Proposed Term Sheet

The following is a summary of the principal features of this distribution and should be read together with the more detailed information to be contained in the offering memorandum for the offered Units. This term sheet is not to be construed as an offering of securities, which offering can only be made by private placement exemption from prospectus requirements and only in those jurisdictions in which such securities can be lawfully offered for sale.

Legal Counsel For Term Sheet & Partnership Contracts

Blake, Cassels & Graydon LLP Toronto / Beijing
Attention: Christopher A. Hewat
Telephone: 416 863 2761
4000 - 199 Bay Street / 901- 7 Dong Sanhuan Zhonglu
Commerce Court West / Office Tower A, Beijing Fortune Plaza, Chaoyand Dist.
Toronto, Ontario, Canada M5L 1A9 / Beijing 100020 China

The Fund

Energy Capital North Limited Partnership

Offering Size:

Maximum Offering: C$250,000,000 (250 Units).
Minimum Offering: C$100,000,000 (100 Units).

Price per Unit:

C$1,000,000 per Unit.

Minimum Subscription:

1 Units (C$1,000,000).
Additional subscriptions may be made in single Unit multiples of C$1,000,000.


Closing of the initial Offering is expected on or around 30 April 2014. The subscription price is payable in full on closing either by cheque or bank draft made payable to the Partnership in trust to Blake Cassels & Graydon LLP. Each Limited Partner subscribing for an amount may initially contribute a minimum of 20% of such capital commitment at the applicable Closing (the unpaid remaining balance of such capital commitment referred to herein as the "Unfunded Capital Commitment") with the Unfunded Capital Commitment payable on request by the Fund. See "Subsequent Capital Contributions" below. Distributions of proceeds by the Fund will not be made in respect of any Unfunded Capital Commitment.


Energy Capital North General Partner Inc., a corporation controlled by Archie MacKinnon and Ed Chwyl.


The Partnership will be dissolved and assets distributed on the 7th anniversary of the closing date of the initial offering or on the 8th anniversary of the closing if the one year partnership extension is elected.

Investment Objectives:

The Partnership will provide Limited Partners with an investment in a diversified portfolio of securities of Canadian and Canadian-based issuers, with focus on issuers whose principal business is oil development, production and exploitation, with a view to achieving capital appreciation for Limited Partners. All investments will be made in accordance with the Partnership’s Investment Strategy and Investment Guidelines described below.

Investment Strategy:

The Partnership’s investment strategy (the “Investment Strategy”) is to invest in securities of Canadian issuers or issuers with substantial Canadian investments that:

• have experienced and reputable management with a defined track record in the oil and gas industry;

• have established oil [and gas] development, production and/or exploitation programs, with any exploration activity representing a limited aspect of the issuer’s overall activity, and related businesses such as pipeline or service companies;

• are suitably priced and offer capital appreciation [or income potential]; and

• meet certain market capitalization and other criteria set out in the Investment Guidelines.

Investments are contemplated to include shares of private and public issuers acquired in private placements, public offerings and in the open market; convertible debentures; subordinated debt accompanied by warrants; and direct interests in production properties including properties in selected jurisdictions outside Canada such as the United States and South America.

The Manager will proactively manage the Partnership’s investment portfolio with the objective of achieving capital appreciation for the Partnership after the initial investment period. This may involve the sale of investments initially acquired and the reinvestment of the net proceeds from such dispositions after consideration being given to applicable distributions to Limited Partners.

Subsequent Capital Contributions:

Capital calls in respect of all or any portion of a Limited Partner's Unfunded Capital Commitment may be made by the Fund from time to time during the Commitment Period on a minimum of ten (10) business day's notice. If any Limited Partner does not contribute to the Fund the requested amount of its Unfunded Capital Commitment by the tenth business day after receiving such notice and does not remedy such default within five (5) business days after receipt of written notice to that effect, the General Partner may, in addition to any credit balance in the capital account of the Limited Partner to be automatically and irrevocably reduced to zero.

In no event will a Limited Partner be required to make capital contributions in an amount in excess of its Unfunded Capital Commitment.

Investment Guidelines:

The Partnership has developed certain investment policies and restrictions which govern the Partnership’s overall investment activities (the “Investment Guidelines”). The Investment Guidelines provide, among other things, that the Partnership will invest directly or indirectly

Type of Investment

Investment Restrictions (Percentage of Gross Proceeds at the date of investment)

Issuers listed on a stock exchange.

At least 30%

Issuers listed and posted for trading on the TSX, NYSE, AMEX or the Nasdaq National Market.

At least 25%

Illiquid Investments (including securities of Issuers that are not publicly traded).

Not more than 30%

Investment in any one issuer.

Not more than 20%

Investment in Issuers that are related issuers.

