Timbercreek Global Real Estate Fund

Transcription

1 Timbercreek Global Real Estate Fund Annual Information Form dated March 25, 2015 No securities regulatory authority has expressed an opinion about these units and it is an offense to claim otherwise.

2 TABLE OF CONTENTS NAME, FORMATION AND HISTORY OF THE FUND... 2 Status of the Fund... 2 INVESTMENTS OF THE FUND... 3 Investment Objectives... 3 Investment Strategies... 3 Investment Restrictions... 6 DESCRIPTION OF THE SECURITIES OFFERED BY THE FUND... 7 Description of the Class A Units and Class B Units... 8 UNITHOLDERS MATTERS Meetings of Unitholders Matters Requiring Unitholder Approval Amendments to the Declaration of Trust Reporting to Unitholders Termination of the Fund VALUATION OF PORTFOLIO SECURITIES Calculation of Net Asset Value Reporting of the Net Asset Value Net Asset Value per Class A Unit and Net Asset Value per Class B Unit PURCHASES OF THE FUND UNITS Market Purchases REDEMPTIONS Annual Redemptions Monthly Redemptions Exercise of Redemption Privileges Limitation and Suspension of Redemptions RESPONSIBILITY FOR FUND OPERATION Manager of the Fund Global Real Estate Securities Team The Custodian and Prime Broker Valuation Agent Auditor Transfer Agent and Registrar Promoter CONFLICTS OF INTEREST Principal Holders of Securities FUND GOVERNANCE Independent Review Committee Derivatives Securities Lending Short Term Trades FEES AND EXPENSES Page i

3 Management Fees Service Fees Ongoing Expenses INCOME TAX CONSIDERATIONS Status of the Fund Taxation of the Fund Taxation of Unitholders Taxation of Registered Plans Tax Implications of the Fund s Distribution Policy REMUNERATION OF DIRECTORS AND OFFICERS MATERIAL CONTRACTS LEGAL AND ADMINISTRATIVE PROCEEDINGS OTHER MATERIAL INFORMATION AND RISK FACTORS No Assurance of Achieving Investment Objectives Fluctuations in NAV Performance of the Portfolio Equity Risk Credit Risk Reliance on the Manager Sensitivity to Interest Rates Liquidity of the Securities in the Portfolio Risks Relating to Real Estate Foreign Market Exposure Limited Information Regarding Private Issuers Use of Derivative Instruments Use of Short Selling Use of Options Counterparty Risk Securities Lending Use of a Prime Broker to Hold Assets Currency Exposure Trading Price of the Units Redemptions Status of the Fund for Securities Law Purposes Potential Conflicts of Interest Changes in Legislation Taxation of the Fund Not a Trust Company Nature of the Units Limitations on Non-Resident Ownership Liability of Unitholders ii

4 FORWARD-LOOKING STATEMENTS This annual information form ( AIF ) contains forward-looking statements. Often, but not always, forward looking statements can be identified by the use of words such as plans, proposes, expects, estimates, intends, anticipates or believes, or variations (including negative and grammatical variations) of such words and phrases or state that certain actions, events or results may, could, would, might or will be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or developments of the Timbercreek Global Real Estate Fund (the Fund ) to be materially different from any future results, performance or developments expressed or implied by the forward-looking statements. While the Fund anticipates that subsequent events and developments may cause its views to change, the Fund specifically disclaims any obligation to update these forward-looking statements, except as required by applicable law. These forward-looking statements should not be relied upon as representing the Fund s views as of any date subsequent to the date of this AIF. Although the Fund has attempted to identify important factors that could cause actual results, performance or developments to differ materially from those described in forward-looking statements, there may be other factors that cause results, performance or developments not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results, performance or developments could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the Fund. Additional factors are noted under Other Material Information and Risk Factors in this AIF. 1

