PRIVATE OFFERING MEMORANDUM

Transcription

1 1 PRIVATE OFFERING MEMORANDUM RECEIVED BY: ON BEHALF OF HIM/HERSELF OR ON BEHALF OF ON, 20 SIGNATURE OF RECIPIENT: ACKNOWLEDGED & WITNESSED BY: ON BEHALF Name: OF INFINET CAPITAL MORTGAGE INVESTMENT CORPORATION. This Offering Memorandum is not, and under no circumstances is to be construed as, a prospectus or advertisement or a public offering of the securities referred to herein. No securities commission or similar regulatory authority in Canada or in any other jurisdiction has passed on the merits of the securities offered hereunder and any representation to the contrary is an offence. This Offering Memorandum constitutes an offering of these securities only in those jurisdictions and to those persons where and to whom they may be lawfully offered for sale and therein only by persons permitted to sell such securities. This document does not provide disclosure of all information required for an investor to make an informed investment decision. Investors should read the offering memorandum, especially the risk factors relating to the securities offered, before making an investment decision. All offering memorandum marketing materials and financial statements, as approved by the Corporation, are available for viewing and download at Note: Audited Annual Financial Statements together with a Notice of Use of Proceeds (Form F16), if applicable, will be available within 120 days after the fiscal year end. Continuous Private Placement Offering September 1, 2017 INFINET CAPITAL MORTGAGE INVESTMENT CORPORATION $50,000,000 Class A Preferred Shares INFINET CAPITAL Mortgage Investment Corporation ( INFINET CAPITAL or the Corporation ) hereby offers (the Offering ) up to 50,000,000 Class A Preferred Shares (the Shares or the Preferred Shares ) in the capital of the Corporation at $1.00 per Share subject to a minimum subscription of $5,000 to $150,000 depending on which Prospectus Exemption is relied upon. The Corporation has the right to waive the minimum subscription requirement. Shares will be offered by the Corporation to subscribers pursuant to exemptions from registration and prospectus requirements of applicable securities laws in accordance with the conditions specified in this Offering Memorandum and depending on the provincial and national residency of the subscriber. Subscription Price: $1.00 per Share Price Agent s Commission (1) Net Proceeds to the Corporation (2) Per Share $1.00 $0.00 $1.00 Maximum Offering $50,000,000 $0.00 $50,000,000

2 2 Notes (1) If an Exempt Market Dealer ( EMD ) is used, otherwise referred to as the Agent, the Agents Commission, where applicable, will be up to five per cent (5%) of the gross proceeds of the Offering, payable by the Corporation on closing. (2) Before deducting expenses of the Offering estimated at $17,000. Shares will be offered to eligible investors under certain prospectus exemptions under National Instrument Prospectus and Registration Exemptions ( NI ) in accordance with the conditions specified in this Offering Memorandum. The Corporation may choose to retain a Manager and mortgage administration services provider in the future. It is currently in the process of vetting a Manager which may be considered to be a related party of the Corporation under applicable securities laws once appointed. Therefore, the Corporation will be a connected issuer of the Manager, once retained, due to various factors, including the fact that the directors and officers of the Manager may be voting shareholders of the Corporation. See sample Management Services Agreement, The Manager and Conflicts of Interest. This Offering Memorandum is submitted on a confidential basis to prospective investors for informational use solely in connection with their consideration of the purchase of Shares. Use for any other purposes is not authorized. No person has been authorized to give any information or to make any representations regarding the Corporation or the Offering other than as contained in this Offering Memorandum and, if given or made, such information or representations must not be relied upon as having been authorized by the Corporation. This Offering Memorandum may not be copied or reproduced in whole or in part, nor may it be distributed or any of its contents be disclosed to anyone other than the prospective investors to whom it is submitted. Any decision to purchase Shares pursuant to the Offering must be based solely upon the information contained herein. An investment in Shares may be considered speculative due to the stage and nature of the Corporation s business. The Corporation is subject to competition from other corporations which may have greater financial and technical resources competing in the same markets. The operations of the Corporation are dependent upon certain business risks, monitoring key employees, ability to obtain financing necessary to develop, acquire and further develop business and to attain profitable operations. See Risk Factors. There is no market through which Shares may be sold and no such market is expected to develop as a consequence of this Offering. The Shares being distributed pursuant to this Offering Memorandum are subject to restrictions on resale until such time as: (i) appropriate hold periods under applicable securities laws have been satisfied; (ii) the trade is made in reliance on an available statutory exemption; or (iii) an appropriate discretionary order is obtained pursuant to applicable securities laws. Since the Corporation is not a Reporting Issuer pursuant to Canadian applicable securities laws, the applicable hold period may never expire, and if no further statutory exemption may be relied upon or if no discretionary order is obtained, this could result in a purchaser having to hold Shares for an indefinite period of time. The Corporation does not currently intend to file a prospectus or otherwise become a Reporting Issuer pursuant to applicable Canadian securities laws and accordingly it is not intended that the Shares will become freely tradable in any Province of Canada in the immediate future. See "Restrictions on Resale".

