Peyto Energy Trust

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the current annual financial statement and current annual information form short form prospectus qualification criteria -- 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 44-101, s. 8.1 Short Form Prospectus Distributions.

Citation: Peyto Energy Trust, Re, 2010 ABASC 589

December 20, 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

PEYTO ENERGY TRUST

(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting New Peyto (as defined below) from the qualification criteria for short form prospectus eligibility contained in subsection 2.2(d) of NI 44-101 Short Form Prospectus Distributions (NI 44-101) following completion of the Arrangement (as defined below) until the earlier of: (i) 30 March 2012; and (ii) the date upon which New Peyto, as successor issuer to the Filer, and which is anticipated to become a reporting issuer on 1 January 2011, has filed both its annual financial statements and annual information form for the year ended 31 December 2011 pursuant to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) (the Qualification 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 Filer has 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, Newfoundland and Labrador, and Prince Edward Island; 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 NI 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 Filer:

The Filer, Peyto AdminCo, PEDC, Newco and New Peyto

1. On 2 November 2010, the Decision Makers issued an order that exempted the Filer and New Peyto (as defined below) from certain securities law requirements in the context of the proposed internal reorganization of the Filer into a corporate structure, notably the order:

(a) exempted the Filer from the requirement under section 14.2 of Form 51-102F5 Information Circular (the Circular Form) to provide: (i) an income statement, a statement of retained earnings and a cash flow statement of each of Peyto Energy Administration Corp. (Peyto AdminCo) and Peyto Exploration & Development Corp. (PEDC) for each of the financial years ended 31 December 2009, 31 December 2008 and 31 December 2007 as well as a balance sheet of each of Peyto AdminCo and PEDC as at the end of 31 December 2009 and 31 December 2008 (the Annual Financial Statements); (ii) a comparative income statement, a statement of retained earnings and a cash flow statement of each of Peyto AdminCo and PEDC for the interim period ended 30 June 2010, as well as a balance sheet of each of Peyto AdminCo and PEDC as at the end of 30 June 2010 and 31 December 2009 (the Interim Financial Statements); and (iii) the management's discussion and analysis of each of Peyto AdminCo and PEDC corresponding to each of the financial years ended 31 December 2009 and 31 December 2008 and the interim period of 30 June 2010 (the MD&A, and together with the Annual Financial Statements and Interim Financial Statements, the Financial Information) in the management information circular of the Filer (the Circular) dated 5 November 2010 and delivered to the holders (Unitholders) of trust units of the Filer (Units) in connection with a special meeting (the Meeting) of Unitholders expected to be held 8 December 2010 for the purposes of considering a plan of arrangement under the Business Corporations Act (Alberta) (the Arrangement) resulting in the internal reorganization of the Filer's trust structure into a corporate structure (the Circular Relief);

(b) exempted the corporation to be known as "Peyto Exploration & Development Corp." (New Peyto), which will be the corporation resulting from the amalgamation of Peyto Exploration (2011) Ltd. (Newco), Peyto AdminCo and PEDC pursuant to the terms of the Arrangement, from the requirement applicable to New Peyto contained in section 2.8 of NI 44-101 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; and

(c) exempted New Peyto from the requirement under subsection 4.1(b) of NI 44-101 for New Peyto to file a Personal Information Form and Authorization to Collect, Use and Disclose Personal Information in the form attached as Appendix A to NI 41-101 General Prospectus Requirements (NI 41-101) for each director and executive officer of New Peyto at the time of filing a preliminary short form prospectus for whom the Filer has previously delivered any of the documents described in paragraphs 4.1(b)(i)(E) through (G) of NI 44-101 at the time of filing such preliminary short-form prospectus.

The Filer

2. The Filer is an open-ended unincorporated investment trust established under the laws of Alberta pursuant to a trust indenture dated 22 May 2003 and amended and restated on 1 January 2008. The principal office of the Filer is located in Calgary, Alberta.