5 All information presented in this AIF, unless otherwise indicated, was prepared as of December 31, NAME, FORMATION AND HISTORY OF THE FUND The Fund is a trust formed under the laws of the Province of Ontario and governed by a declaration of trust (the Declaration of Trust ) dated August 5, The trustee of the Fund is Timbercreek Asset Management Ltd. The head and registered office and mailing address of the Fund are located at 1000 Yonge Street, Suite 500, Toronto, Ontario M4W 2K2. Timbercreek Asset Management Ltd. is the manager (the Manager ) of the Fund. The Manager has a value oriented investment philosophy, and specializes in providing conservatively managed, risk averse alternative asset class investment opportunities to institutions, trusts and endowment funds, discretionary investment advisors and qualified individuals. The Fund completed its initial public offering on August 26, 2010 issuing 4,214,126 Class A units of the Fund ( Class A Units ), 211,777 Class B units of the Fund ( Class B Units ) and its private placement (the Private Placement ) of 723,517 Class I units of the Fund ( Class I Units ) for aggregate gross proceeds of $61,793,040. On September 14, 2010, the Fund issued an additional 238,192 Class A Units pursuant to the exercise by the Agents of their over-allotment option, at $12.00 per Class A Unit, for gross proceeds of $2,858,304. Any units of the Fund that are issuable in accordance with the Declaration of Trust are collectively referred to herein as the Units. On December 29, 2010, 723,517 Class I Units were converted into Class B Units pursuant to the terms of the Private Placement. On March 16, 2011, the Fund completed a public offering of 1,095,861 Class A Units and 202,529 Class B Units for aggregate gross proceeds of approximately $15.8 million. Effective August 23, 2011, the Manager terminated the investment management agreement, dated August 26, 2010, between FSX Securities Canada Inc. (the Global Investment Advisor ) and the Manager, as both manager and trustee of the Fund (the Investment Management Agreement ). The Investment Management Agreement provided for the appointment of the Global Investment Advisor to provide, among other things, investment advisory and portfolio management services to the Fund. Corrado Russo acted as lead portfolio manager for the Fund on behalf of the Global Investment Advisor, and since the termination of the Investment Management Agreement has acted as portfolio manager for the Fund with the Manager. On May 7, 2012, the Fund completed a public offering of 1,429,716 Class A Units and 92,000 Class B Units for aggregate gross proceeds of approximately $18.8 million. On July 10, 2014, the Fund issued to each holder of record of outstanding Class A Units 5,743,869 warrants to subscribe for and purchase an aggregate of up to 2,871,934 Class A Units at a price of $13.53 per Class A Unit (the Warrant Offering ). Such warrants expired on November 26, 2014 and a total of 102,984 Class A Units were issued for aggregate gross proceeds of approximately $1,393,373. Effective September 22, 2014, the Fund became subject to the requirements of National Instrument Investment Funds of the Canadian Securities Administrators ( NI ). Accordingly, the terms of the declaration of trust or other agreements entered into prior to September 22, 2014, should be considered in conjunction with NI Status of the Fund The Fund is a non-redeemable investment fund and is not considered to be a mutual fund under applicable Canadian securities legislation. While the Fund is subject to NI , it is not subject to all of the investment restrictions and operating policies that apply to mutual funds under such legislation. 2

6 INVESTMENTS OF THE FUND Investment Objectives The Fund s investment objectives are to: (a) (b) provide holders of Units ( Unitholders ) with quarterly distributions; and preserve capital while providing the opportunity for long-term capital appreciation for Unitholders, by investing in a diversified portfolio (the Portfolio ) of premier real estate securities including common equity, preferred shares and debt of both public and private real estate investment trusts and real estate companies in Canada, the United States, the United Kingdom, Continental Europe, Japan, Australia, Hong Kong, Singapore and other countries. Investment Strategies The Manager believes that there is a compelling investment opportunity to invest in the Portfolio because the global real estate securities market is inefficient relative to that of the direct real estate or broader equities markets. Managed by a specialized real estate manager, the Fund s investment strategy has been designed to capitalize on these pricing inefficiencies in order to deliver a stable income stream acquired at a price that the Manager believes does not reflect the long-term value of the underlying assets. Furthermore, the Manager believes that the current pricing in global equity markets provides the Fund with the opportunity to assemble a global portfolio of prime real estate securities at prices that generate attractive, stable yields with the potential for capital appreciation. While the Fund invests primarily in publicly traded real estate securities, subject to NI , up to 20% of the Fund s aggregate value of assets (the Total Assets ) may be invested in private equity or mortgages secured by real estate where the Manager believes it is the most efficient way to access desired real estate. The Fund builds upon the Manager s history of investing in real estate that offers secure and growing dividend yields while limiting volatility and protecting capital. The Manager believes that the Fund can benefit from its experience focusing on: (a) (b) (c) (d) buying real estate securities that generate a stable income stream; active management to protect capital and minimize volatility; a value investment philosophy focused on paying a price that does not reflect the long-term value of the underlying assets; and investing across the capital structure including corporate debt, preferred shares and public or private equity. The Manager believes the timing of this opportunity is attractive given that the Fund s holdings are expected to benefit from: (a) (b) (c) (d) a continued recovery of fundamentals in many major markets around the world, leading to strong growth in cash flow; continued growth in securitization of real estate and new legislation impacting real estate investment trusts around the world; companies with conservative balance sheets that are poised to take advantage of distressed opportunities; the high quality nature of assets available in the securitized or public markets; and 3

