Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - closed-end real estate investment trustexempt from prospectus and registration requirements in connectionwith issuance of units to existing unit holders pursuant todistribution reinvestment plan whereby distributions are reinvestedin additional units of the trust, subject to certain conditions- first trade in additional units deemed a distribution unlessmade in compliance with MI 45-102.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53 and 74(1).

Multilateral Instrument Cited

Multilateral Instrument 45-102 Resale of Securities(2001), 24 OSCB 5522.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, SASKATCHEWAN,MANITOBA,

ONTARIO, QUÉBEC, NOVASCOTIA, NEW BRUNSWICK,

PRINCE EDWARD ISLAND, NEWFOUNDLANDAND LABRADOR,

YUKON, NUNAVUT AND NORTHWESTTERRITORIES

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

TGS NORTH AMERICAN REAL ESTATEINVESTMENT TRUST

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Saskatchewan, Manitoba, Ontario, Québec,Nova Scotia, New Brunswick, Prince Edward Island, Newfoundlandand Labrador, Yukon, Nunavut and Northwest Territories (the"Jurisdictions") has received an application fromTGS North American Real Estate Investment Trust (the "REIT")for a decision, pursuant to the securities legislation of theJurisdictions (the "Legislation") that the requirementcontained in the Legislation to be registered to trade in asecurity and to file and obtain a receipt for a preliminaryprospectus and a final prospectus (the "Registration andProspectus Requirements") shall not apply to the distributionor resale of units of the REIT pursuant to a distribution reinvestmentplan (the "DRIP");

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;

AND WHEREAS THE REIT has representedto the Decision Makers that:

1. The REIT is an unincorporated open-endinvestment trust established under the laws of the Provinceof Alberta by declaration of trust dated July 31, 2002, asamended and restated (the "Declaration of Trust").

2. The beneficial interests in the REIT aredivided into a single class of units (the "Units")and the REIT is authorized to issue an unlimited number ofUnits.

3. Each Unit represents a proportionate undividedbeneficial interest in the REIT, and entitles holders of Units("Unitholders") to one vote at any meeting of Unitholdersand to participate pro rata in the distributions of the REIT.

4. The Units of the REIT have been conditionallyapproved for listing on the Toronto Stock Exchange (the "TSX").

5. The REIT is not a "mutual fund"as described in the Legislation because the Unitholders arenot entitled to receive on demand an amount computed by referenceto the value of a proportionate interest in the whole or inpart of the net assets of the REIT as contemplated in thedefinition of "mutual fund" in the Legislation.

6. The REIT will become a reporting issueror the equivalent thereof in each province and territory inCanada when it obtains a receipt for its final prospectus(the "Prospectus"). As of the date hereof, the REITis not in default of any requirements under the Legislation.

7. The REIT has been formed to invest in income-producingreal estate located in western North America. The REIT offersan opportunity to invest, through a tax-efficient Canadianreal estate investment trust structure, in a diversified portfolioof office, retail and, in the future, industrial propertiesorganized along the natural north/south economic and tradingpatterns of western North America. The REIT's properties willbe located in selected markets in the western United Statesand western Canada which exhibit strong economic and populationgrowth trends. The REIT will be internally managed.

8. The REIT currently intends to make cashdistributions to Unitholders monthly, equal to, on an annualbasis, approximately 89% of its Distributable Income.

9. The REIT intends to establish the DRIPpursuant to which Unitholders may, at their option, investcash distributions paid on their Units in additional Units("Additional Units"). The DRIP will not be availableto Unitholders who are not Canadian residents.

10. Distributions due to participants in theDRIP ("DRIP Participants") will be paid to ComputershareTrust Company of Canada in its capacity as agent under theDRIP (in such capacity, the "DRIP Agent") and appliedto purchase Additional Units. All Additional Units purchasedunder the DRIP will be purchased by the DRIP Agent directlyfrom the REIT.

11. The price of Additional Units purchasedwith such cash distributions will be the volume weighted averageof the closing price for a board lot of Units on the TSE forthe twenty trading days immediately preceding the relevantdistribution date. Unitholders who elect to participate inthe DRIP will receive a further distribution of AdditionalUnits equal in value to 3% of each distribution that is reinvestedunder the DRIP.

