Pembina Pipeline Income Fund and Pembina Pipeline Corporation

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the requirement to include financial statements and management's discussion and analysis in an information circular for an entity participating in an arrangement -- the information circular will be sent to the trust's unitholders in connection with a proposed internal reorganization pursuant to which its business operations will be conducted through a corporate entity -- the arrangement does not contemplate the acquisition of any additional interest in any operating assets or the disposition of any of the trust's existing interests in operating assets.

Exemption granted from the current annual financial statement and current AIF short form prospectus qualification criteria and the requirement to file a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the filing of a preliminary short form prospectus -- relief granted as disclosure regarding the predecessor issuer will effectively be the disclosure of the successor issuer -- predecessor issuer is qualified to file a short form prospectus.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1, Form 51-102F5 -- Information Circular, Item 14.2.

National Instrument 44-101 Short Form Prospectus Distributions, s. 8.1.

Citation: Pembina Pipeline Income Fund, Re, 2010 ABASC 128

March 19, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO (THE JURISDICTIONS)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

PEMBINA PIPELINE INCOME FUND (Pembina)

AND PEMBINA PIPELINE CORPORATION

(PPC and, together with Pembina, the Filers)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation):

(a) exempting Pembina from the requirement under Section 14.2 of Form 51-102F5 Information Circular (the Circular Form) of the Legislation to provide the financial statements of Pembina Pipeline Corporation (PPC) for the financial years ended December 31, 2009, December 31, 2008 and December 31, 2007 and the corresponding management's discussion and analysis for the financial years ended December 31, 2009 and December 31, 2008 in the management information circular (the Circular) to be prepared by the Filers and delivered to the holders (Pembina Unitholders) of trust units (Pembina Units) in connection with a special meeting (Pembina Meeting) of Pembina Unitholders expected to be held in early May 2010 for the purposes of considering a plan of arrangement under the Business Corporations Act (Alberta) (the ABCA) (the Arrangement) resulting in the internal reorganization of Pembina's trust structure into a corporate structure (the Circular Relief);

(b) exempting PPC from the qualification criteria for short form prospectus eligibility contained in Subsection 2.2(d) of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) following completion of the Arrangement until the earlier of: (a) March 31, 2011; and (b) the date upon which PPC has filed both its annual financial statements and annual information form for the year ended December 31, 2010 pursuant to NI 51-102 Continuous Disclosure Obligations (NI 51-102) (the Qualification Relief); and

(c) exempting PPC from the requirement to file a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the filing of its first preliminary short form prospectus after the notice (the Prospectus Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this Application;

(b) the Filers have provided notice that Subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

Pembina and PPC

Pembina

1. Pembina is an unincorporated open-ended limited purpose trust established under the laws of the Province of Alberta pursuant to a declaration of trust dated September 3, 1997, as amended and restated. The principal office of Pembina is located in Calgary, Alberta.

2. Pembina is a reporting issuer or the equivalent under the securities legislation of each of the provinces of Canada. To its knowledge, Pembina is not in default of securities legislation in any jurisdiction of Canada.

3. The Pembina Units are listed on the Toronto Stock Exchange (TSX) under the symbol "PIF.UN" and the Convertible Debentures (as defined below) are listed on the TSX under the symbol "PIF.DB.B".

4. Pembina has filed a "current AIF" and has "current annual financial statements" (as such terms are defined in NI 44-101) for the financial year ended December 31, 2008 and we have been informed by Pembina that such documents will also be filed by Pembina for the financial year ended December 31, 2009 within the required timelines as set out in NI 51-102.

PPC

5. PPC is a corporation amalgamated under the laws of the Province of Alberta. The principal office of PPC is located in Calgary, Alberta.

6. PPC is a wholly-owned subsidiary of Pembina.

7. PPC is not a reporting issuer in any jurisdiction and to its knowledge, is not in default of applicable securities legislation in any jurisdiction of Canada.

8. The PPC Shares (as defined below) are not listed or posted for trading on any exchange or quotation and trade reporting system, however, we have been informed by Pembina that application will be made to have the PPC Shares to be issued in connection with the Arrangement listed on the TSX.