7 (e) attractive current pricing with stable dividends. The Fund invests across the capital structure, including in corporate debt, preferred shares and public or private equity. The Fund invests across different security types, real estate sectors and world markets, which allow management to create a portfolio of real estate securities that have low correlations relative to one another and thus control overall volatility. The Fund seeks to achieve its investment objectives by investing in a globally diversified Portfolio consisting primarily of real estate securities and investments that: (a) (b) (c) are secured by high-quality real estate located in major urban areas of the world s top international cities; pay an attractive and stable distribution with the potential to generate capital gains; and are conservatively financed to weather economic cycles and take advantage of value creation opportunities. The Fund manages risk and minimizes volatility by: (a) (b) (c) (d) building a diversified portfolio comprised of securities of real estate trusts and real estate companies located in Canada, United States, United Kingdom, Continental Europe, Japan, Australia, Hong Kong, Singapore and other countries; investing in securities across the capital structure including corporate debt, preferred shares, mortgages and common equity/trust units that have low correlations relative to one another; employing a global investment and analytical team with people on the ground in the Asia-Pacific region, Europe and North America to closely monitor local market conditions and identify investment opportunities in each region; and actively managing the Portfolio, including continuously reviewing the global investment strategy across the capital structure and actively searching for opportunities. With flexibility to invest in all forms of the capital structure and across all property types, the Fund benefits from exposure to high quality real estate, located in prime locations within the world s top markets ( Prime Assets ). Although these Prime Assets typically trade privately at a significant premium to that of lower grade assets located outside of the major urban centres, the Prime Assets are typically more stable and offer more upside potential in the long run. The Fund takes advantage of the relatively inefficient global real estate market and invests in various forms of public real estate securities in order to access these Prime Assets at a more attractive price than where these same assets would trade in the private market. The Fund also invests up to 20% of its assets in direct real estate holdings where the Manager feels it has a competitive advantage given current and past experience and/or where the Manager believes it is the most efficient way to access desired real estate. Use of Derivatives The Fund may invest in or use derivative instruments, other than commodity derivatives, for hedging purposes consistent with its investment objectives and investment strategy and subject to its investment restrictions. For example, the Fund may use derivatives, including foreign exchange hedges, with the intention of offsetting or reducing risks associated with an investment or group of investments. No assurance can be given that the Fund will be hedged from any particular risk from time to time. 4

8 Foreign Currency Hedging The Fund is to be exposed to a number of foreign currencies. The Manager takes currency exposure into account in managing the Portfolio, and targets currency hedging of approximately 90% of the value of the Portfolio exposed to the United States dollar and Euro back to the Canadian dollar over the long term. Leverage The Fund may utilize various forms of leverage including a margin facility that will allow the Fund to borrow funds from time to time that the Manager determines appropriate. In connection with such borrowing, the Fund may grant security over the assets of the Fund. The aggregate amount of borrowing by the Fund may not exceed 25% of the Total Assets at the time of borrowing. Accordingly, the maximum amount of leverage that the Fund could employ is 1:25 ((total long positions including leveraged positions plus total short positions) divided by net assets of the Fund). In the event that the leverage exceeds 25% of Total Assets, the Manager will take reasonable measures to reduce the total borrowings such that it is below 25% of the Total Assets of the Fund. Currently, the Fund has drawn down leverage in an amount representing approximately 11.5% of the Total Assets through a margin facility and through financing some of its positions with total rate of return swaps. Securities Lending In order to generate additional returns, the Fund may lend Portfolio securities to securities borrowers acceptable to the Fund pursuant to the terms of a securities lending agreement between the Fund and any such borrower under which: (i) the borrower will pay to the Fund a negotiated securities lending fee and will make compensation payments to the Fund equal to any distributions received by the borrower on the securities borrowed; (ii) the securities loans must qualify as securities lending arrangements for the purposes of the Income Tax Act (Canada) (the Tax Act ); and (iii) the Fund will receive collateral security. If a securities lending agent is appointed for the Fund, such agent will be responsible for the ongoing administration of the securities loans, including the obligation to mark-to-market the collateral on a daily basis. Proxy Voting for Portfolio Securities The Manager has established a proxy voting policy (the Proxy Voting Policy ) that provides that the Manager will vote the securities in the Portfolio in the best interests of the Unitholders of the Fund after careful review of the relevant proxy statements. The Proxy Voting Policy provides that routine, uncontested matters to be considered at annual general meetings will generally be voted in accordance with management s recommendations. More complex, non-routine matters (i.e. certain issues related to the compensation and liability of directors, amendments to the constating documents of an issuer, share and debt issuances, related party transactions, reorganizations, restructurings, shareholder proposals and proposals relating to corporate social responsibility) will be decided on a case-by-case basis. When the Manager becomes aware of any vote that presents a conflict, the Manager must vote such proxy question in a manner consistent with, and uninfluenced by considerations other than the best interests of the Fund and the Unitholders. The Proxy Voting Policy also provides procedures for dealing with potential conflicts of interest, the delegation of proxy voting services to third party service providers such as ProxyEdge and recordkeeping obligations whereby the Manager will maintain records of all votes cast by the Fund. The Fund s proxy voting record for the most recent period ended June 30 of each year is available free of charge to any Unitholder upon request at any time after August 31 of that year. The Manager will publish these records on an annual basis on its web site at A copy of the Proxy Voting Policy is available at no cost on request by contacting the Manager at