3. The Filer is a reporting issuer or the equivalent under the securities legislation of each of the provinces of Canada. The Filer is not in default of securities legislation in any jurisdiction of Canada.

4. The authorized capital of the Filer includes an unlimited number of Units. As of 30 November 2010, there were 131,372,061 Units outstanding.

5. The Units are listed on the Toronto Stock Exchange (TSX).

6. The Filer has filed a "current AIF" and "current annual financial statements" (as such terms are defined in NI 44-101) for the financial year ended 31 December 2009.

Peyto AdminCo

7. Peyto AdminCo is a corporation incorporated under the laws of Alberta. The principal office of Peyto AdminCo is located in Calgary, Alberta.

8. Peyto AdminCo is wholly-owned by the Filer.

9. Peyto AdminCo is not a reporting issuer in any jurisdiction and is not in default of applicable securities legislation in any jurisdiction of Canada.

10. The common shares of Peyto AdminCo are not listed or posted for trading on any exchange or quotation and trade reporting system.

PEDC

11. PEDC is a corporation amalgamated under the laws of Alberta. The principal office of PEDC is located in Calgary, Alberta.

12. PEDC is wholly-owned by the Filer.

13. PEDC is not a reporting issuer in any jurisdiction and is not in default of applicable securities legislation in any jurisdiction of Canada.

14. The common shares of PEDC are not listed or posted for trading on any exchange or quotation and trade reporting system.

Newco and New Peyto

15. Newco is a corporation incorporated under the laws of Alberta. The principal office of Newco is located in Calgary, Alberta.

16. Newco is an indirect wholly-owned subsidiary of the Filer and was incorporated solely to participate in the Arrangement, including to issue common shares of Newco to former Unitholders and to amalgamate with Peyto AdminCo and PEDC to form New Peyto, as a result of which the former Unitholders will hold common shares of New Peyto (New Peyto Shares) following the completion of the Arrangement.

17. Newco is not a reporting issuer in any jurisdiction and is not in default of applicable securities legislation in any jurisdiction of Canada. Following completion of the Arrangement, New Peyto, as amalgamation successor to Peyto AdminCo, PEDC and Newco, will be a reporting issuer in each of the provinces of Canada.

18. None of the common shares issued by Newco are listed or posted for trading on any exchange or quotation system and trade reporting system. The TSX has conditionally approved the listing of the New Peyto Shares to be issued in connection with the Arrangement on the TSX.

Arrangement

19. As part of the Arrangement: (i) the Filer will be dissolved; (ii) the Units will be cancelled; (iii) common shares of Newco will be distributed to the Unitholders on a one-for-one basis; (iv) the common shares of Newco will continue as New Peyto Shares; and (iv) New Peyto will directly own all of the existing assets and assume all of the existing liabilities of the Filer, effectively resulting in the internal reorganization of the Filer's trust structure into a corporate structure.

20. Following the completion of the Arrangement: (i) the sole business of New Peyto will be the current business of the Filer; (ii) New Peyto will be a reporting issuer or the equivalent under the securities legislation in each of the provinces of Canada; and (iii) the New Peyto Shares will be listed on the TSX.

21. The Arrangement does not contemplate the acquisition of any additional operating assets or the disposition of any existing operating assets and will not result in a change in the ultimate beneficial ownership of the assets and liabilities of the Filer. The Arrangement will be an internal reorganization undertaken without dilution to the Unitholders or additional debt or interest expense.

22. Pursuant to the Filer's constating documents and applicable securities laws, the Unitholders will be required to approve the Arrangement at the Meeting. The Arrangement must be approved by not less than two-thirds of the votes cast by the Unitholders at the Meeting. The Meeting took place on 8 December 2010. The Arrangement was approved by the Unitholders.

23. The Arrangement will be a "restructuring transaction" under NI 51-102 in respect of the Filer and therefore would require compliance with section 14.2 of the Circular Form.

