe
RRSP,providedtheRRSPhasnotborrowedmoneyorcarriedonbusinessandtheannuitantundertheRRSPisalive.An
RRSPwillnotcarryonbusinessmerelybyholdingShares.ThedistributionspaidtotheRRSPwillbetaxabletothe
annuitantundertheRRSPonwithdrawalofthefundsfromtheRRSP,whichmustoccurnolaterthantheyearthe
annuitantbecomes69yearsold.
D. RRSPContributionLimits
Anindividualmaycontributecashoreligibleproperty(suchasaShare)toanRRSPinacalendaryearorwithinsixty
(60)daysaftertheendoftheyear,andmayclaimadeductionforthatcalendaryeartotheextentthattheamount
contributeddoesnotexceedthelimitsspecifiedbyCCRA.Theamountofanindividualscontributionwillbeequal
tothe
fair
market
value
of
any
property
contributed
as
of
the
day
of
contribution.
A
seven
(7)
year
carry
forward
of
unusedRRSPdeductionroomisavailableintheeventcontributionsmadetoanRRSPforaparticularyearareless
thantheallowablecontributionforthatyear.
ThetransferofaSharetoanRRSPwillresultinthedeemeddispositionforincometaxpurposesatanamountequal
tothefairmarketvalueoftheShareatthetimeofthetransfer.ForanindividualShareholderwhoholdsaShareas
capitalpropertythedispositionwillresultinacapitalgainequaltotheexcessofthefairmarketvalueoftheShare
overitsadjustedcostbase.ShouldthefairmarketvalueoftheSharebelessthanitsadjustedcostbaseupon
contributiontotheRRSP,nocapitallosswillbeallowed.
FundsorpropertywithdrawnfromanRRSParetaxabletotheannuitantundertheRRSPintheyearof
withdrawal.TheamountofanynonqualifiedinvestmentacquiredbyanRRSPinayearisincludedintheincome
ofthe
annuitant
for
the
year.
EACHPROSPECTIVE INVESTOR ISADVISEDTOSEEK INDEPENDENTADVICE INRESPECTOFTHE INCOMETAX
CONSEQUENCES OF HIS PARTICIPATION IN THE ISSUER, TAKING INTO ACCOUNT HIS OWN PARTICULAR
CIRCUMSTANCES.
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Item7CompensationPaidtoSellersandFinders
7.1 TypeandEstimatedAmountofCompensationTheShareswillbesoldbytheManager,theIssuer,andtheirrespectivedirectors,officersandemployees,andmaybesoldonabesteffortbasisbyAgentsauthorizedbytheIssuer.Inits
discretiontheIssuermaypaycommissionstopersonsorcompaniessellingShares.Thisincludestheofficers,directors,
andemployeesoftheIssuerandtheManager,whomayreceiveacommissioninrespectofanySharessoldbythem.Such
commissionmaybepaidincashimmediatelyupontheIssueracceptingtheparticularsubscription,orpaidovertime.If
theOffering
is
fully
subscribed
and
the
Issuer
pays
the
maximum
possible
commission,
the
Issuer
will
pay
$21,000,000
in
commissions.
TheIssuermayenterintoexclusiveornonexclusiveagencyagreementswithagentsunderwhichtheAgentswould
offertheSharesforsaletoinvestorsonabesteffortsbasis,andtheIssuerwouldberesponsibleforpaymentofthe
agentscommissions.AsofthedateofthisOfferingMemorandumnosuchagreementshavebeenenteredinto.
7.2 PercentageofGrossProceedsThe Issuer maypayamaximumof7%of theOfferingsgrossproceeds incommissions.
Item8RiskFactors
Thisis
aspeculative
Offering.
The
purchase
of
Shares
involves
anumber
of
risk
factors
and
is
suitable
only
for
Investors
whoareawareoftherisksinherentintherealestateindustryandwhohavetheabilityandwillingnesstoacceptthe
riskoflossoftheirinvestedcapitalandwhohavenoimmediateneedforliquidity.Thereisnoassuranceofanyreturn
onanInvestorsinvestment.
TheIssueradvisesthatprospectiveInvestorsshouldconsultwiththeirownindependentprofessionallegal,tax,
investmentandfinancialadvisorsbeforepurchasingSharesinordertodeterminetheappropriatenessofthis
investmentinrelationtotheirfinancialandinvestmentobjectivesandinrelationtothetaxconsequencesofanysuch
investment.