9 Investment Restrictions The Fund is subject to, and the Portfolio is managed in accordance with, certain standard restrictions and practices contained in securities legislation, including NI , and any deviation from these restrictions and practices requires the prior approval of the Canadian Securities Administrators of each of the provinces of Canada. These restrictions and practices are designed, in part, to ensure that the Fund s investments are diversified and relatively liquid and to ensure the proper administration of the Fund. The Fund is managed in accordance with the foregoing restrictions and practices and is also subject to certain investment restrictions or criteria as stipulated in the Declaration of Trust that, among other things, limit the investments that may be made by the Fund: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) the Fund may not purchase any securities of any single issuer (other than short-term debt securities issued or guaranteed by the Government of Canada or any Canadian province or municipality) if as a result more than 10% of the Fund s Total Assets would consist of securities of such issuer; the Fund may not purchase securities of any single issuer if, as a result of such purchase, the Fund would be required to make a take-over bid that is a formal bid for the purposes of the Securities Act (Ontario) or the equivalent provision of applicable securities laws of any other jurisdiction; the Fund will not acquire securities which represent direct real estate investment and/or illiquid assets (as defined by NI ) if, immediately after the purchase, more than 20% of the Fund s Total Assets, taken at the time of acquisition, would consist of real estate and illiquid assets; the Fund will not invest in issuers domiciled outside of industrialized economies except that up to 10% of the Total Assets of the Fund may be invested in the securities of issuers domiciled in a country included in the MSCI Emerging Markets Index; the Fund will not write call options on securities representing more than 5% of Total Assets and will not write a call option in respect of a Portfolio security unless such security is held by the Fund at the time the option is written or dispose of such a security that is subject to a call option written by the Fund unless that option has either been terminated or has expired; the Fund will not engage in short selling in excess of 5% of Total Assets (and then only in connection with pairs trading) and will not be net short; the Fund will not borrow money in excess of 25% of the Total Assets; the Fund will not invest more than 5% of the Total Assets in securities outside of the real estate sector; the Fund will not make or hold any investment or conduct any activity that would result in the Fund failing to qualify as a unit trust or a mutual fund trust within the meaning of the Tax Act; the Fund must not hold securities of a subject entity, other than a portfolio investment entity, (as defined in the SIFT Measures (as defined herein)) if such securities have a fair market value that is greater than 10% of the equity value of such subject entity for the purposes of the Tax Act; the Fund must not hold securities of a subject entity, other than a portfolio investment entity, (as defined in the SIFT Measures) if, together with all of the securities that the Fund holds of entities affiliated with the particular subject entity, such securities have a total fair market value that is greater than 50% of the equity value of the Fund for the purposes of the Tax Act; the Fund must not hold any property that is a Canadian real, immovable or resource property for purposes of the Tax Act if at any time in the taxation year the total fair market value of such property 6

10 held by the Fund is greater than 45% of the equity value of the Fund for the purposes of the Tax Act, (in respect of paragraphs (j), (k) and (l), see Income Tax Considerations ); (m) (n) (o) (p) (q) (r) (s) (t) the Fund will not invest in or hold (i) securities of or an interest in any offshore investment fund property, for purposes of the Tax Act, if the Fund would be required to include any significant amounts in income pursuant to section 94.1 of the Tax Act, (ii) an interest in a trust which would require the Fund to report income in connection with such interest pursuant to the rules in section 94.2 of the Tax Act, or (iii) any interest in a non-resident trust other than an exempt foreign trust for the purposes of section 94 of the Tax Act; the Fund will not purchase or hold any securities of an entity that would be a foreign affiliate of the Fund for purposes of the Tax Act; the Fund will not make loans or guarantee obligations, except that the Fund may purchase and hold debt obligations (including bonds, debentures or other obligations and certificates of deposit, bankers acceptances and fixed time deposits) in accordance with the investment strategies; the Fund will not invest for the purposes of exercising control over management of the issuer of any real estate securities; the Fund will not lend the property and assets of the Fund held in trust by the Trustee for the Unitholders pursuant to the Declaration of Trust except as permitted by NI (as if the Fund were subject to NI ); the Fund will not invest in any security that would be a tax shelter investment within the meaning of section of the Tax Act; the Fund may invest, directly or indirectly through subsidiaries, in interests in income producing real property; and the Fund shall not invest, directly or indirectly, in operating businesses unless such investment is incidental to a transaction (i) where revenue will be derived, directly or indirectly, principally from real property, or (ii) which principally involves the ownership, maintenance, improvement, leasing or management, directly or indirectly, of real property (in each case as determined by the Trustee). If a percentage restriction on investment or use of assets set forth above in paragraphs (c), (d), (k), and (l) is adhered to at the time of the transaction, subsequent changes to the market value of the investment or NAV (as defined herein) will not be considered a violation of the investment restrictions. If the Fund receives from an issuer subscription rights to purchase securities of that issuer, and if the Fund exercises those subscription rights at a time when the Fund s holdings of securities of that issuer would otherwise exceed the limits set forth above, the exercise of those rights will not constitute a violation of the investment restrictions if, prior to the receipt of securities of that issuer on exercise of these rights, the Fund has sold at least as many securities of the same class and value as would result in the restriction being complied with. The Fund s fundamental investment restrictions may not be changed without approval of Unitholders by a twothirds majority vote at a meeting called for such purpose, unless such changes are necessary to ensure compliance with applicable laws, regulations or other requirements imposed by applicable regulatory authorities from time to time. See Unitholder Matters - Matters Requiring Unitholder Approval. DESCRIPTION OF THE SECURITIES OFFERED BY THE FUND The Fund is authorized to issue an unlimited number of Units of an unlimited number of classes. There are three classes of Units currently authorized, namely Class A Units, Class B Units and Class I Units. Only Class A Units and Class B Units are issued and outstanding. Pursuant to the Declaration of Trust, the Manager may create a new class of Units and make corresponding amendments to the Declaration of Trust to create such new class of Units by providing 7