3 3 Purchasers of Shares pursuant to the Offering are granted certain rights of withdrawal and recession described herein under the heading Purchaser s Rights of Withdrawal and Rescission. This is the initial Private Offering of INFINET CAPITAL Mortgage Investment Corporation. There may be as many additional closings as the Corporation determines. EACH PURCHASER OF SHARES IS ADVISED TO CONSULT WITH THEIR OWN LEGAL ADVISOR AS TO THE COMPLETE DETAILS OF THE EXEMPTIONS FROM THE PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS BEING RELIED UPON AND THE CONSEQUENCES OF PURCHASING SHARES PURSUANT TO SUCH EXEMPTIONS.

4 4 SUMMARY OF THE OFFERING The following is intended to provide a summary only of the principal features of this Offering Memorandum and should be read in conjunction with the more detailed information appearing elsewhere herein. In this Offering Memorandum all references are to Canadian dollars. The Corporation: The Offering: Conditions: Price: Minimum Subscription: Use of Proceeds: Taxation and Dividend Distribution: Subscription Procedure: INFINET CAPITAL Mortgage Investment Corporation was incorporated on July 14, 2017 pursuant to the Ontario Business Corporations Act. Class A Preferred Shares, see Description of Securities. The completion of the issuance of the Shares pursuant to this Offering is conditional upon: (a) The Corporation receiving and accepting, on or before the Closing, subscriptions for at least 1,000,000 Class A Preferred Shares; and (b) The Corporation receiving and accepting, on or before the Closing, subscriptions from at least 20 subscribers. $1.00 per Share. 5,000 Shares ($5,000). The Corporation has the right to waive the minimum subscription. The net proceeds from the sale of the Shares are estimated to be $50,000, initially on a currently estimated basis after deducting no Agent s commission and before deducting the estimated expenses of the Offering. The net proceeds will be used to invest in eligible investments as described in this Offering Memorandum, primarily being first and second priority mortgages with possibly some third priority mortgages, with terms that are usually no longer than 12 months, on Canadian real estate properties. The Canadian real estate properties will mainly be existing single-family residential properties. Otherwise short-terms bank deposits, such as GICs, will be invested in as well. The Corporation will distribute, on a monthly basis, all of its net income and any net realized capital gains, as determined under the Income Tax Act, as dividends during each year or within 90 days of its year. As a Mortgage Investment Corporation under the Income Tax Act, the Corporation is allowed to deduct such dividends from income and as a result does not pay any income tax. An investor wishing to subscribe for Shares will be required to deliver a duly completed and executed subscription agreement in the form attached hereto as Exhibit 1 and as required by the applicable securities regulatory authorities of the jurisdiction in which they are resident. Subscriptions for Shares will be received subject to rejection or acceptance in whole or in part by the Corporation in its absolute discretion, and the right is reserved to close the subscription books at any

5 5 Management Fees: time without notice. As more explicitly elaborated under the section entitled Management Fees, the Corporation may pay to the Manager, should one be retained, the following management fees: (a) Administration fees in respect of the Manager s general management and advisory services in an amount not to exceed 2% per annum, of the assets of the Corporation calculated and paid monthly. (b) Underwriting fees in respect of any underwriting, commitment, brokerage or renewal services, a fee in an amount equal to any underwriting, commitment, brokerage, renewal or similar fees set out in the commitment for the mortgage investments. Note: No such fee applies if the Corporation takes an assignment of an existing loan; unless thereafter the Corporation uses the Manager, once retained, to underwrite the renewal. (c) Ancillary fees as set out in the security documents with the borrowers as compensation or reimbursement for overhead expenses. (d) Service fees in respect of any property management, mortgage, real estate or capital raising services, as provided on an ad hoc basis upon agreement of the parties at the time. Redemption: A Class A Preferred Share that has been issued and outstanding for at least 12 months will be redeemed by the Corporation on the Redemption Date next following the date which is 90 days after receipt by the Corporation of the Redemption Request, subject to detailed restrictions under the section entitled Redemptions. In special circumstances at the sole and absolute discretion of the Corporation, on Class A Preferred Shares that have been issued and outstanding for less than 12 months, the Corporation may grant a redemption request and apply a redemption fee of 5.00% of the aggregate Redemption Price. On Class A Preferred Shares that have been issued and outstanding for longer than 12 months but less than 24 months, redemption fees of 1.5% of the aggregate Redemption Price shall apply. Risk Factors: An investment in the securities described herein is subject to significant risks, including the following: (a) Shares purchased pursuant to the Offering will be subject to restrictions on resale and may only be resold if: (i) the appropriate hold periods under applicable securities laws have been satisfied; (ii) the trade is made in reliance on an available statutory exemption; or (iii) an appropriate discretionary order is obtained pursuant to applicable securities laws; (b) The Corporation s restrictions on an investor s ability to redeem their shares, including and among others a 12 month minimum hold period, redemption fees, and a maximum aggregate redemption limit of 9% of