InadditiontothefactorssetforthelsewhereinthisOfferingMemorandumprospectiveInvestorsshouldconsiderthe
followingrisksbeforepurchasingShares.Anyoralloftheserisks,orotherasyetunidentifiedrisks,mayhaveamaterial
adverseeffectontheIssuersbusinessand/orthereturntotheInvestors.
8.1 InvestmentRiskRisksthatarespecifictotheSharesbeingofferedunderthisOfferingincludethefollowing:1. NoMarketforSharesThereisnomarketthroughwhichtheSharesmaybesold,andtheIssuerdoesnot
expectthatanymarketwilldeveloppursuanttothisOfferingorinthefuture.Accordingly,aninvestmentin
SharesshouldonlybeconsideredbyInvestors
whodonotrequireliquidity.TheSharesaresubjecttoonerousresalerestrictionsunderapplicable
securitieslegislation.Seeitem10,ResaleRestrictions,regardingresalerestrictionsapplicabletotheShares.
2. RetractionLiquidityTheSharesareretractable,meaningthatInvestorshavetherighttorequiretheIssuertoredeemthem,uponappropriateadvancenoticefromtheInvestortotheIssuer.Thedifferentclassesof
Shareshave
different
retraction
timings,
as
measured
from
the
date
on
which
the
Investor
is
issued
the
SharestothedateonwhichtheInvestorisentitledtocallfortheirredemptionbytheIssuer,withtheClassB
shareshavingafive(5)yearretractionperiodandtheClassFsharesaone(1)yearretractionperiod.Ifthe
InvestordoesnotprovidetheIssuerwiththeappropriatenoticeofretraction,therightofretractionis
suspendeduntilanadditionaltimeperiodhaselapsed.Seeitem5.1,TermsofSecurities.
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TheIssuergivesnoassurancethatanyInvestorwillbeabletoretractanyoralloftheirSharesatanytime.
RetractionandredemptionoftheSharesissubjecttotheIssuerhavingaccesstosufficientcash,orother
liquidassets,andbeingincompliancewithapplicablecorporateandsecuritieslegislation,andissubjectto
thetermsinthisOfferingMemorandum,allasdeterminedsolelybytheIssuer.Retractionandredemption
oftheSharesisalsosubjecttothediscretionofthedirectorstoactinthebestinterestsoftheMICunder
theTaxAct.AccordinglythisinvestmentisunsuitableforthoseprospectiveInvestorswhomayrequire
liquidity.
3. AbsenceofManagementRightsTheClassBandClassFSharesbeingsoldunderthisOfferingdonotcarryvotingrights,andconsequentlyanInvestorsinvestmentinSharesdoesnotcarrywithitanyright
totakepartinthecontrolormanagementoftheIssuersbusiness,includingtheelectionofdirectors.
InassessingtherisksandrewardsofaninvestmentinShares,potentialInvestorsshouldappreciatethatthey
arerelyingsolelyonthegoodfaith,judgmentandabilityofthedirectors,officersandemployeesoftheIssuer
andtheManagertomakeappropriatedecisionswithrespecttothemanagementoftheIssuer,andthatthey
willbeboundbythedecisionsoftheIssuersandtheManagersdirectors,officersandemployees.Itwouldbe
inappropriateforInvestorsunwillingtorelyontheseindividualstothisextenttopurchaseShares.
4. LackofSeparateLegalCounselTheInvestors,asagroup,havenotbeenrepresentedbyseparatecounsel.NeithercounselfortheIssuernorcounselfortheManagerpurporttohaveactedfortheInvestorsnorto
haveconducted
any
investigation
or
review
on
their
behalf.
8.2 IssuerRiskRisksthatarespecifictotheIssuerincludethefollowing:1. MICTaxDesignationUndertheIssuersarticlestheIssuersdirectorsarerequiredtousetheirbestefforts
toensurethattheIssuerqualifiesasaMICpursuanttotheTaxAct.Aswell,theIssuersArticlesof
Incorporationgrantthedirectorsthediscretiontorejectanyapplicationsforsharedividendsorshare
subscriptions,transfers,redemptionsorretractionswhere,intheviewofthedirectors,suchwouldnotbe
intheIssuersbestinterestsasaMICundertheTaxAct.
There can be no assurance, however, that the Issuer will be able to meet the Tax Acts MIC
qualificationsatallmaterialtimes.