11 not less than 30 days prior written notice to Unitholders. Currently, the Class B Units are designed for fee-based and/or institutional accounts and differ from the Class A Units in the following ways: (i) Class B Units will not be listed on a stock exchange; (ii) the Agents fees paid upon issuance of the Class B Units are lower than those payable on the issuance of the Class A Units; and (iii) there is no Service Fee (as defined herein) payable in respect of the Class B Units. Accordingly, the NAV per Unit for Class A Units and Class B Units will not be the same as a result of the different fees allocable to Class A Units and Class B Units. Description of the Class A Units and Class B Units General Rights and Privileges Each Class A Unit and Class B Unit entitles the holder to the same rights and obligations as a Unitholder and no Unitholder is entitled to any privilege, priority or preference in relation to any other holder of Units. Each Unitholder is entitled to one vote for each Class A Unit or Class B Unit held and is entitled to participate equally with respect to any and all distributions made by the Fund, including distributions of net realized capital gains, if any. The Units are redeemable in accordance with their terms. See Redemptions. On the redemption of Units, however, the Fund may in its sole discretion, designate payable to redeeming Unitholders, as part of the redemption price, any capital gains realized by the Fund in the taxation year in which the redemption occurred. On termination or liquidation of the Fund, the Unitholders of record are entitled to receive on a pro rata basis all of the assets of the Fund remaining after payment of all debts, liabilities and liquidation expenses of the Fund. Unitholders will have no voting rights in respect of securities held by the Fund. See Valuation of Portfolio Securities - Calculation of Net Asset Value. Under the Trust Beneficiaries Liability Act, 2004 (Ontario), holders of units of a trust are not, as beneficiaries, liable for any act, default, obligation or liability of the trust if, when the act or default occurs or the liability arises, (i) the trust is a reporting issuer under the Securities Act (Ontario) and (ii) the trust is governed by the laws of Ontario. The Fund is a reporting issuer under the Securities Act (Ontario) and it is governed by the laws of Ontario by virtue of the provisions of the Declaration of Trust. Exchange Feature for the Class B Units Holders of Class B Units may exchange all or any portion of such Class B Units for Class A Units (the Exchange Feature ) by delivering notice by 4:00 p.m. on any day except Saturday, Sunday, a statutory holiday in Toronto, Ontario or any other day on which the TSX is not open for trading (each such day, a Business Day ) to the Fund s registrar and transfer agent. Any Class B Units surrendered for exchange into Class A Units shall be converted as of the close of business on the first Thursday that is at least two Business Days following the date on which such Class B Units were surrendered for exchange (the Exchange Date ). Determination of Exchange Ratio The ratio (the Class B Exchange Ratio ) upon which Class B Units will be exchanged into Class A Units upon exercise of the Exchange Feature will be determined by dividing the NAV per Class B Unit on the applicable Exchange Date by the NAV per Class A Unit on such date. Holders of Class B Units who deposit such securities pursuant to the Exchange Feature will continue to be holders of record up to but not including the Exchange Date and will be entitled to receive distributions in respect of such securities up to that date. The number of Class A Units issuable pursuant to the Exchange Feature will be rounded down to the nearest whole number of Class A Units. No fractions of Class A Units will be issued upon any conversion of Class B Units. Any remaining fractional Class B Unit will be redeemed. A conversion of Class B Units into whole Class A Units will not constitute a disposition of such Class B Units for the purposes of the Tax Act. The redemption of any fractional Class B Unit will result in a capital gain (or capital loss) to the redeeming Unitholder. See Income Tax Considerations Taxation of Unitholders. Following an exercise of the Exchange Feature, the NAV associated with the Class B Units so exchanged will be deducted from the NAV for Class B Units and will be added to the NAV for Class A Units. 8