Arrangement

9. As part of the Arrangement, (i) Pembina will be dissolved; (ii) the Pembina Units will be cancelled; (iii) common shares of PPC (PPC Shares), Pembina's administrator and wholly-owned subsidiary, will be distributed to Pembina Unitholders on a one-for-one basis; (iv) PPC will assume all obligations of Pembina under the debenture indenture and supplemental indentures, that govern the 7.35% convertible unsecured subordinated debentures of Pembina due December 31, 2010 (the Convertible Debentures); and (v) PPC will continue to carry on the business it presently carries out on behalf of Pembina, and PPC will own, directly or indirectly, all of the existing assets and assume all of the existing liabilities of Pembina (including Pembina's outstanding convertible debentures), effectively resulting in the internal reorganization of Pembina's trust structure into a corporate structure.

10. Following the completion of the Arrangement: (i) the sole business of PPC will be the current business of Pembina; (ii) PPC will be a reporting issuer or the equivalent under the securities legislation in all of the provinces of Canada; and (iii) the PPC Shares and the Convertible Debentures will, subject to approval by the TSX, be listed on the TSX.

11. The Arrangement does not contemplate the acquisition of any additional operating assets or the disposition of any existing operating assets.

12. Pursuant to Pembina's constating documents, the ABCA and applicable securities laws, the Pembina Unitholders will be required to approve the Arrangement at the Pembina Meeting. The Arrangement must be approved by not less than two-thirds of the votes cast by Pembina Unitholders at the Pembina Meeting. The Pembina Meeting is anticipated to take place in early May 2010 and the Circular is expected to be mailed in early April 2010.

13. The Arrangement will be a "restructuring transaction" under NI 51-102 in respect of Pembina and therefore will require compliance with Section 14.2 of the Circular Form.

Financial statements and MD&A disclosure in the Circular

14. Section 14.2 of the Circular Form requires, among other items, that the Circular contain the disclosure (including financial statements and management's discussion and analysis) prescribed under securities legislation and described in the form of prospectus that PPC would be eligible to use immediately prior to the sending and filing of the Circular for a distribution of its securities. Therefore, the Circular must contain the disclosure in respect of PPC prescribed by Form 41-101F1 Information Required in a Prospectus (the Prospectus Form) and by NI 41-101.

15. Subsections 8.2(1)(a) and 8.2(2) of the Prospectus Form require Pembina to include management's discussion and analysis corresponding to each of the financial years ended December 31, 2009 and December 31, 2008 of PPC (the MD&A) in the Circular.

16. Subsection 32.2(1) of the Prospectus Form requires Pembina to include certain annual financial statements of PPC in the Circular, including: (i) an income statement, a statement of retained earnings, and a cash flow statement of PPC for each of the financial years ended December 31, 2009, December 31, 2008 and December 31, 2007; and (ii) a balance sheet of PPC as at the end of December 31, 2009 and December 31, 2008 (collectively, the Financial Statements). Subsection 32.3(1) of the Prospectus Form would require Pembina to include certain comparative interim financial statements of PPC in the Circular if the Circular is first sent to Pembina Unitholders more than 45 days after the end of the first interim period of 2010 (i.e. March 31, 2010), however, it is anticipated that the Circular will be mailed to Pembina Unitholders in early April and such requirement will not be applicable in this instance.

17. Subsection 4.2(1) of NI 41-101 requires that the Financial Statements required to be included in the Circular must be audited in accordance with National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107).

18. The Arrangement will not result in a change in beneficial ownership of the assets and liabilities of Pembina, from both an accounting perspective and an economic perspective. Accordingly, no acquisition will occur as a result of the Arrangement and therefore the significant acquisition financial statement disclosure requirements contained in the Prospectus Form are inapplicable.

19. The Arrangement will be an internal reorganization undertaken without dilution to the Pembina Unitholders or additional debt or interest expense being incurred or assumed by PPC other than assumption of the Convertible Debentures.