Asacompany
qualified
as
aMIC
the
Issuer
may
deduct
taxable
dividends
it
pays
from
its
income,
and
the
normalgrossupanddividendtaxcreditruleswillnotapplytodividendspaidbytheIssuerontheShares.
Rather,thedividendswillbetaxableinthehandsofshareholdersasiftheyhadreceivedaninterest
payment.IfforanyreasontheIssuerfailstomaintainitsMICqualificationinaparticularyear,the
dividendspaidbytheIssuerontheShareswouldceasetobedeductiblefromtheincomeoftheIssuerfor
thatyearandthedividendsitpaysontheShareswouldbesubjecttothenormalgrossupanddividendtax
creditrules.Inaddition,theSharesmightceasetobequalifiedinvestmentsfortrustsgovernedbyRRSPs,
DeferredProfitSharingPlansandRegisteredRetirementIncomeFunds,withtheeffectthatapenaltytax
wouldbepayablebytheInvestor.
2. RelianceonFisgardAssetManagementCorporationInaccordancewiththetermsof
the
Management
Services
Agreement
between
the
Issuer
and
the
Manager,
the
Manager
has
significant
responsibilityforassistingtheIssuertoconductitsaffairs.AnyinabilityoftheManagertoperformcompetently
oronatimelybasiswillnegativelyaffecttheIssuer.
3. KeyPersonnelTheoperationsoftheIssuerandtheManagerarehighlydependentuponthecontinuedsupportandparticipationoftheirkeypersonnel.Thelossoftheirservicesmaymateriallyaffectthetimingor
theabilityoftheIssuertoimplementitsbusinessplan.
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TheIssuersandManagersmanagementteamsconsistofseveralkeypersonnel.Inordertomanagethe
IssuerandtheManagersuccessfullyinthefutureitmaybenecessarytofurtherstrengthentheir
managementteams.Thecompetitionforsuchkeypersonnelisintense,andtherecanbenoassuranceof
successinattracting,retaining,ormotivatingsuchindividuals.Failureinthisregardwouldlikelyhavea
materialadverseeffectontheIssuersbusiness,financialcondition,andresultsofoperations.
4. Conflict of Interest Conflicts of Interest exist, and others may arise, between Investors and thedirectorsandofficersoftheManagerandtheIssuerandtheirassociatesandaffiliates.
Thereisnoassurancethatanyconflictsofinterestthatmayarisewillberesolvedinamannermost
favorabletoInvestors.PersonsconsideringapurchaseofSharespursuanttothisOfferingmustrelyon
thejudgmentandgoodfaithofthedirectors,officersandemployeesoftheManagerandtheIssuerin
resolvingsuchconflictsofinterestasmayarise.
TheIssueranditsshareholdersaredependentinlargepartupontheexperienceandgoodfaithofthe
Manager.TheManagerisentitledtoanddoesactinasimilarcapacityforothercompanieswith
investmentcriteriasimilartothoseoftheIssuer.Assuch,thereisarisktheManagerwillnotbeableto
originatesufficientsuitableinvestmentopportunitiestokeeptheIssuersfundsfullyinvested.Also,the
directorsoftheIssuerandtheManagerareemployedbyoractinothercapacitiesforothercompanies
involvedinmortgageandlendingactivities.Seeitem2.6,MaterialAgreements.
5. FutureOperationsandPossibleNeedforAdditionalFundsTheIssuerrequiressignificantfundstocarryoutitsbusinessplan.IntheeventtheIssuerisunabletoraisesufficientfundsbythisOffering
and/orfutureofferingsand/orotherdebtorequityfinancingtheIssuermayhaveinsufficientfunds
availabletoimplementitsbusinessplan,andInvestorsmayreceivenoreturnontheirShares.Certain
uninsurableoruninsuredeventsmayalsooccurwhichcansubstantiallyreducetheabilityoftheIssuer
tocarryonbusinessinaprofitablemanner,includingnaturalormanmadedisasters.