12 No Listing for Class B Units The Fund does not intend to make any application to list the Class B Units on any stock exchange. Accordingly, there will be no market through which the Class B Units may be sold. Purchase for Cancellation Subject to applicable law, the Fund may at any time or times purchase Class A Units or Class B Units for cancellation at a price per Unit not exceeding the applicable NAV per Unit of such Unit on the Business Day immediately prior to such purchase. Amendments Amendments to the terms of the Class A Units or Class B Units must be approved by the applicable Unitholders of the Fund in accordance with applicable laws and as set forth under Unitholder Matters Matters Requiring Unitholder Approval. Take-over Bids The Declaration of Trust contains provisions to the effect that if a take-over bid is made for the Class A Units and not less than 90% of the aggregate of the Class A Units (but not including any Class A Units held at the date of the take-over bid by or on behalf of the offeror or associates or affiliates of the offeror) are taken up and paid for by the offeror, the offeror will be entitled to acquire the Class A Units held by the Unitholders who did not accept the take-over bid on the terms offered by the offeror. The Declaration of Trust also provides that if, prior to the termination of the Fund, a formal bid (as defined in the Securities Act (Ontario)) is made for all of the Class B Units, if such bid would constitute a formal bid for all Class A Units if the Class B Units had been converted to Class A Units immediately prior to such bid and the Class B offer does not include a concurrent identical take-over bid, including in terms of price (relative to the Net Asset Value per Unit of the class), for the Class A Units, then the Fund shall provide the holders of Class A Units the right to convert all or a part of their Class A Units into Class B Units and to tender such Class A Units to the Class B offer. In the circumstances described above, the Fund shall by press release provide written notice to the holders of the Class A Units that such an offer has been made and of the right of such holders to convert all or a part of their Class A Units into Class B Units and to tender such Class A Units to the Class B offer. Book-Entry Only System Registration of interests in and transfers of the Class A Units and the Class B Units will be made only through non-certificated interests issued under the Book-Entry Only System (as defined herein). Non-certificated interests representing the aggregate issued and outstanding Class A Units and Class B Units are recorded, in the name of CDS (as defined herein) or its nominee, on the register of the Fund maintained by CST Trust Company. Class A Units and Class B Units must be purchased, converted, transferred and surrendered for redemption through a CDS Participant (as defined herein). All rights of Unitholders must be exercised through, and all payments or other property to which such Unitholders are entitled will be made or delivered by CDS or the CDS Participant through which the Unitholder holds such Units. Upon purchase of any Class A Units or Class B Units, the Unitholders will receive only a customer confirmation from the registered dealer which is a CDS Participant and from or through which such Units are purchased. The ability of a beneficial owner of Class A Units and/or Class B Units to pledge such Units or otherwise take action with respect to such Unitholder s interest in such Units (other than through a CDS Participant) may be limited due to the lack of a physical certificate. The Fund has the option to terminate registration of the Class A Units and/or Class B Units through the Book- Entry Only System, in which case certificates for such Units in fully registered form would be issued to beneficial owners of such Units or their nominees. 9

13 Distribution Policy The Fund intends to continue to make quarterly distributions to Unitholders of record on the last Business Day of each calendar quarter. Distributions will be paid on a Business Day designated by the Manager that will be no later than the 15th day of the following month. The Fund does not have a fixed quarterly distribution but annually determines the expected distribution amount in March of each year. There can be no assurance given as to the amount of targeted distributions in the future. There is no assurance that the Fund will meet its investment objectives. Meetings of Unitholders UNITHOLDERS MATTERS A meeting of the Unitholders as a whole or of any particular class of Units of the Fund may be called at any time by the Manager and shall be called by the Trustee upon written request of the Unitholders holding in the aggregate not less than 20% of the Units then outstanding, which request must specify the purpose or purposes for which such meeting is to be called. Except as required by law or set out below, Unitholders will not be entitled to receive notice of, to attend or to vote at, any meeting of Unitholders. Matters Requiring Unitholder Approval In addition to the matters requiring Unitholder approval under NI and unless otherwise required by law, the following acts require the approval of holders of Class A Units and holders of Class B Units at a meeting called and held for such purpose. Each Class A Unit and each Class B Unit will have one vote at such a meeting. Items (a) through (e) require approval by resolution passed by at least 66⅔% of the votes cast by holders of Units voting thereon (an Extraordinary Resolution ) voting as a single class. Items (f) and (g) require approval by Extraordinary Resolution of the holders of each class of Units required to vote on the matter. Items (h) and (i) require approval by resolution passed by at least a simple majority of votes cast by each class of Unitholders (an Ordinary Resolution ), unless a greater majority is required by law. Item (i) will require approval by Ordinary Resolution of the Unitholders voting as a single class. (a) (b) (c) (d) (e) (f) (g) A change to the fundamental investment objective or investment restrictions of the Fund, unless such changes are necessary to ensure compliance with applicable laws, regulations or other requirements imposed by applicable regulatory authorities from time to time; Except as described herein, a change in the Manager, other than (a) a change resulting in an affiliate of the Manager assuming such position or (b) a termination of the Management Agreement in accordance with its terms; Any increase in the basis of calculating management fees paid to the Manager; The sale of all or substantially all of the assets of the Fund other than in the ordinary course of its activities and other than in connection with the termination of the Fund; Any amendment, modification or variation in the provisions or rights attaching to the Class A Units or Class B Units; Any termination of the Fund; A reorganization with, or transfer of assets to, another entity, if (i) (ii) the Fund ceases to continue after the reorganization or transfer of assets; and the transaction results in Unitholders becoming securityholders in the other entity; 10