6 6 the outstanding shares in a calendar quarter; (c) The nature of the Corporation s business and its present stage of development; and (d) The Corporation being subject to competition from other corporations which may have greater financial and technical resources. Selling Jurisdictions: Provinces of Ontario, Alberta, British Columbia, Saskatchewan, and Manitoba, and such other jurisdictions as the Corporation may determine; Eligibility: Accredited Investors as defined in Section 2.3 of National Instrument Minimum amount investment as defined in Section 2.10 of National Instrument Family, Friends and Business Associates as defined in Section 2.5 or 2.6 of National Instrument Offering Memorandum as defined in Section 2.9 of National Instrument Agent s Commission: Management: Up to 5% of the proceeds to be raised through subscriptions placed by an Agent qualified as an Exempt Market Dealer ( EMD ). Currently there is no Agent retained. The Corporation shall be managed by the Board of Directors, the Credit Committee, the Investment Committee and the Manager, otherwise known as the mortgage administrator, should one be retained. The Board of Directors shall decide on higher level policies, however the officers of the Corporation will carry out these policies through Corporations day to day activities. The Credit and Investment Committees shall include members of the Board of Directors as well as investors and other professionals in the industry.

7 7 Contents PRIVATE OFFERING MEMORANDUM... 1 Subscription Price: $1.00 per Share... 1 SUMMARY OF THE OFFERING... 4 Contents... 7 ACTIVITIES OF THE CORPORATION THE CORPORATION Business of the Corporation Management Experience Investment Policies, Practices and Restrictions Borrowing Strategy Market Value Summary of the Income Tax Act MIC Criteria Management Services Agreement Responsibilities of the Manager Management Fees Management Expenses Corporation s Credit Committee CANADIAN FEDERAL INCOME TAX CONSIDERATIONS The Corporation Shareholders Dividends Dispositions Interest on Money Borrowed to Purchase Shares Deferred Income Plans (RRSPs, RRIFs, RESPs, Deferred Profit Sharing Plans, TFSAs) Eligibility for Investment by Deferred Income Plans Interest Expense Regarding RRSP Contributions Distributions Received From Corporation by RRSP RRSP Contribution Limits Prohibited Investment Rules DESCRIPTION OF THE CLASS A PREFERRED SHARES Interpretation as to the Description of the Class A Preferred Shares Dividends... 25

8 8 Liquidation Redemptions Method of Payment Voting Amendment of Articles of Incorporation Priority Dividend Reinvestment Plan Eligibility Investment Date Cost and Attributes of Shares Purchased under the DRIP Transaction Statements Termination of Participation in the DRIP Liabilities of the Corporation and Manager Amendments to Plan and Termination by Corporation Tax Consequences Preemptive Rights CAPITALIZATION DIRECTORS, MANAGEMENT, PROMOTERS AND PRINCIPAL HOLDERS LEGAL PROCEEDINGS Indebtedness of the Directors and Offices Bankers Auditors Legal Counsel CONFLICTS OF INTEREST General The Manager Lack of Separate Legal Counsel RISK FACTORS General No Market for Shares Retraction Liquidity Absence of Management Rights... 34

9 9 MIC Tax Designation Reliance on Manager Key Personnel Lack of Business History Use of Leverage Conflict of Interest Future Operations and Possible Need for Additional Funds Insurance Priority Default Yield Competition Interest rates Property values Environmental liability Rate of Return and loan loss Concentration / Portfolio allocation PROSPECTUS EXEMPTION RESTRICTIONS ON RESALE PURCHASER S RIGHTS OF WITHDRAWAL AND RESCISSION HOW TO SUBSCRIBE Share Certificates FINANCIAL STATEMENTS DATE AND CERTIFICATE EXHIBIT 1 SUBSCRIPTION AGREEMENT... 1 EXHIBIT 2 ENROLMENT FORM FOR DIVIDEND REINVESTMENT PLAN... 2 Completing and Returning the Form... 2 Enrolment Form for Direct Deposit... 3 CONSENT TO DISCLOSURE OF PERSONAL INFORMATION... 4 CONSENT TO ELECTRONIC DELIVERY OF DOCUMENTS... 5