TheIssueranticipatesthatasubstantialportionofthenetproceedsofthisOfferingwillbeexpended
bytheIssuerininvestinginresidentialmortgages,andalsoanticipatesthatthenetproceedsofthe
OfferingandanticipatedcashflowfromoperatingrevenueswillbesufficienttocarryouttheIssuers
businessplan.Therecanbenoassurances,however,thattheIssuerwillgeneratesufficientcashflow
fromoperationsorthatitwillnotencounterunexpectedcostsinconnectionwithimplementingits
businessplan
and,
as
aconsequence,
there
can
be
no
assurances
that
the
Issuer
will
not
require
additionalfinancing.TheIssuerhasnocurrentarrangementswithrespecttoanyotheradditional
financing,andtherecanbenoassurancethatanysuchadditionalfinancingcanbeobtainedonterms
acceptabletotheIssuer,oratall.Failuretoobtainadditionalfinancingwouldlikelyhaveasubstantial
materialadverseeffectontheIssuer.Moreover,intheeventtheIssuerweretoobtainsuchadditional
financing,itcouldhaveadilutiveaffectonInvestorsparticipationintherevenuesgeneratedthrough
theIssuersoperations.
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8.3 IndustryRiskTherearealsorisksfacedbytheIssuerbecauseoftheindustryinwhichitoperates.Realestateinvestmentissubjecttosignificantuncertaintiesdue,amongotherfactors,touncertaincostsofconstruction,
developmentandfinancing,uncertaintyastotheabilitytoobtainrequiredlicenses,permitsandapprovals,and
fluctuatingdemandfordevelopedrealestate.TheanticipatedhigherreturnsassociatedwiththeIssuersmortgageloans
reflectthegreaterrisksinvolvedinmakingthesetypesofloansascomparedtolongtermconventionalmortgageloans.
Inherentintheseloansarecompletionrisksaswellasfinancingrisks.Inaddition,prospectiveInvestorsshouldtakenote
ofthefollowing:
1. InsuranceTheIssuersmortgageloanswillnotusuallybeinsuredinwholeorinpart.Aswell,therearecertaininherentrisksintherealestateindustry,someofwhichtheIssuermaynotbeabletoinsureagainstor
whichtheIssuermayelectnottoinsureduetothecostofsuchinsurance.Theeffectofthesefactorscannot
beaccuratelypredicted.
2. PriorityFinancialchargesforconstructionandotherfinancingfundedbyconventionalthirdpartylendersmayrankinprioritytothemortgagesregisteredinfavoroftheIssuer.Intheeventofdefaultbythemortgagor
underanypriorfinancialcharge,theIssuermaynotrecoveranyorallofthemoniesadvanced.
3. DefaultIfthereisdefaultonamortgageitmaybenecessaryfortheIssuer,inordertoprotecttheinvestment,toengageinforeclosureorsaleproceedingsandtomakefurtheroutlaystocompletean
unfinishedprojectortomaintainpriorencumbrancesingoodstanding.Insuchcasesitispossiblethatthe
totalamount
recovered
by
the
Issuer
may
be
less
than
the
total
investment,
resulting
in
loss
to
the
Issuer.
Equityinvestmentsinrealpropertymayinvolvefixedcostsinrespectofmortgagepayments,realestate
taxes,andmaintenancecosts,whichcouldadverselyaffecttheIssuersincome.
4. YieldTheyieldsonrealestateinvestments,includingmortgages,dependonmanyfactorsincludingeconomicconditionsandprevailinginterestrates,thelevelofriskassumed,conditionsintherealestateindustry,
opportunitiesforothertypesofinvestments,legislation,governmentregulationandtaxlaws.TheIssuer
cannotpredicttheeffectthatsuchfactorswillhaveonitsoperations.
5. CompetitionTheearningsoftheIssuerdependontheIssuersability,withtheassistanceoftheManager,tolocatesuitableopportunitiesfortheinvestmentandreinvestmentoftheIssuersfundsandontheyields
availablefromtimetotimeonmortgagesandotherinvestments.TheinvestmentindustryinwhichtheIssuer
operatesissubjecttoawidevarietyofcompetitionfromprivatebusinessesinCanadaandtheUnitedStates,
manyof
whom
have
greater
financial
and
technical
resources
than
the
Issuer.
Such
competition,
as
well
as
any
futurecompetition,mayadverselyaffecttheIssuerssuccessinthemarketplace.Thereisnoassurancethatthe
Issuerwillbeabletosuccessfullymaintainitsbusinessplanoroperateprofitably.
Existingcompetitorsmayhavegreaterfinancial,managerialandtechnicalresources,andnamerecognition
than the Issuer. Competitors may reduce the interest rates they charge, resulting in a reduction of the
Issuersshareofthemarket,reducedinterestratesonloansandreducedprofitmargins.