14 (h) A reorganization with, or acquisition of assets of, another entity, if (i) (ii) the Fund continues after the reorganization or acquisition of assets; and the transaction results in the securityholders of the other entity holding a majority of the outstanding securities of the Fund; or (i) Any offering of Units at a price per Unit the net proceeds of which is less than 100% of the most recently calculated NAV per Unit, as applicable immediately prior to the pricing of such issuance. In addition, any change to any of the foregoing matters requiring Unitholder approval shall require the same approval required to approve such matter. At a meeting of Unitholders, a quorum will constitute 10% of the outstanding Units (or in respect of a class vote, 10% of the outstanding Units of that class), represented in person or by proxy at a meeting. If no quorum is present at such meeting within 30 minutes of the time called for such meeting, if called on the requisition of a Unitholder the meeting will be terminated and otherwise will be adjourned to be held on the day that is 14 days after the so adjourned meeting, at the same time and place; provided that if such day is not a Business Day, the meeting shall be held on the next Business Day. At the adjourned meeting, the Unitholders then present in person or represented by proxy will form the necessary quorum. Amendments to the Declaration of Trust The Trustee may, without the approval of or notice to Unitholders, amend the Declaration of Trust for certain limited purposes specified therein, including to: (a) (b) (c) (d) (e) remove any conflicts or other inconsistencies which may exist between any terms of the Declaration of Trust and any provisions of any law or regulation applicable to or affecting the Fund; make any change or correction in the Declaration of Trust which is of a typographical nature or is required to cure or correct any ambiguity or defective or inconsistent provision, clerical omission, mistake or manifest error contained therein; bring the Declaration of Trust into conformity with applicable laws, including the rules and policies of Canadian securities regulators or with current practice within the securities or investment fund industries provided that any such amendment does not adversely affect the rights, privileges or interests of Unitholders; maintain, or permit the Manager to take such steps as may be desirable or necessary to maintain, the status of the Fund as a mutual fund trust and a unit trust for the purposes of the Tax Act or to respond to amendments to the Tax Act or to the interpretation thereof; or provide added protection to Unitholders. Except for changes to the Declaration of Trust which require the approval of Unitholders or changes described above which do not require approval of or prior notice to Unitholders, the Declaration of Trust may be amended from time to time by the Manager upon not less than 30 days prior written notice to Unitholders. Reporting to Unitholders The Fund will make available to Unitholders, within the time periods prescribed by law, such financial statements and other continuous disclosure documents as are required by applicable law, including consolidated unaudited interim and consolidated audited annual financial statements that will include the accounts of the Fund and a consolidated statement of investments. The Fund shall make available to each Unitholder annually, within the time 11

15 periods prescribed by law, information necessary to enable such Unitholder to complete an income tax return with respect to the amounts payable by the Fund. Termination of the Fund The Fund does not have a fixed termination date but may be terminated at any time with the approval of Unitholders of each class by an Extraordinary Resolution passed at a duly convened meeting of Unitholders called for the purpose of considering such Extraordinary Resolution. Upon termination of the Fund, the net assets of the Fund will be distributed to the Unitholders. Prior to the date fixed for the termination of the Fund (the Fund End Date ), the Manager will, to the extent practicable, convert the assets of the Fund to cash. The Manager may, in its discretion and upon not less than 30 days prior written notice to Unitholders by press release, extend the Fund End Date by a maximum of 180 days if the Manager would be unable to convert all the Fund s assets to cash and the Manager determines that it would be in the best interests of the Unitholders to do so. The Fund will be dissolved following the distribution of its net assets to the Unitholders. VALUATION OF PORTFOLIO SECURITIES In calculating the NAV, the Total Assets on the day on which the Net Asset Value per Unit is calculated (the Valuation Date ) are determined as follows: (a) (b) (c) (d) (e) (f) the value of any cash on hand or on deposit, bills and demand notes and accounts receivable, prepaid expenses, distributions, dividends or other amounts received (or declared to holders of record of securities owned by the Fund on a date before the Valuation Date as of which the Total Assets are being determined, and to be received) and interest accrued and not yet received, shall be deemed to be the full amount thereof provided that if the Valuation Agent (as defined herein) has determined that any such deposit, bill, demand note, accounts receivable, prepaid expense, distribution, dividend or other amount received (or declared to holders of record of securities owned by the Fund on a date before the Valuation Date as of which the Total Assets are being determined, and to be received) or interest accrued and not yet received is not otherwise worth the full amount thereof, the value thereof shall be deemed to be such value as the Valuation Agent determines to be the fair market value thereof; the value of any security, index future or index option which is listed or traded upon a stock exchange (or if more than one, on the principal stock exchange for the security, as determined by the Valuation Agent) shall be determined by the closing price at the Valuation Date or, if there is no closing price, the Valuation Agent will determine the point within the bid-ask spread, based on the specific facts and circumstances as at the Valuation Date on which the Total Assets are being determined, all as reported by any means in common use; the value of any security which is traded over-the-counter will be priced at the mean between the closing bid and ask price quoted by a major dealer (which may be the counterparty), in the opinion of the Valuation Agent, most closely reflects their fair value; the value of any purchased or written clearing corporation options, options on futures or over-thecounter options, debt like securities and listed warrants shall be the current market value thereof; the value of any security or other asset for which a market quotation is not readily available will be its fair market value on the Valuation Date on which the Total Assets are being determined as determined by the Valuation Agent (generally the Valuation Agent will value such asset at cost until there is a clear indication of an increase or decrease in value); any market price reported in currency other than Canadian dollars shall be converted into Canadian funds by applying the rate of exchange obtained from the best available sources to the Valuation Agent, including, but not limited to, the Valuation Agent or any of its affiliates; and 12