24. Subsequent to the effective date of the Arrangement and in accordance with the timing specified in the Qualification Relief, New Peyto, as successor issuer to the Filer, will file on SEDAR certain continuous disclosure documents of the Filer for the year ended 31 December 2010 that would be required to be filed by the Filer under NI 51-102 if it were still a reporting issuer 90 days after 31 December 2010, including: (i) the audited annual comparative financial statements and management's discussion and analysis of New Peyto, as successor issuer of the Filer, for the financial year ended 31 December 2010; and (ii) an annual information form of New Peyto, as successor issuer of the Filer, for the year ended 31 December 2010 (such financial statements, management's discussion and analysis and annual information form referred to as the Filer 2010 Annual Filings).

25. The Arrangement is being undertaken to reorganize the Filer following the enactment by the federal government of rules in respect of the tax treatment of specified investment flow-through trusts. Pursuant to the Arrangement, the Filer will be reorganized into a dividend paying public oil and gas exploration and development corporation, New Peyto, that will operate under the name "Peyto Exploration & Development Corp." and will directly own all of the existing assets and assume all of the existing liabilities of the Filer.

26. The rights of the Unitholders in respect of New Peyto following the Arrangement will be substantively equivalent to the rights the Unitholders currently have in respect of the Filer and their relative interest in and to the business carried on by New Peyto will not be affected by the Arrangement.

27. The only securities that will be distributed to the Unitholders pursuant to the Arrangement will be common shares of Newco, which will continue as New Peyto Shares.

28. While changes to the consolidated financial statements of New Peyto will be required to reflect the organizational structure of the Filer following the Arrangement, the financial position of New Peyto will be substantially the same as reflected in the Filer's audited annual consolidated financial statements most recently filed or required to have been filed under Part 4 of NI 51-102 prior to the date of the Circular and the Filer's unaudited interim consolidated financial statements most recently filed or required to have been filed under Part 4 of NI 51-102 prior to the date of the Circular. In particular, the entity that exists both before and subsequent to the Arrangement will be substantially the same given the fact that the assets and liabilities of the enterprise, from both an accounting perspective and economic perspective, are not changing based on the Arrangement. However, as the tax structure will be changing from that of an income trust to a corporation, the tax advantages of the income trust structure will be lost.

Exemptive Relief Sought

29. 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 for the successor issuer.

30. New Peyto 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 has been filed by the Filer (a party to the restructuring transaction), the Circular complies with applicable securities legislation and the Circular includes the disclosure required by Item 14.2 of the Circular Form, except for the Financial Information which was not included in the Circular pursuant to the Circular Relief.

31. The Filer is qualified to file a prospectus in the form of a short form prospectus pursuant to subsection 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 subsection 2.8(4) of NI 44-101.

32. The Filer anticipates that New Peyto 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 New Peyto Shares or other securities) of New Peyto.

33. The short form prospectus of New Peyto will incorporate by reference the documents that would be required to be incorporated by reference under Item 11 of Form 44-101F1 Short Form Prospectus (Prospectus Form) in a short form prospectus of New Peyto, 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 Qualification Relief is granted, provided that any short form prospectus filed by New Peyto pursuant to NI 44-101 during the currency of the Qualification Relief specifically incorporates by reference:

(i) the Circular and any financial statements and related management's discussion and analysis of the Filer incorporated by reference into the Circular;

(ii) if the short form prospectus is filed before the earlier of the Filer 2010 Annual Filings having been filed by New Peyto or the date that is 90 days following 31 December 2010, the unaudited comparative interim financial statements of the Filer for the three and nine months ended September 30, 2010 together with the accompanying management's discussion and analysis of the Filer;

(iii) if the short form prospectus is filed either after the Filer 2010 Annual Filings have been filed by New Peyto or on a date more than 90 days following 31 December 2010, the Filer 2010 Annual Filings; and

(iv) any continuous disclosure documents of New Peyto, as successor issuer to the Filer, required to be incorporated by reference pursuant to the Prospectus Form.