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Item9ReportingObligations
9.1 TheIssuerisnotareportingissuerasthattermisdefinedinapplicablesecuritieslegislation,norwillitbecomeareportingissuerfollowingthecompletionoftheOffering.AsaresulttheIssuerwillnotbesubjecttothecontinuous
disclosurerequirementsofsuchsecuritieslegislation.However,Investorswillreceivequarterlystatementsreflecting
theirinvestmentintheIssuerandquarterlydividendcheques,ifapplicable,andwillreceiveyearlyT5taxreturnsforcash
investmentincome.
TheIssuers
fiscal
years
commence
January
1in
each
year
and
end
December
31
of
the
same
year.
Issuer
will
prepare
financialstatementsforeachfiscalyear,andprovidethemtoInvestorsuponrequest.
9.2 CorporateorsecuritiesinformationabouttheIssuerisavailablefromthefollowingwebsiteaddresses:BritishColumbiaSecuritiesCommissionwww.bcsc.bc.ca
AlbertaSecuritiesCommissionwww.albertasecurities.com
ManitobaSecuritiesCommissionwww.msc.gov.mb.ca
OntarioSecuritiesCommissionwww.osc.gov.on.ca and
SaskatchewanFinancialServicesCommission,SecuritiesDivisionwww.sfsc.gov.sk.ca
Item10ResaleRestrictions
10.1 Thesesecuritieswillbesubjecttoanumberofresalerestrictions,includingarestrictionontrading.Untiltherestrictionontradingexpires,youwillnotbeabletotradethesecuritiesunlessyoucomplywithanexemptionfromthe
prospectusandregistrationrequirementsundersecuritieslegislation.
10.2 RestrictedPeriod TheIssuerisnot:(a) areportingissuerinanyCanadianprovinceorterritory,nor(b) aSEDAR filerandareportingissuerinanyCanadianprovinceorterritory.
Unlesspermittedundersecuritieslegislationyoucannottradethesecuritiesbeforethedatethatisfour(4)months
andaday
after
the
date
the
Issuer
becomes
areporting
issuer
in
any
province
or
territory
in
Canada.
TheIssuerwillnotbecomeareportingissueruponcompletionofthisOffering,anddoesnotcurrentlyanticipate
becomingareportingissuer.TheresalerestrictionontheSharesmaythereforeneverexpire.
10.3 Manitoba Resale Restrictions Unless permitted under securities legislation, you must not trade the securitieswithoutthepriorwrittenconsentoftheregulatorinManitobaunless:
(a) theIssuerhasfiledaprospectuswiththeregulatorinManitobawithrespecttothesecuritiesyouhavepurchased,andtheregulatorinManitobahasissuedareceiptforthatprospectus,or
(b) youhaveheldthesecuritiesforatleasttwelve(12)months.The
regulator
in
Manitoba
will
consent
to
your
trade
ifthe
regulator
is
of
the
opinion
that
to
do
so
is
not
prejudicial
to
thepublicinterest.
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Item11PurchasersRights
Ifyoupurchasethesesecuritiesyouwillhavecertainrights,someofwhicharedescribedbelow.Forinformation
aboutyourrightsyoushouldconsultalawyer.
1. TwoDayCancellationRightYoucancancelyouragreementtopurchasethesesecurities.TodosoyoumustsendanoticetotheIssuerbymidnightonthe2
ndbusinessdayafteryousigntheagreementtobuythesecurities.
2. STATUTORYRights
of
Action
in
Event
of
aMisrepresentation
AlbertaInvestorsStatutoryRightsofActionintheEventofaMisrepresentation
Ifthereisamisrepresentationinthisofferingmemorandum,youhaveastatutoryrighttosue:
(a) theIssuertocancelyouragreementtobuythesesecurities,or(b) fordamagesagainsttheIssuer.
Thisstatutoryrighttosueisavailabletoyouwhetherornotyoureliedonthemisrepresentation.However,thereare
variousdefensesavailabletothepersonsorcompaniesthatyouhavearighttosue.Inparticular,theyhaveadefense
ifyouknewofthemisrepresentationwhenyoupurchasedthesecurities.
Ifyouintendtorelyontherightsdescribedin(a)or(b)above,youmustdosowithinstricttimelimitations.Youmust
commenceyouractiontocanceltheagreementwithin180daysafteryousignedtheagreementtobuythesecurities.
Youmustcommenceyouractionfordamageswithintheearlierof180daysafterlearningofthemisrepresentationand
one(1)yearafteryousignedtheagreementtopurchasethesecurities.
