Preferred Unit Offerings

Overview

The Partnership is issuing the Series 1 Preferred Units, which will have a fixed yield of 4.5% of their C$25 issue price for the first five year (plus a few months), and for each five-year period thereafter will bear a yield equal to Canada five-year yields 30 days before that period, plus 3.56%. However, holders may "reclassify" their units as units whose yield instead would reset every quarter based on Canada T-Bill yields plus 3.56%. The units are non-retractable, and redeemable by the Partnership every five years. Both classes are intended to be listed. These preferred units likely will be allocated the same percentage of income for ITA purposes (expected to average around 50% for the next five years) as on the "common" units. For U.S. purposes, the LP does not expect to withhold US taxes from the preferred unit distributions on the basis inter alia that they are guaranteed payments for the use of capital, rather than the holders being subject to the more usual partnership taxation rules.

Partnership

It is a Bermuda exempted limited partnership (with a Bermuda general partner) whose units are listed on the TSX and NYSE and whose only significant asset is a limited partnership interest in another Bermuda exempted limited partnership ("Brookfield Infrastructure L.P., or "Holding LP").

Holding L.P

Its Bermuda general partner holds its directors' meetings in Bermuda. Holding L.P. holds the "Holding Entities."

Distributions

For the initial period commencing on the anticipated closing date of March 12, 2015 and ending on and including June 30, 2020, the holders of Series 1 Preferred Units will be entitled to receive fixed cumulative preferential cash distributions, as and when declared by the General Partner, payable quarterly, at an annual rate equal to C$1.125 per Series 1 Preferred Unit (with the first quarterly distribution pro-rated). For each five-year period thereafter, the holders will be entitled to fixed cumulative preferential cash distributions, payable quarterly, in an annual amount per unit equal to C$25.00 multiplied by the sum of the five-year Government of Canada bond yield on the 30^th day prior to the first day of that five-year period, and 3.56%.

Option to reclassify into Series 2 Preferred Units

The holders of Series 1 Preferred Units will have the right, at their option, to reclassify their Series 1 Preferred Units into Cumulative Class A Preferred Limited Partnership Units, Series 2 (the "Series 2 Preferred Units"), subject to certain conditions, on June 30, 2020 and on June 30 every five years thereafter. The holders of Series 2 Preferred Units will be entitled to receive floating rate cumulative preferential cash distributions, calculated similarly to those on the Series 1 Preferred Units, except that they will be based on the Canada T-Bill yield 30 days before each quarter plus 3.56%.

Redemption rights

The Series 1 Preferred Units will not be redeemable by the Partnership prior to June 30, 2020. On June 30, 2020 and on June 30 every five years thereafter, subject to certain other restrictions, the Partnership may, at its option, redeem for cash all or from time to time any part of the outstanding Series 1 Preferred Units for C$25.00 per Series 1 Preferred Unit, together with all accrued and unpaid distributions up to but excluding the date of payment or distribution (less any tax required to be deducted). The Series 1 Preferred Units and the Series 2 Preferred Units do not have a fixed maturity date and are not redeemable at the option of the holders.

Liquidation preference

Of C$25.00 per unit plus accrued but unpaid distributions.

Listing

Application has been made to list both preferred classes on the TSX.

Canadian tax consequences

SIFT Rules. The Partnership and Holding LP are assumed not to be SIFT partnerships on the basis of being Canadian resident partnerships.

Income Allocations

. "[H]olders of Series 1 Preferred Units and the Series 2 Preferred Units will be allocated a portion of the taxable income of the Partnership based on their proportionate share of distributions received on their units. … Management anticipates a 5 year average per unit return of capital percentage of 50% for the period 2015 through 2019."

Reclassification

Reclassification of the Series 1 Preferred Units inot Series 2 Preferred Units would be considered by CRA to be a disposition if there were a significant change in the holder's rights and obligations, including in the percentage of profits.

