Take-over Bid for Norcast Income Fund by an Indirect Wholly-Owned Subsidiary of Pala Investments Holdings Limited - MRRS Decision

Headnote

Mutual Reliance Review System -- OSC Rule 61-501 -- take-over bid and subsequent business combination -- Rule 61-501 requires sending of information circular and holding of meeting in connection with second step business combination -- target's declaration of trust provides that a resolution in writing executed by unitholders holding more than 66 2/3% of the outstanding units is valid and binding as if such voting rights had been exercised in favour of such resolution at a meeting of Unitholders -- second step business combination to be subject to minority approval, calculated in accordance with section 8.2 of Rule 61-501 -- relief granted from requirement that information circular be sent and meeting be held.

Applicable Legislative Provisions

OSC Rule 61-501 Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions, ss. 4.2 and 9.1.

March 19, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO AND QUEBEC

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

THE TAKE-OVER BID FOR NORCAST INCOME FUND

BY AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF

PALA INVESTMENTS HOLDINGS LIMITED

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of Ontario and Quebec (the "Jurisdictions") has received an application from 2127505 Ontario Inc. (the "Filer"), an indirect wholly-owned subsidiary of Pala Investments Holdings Limited ("Pala", together with the Filer, the "Offeror"), in connection with a take-over bid (the "Bid") for Norcast Income Fund (the "Fund") by the Filer for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the requirements of the Legislation that:

1. a Compulsory Acquisition or Subsequent Acquisition Transaction (each as defined below), as applicable, be approved at a meeting of the unitholders of the Fund (the "Unitholders"); and

2. an information circular be sent to Unitholders in connection with either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable;

be waived (the "Requested Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the OSC is the principal regulator for this application; and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filer:

1. Pala is a corporation incorporated under the laws of Jersey and the Filer is a corporation incorporated under the Business Corporations Act (Ontario). The Filer is an indirect wholly-owned subsidiary of Pala and was formed for the purpose of making the Bid. The Filer's head and registered offices are located in Toronto, Ontario.

2. Pala may in its sole discretion continue the Filer to another jurisdiction on or prior to the expiry date of the Bid.

3. The Filer has prepared and sent an offer and take-over bid circular to Unitholders in connection with the Bid.

4. The outstanding trust units of the Fund (the "Units") are held by CDS Clearing and Depository Services Inc. in book-entry only form.

5. The terms of the Bid include the following:

(a) the Bid is for all of the issued and outstanding Units, other than Units already held by the Filer and its affiliates, at a price of Cdn. $9.30 in cash per Unit;

(b) one of the conditions of the Bid is that there shall have been validly deposited under the Bid and not withdrawn at the time of expiry of the Bid (the "Expiry Time") that number of Units which, together with any Units held by the Offeror and its affiliates, constitutes at least 66?% of the Units, outstanding at the Expiry Time;

(c) if the conditions to the Bid are satisfied (or waived by the Filer) and the Filer takes up and pays for Units deposited pursuant to the Bid, the Filer may proceed with a compulsory acquisition of the Units not deposited to the Bid as permitted by the Fund's Amended and Restated Declaration of Trust (the "Declaration of Trust"), for the same consideration per Unit as was paid under the Bid, if within the time provided in the Bid for its acceptance or within 120 days after the date of the Bid, whichever period is the longer, the Bid is accepted by the holders of not less than 90% of the outstanding Units, other than Units beneficially owned, or over which control or direction is exercised, on the date of the Bid by the Filer, an affiliate or associate of the Filer, or any person or company acting jointly or in concert with the Filer (a "Compulsory Acquisition");

(d) if a Compulsory Acquisition as permitted under the Declaration of Trust is not available to the Filer or if the Filer elects not to proceed under those provisions, the Filer currently intends to acquire the Units not deposited to the Bid by:

(i) amending the Declaration of Trust (the "Threshold Amendment") to provide that a Compulsory Acquisition may be effected immediately if the Filer and its affiliates, after take-up and payment of Units deposited under the Offer, hold not less than 66?% of the Units (a Compulsory Acquisition, amended by the Threshold Amendment, being referred to herein as a "Subsequent Acquisition Transaction"); and

(ii) proceeding with the Subsequent Acquisition Transaction in respect of Units not deposited to the Bid as permitted by the Declaration of Trust, as so amended, for the same consideration per Unit as was paid under the Bid.

(e) in connection with either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction, the Filer currently intends to amend the provisions of the Declaration of Trust by the Written Resolution (as defined below), to provide that Units held by non-tendering Unitholders will be deemed to have been transferred to the Filer immediately on the giving of the Filer's notice, as prescribed by the Declaration of Trust, and that those non-tendering Unitholders will cease to have any rights as Unitholders from and after that time, other than the right to be paid the same consideration that the Filer would have paid to the non-tendering Unitholders if they had tendered those Units to the Offer (the "Notice Amendment");

(f) in order to effect either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction in accordance with the foregoing, rather than seeking Unitholder approval at a special meeting of the Unitholders to be called for such purpose, the Filer intends to rely on section 12.10 of the Declaration of Trust, which specifies that a resolution in writing executed by Unitholders holding more than 66?% of the outstanding votes required to vote in favour thereof at a meeting of Unitholders to approve that resolution shall be as valid and binding as if such Unitholders had exercised at that time all of their voting rights in favour of such resolution at a meeting of Unitholders duly called for that purpose (the "Written Resolution"), which Written Resolution will approve, among other things, the Threshold Amendment, the Notice Amendment and any Compulsory Acquisition or Subsequent Acquisition Transaction undertaken in accordance therewith, as applicable;

(g) if the Filer is unable to effect a Compulsory Acquisition or to propose a Subsequent Acquisition Transaction involving the Fund, or if it proposes a Subsequent Acquisition Transaction but cannot promptly obtain any required approvals or exemptions, the Filer will evaluate its other alternatives. Such alternatives could include, to the extent permitted by applicable law, purchasing additional Units in the open market, in privately negotiated transactions, in another take-over bid or exchange offer or otherwise, or from the Fund, or taking no further action to acquire additional Units;

6. notwithstanding Section 12.10 of the Declaration of Trust, in certain circumstances the Legislation requires that the Compulsory Acquisition or the Subsequent Acquisition Transaction, as applicable, be approved at a meeting of Unitholders called for that purpose;

7. to effect either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable, the Filer will obtain minority approval, as that term is defined in the Legislation, calculated in accordance with the terms of Section 8.2 of AMF Policy Q-27, and Section 8.2 of OSC Rule 61-501 (the "Minority Approval"), albeit not at a meeting of Unitholders, but by Written Resolution; and

8. the offer and take-over bid circular provided to Unitholders in connection with the Bid contains all disclosure required by applicable securities laws, including without limitation the take-over bid provisions and form requirements of the securities legislation in the Jurisdictions and the provisions of OSC Rule 61-501 relating to the disclosure required to be included in a disclosure document for a formal bid in respect of a second-step business combination.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that Minority Approval shall have been obtained, albeit not at a meeting of Unitholders, but by Written Resolution.