10 10 ACTIVITIES OF THE CORPORATION The investment strategy of the Corporation is to invest in a portfolio of single-family residential mortgages from borrowers in market segments which are underserviced by large financial institutions. The Corporation is building a portfolio of residential mortgages as follows: 1. Residential Mortgages - at least 50% of the Corporation's assets, at cost, consists of mortgages solely on existing residential properties in Canada, including but not limited to, single family dwellings, duplexes, townhouses, and rarely condominium units or cash on hand or deposit pending investment in mortgages. 2. Other Investments - investments may also be made from time to time in money market instruments, pending investment in mortgages. 3. Real Property - up to 25% of the Corporation's assets may be invested directly in real estate properties held for income purposes. The Corporation may acquire real estate properties by foreclosure or otherwise after default occurs on a mortgage. It is anticipated that a substantial portion of the Corporation s mortgage investments will be located in Ontario. The Corporation may also invest in other provinces as opportunities arise. The Corporation may be a party to syndicated mortgage investments with one or more lenders. The syndicated mortgages will be funded with a specified interest rate and a portion may be syndicated to other lenders at a lower interest rate. Syndication may be on a ahead, pari passu or subordinated basis. Where the mortgage is syndicated on a subordinated basis, the rights of the other lenders to receive interest and repayment of principal may rank in priority to the rights of the Corporation. The spread between the interest rate payable by the borrower and the interest rate paid to the other lenders may be payable to the Corporation and enhance its overall yield. The syndicated mortgages may be registered in the name of the Corporation or a nominee representing all of the lenders. The Corporation is allowed to borrow funds under the provisions of the Canadian Income Tax Act. All investments will comply with the investment policies of the Corporation, as herein set out. The Corporation conducts its affairs so as to qualify at all times as a Mortgage Investment Corporation (or MIC ) under the Income Tax Act (Canada) (the "Income Tax Act"). (See Risk Factors ). The Corporation will distribute, on a quarterly or monthly basis, all of its net income and any net realized capital gains, as determined under the Income Tax Act, as dividends during each year or within 90 days of its year end (See DESCRIPTION OF THE CLASS A PREFERRED SHARES: Dividends ). As a Mortgage Investment Corporation under the Income Tax Act, the Corporation is allowed to deduct such dividends from income and as a result does not pay any income tax (See Canadian Federal Income Tax Considerations ). The Corporation may also employ leverage as permitted by the Income Tax Act.

11 11 THE CORPORATION INFINET CAPITAL Mortgage Investment Corporation was incorporated as a private Corporation under the Ontario Business Corporations Act by Articles of Incorporation on July 14, The head and registered office of the Corporation is located at 3555 Don Mills Road, Suite , Toronto, ON, M2H 3N3. The Corporation may register extra provincially in other Canadian jurisdictions in order to conduct its business in provinces other than Ontario as may be approved by the Corporation s directors. Business of the Corporation The Corporation intends to qualify at all times as a MIC under the Income Tax Act. The Corporation operates as a tax free flow through conduit of profit to its shareholders. (See Canadian Federal Income Tax Considerations.) The MIC criteria under the Income Tax Act permit revenue sources other than residential mortgages secured against Canadian residential real estate, including equity investments in real estate, investments in stocks and securities of Canadian companies and mortgage lending in respect of Canadian commercial real estate. Notwithstanding its ability to invest in a variety of investments allowed under the Income Tax Act, the Corporation invests its non-cdic (short term bank deposits) holdings in mortgages secured by Canadian real estate consisting of residential properties. The only permitted undertaking of a Mortgage Investment Corporation under the Income Tax Act criteria is the investing of its funds and it is specifically prohibited from managing or developing real property. The Corporation s business objective is to obtain a secure stream of income by optimizing its investment portfolio within the MIC criteria mandated by the Income Tax Act. The Corporation s primary business is earning income through investing in residential loans to borrowers on real property situated in Canada. There is an established need for real estate mortgage financing that is not readily provided by banks, trust companies, credit unions and other traditional lenders. Short term mortgage financing is a continuing need of individuals. As a result of their needs for flexibility and prompt approvals, they often require the services of private lenders and organizations such as the Corporation. The rate of return the Corporation earns from its mortgage investments fluctuates with prevailing market demand for short term mortgage financing. In some cases, the Corporation s mortgage investments may not meet the financing criteria for conventional mortgages from institutional sources, and as a result, these investments generally earn a higher rate of return than that is normally attainable from conventional mortgage investments. The Corporation attempts to minimize risk by being prudent in both its credit decisions and in assessing the value of the underlying real property offered as security. In order to facilitate the MIC s investments in the mortgage lending industry INFINET CAPITAL will enter into a Management Services Agreement with the Manager, should one be retained (See sample Management Services Agreement ). The Manager, should one be retained, may be a Corporation incorporated under the laws of the Province of Ontario. The Manager, should one be retained, will also be licensed as a Mortgage