Allocation of ACB where Units also are held

As CRA considers that different interests in a partnership held by a holder are one holder, such a holder would be required to allocate its total ACB among classes on a disposition. However, counsel considers that in such event, the holder "should generally be able to allocate his or her adjusted cost base in a manner that treats the different classes of units…as separate property," and the General Partner intents to prepare partnership information returns on this basis.

Foreign tax credits

. No assurance can be given that the foreign tax credit generator rules will not be applied to deny the allocation of business-income taxes or non-business-income taxes to holders.

Canadian withholding

. In determining the rate of Canadian withholding applicable to dividends and interest paid to Holding L.P. by subsidiaries, they intend to look through to the underlying residency status of the Partnership partners.

FAPI

. FAPI might be generated for inclusion in Holding L.P.'s income. No assurance can be given that the foreign tax credit generator rules will not deny recognition of foreign accrual tax.

Non-residents

The General Partner intends to conduct the affairs of the Partnership of Holding L.P. such that non-resident holders are not considered to be carrying on business in Canada.

U.S. tax consequences

Classification. Each of the Partnership and Holding L.P. has made a protective election to be classified as a partnership for Code purposes. The General Partner intends to manage their affairs so that it will meet the "Qualifying Income Exception" for publicly traded partnerships.

Distributions as guaranteed payments

Non-U.S. Holders will be treated by the General Partner as partners entitled to a guaranteed payment for the use of capital on their Series 1 Preferred Units, although the IRS may disagree with this treatment. If the Series 1 Preferred Units are not partnership interests, they would likely constitute indebtedness for federal income tax purposes, and distributions on the Series 1 Preferred Units would constitute ordinary interest income to Non-U.S. Holders - which would be treated as being from sources outside the U.S., provided the Partnership ws not engaged in a U.S. trade or business.

No withholding on guaranteed payments

Provided the Partnership is not engaged in a trade or business within the U.S., the Partnership will treat the distributions (viewed as guaranteed payments for the use of capital) as made from sources outside the U.S., and on that basis does not expect to withhold U.S. income tax therefrom. However, the IRS could assert that Non-U.S. Holders would be subject to U.S. federal income tax on their share of the Partnership's ordinary income from sources within the U.S., even if distributions on the Series 1 Preferred Units were treated as guaranteed payments.

Withholding on non-guaranteed payments

If, contrary to expectation, distributions on the Series 1 Preferred Units were not treated as guaranteed payments, then Non-U.S. Holders would be expected to share in the Partnership items of income, gain, loss, or deduction for U.S. federal income tax purposes, even if the Partnership were not engaged in a U.S. trade or business and the holder was not otherwise engaged in a U.S. trade or business – so that the holder might be subject to a withholding tax of up to 30% on the gross amount of certain U.S.-source income of the Partnership, including dividends and certain interest income, which was not effectively connected with a U.S. trade or business.

Avoidance of effectively-connected income

The General Partner intends to use commercially reasonable efforts to structure the activities of the Partnership and the Holding L.P. to avoid generating income treated as effectively connected with a U.S. trade or business, including effectively connected income attributable to the sale of a United States real property interest." If, contrary to expectation, the Partnership is engaged in a U.S. trade or business, then a Non-U.S. Holder of Series 1 Preferred Units generally would be required to file a U.S. federal income tax return, and distributions to such holder might be treated as "effectively connected income" (which would subject such holder to U.S. net income taxation and possibly the branch profits tax in the case of a corporate Non-U.S. Holder) and might be subject to withholding tax imposed at the highest effective tax rate applicable to such Non-U.S. Holder.

Overview

Artis is a Manitoba real estate investment trust holding a majority of its consolidated (office, industrial and retail) assets in Canada. Its Declaration of Trust will be amended prior to the closing of the Offering to authorize the issuance of (generally non-voting) preferred units of Artis ("Preferred Units") and to convert Artis from an "open-end" trust to a "closed-end" trust. The outstanding trust units ("Units") are listed on the TSX. A portion of its assets are held in two subsidiary LPs, the larger of which also holds a U.S. subsidiary which will be a U.S. private REIT.