ManitobaInvestorsStatutoryRightsofActionintheEventofaMisrepresentation
Ifthereisamisrepresentationinthisofferingmemorandum,youhaveastatutoryrighttosue:
(a) theIssuertocancelyouragreementtobuythesesecurities,or(b) fordamagesagainsttheIssuer.
Thisstatutoryrighttosueisavailabletoyouwhetherornotyoureliedonthemisrepresentation.However,thereare
variousdefenses
available
to
the
persons
or
companies
that
you
have
aright
to
sue.
In
particular,
they
have
adefense
ifyouknewofthemisrepresentationwhenyoupurchasedthesecurities.
Ifyouintendtorelyontherightsdescribedin(a)or(b)above,youmustdosowithinstricttimelimitations.Youmust
commenceyouractiontocanceltheagreementwithin180daysafteryousignedtheagreementtobuythesecurities.
Youmustcommenceyouractionfordamageswithintheearlierof180daysafterlearningofthemisrepresentationand
three(3)yearsafteryousignedtheagreementtopurchasethesecurities
OntarioInvestorsStatutoryRightsofActionintheEventofaMisrepresentation
IfthisOfferingMemorandum,togetherwithanyamendmenthereto,containsanuntruestatementofamaterialfact
oromitstostateamaterialfactthatisrequiredtobestatedorthatisnecessaryinordertomakeanystatementherein
notmisleadinginlightofthecircumstancesinwhichitwasmade(referredtohereinasamisrepresentation),subject
tothe
qualifications
set
forth
below,
you
have
astatutory
right
of
action
against
the
Issuer:
(a) tocancelyouragreementtobuythesesecurities,or(b) suefordamages.
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Thisstatutoryrightofactionisavailabletoyouwhetherornotyoureliedonthemisrepresentationifsuchstatementor
omissionwasamisrepresentationatthetimeofyourpurchaseofthesesecurities.However,inanactionfordamages,
theamountthatyoumayrecoverwillnotexceedthepricethatyoupaidforyoursecuritiesandwillnotincludeallorany
partofthedamagesthattheIssuerprovesdonotrepresentthedepreciationinvalueofyoursecuritiesasaresultofthe
misrepresentation.TheIssuerhasadefenseifitprovesthatyoupurchasedthesecuritieswithknowledgeofthe
misrepresentation.
Ifyouintendtorelyontherightsdescribedin(a)or(b)above,youmustdosowithinstricttimelimitations.Youmust
commenceyour
action
to
cancel
the
agreement
to
buy
the
securities
within
180
days
of
the
date
upon
which
you
enteredintosuchagreement.Youmustcommenceyouractionfordamagesnolaterthantheearlierof(i)180days
afteryoufirstreceivedknowledgeofthefactsgivingrisetothecauseofaction;and(ii)three(3)yearsafterthedate
uponwhichyouenteredintotheagreementtopurchasethesecurities.
SaskatchewanInvestorsStatutoryRightsofActionintheEventofaMisrepresentation
Ifthereisamisrepresentationinthisofferingmemorandum,youhaveastatutoryrighttosue:
(a) theIssuertocancelyouragreementtobuythesesecurities,or(b) fordamagesagainsttheIssuer.
Thisstatutory
right
to
sue
is
available
to
you
whether
or
not
you
relied
on
the
misrepresentation.
However,
there
are
variousdefensesavailabletothepersonsorcompaniesthatyouhavearighttosue.Inparticular,theyhaveadefenseif
youknewofthemisrepresentationwhenyoupurchasedthesecurities.
Ifyouintendtorelyontherightsdescribedin(a)or(b)above,youmustdosowithinstricttimelimitations.Youmust
commenceyouractiontocanceltheagreementwithin180daysafteryousignedtheagreementtobuythesecurities.
Youmustcommenceyouractionfordamageswithintheearlierof180daysafterlearningofthemisrepresentationand
six(6)yearsfromthedateoftheIssuerhavingacceptedyoursubscriptiontopurchaseShares.
3. CONTRACTUALRightsofActioninEventofaMisrepresentation
BritishColumbiaInvestorsContractualRightsofActionintheEventofaMisrepresentation
IfthereisamisrepresentationinthisOfferingMemorandum,youhaveacontractualrighttosuetheIssuer:
(a) tocancelyouragreementtobuythesesecurities,or(b) fordamages.