Not more than 20%

Fully-diluted ownership of any class of equity or voting securities of any issuer or purchase of securities of any issuer for the purpose of exercising control or management over such issuer

Not more than 10%

Direct investment in production properties.

Not more than 5%


The Investment Guidelines also include a number of general investment restrictions. On or prior to the closing of the initial Offering , the Partnership will enter into a loan and margin facility with a Canadian chartered bank or a subsidiary of a Canadian chartered bank in order to maximize the funds that will be available for investment (the “Partnership Loan Facility”). The Partnership may borrow an amount up to 15% of the gross proceeds of the Offering pursuant to the Partnership Loan Facility. Such amounts borrowed will be used to finance the expenses, reasonable out-of pocket expenses incurred by the Manager, other expenses of the Offering, to pay the Manager’s Fee and certain operating and administrative costs and expenses of the Partnership that are not expected to be fully deductible in computing income of the Partnership while the Partnership Loan Facility remains outstanding. The General Partner expects that the Partnership’s obligations under the Partnership Loan Facility will be secured by a pledge of the assets held by the Partnership, will require the Partnership to meet certain minimum margin requirements, and the Partnership Loan Facility will be repayable on demand. The General Partner believes that the interest rates, fees and expenses under the Partnership Loan Facility will be typical of credit facilities of this nature.

Distribution Policy

Subject to the terms of the Partnership Loan Facility, on or before April 30 of each year, the Partnership intends to make distributions to Limited Partners pro rata in proportion to their respective percentage shares, until each Limited Partner has received distributions equal to a return of all of such Limited Partner’s capital contributions. Thereafter, the Partnership shall make distribution to Limited Partners and the Manager, allocated as follows:

• as to 80%, to the Limited Partners pro rata in proportion to their respective percentage; and

• as to 20%, to the Manager (not including any rateable distributions made to affiliates of the Manager in their role as Limited Partners).

Administration Fee:

An administration fee (“Administration Fee”) shall be payable to the Manager as follows:

• in the first four fiscal years of the Partnership, a quarterly fee equal to 0.5% of Net Asset Value; and

• in the final three fiscal years of the Partnership, a quarterly fee equal to 0.375% of Net Asset Value,

• in each case calculated as at 5:00 p.m. (Calgary time) on the last business day of the fiscal quarter.

Use of Proceeds:

The Partnership will invest (directly or indirectly) in securities of Issuers and fund fees and ongoing expenses of the Partnership by way of the Partnership Loan Facility as described herein. The following table sets out the gross proceeds and the estimated expenses of the maximum and minimum Offering:

Gross proceeds to the Partnership

Maximum: C$250,000,000
Minimum: C$100,000,000

Offering Expenses*

Maximum: TBD
Minimum: TBD

* (1) The Offering expenses will be paid by the Partnership from funds borrowed by the Partnership for such purpose pursuant to the Partnership Loan Facility. Estimated fees and expenses paid using the proceeds of the Partnership Loan Facility or advances by the Manager are not expected to be deductible in computing the income of the Partnership pursuant to the Income Tax Act (Canada) while the amounts borrowed to fund such fees and expenses remain outstanding.

* (2) Certain offering costs (up to a maximum of 1/2% of gross proceeds), operating expenses and the Manager’s Fee may be paid with the use of the Partnership Loan Facility or by the Manager deferring fees or advancing costs, which will be reimbursed by the Partnership. The Partnership intends to pay these costs using the proceeds of the sale of the portfolio assets of the Partnership.

Risk Factors:

This Offering is a speculative offering. This Offering is a blind pool offering. There is no market through which the Units may be sold and no market is expected to develop, and accordingly, investors may not be able to resell Units.

Income Tax Considerations:

Income including capital gains realized by the Partnership will be allocated to Limited Partners of record on December 31 of each fiscal year. It is the intent of the Partnership to structure Limited Partner distributions in such a manner as to eliminate Canada Revenue Agency (CRA) encroachment. Investors should seek independent advice from their tax adviser as to the tax consequences under applicable legislation of an investment in Units.

The Offering constitutes a private offering of these securities only in those jurisdictions and to those persons where they may be lawfully sold and therein only to those entities permitted to sell such securities. This Term Sheet is not to be construed as a prospectus, advertisement or public offering of the securities referred to herein. No securities commission or similar regulatory authority has passed on the merits of the securities offered nor has it reviewed this presentation and any representation to the contrary is an offence. The securities offered hereunder will be issued under exemption from the registration and prospectus requirements of the applicable securities laws of certain of the Provinces of Canada and the rules, regulations and policies thereunder and will be subject to resale restriction. These securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “US Securities Act”) or the securities laws of any state of the United States. These securities may not be offered or sold in the United States except pursuant to exemption from regulations under the United States Securities Act and all applicable states securities laws. The term “United States” is as defined in rule 902 of Regulation 5 under the United Stated Securities Act.

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