Series A Units

The Series A Units entitle the holder thereof to receive fixed cumulative preferential distributions, payable on the last day of March, June, September and December of each year, as and when declared by the Trustees, for the initial approximately five-year period ending September 30, 2017 (with the distributions for this initial period to be at an annual rate of $1.3125 per Class A unit). The distribution rate will be reset on September 30, 2017, and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield and a spread prescribed in the certificate of preferred unit terms relating to the Series A Units. The Series A Units are redeemable by Artis, at its option, on September 30, 2017, and on September 30 of every fifth year thereafter. Holders of Series A Units will have the right to reclassify all or any part of their Series A Units into Series B Units, subject to certain conditions set forth in the certificate of preferred unit terms relating to the Series A Units, on September 30, 2017, and on September 30 of every fifth year thereafter.

Series B Units

The Series B Units entitle the holder thereof to receive a floating cumulative preferential distribution, payable on the last day of March, June, September and December of each year, as and when declared by the Trustee, at a rate equal to the sum of the then 90-day Government of Canada Treasury Bill yield plus the spread prescribed in the certificate of preferred unit terms relating to the Series B Units. Holders of Series B Units will have the right, at their option, on September 30, 2022 and on September 30 every five years thereafter, to reclassify, subject to certain conditions, all or any of their Series B Units as Series A Units on the basis of one Series A Unit for each Series B Unit.

Income allocation

Artis' income and net taxable gains for the purposes of the Tax Act will be allocated to the holders of Units and Preferred Units in the same proportion as the distributions received by such holders.

Priority

The Series A Units will rank equally with the Series B Units and in priority to the Units with respect to priority in the payment of distributions and in the distribution of assets in the event of liquidation etc. of Artis.

Canadian tax disclosure

[Ruling.]

This summary is also based on an advance income tax ruling received by Artis from the CRA on July 6, 2012 (the "Ruling") and opinions contained in the Ruling. Artis received the Ruling in respect of the authorization of the Preferred Units, the issuance of the Series A Units and Series B Units, and the implementation of the amendments to the Declaration of Trust to convert Artis from an open-end to a closed-end mutual fund trust (the "Proposed Transactions"). The Ruling included opinions regarding the application, to trusts which hold property through a partnership, of the asset and income tests which must be met by a closed-end mutual fund trust, which tests will have to be met by Artis after its conversion to a closed-end mutual fund trust. …

[Conversion to s. 108(2)(b) unit trust.]

The Trustees have advised counsel that they intend to implement the changes to the Declaration of Trust which were approved by the Unitholders, with the result that Artis would be converted from an open-end trust to a closed-end trust prior to the closing of the Offering. The Ruling confirms that the conversion will not result in a disposition by Artis of its property or by the Unitholders of their Units, includes opinions regarding the application of the asset and income tests (described above) which must be met by a closed-end mutual fund trust which holds property through a partnership, and includes an opinion that none of the factual information or the description of the Proposed Transactions contained in the Ruling would lead to a conclusion that Artis did not meet the requirements to be a closed-end mutual fund trust. … Management of Artis intends to ensure that Artis will, from and after the time of the conversion, be able to satisfy the conditions to qualify as a closed-end mutual fund trust. …

[REIT status.]

Management of Artis believes that Artis has met the requirements of the REIT Exception in each taxation year since 2009 and will be able to meet the requirements of the REIT Exception throughout 2012, and intends for Artis to qualify for the REIT Exception at all future times. …

[Disposition on Unit reclassifications.]

In the Ruling, the CRA expresses the preliminary view that the reclassification of Series A Units as Series B Units (or Series B Units as Series A Units) would likely result in a taxable disposition at that time. In such circumstances, a Preferred Unitholder will generally be considered to have disposed of the reclassified Preferred Units for proceeds of disposition equal to the fair market value of the Preferred Units into which such units are reclassified.

Similar ruling.