12 12 Administrator through The Financial Services Commission of Ontario should it administer any mortgage payments on behalf of INFINET CAPITAL. Should a Manager be retained, the Manager s key personnel would be knowledgeable business leaders with extensive Canadian experience. The Manager, should one be retained, would have years of business experience and its qualifications and experience should put the Manager, once retained, in an advantageous position to provide the MIC with related management, administrative, advisory, mortgage lending and financing services to the Corporation. More specifically, the Manager s personnel would have extensive experience in property management and mortgage lending, and have established relationships with experienced owners, brokers, sales representatives and agents active in the real estate industry. The Corporation believes the Manager, once retained, would therefore be suitably qualified to locate and recommend investment opportunities for the Corporation. The near prime market segments of the Canadian lending industry in which the Corporation and Manager, should one be retained, operates may be underserviced by the large financial institutions in Canada. The near prime market segments differ from prime market segments because of lower borrower equity, lower borrower credit scores, lower presales/pre-leasing and size of the loan. These segments are populated by small to mid-sized borrowers in smaller, urban and non-urban geographic markets, who require custom tailored financing solutions to meet their capital requirements. INFINET CAPITAL maintains a mix of mortgage types in its portfolio including builder mortgages, first and second mortgages, the occasional third mortgage. A typical loan size ranges from $20,000 to $200,000. The Corporation has established a policy that limits its credit exposure to any one borrowing group. The Corporation s target portfolio loan-to-value average is 80%, though this may be higher at times depending on the portfolio s makeup. Management Experience The principal occupations of the directors and senior officers of the Corporation over the past five years and their experience relevant to the Corporation s business are as follows: Alex A. Gupta, President, is a Canadian Citizen with a Chartered Accountant (CA) designation from the Institute of Chartered Accountants of Ontario, Canada (ICAO); a Certified Internal Auditor (CIA), a Certified Public Accountant (CPA) from USA, and a member of several social and professional associations. Mr Gupta has over twenty-five years of Management and Corporate Governance experience, including over twenty years of International experience in the field of Corporate Governance, Financial Reporting, Corporate and Risk Management. Mr Gupta has worked with leading international and Canadian corporations primarily with publicly traded companies in Construction, Real Estate, Mining, Manufacturing, Energy. Before becoming President of Infinet Capital, he was working as a Chief Executive Officer (CEO) and Chairman of Board of Directors of Homeland Energy Group Ltd (TSX HEG) part of GMR Group (NSX & BSX GMR) with market cap of about $4.5 billion employing about 4,500 employees, prior to that Mr. Gupta was Chief Financial Officer of Homeland Energy Group Ltd. (HEG), African Aura Resources Ltd (TSX AAZ) (Auditors Deloitte & Touché); Scandinavian Minerals Limited (TSX SGL) which has now merged with First Quantum Minerals Ltd (TSX FM), the London Stock Exchange (symbol "FQM") in the United Kingdom, First Quantum is also a member of the S&P/TSX 60 index. Other Big Four firms and Fortune 500 companies which he has also worked for are Deloitte & Touché LLP, DuPont Canada, Volvo Commercial etc. Being CPA, CA and CIA, FCA

13 13 qualified, Mr Gupta has a strong understanding of the SEC, OSC, TSX, NYSE PCAOB and other regulatory requirements. Paul Ho Tran, Vice President and Director, comes to this position with extensive knowledge in the financial and real estate arena. He worked for a number of years as a stock broker on Bay street providing investment advice to his clients. Paul also worked as a real estate agent selling homes in the greater Toronto area for many years. His experience in these areas qualifies Paul to be an asset to the operation of our MIC. Vaughn Thomas, Credit & Investment Manager and Director, is a Sheridan College Business Marketing graduate, who has gone on to hone his skills in the areas of Sales, Marketing and investments at some of Toronto's top financial institutions for the past 6 years. He is Licensed in the following areas: OTL license, Mortgage Broker license, RESP license, Life insurance license. Vaughn is currently providing financial, life insurance, mortgage and investment advice to customers as well as excellent customer service. While at BMO as a Department Sales representative, he helped to increase sales by 40% and assisted in peer coaching and training. As a Licensed Insurance Advisor at TD Meloche Monnex, Vaughn was responsible for providing needs-based insurance solutions and client service and performed front-line underwriting for auto and property policies. While at State Farm Insurance Agency as a Licensed Office Associate, he maintained thorough product knowledge through continuous insurance education. Vaughn is customer service oriented, analytical and highly energetic, and has received awards and accolades in all areas of his work including: o o o o o Received exemplary employee of the month award numerous times. Recognized on several occasions for providing superior client experience Member of the BMO Sales Committee and ranked 3rd out of 600 employees for sales generated. Member of the TD Performance Committee and two time quarterly award for Sales. State Farm Recognized for excellent underwriting, sales and customer service W. Godfrey Neale, Secretary and Director, has a career that spans over four decades during which time he has had the opportunity to develop creative ideas to serve his community as well as meeting very interesting people. During 1983 to 1989, he worked for the Co-Operators Insurance as a General Agent, followed by working for a General Motors Dealership as a Sales Representative. From 1989 to 1998 he successfully ran his own General Insurance Agency through all state Insurance company. From 1999 to the present he represented a number of life Insurance companies as a field underwriter such companies include Industrial Alliance among others. Mr. Neale also work with other Mortgage Investment corporations where he became knowledgeable in the field of real estate Financing through Mortgages Mr. Neale currently holds a Mortgage Agent s license to practice in the province of Ontario. Investment Policies, Practices and Restrictions