Thiscontractualrighttosue isavailabletoyouwhetherornotyoureliedonthemisrepresentation.However, inan
actionfordamages,theamountyoumayrecoverwillnotexceedthepricethatyoupaidforyoursecuritiesandwillnot
includeanypartofthedamagesthattheIssuerprovesdoesnotrepresentthedepreciationinvalueofthesecurities
resulting from themisrepresentation. The Issuerhasadefense if itproves thatyouknewof the misrepresentation
whenyoupurchasedthesecurities.
Ifyouintendtorelyontherightsdescribedin(a)or(b)above,youmustdosowithinstricttimelimitations.Youmust
commenceyouractiontocanceltheagreementwithin180daysafteryousignedtheagreementtopurchasethe
securities.You
must
commence
your
action
for
damages
within
the
earlier
of
180
days
after
learning
of
the
misrepresentationandthree(3)yearsafteryousignedtheagreementtopurchasethesecurities.
Item12FinancialStatements
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FISGARD CAPITAL CORPORATION
FINANCIAL STATEMENTS
DECEMBER 31, 2009
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FISGARD CAPITAL CORPORATION
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DECEMBER 31, 2009
CONTENTS
Page
AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations and Retained Earnings 3
Statement of Cash Flows 4
Notes to the Financial Statements 5
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FISGARD CAPITAL CORPORATION
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AUDITOR'S REPORT
To the Shareholders ofFisgard Capital Corporation
I have audited the balance sheet of Fisgard Capital Corporation as at December 31, 2009 and thestatements of operations and retained earnings, and cash flows for the year then ended. These financialstatements are the responsibility of the company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with Canadian generally accepted auditing standards. Thosestandards require that I plan and perform an audit to obtain reasonable assurance whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating theoverall financial statement presentation.
In my opinion, these financial statements present fairly, in all material respects, the financial position ofthe company as at December 31, 2009 and the results of its operations and the cash flows for the year thenended in accordance with Canadian generally accepted accounting principles.
Victoria, BC
April 6, 2010 CERTIFIED GENERAL ACCOUNTANT
Schell & Associates204 - 2840 Nanaimo Street
Victoria, BC V8T 4W9
Certified General Accountant
1.
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FISGARD CAPITAL CORPORATION
31
BALANCE SHEET
DECEMBER 31, 2009
ASSETS
2009 2008
CURRENT
Cash and cash equivalents $ 32,758,835 $ 15,083,635Accrued interest - 13,626Mortgage loans receivable (note 3) 167,426,300 188,640,611Other current assets 40,246 20,791
200,225,381 203,758,663
MORTGAGE LOANS RECEIVABLE (note 3) 30,228,072 12,026,750
LAND AND BUILDING 119,645 -
$ 230,573,098 $ 215,785,413
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 57,845 $ 6,000Interest reserve 1,936,979 1,570,395Large corporation tax payable (note 4) 4,532 4,000Witholding tax payable (note 5) 25,073 -Interest payable 35,288 -
Redeemable shares (note 6) 228,512,901 214,204,538
230,572,618 215,784,933
SHAREHOLDERS' EQUITY
SHARE CAPITAL (note 7) 480 480
$ 230,573,098 $ 215,785,413
APPROVED ON BEHALF OF THE BOARD:
____________________________ Director
____________________________Director
The accompanying notes are an integral part of these statementsSchell & Associates
Certified General Accountant
2.
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FISGARD CAPITAL CORPORATION
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STATEMENT OF OPERATIONS AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 2009
2009 2008
REVENUE
Interest on mortgage loans (note 2b) $ 17,716,306 $ 21,508,722Other revenue 2,848,084 3,960,687
20,564,390 25,469,409
EXPENDITURES
Advertising 876,083 849,832Dividends on redeemable shares 12,549,472 16,984,361Financing costs 2,138,991 2,928,662Large corporation tax 2,089 3,500Management fees 4,181,746 3,694,152Interest on loans payable - 246,992Office and administration 128,018 171,352Professional fees 159,861 97,922Provision for mortgage losses 528,130 492,636
20,564,390 25,469,409
NET EARNINGS, BEING
RETAINED EARNINGS END OF YEAR $ - $ -
The accompanying notes are an integral part of these statementsSchell & Associates
Certified General Accountant
3.
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FISGARD CAPITAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2009
34
1. PURPOSE OF THE ORGANIZATION:
Fisgard Capital Corporation makes investments and operates its business at all times in such a manner as to
qualify as a mortgage investme