12. No commissions, service charges or brokeragefees will be payable by DRIP Participants in connection withthe DRIP and all administrative costs will be borne by theREIT.

13. Additional Units purchased under the DRIPwill be registered in the name of the DRIP Agent, as agentfor the DRIP Participants.

14. Unitholders may terminate their participationin the DRIP at any time by written notice to the DRIP Agent.Such notice, if received prior to a distribution date, willhave effect for such distribution. Thereafter, distributionspayable to such Unitholders will be by cheque.

15. The REIT may amend, suspend or terminatethe DRIP at any time, provided that such action shall nothave a retroactive effect which would prejudice the interestsof the DRIP Participants. All DRIP Participants will be sentnotice of any such amendment, suspension or termination.

16. The distribution of the Plan Units bythe REIT pursuant to the DRIP cannot be made in reliance onregistration and prospectus exemptions contained in the Legislationas the DRIP involves the reinvestment of Distributable Incomedistributed by the REIT and not the reinvestment of distributionsof dividends, interest, capital gains or earnings of surplusof the REIT.

17. The distribution of the Additional Unitsby the REIT pursuant to the DRIP cannot be made in relianceon registration and prospectus exemptions contained in theLegislation for distribution reinvestment plans of mutualfunds, as the REIT is not a "mutual fund" as definedin the Legislation.

18. As of the date of closing, the REIT willbe considered a "qualifying issuer" for purposesof Multilateral Instrument 45-102 - Resale of Securities.

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each of the DecisionMakers (collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Makers with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers pursuantto the Legislation is that the trades of Additional Units bythe REIT to the Plan Agent for the account of the DRIP Participantspursuant to the DRIP shall not be subject to the Registrationand Prospectus Requirements of the Legislation provided that:

(a) at the time of the trade the REIT isa reporting issuer or the equivalent under the Legislationand is not in default of any requirements of the Legislation;

(b) no sales charge is payable in respectof the trade;

(c) the REIT has caused to be sent to theperson or company to whom the Additional Units are traded,not more than 12 months before the trade, a statement describing:

(i) their rights to withdraw from theDRIP and to make an election to receive cash instead ofUnits on the making of a distribution of income by theREIT; and

(ii) instructions on how to exercise theright referred to in (i);

(d) disclosure of the initial distributionof the Additional Units is made to the relevant Jurisdictionsby providing the particulars of the date of the distributionof such Additional Units, the number of such AdditionalUnits and the purchase price paid or to be paid for suchAdditional Units in:

(i) an information circular or take-overbid circular filed in accordance with the Legislation;or

(ii) a letter filed with the DecisionMaker in the relevant Jurisdiction by a person or companycertifying that the person or company has knowledge ofthe facts contained in the letter,

when the REIT distributes such AdditionalUnits for the first time and thereafter, not less frequentlythan annually, unless the aggregate number of AdditionalUnits so traded in any month exceeds 1% of the Units outstandingat the beginning of a month in which the Additional Unitswere traded, in which case a separate report shall befiled in each relevant Jurisdiction in respect of thatmonth within ten days of the end of such month;

(e) except in Québec, the first tradein Additional Units acquired pursuant to this Decision ina Jurisdiction shall be deemed a distribution or primarydistribution to the public under the Legislation of suchJurisdiction and shall not be subject to the ProspectusRequirements, provided that the conditions in paragraphs2 through 5 of subsections 2.6(3) or (4) of MultilateralInstrument 45-102 - Resale of Securities are satisfied;and

(f) in Québec, the first trade (alienation)in Additional Units acquired pursuant to this Decision shallbe deemed a distribution or primary distribution to thepublic unless:

(i) at the time of the first trade, theREIT is and has been a reporting issuer in Québecfor the four months immediately preceding the trade;

(ii) no unusual effort is made to preparethe market or to create a demand for the Units;

(iii) no extraordinary commission or considerationis paid to a person or company in respect of the trade;and

(iv) if the seller of the Additional Unitsis an insider of the REIT, the seller has reasonable groundsto believe that the REIT is not in default of any requirementof the Legislation of Québec.

January 13, 2003.

"Howard I. Wetston"                    "RobertW. Korthals"