14 14 The Corporation s investment policies, practices and restrictions include but are not limited to the Following: The Corporation invests mainly in residential mortgages. The Corporation may also buy or sell portions of mortgages administered or to be administered either by the Manager, should one be retained, or by third parties, such as mortgage brokers, trust and insurance companies and investment dealers. The Corporation maintains at least 50% of its portfolio in mortgages secured on Canadian residential real estate and in short term deposits. the Corporation only invests in mortgages secured on properties. investments are made only when recommended by the Manager, should one be retained, and approved by the Credit Committee. all mortgages are registered on title to the subject property in the Corporation s name, the Manager s name, should one be retained, or a nominee bare trustee for the Corporation. the Corporation may invest in mortgage backed securities provided that the underlying mortgages which secure the bond, unit or other instrument that comprise the mortgage backed securities meet the requirement of a MIC under the Income Tax Act. cash balances not invested in mortgages or mortgage backed securities are deposited with a Canadian chartered bank in short term deposits, savings accounts or government guaranteed income certificates or treasury bills. the Corporation does not invest in any mortgage or make any investment that would result in its failure to qualify as a Mortgage Investment Corporation as defined in the Income Tax Act. the Corporation does not invest for the purposes of exercising control over management of any issuer. the Corporation does not guarantee the securities or obligations of any person. the Corporation does not loan money to or invest in securities of the Manager, should one be retained, or the Manager s affiliates or other non-arm s length parties, other than investments in mortgages provided by the Manager, once retained, under the Management Services Agreement. The Corporation s investment policies, practices and restrictions set out above may be amended, supplemented or replaced from time to time by unanimous approval of the Corporation s Board of Directors. Notwithstanding the foregoing, if at any time a government or regulatory agency having jurisdiction over the Corporation enacts any law, regulation or requirement which is in conflict with the Corporation s investment policies then the Board of Directors will have the authority to amend such policies, practices and restrictions to conform with applicable laws and regulations which shall not require the prior consent of the Shareholders.

15 15 Borrowing Strategy INFINET CAPITAL may from time to time borrow funds from other entities which will enable it to use funds more efficiently. It will do this by operating without excessive un-invested funds on hand. Uninvested funds may occur due to the variable and unpredictable nature of funding commitments and investor inflows and outflows. Additionally, the MIC will earn a positive interest rate spread between the interest earned from investing such borrowings and the interest rate paid by the MIC on those borrowings. Market Value The market value of the underlying properties securing the mortgages will fluctuate over time depending upon local market and economic factors. The Manager, should one be retained, may rely on appraisals by qualified appraisers to assess the loan to value ratio of the portfolio as part of its ongoing risk management practices. Of these investments, most will be secured by first, second and third priority mortgages with terms typically being 12 months, and on occasion being 24 months (not including extensions or renewals). In certain instances there will be additional collateral (e.g. personal property) and/or personal or corporate guarantees. The average term to maturity of the portfolio is typically 12 months from inception, which allows the Corporation to minimize its interest rate exposure. Management anticipates that the utilization of a modest level of borrowing in order to significantly enhance the total return to its shareholders. Summary of the Income Tax Act MIC Criteria Section of the Income Tax Act sets out the criteria governing a MIC, and in summary provides that in order to qualify as a MIC for a taxation year, a Corporation must have met all of the following criteria throughout that taxation year: 1. The Corporation was a Canadian Corporation as defined under the Income Tax Act 2. Its only undertaking was the investing of its funds and it did not manage or develop any real property; 3. It did not invest in (a) (b) (c) debts secured on real property situated outside Canada; debts owing to the Corporation by non-resident persons unless secured by real property situated in Canada; shares of companies not resident in Canada; or

16 16 (d) real property or leasehold interests outside Canada. 4. It had at least 20 shareholders, and no one shareholder together with related shareholder parties to that shareholder held more than 25% of the issued shares of any class of shares of the Corporation; 5. Any holders of preferred shares of the Corporation must have the right after payment to them of their dividends, and payment of dividends in a like amount per share to the holders of common shares of the Corporation, to participate pari passu with holders of the common shares in any further payment of dividends. 6. At least 50% of the cost amount (as defined in the Income Tax Act) of the Corporation s assets must be comprised of: (a) Mortgage loans secured on property as defined in the National Housing Act (Canada) [(e.g. Canadian houses ( a building or movable structure, or any part thereof, that is intended for human habitation and contains not more than two family housing units, together with any interest in land appurtenant to the building, movable structure or part thereof ) and Canadian properties within housing projects ( any building or movable structure, or any part thereof, that is intended for human habitation, or any property that is intended to be improved, converted or developed to provide housing accommodation or services in support of housing accommodation, or any property that is associated with housing accommodation, including, without limiting the generality of the foregoing, land, buildings and movable structures, and public, recreational, commercial, institutional and parking facilities (e.g. a condo development, government housing, retirement & nursing homes, but NOT hotels))] (b) deposits with a bank or other corporation any of whose deposits are insured, or (c) cash. 7. No more than 25% of the cost amount of the Corporation s assets consist of real property (excluding any real property acquired after default made on a mortgage, hypothec or agreement of sale of real property whether it be by way of foreclosure or otherwise); 8. The liabilities of the Corporation at any time in the year must not exceed three times the excess of the cost amount to the Corporation of all of its property over such liabilities, if at any time in the year the cost amount to the Corporation of the properties referred to above under item 6 (50% asset test) is less than two thirds of the cost amount to the Corporation of all of its property. However, where at any time in the year the cost amount to a Corporation of the properties referred to above under item 6 (50% asset test) is equal to two thirds or more of the cost amount to the Corporation of all of its property, the liabilities of the Corporation must not exceed five times the excess of the cost amount to the Corporation of all of its property over such liabilities. From time to time, the Corporation may borrow funds provided it is economical and prudent to do so. These borrowings may take the form of lines of credit from banks and other lending institutions and/or