Exemptions Sought

Circular Relief

20. Pembina's financial statements and related management's discussion and analysis are prepared on a consolidated basis, which includes the financial results for PPC. To present the Financial Statements and MD&A in the Circular, which would exclude accounts of Pembina, would present the effects of only one side of the transactions between PPC and Pembina (which include monthly payments made by PPC to Pembina on approximately $1.5 billion of unsecured, subordinated promissory notes issued to Pembina by PPC, which notes will be cancelled pursuant to the Arrangement). This would result in the presentation of significant intra-group liabilities and significant amounts of intra-group interest expense, which would not be representative of PPC's capital structure following completion of the Arrangement. In addition, Pembina currently has outstanding Convertible Debentures and pays semi-annual interest on the outstanding debentures, which liabilities and transactions are not reported at the PPC level. To present PPC's financial results excluding the Convertible Debentures would also not be representative of PPC's capital structure following completion of the Arrangement, as the Convertible Debentures will be assumed by PPC under the Arrangement.

21. The Financial Statements and MD&A are not relevant to the Pembina Unitholders for the purposes of considering the Arrangement as the Financial Statements and MD&A, other than as discussed above, would be substantially and materially the same as the consolidated financial statements of Pembina filed in accordance with Part 4 of NI 51-102 because the financial position of the entity that exists both before and after the Arrangement is substantially the same.

22. The Circular will contain prospectus level disclosure in accordance with the Prospectus Form (other than the Financial Statements and MD&A) and will contain sufficient information to enable a reasonable securityholder to form a reasoned judgement concerning the nature and effect of the Arrangement and the nature of the resultant public entity and reporting issuer from the Arrangement, being PPC.

Prospectus Relief

23. Subsection 2.7(2) of NI 44-101 contains an exemption for successor issuers from the qualification criteria for short form prospectus eligibility contained in Subsection 2.2(d) of NI 44-101, if an information circular relating to the restructuring transaction that resulted in the successor issuer was filed by the successor issuer or an issuer that was a party to the restructuring transaction, and such information circular (i) complied with applicable securities legislation, and (ii) included disclosure in accordance with Item 14.2 or 14.5 of the Circular Form of the successor issuer. PPC will be a "successor issuer" (as such term is defined in NI 44-101) as a result of the Arrangement (which, as discussed above, is a restructuring transaction). The Circular will be filed by Pembina (a party to the restructuring transaction), the Circular will comply with applicable securities legislation and the Circular will include the disclosure required by Item 14.2 of the Circular Form, except for the Financial Statements and MD&A which will not be included in the Circular pursuant to the Circular Relief (assuming the Circular Relief is granted).

Prospectus filing following the Arrangement

24. Pembina is qualified to file a prospectus in the form of a short form prospectus pursuant to Section 2.2 of NI 44-101 and is deemed to have filed a notice of intention to be qualified to file a short form prospectus under Section 2.8(4) of NI 44-101.

25. The Filers anticipate that they may wish to file a preliminary short form prospectus following the completion of the Arrangement, relating to the offering or potential offering of securities (including common shares, debt securities or subscription receipts) of PPC.

26. In anticipation of the filing of a preliminary short form prospectus, and assuming the Arrangement has been completed, PPC intends to file a notice of intention to be qualified to file a short form prospectus (the Notice of Intention) following completion of the Arrangement. In the absence of the Prospectus Relief, PPC will not be qualified to file a preliminary short form prospectus until 10 business days from the date upon which the Notice of Intention is filed.

27. Pursuant to the qualification criteria set forth in Section 2.2 of NI 44-101 as modified in the Qualification Relief, following the Arrangement, PPC will be qualified to file a short form prospectus pursuant to NI 44-101.

28. Notwithstanding Section 2.2 of NI 44-101 as modified in the Qualification Relief, Section 2.8(1) of NI 44-101 provides that an issuer is not qualified to file a short form prospectus unless it has filed a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the issuer filing its first preliminary short form prospectus.

29. The short form prospectus of PPC will incorporate by reference the documents that would be required to be incorporated by reference under item 11 of Form 44-101F1 in a short form prospectus of PPC, as modified by the Qualification Relief.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that:

(a) the Circular Relief is granted;

(b) the Qualification Relief is granted provided that any short form prospectus filed by PPC pursuant to NI 44-101 during the currency of the Qualification Relief specifically incorporates by reference the Circular and any financial statements and related management's discussion and analysis of Pembina incorporated by reference into the Circular; and

(c) the Prospectus Relief is granted, provided that at the time PPC files its Notice of Intention, PPC meets the requirements of Section 2.2 of NI 44-101, as modified by the Qualification Relief.