16 (g) listed securities subject to a hold period will be valued as described above with an appropriate discount as determined by the Valuation Agent. Direct investments in private real estate companies and other assets for which no published market exists will be valued at the lesser of cost and the most recent appraisal or valuation, unless a different fair market value is determined to be appropriate by the Valuation Agent. If an investment cannot be valued under the above guidelines, or if the Valuation Agent or Manager determines that the above guidelines are at any time inappropriate under the circumstances, then notwithstanding such guidelines, the Valuation Agent will make such valuation as it considers fair and reasonable in consultation with the Manager, and, if there is an appropriate industry practice, in a manner consistent with such industry practice in valuing such investment. The Manager will review and, if required from time to time, consider the appropriateness of the valuation guidelines adopted by the Fund. As such, at the discretion of the Manager, the valuation guidelines may be modified, acting reasonably, in good faith and in the best interests of the Unitholders. Any such material modification of the valuation guidelines will be disclosed by press release or other timely disclosure document issued by the Fund. The Manager has not exercised its discretion to modify the valuation guidelines set out above since the inception of the Fund. Calculation of Net Asset Value For Fund pricing purposes, the net asset value ( NAV or Net Asset Value ) of the Fund is calculated at the close of business on each Business Day by the Valuation Agent. The NAV of the Fund is the value of the Total Assets of the Fund less the consolidated liabilities of the Fund. Reporting of the Net Asset Value The most recently calculated Fund NAV, NAV per Class A Unit (as defined herein) and NAV per Class B Unit (as defined herein) are available at no cost to the public upon request and posted daily at for this purpose. The Fund NAV is reported in Canadian dollars. Net Asset Value per Class A Unit and Net Asset Value per Class B Unit The net asset value per Class A Unit (the NAV per Class A Unit ) will be the quotient obtained by dividing the value of assets of the Fund allocated to Class A Units by the total number of Class A Units (immediately before any Unit redemptions and subscriptions) at the close of business on the relevant Valuation Date. The net asset value per Class B Unit (the NAV per Class B Unit ) will be the quotient obtained by dividing the value of assets of the Fund allocated to Class B Units by the total number of Class B Units (immediately before any Unit redemptions and subscriptions) at the close of business on the relevant Valuation Date. PURCHASES OF THE FUND UNITS All of the currently issued and outstanding Units were issued in connection with the initial public offering of the Fund on August 26, 2010, a subsequent related closing on September 14, 2010, additional offerings of Units on March 16, 2011 and May 7, 2012 and the conversion of warrants issued pursuant to the Warrant Offering (collectively, the Offerings ). In addition, Units may be issued from time to time in the Manager s discretion, subject to the terms of the Declaration of Trust; Units may not be issued for net proceeds per Unit less than the most recently calculated NAV per Unit. The Class A Units are listed on the TSX under the symbol TGF.UN. Registration of interests in and transfers of Class A Units and Class B Units are made only through the book-entry only system (the Book-Entry Only System ) administered by CDS Clearing and Depository Service Inc. ( CDS ). Class A Units and Class B Units must be purchased, converted, transferred and surrendered for redemption through a broker, dealer, bank other financial institution or other person for whom, from time to time, CDS effects book entries for the book-entry only Units deposited with CDS (a CDS Participant ). All rights of Unitholders must be exercised through, and all payments or other property to which such Unitholders are entitled will be made or delivered by CDS or the CDS Participant through which the Unitholder holds such Units. Upon purchase of any Class A Units or Class B Units, Unitholders will receive 13