17 17 promissory notes and other types of debt contracts with individuals and companies, as the case may be. It is probable that debt instruments will be secured by a charge against the assets of the Corporation, and in the event of liquidation or wind up, will rank in priority to the rights of the shareholders of the Corporation. As a MIC under the Income Tax Act, the Corporation is entitled to deduct from its income certain amounts related to taxable dividends and capital gains dividends. The Corporation intends to pay out as dividends substantially all of its net income and net realized capital gains every year, and as a result the Corporation anticipates that it will not be liable to pay income tax in any year. Management Services Agreement The Corporation may retain a Manager pursuant to the terms of The Management Services Agreement ( Management Agreement ), to administer the Corporation s business affairs on a day to day basis, to provide ongoing advice to the Corporation, to raise investment capital for the Corporation and to provide the Corporation with real estate, mortgage and financing services, subject to the supervision of the Board of Directors of the Corporation and the Credit Committee. The Manager, should one be retained, will most likely be registered in the Province of Ontario through The Financial Services Commission of Ontario, as a Mortgage Administrator. The Management Agreement has an initial term of ten years and is automatically renewable for further terms of ten years after the expiration of the initial term, unless terminated early in accordance with the termination provisions. The Corporation may only terminate the Management Agreement for cause or the insolvency of the Manager, should one be retained. The Manager, should one be retained, may also terminate the Management Services Agreement for cause or the insolvency of the Corporation. Though the Corporation and the Manager, should one be retained, would expressly agree in the Management Agreement that neither the Management Services Agreement nor the relationship between the Corporation and the Manager establish the Manager as a fiduciary to the Corporation, the Manager has agreed that it will exercise its powers and discharge its duties under the Management Agreement honestly, in good faith and in what it reasonably believes to be in the best interests of the Corporation. The Manager, should one be retained, would be given reasonable advance notice of and has the right to attend and be heard at all meetings of the Corporation s shareholders, the Corporation s Board of Directors, and any committees established by the Board of Directors. The Manager, once retained, would be provided with copies of the minutes of and any resolutions passed at all such meetings within a reasonable time after the meeting. The Corporation acknowledges in the Management Agreement that the Manager, should one be retained, and its shareholders, directors and senior officers have, or may have, interests and dealings in other companies, joint ventures, limited partnerships and/or MIC s which are presently or may in the future be actively engaged in similar businesses as the Corporation. The Corporation agrees that neither the Manager, should one be retained, nor its shareholders, directors or senior officers will be liable to the Corporation for any conflict of interest as a result of such other interests or dealings, and that such interests and dealings do not and will not constitute a breach of the Management Agreement, even if competitive with the business of the Corporation, and even if the business opportunity could have been pursued by the Corporation. The Manager, should one be retained, would not be liable to the Corporation in respect of any loss or

18 18 damage suffered by the Corporation, including any loss or diminution in the net assets (that is, the value of the Corporation s assets less its liabilities) of the Corporation, unless such loss or damage is a direct result of gross negligence, gross willful misconduct, or dishonesty by the Manager, should one be retained, in relation to its duties and responsibilities under the Management Agreement. The Management Agreement also provides that the Corporation will indemnify the Manager, should one be retained, and its directors, officers and employees from any claims arising in relation to the Manager s duties and responsibilities under the Management Agreement. The Manager, once retained, shall at all times carry sufficient insurance as required under The Financial Services Commission of Ontario to cover any errors or omissions. Responsibilities of the Manager The Manager, should one be retained, would hold directly or through subsidiary or associated companies all licenses, permits and registrations necessary in Ontario or elsewhere, for the Manager to carry out its responsibilities under the Management Agreement. More specifically, among other things, the Manager, once retained, would; assist the Directors in formulating and modifying the Corporation s investment policies and objectives; use its best efforts to present investment opportunities consistent with the Corporation s investment policies; provide information relating to proposed acquisitions, dispositions, financing and mortgage investments; service and administer the Corporation s investments on its behalf, maintaining records and accounts in respect of each eligible investment and reports thereon on a monthly basis; provide those services required in connection with the collection, handling, prosecuting and settling of any claims with respect to the Corporation s investments, including foreclosing and otherwise enforcing security interests securing the Corporation s investments; deliver portfolio reports on a regular basis with respect to the Corporation s investments and provides documentation and/or other information as requested; generally act as a residential and commercial mortgage loan administrator in administering the mortgage portfolio and related investments. The Corporation is responsible for its entire taxes, legal, audit, shareholder communication, operating and administrative costs and expenses plus expenses associated with the acquisition, disposition and enforcement of the portfolio investments, except as outlined below under the section entitled Management Expenses. The costs of incorporating and organizing the Corporation and the offering of Shares were initially deferred and are being amortized against income over a five year period. Management Fees In consideration of the services provided by the Manager, should one be retained, as described above,

