H&R Finance Trust

Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions - Exemption granted from section 2.2(3)(b)(ii) of National Instrument 44-102 Shelf Distributions, subject to certain conditions - Absent the granting of the exemption, a receipt issued for a base shelf prospectus of the Filer would expire immediately before entering into an agreement of purchase and sale for a security to be sold under the base shelf prospectus due to the Filer not having a current annual information form at such time - The Filer has previously been granted relief from, inter alia, the annual information form requirement in section 2.2(d)(ii) of National Instrument 44-101 Short Form Prospectus Distributions.

Applicable Legislative Provisions

National Instrument 44-102, ss. 2.2(3)(b)(ii) and 11.1.

National Instrument 44-101, s. 2.2(d)(ii).

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

H&R FINANCE TRUST

DECISION

Background

The principal regulator in the Jurisdiction has received an application from H&R Finance Trust ("H&R Finance" or the "Filer") under the securities legislation of the Jurisdiction (the "Legislation") for a decision that, pursuant to section 11.1 of National Instrument 44-102 Shelf Distributions ("NI 44-102"), subparagraph 2.2(3)(b)(ii) of NI 44-102 does not apply to H&R Finance (the "Exemption Sought").

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

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Prince Edward Island, New Brunswick, Newfoundland and Labrador, Nova Scotia, Northwest Territories, Yukon Territory and Nunavut (collectively, together with Ontario, the "Canadian Jurisdictions").

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 Filer:

1. At the time of this application the Filer is not in default of securities legislation in any of the Canadian Jurisdictions. The head office of the Filer is located in Toronto, Ontario.

2. On October 1, 2008 H&R Real Estate Investment Trust (the "REIT") effected a plan of arrangement (the "Plan of Arrangement") pursuant to which, among other things, H&R Finance was established as an open-ended limited purpose unit trust governed by the laws of the Province of Ontario.

3. As contemplated in the Plan of Arrangement and as provided in the respective declarations of trust of the REIT and H&R Finance, each unit of the REIT is stapled to a unit of H&R Finance (and each unit of H&R Finance is stapled to a unit of the REIT), and a unit of the REIT, together with a unit of H&R Finance, trades as a "Stapled Unit" until there is an "Event of Uncoupling".

4. An Event of Uncoupling shall occur only: (a) in the event that unitholders of the REIT vote in favour of the uncoupling of units of H&R Finance and units of the REIT such that the two securities will trade separately; or (b) at the sole discretion of the trustees of H&R Finance, but only in the event of the bankruptcy, insolvency, winding-up or reorganization (under an applicable law relating to insolvency) of the REIT or H&R (U.S.) Holdings Inc. or the taking of corporate action by the REIT or H&R (U.S.) Holdings Inc. in furtherance of any such action or the admitting in writing by the REIT or H&R (U.S.) Holdings Inc. of its inability to pay its debts generally as they become due.

5. As part of the Plan of Arrangement, the REIT and H&R Finance entered into a support agreement (the "Support Agreement") which provided, among other things, for the co-ordination of the declaration and payment of all distributions so as to provide for simultaneous record dates and payment dates; for co-ordination so as to permit the REIT to perform its obligations pursuant to the REIT's Declaration of Trust, Unit Option Plan, Distribution Re-Investment Plan and Unitholder Rights Plan; for H&R Finance to take all such actions and do all such things as are necessary or desirable to enable and permit the REIT to perform its obligations arising under any security issued by the REIT (including securities convertible, exercisable or exchangeable into Stapled Units); for H&R Finance to take all such actions and do all such things as are necessary or desirable to enable the REIT to perform its obligations or exercise its rights under its convertible debentures; and for H&R Finance to take all such actions and do all such things as are necessary or desirable to issue H&R Finance units simultaneously (or as close to simultaneously as possible) with the issue of REIT units and to otherwise ensure at all times that each holder of a particular number of REIT units holds an equal number of H&R Finance units, including participating in and cooperating with any public or private distribution of Stapled Units by, among other things, executing prospectuses or other offering documents.

6. In the event that the REIT issues additional REIT units, pursuant to the Support Agreement, the REIT and H&R Finance will coordinate so as to ensure that each subscriber receives both REIT units and H&R Finance units, which shall trade together as Stapled Units. Prior to such event, the REIT shall provide notice to H&R Finance to cause H&R Finance to issue and deliver the requisite number of H&R Finance units to be received by and issued to, or to the order of, each subscriber as the REIT directs.

7. In consideration of the issuance and delivery of each such H&R Finance unit, the REIT (on behalf of the purchaser) or the purchaser, as the case may be, shall pay (or arrange for the payment of) a purchase price equal to the fair market value (as determined by H&R Finance in consultation with the REIT) of each such H&R Finance unit at the time of such issuance. The remainder of the subscription price for Stapled Units shall be allocated to the issuance of the REIT units by the REIT.

8. Pursuant to a MRRS Decision Document dated August 8, 2008, as varied by a MRRS Decision Document dated September 12, 2008 In the Matter of H&R Real Estate Investment Trust on its own behalf and on behalf of H&R Finance Trust, the Filer has been granted relief from (i) the requirements contained in Parts 6 and 7 of National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102") (except in the Northwest Territories, where NI 51-102 has been adopted as a policy only (collectively, the "Specified Continuous Disclosure Requirements Relief"); and (ii) the requirement contained in subparagraph 2.2(d)(ii) of National Instrument 44-101 Short Form Prospectus Distributions ("NI 44-101").

9. The REIT and H&R Finance filed a preliminary base shelf prospectus on May 1, 2009.

10. Pursuant to section 2.2(3)(b)(ii) of NI 44-102, a receipt issued for a base shelf prospectus of an issuer expires immediately before entering into an agreement of purchase and sale for a security to be sold under the base shelf prospectus if the issuer does not have a current annual information form at such time.

11. The Exemption Sought is necessary as absent the granting of the Exemption Sought, pursuant to section 2.2(3)(b)(ii) of NI 44-102, a receipt issued for a base shelf prospectus of H&R Finance would expire immediately before entering into an agreement of purchase and sale for a security to be sold under the base shelf prospectus due to H&R Finance not having a current annual information form at such time.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted for so long as:

(a) H&R Finance qualifies for the relief contemplated by, and is in compliance with the requirements and conditions set out in, the Specified Continuous Disclosure Requirements Relief;

(b) H&R Finance is exempt from or otherwise not subject to subparagraph 2.2(d)(ii) of NI 44-101;

(c) H&R Finance does not issue any units that are not stapled to units of the REIT except for distributions of units of H&R Finance which are immediately followed by a consolidation of outstanding units of H&R Finance such that an equal number of units of H&R Finance and units of the REIT are outstanding immediately following such consolidation; and

(d) each H&R Finance unit is stapled to a unit of the REIT and trades as a Stapled Unit.

DATED this 7th day of May, 2009.