19 19 the Management Agreement provides that the Corporation will pay to the Manager management fees equal to the following: 1. Administration fees in respect of the Manager s general management and advisory services in an amount not to exceed 2.00% per annum, of the assets of the Corporation calculated and paid monthly. For this purpose, assets mean total assets of the Corporation and for greater certainty. This administration fee will be reviewed by the Corporation and the Manager, once retained, each year on the anniversary date of the Management Agreement, but in no case will there be a change in the fee unless the Manager, once retained, and the Corporation agree in writing. 2. Underwriting fees in respect of any underwriting, commitment, brokerage or renewal services, a fee in an amount equal to any underwriting, commitment, brokerage, renewal or similar fees set out in the commitment for the mortgage investments. The underwriting fees shall only be payable to the Manager, once retained, to the extent that they are recovered from the borrowers. Note: No such fee applies if the Corporation takes an assignment of an existing loan; unless thereafter the Corporation uses the Manager to underwrite the renewal. 3. Ancillary fees as set out in the security documents with the borrowers as compensation or reimbursement for overhead expenses. The ancillary fees shall only be payable to the Manager, once retained, to the extent that they are recovered from the borrowers. Examples of ancillary fees include fees for statements, late payments, enforcement, insurance, inspections, dishonored cheques and defaults. 4. Service fees in respect of any property management, mortgage, real estate or capital raising services, as provided on an ad hoc basis upon agreement of the parties at the time. The Corporation will pay the Manager, once retained, as agreed between them at the time the particular service is initiated, but in no case will the Manager be paid a fee which is greater than fair market value for the service. However, should any employees or independent contractors of the Corporation be compensated for services or duties performed on behalf of the Corporation or for the benefit of the Corporation that are similar to and instead of the services to be provided by the Manager, once retained, then the Management Fees will be reduced by those compensation amounts. Management Expenses The Manager, should one be retained, will be responsible for all fees and expenses incurred in connection with the underwriting, completion and administration of investments to the extent that such fees and expenses are recoverable from borrowers. Corporation s Credit Committee The Corporation has established a credit committee (the "Credit Committee") to review all proposals regarding investment decisions and to approve or reject such proposals. These include investments and/or loans by the Corporation, borrowings by the Corporation and acquisitions and/or dispositions. The Credit Committee meets as required and in any event no less than quarterly to provide strategic guidance and direction. The Credit Committee will be appointed by the Directors of the Corporation. The Credit Committee is comprised of Alex Gupta, Paul Ho Tran and Vaughn Thomas. All mortgage loans funded are presented to the Corporation by registered mortgage agents and brokers and fully vetted under their underwriting process before being decided upon. The Corporation does not deal directly

20 20 with borrowers. Corporation's Investment Committee The Corporation has established an investment committee (the "Investment Committee"). The members of the Investment Committee are: Winston Neale and Vaughn Thomas. The Investment Committee is responsible for the following: 1. Adjudicating and advising on transactions involving potential conflicts of interest; 2. Approving or rejecting investments in, and acquisitions of, mortgages which may adversely affect the status of the Corporation as a MIC; and 3. Dealing with such other matters as may be referred to the Investment Committee by the Board of Directors. CANADIAN FEDERAL INCOME TAX CONSIDERATIONS No application has been made for an advance income tax ruling with respect to the investment described in this Offering Memorandum nor is it intended that any application be made. Each Investor should consult their own professional advisers to obtain advice on the tax consequences that apply to the investor. No opinion from the Corporation s legal counsel or accountants has been given with respect to these income tax considerations. The analysis contained herein is not all encompassing and should not be construed as specific advice to any particular investor and is not a substitute for careful tax planning. Regardless of tax consequences, a decision to purchase the Shares offered should be based primarily on the merits of the investment as such and on an investor's ability to bear any loss that may be incurred. The Corporation has prepared the following commentary, which it believes is a fair and adequate summary of the principal federal income tax consequences arising under the Income Tax Act for an investor who is resident in the Province of Ontario and who acquires Shares under this Offering Memorandum. The income tax consequences will not be the same for all investors, but may vary depending on a number of factors including, whether Shares acquired by such investor will be characterized as capital property, and the amount such investor's taxable income would be but for their participation in this Offering. The following discussion of the Canadian income tax consequences is, therefore, of a general and limited nature only and is not intended to constitute a complete analysis of the income tax consequences. This summary does not address provincial or territorial laws of Canada or any tax laws of any jurisdiction outside of Canada. Each prospective investor should obtain advice from its own independent tax advisor as to the Canadian federal and provincial income tax consequences of an acquisition of Shares. This summary is based on the Corporation s understanding of the current provisions of the Income Tax Act, the Regulations to the Income Tax Act, and the current administrative and assessing practices of Canada Revenue Agency, taxation ( CRA ).