Securities Law & Instruments

Headnote

Relief granted to a wholly owned subsidiaryissuing medium term notes from continuous disclosure requirements,subject to filing parent's financial information and summarizedfinancial information with respect to the subsidiary.

Relief from insider reporting requirements forinsiders of the subsidiary on condition that the Corporationremain a wholly owned subsidiary of its parent.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,s. 77, 78, 80(b)(iii), s. 121(2)(a)(ii), 88(2)(b).

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN,

MANITOBA, ONTARIO, QUÉBEC,NEW BRUNSWICK,

NEWFOUNDLAND AND LABRADORAND NOVA SCOTIA

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

CANADIAN OIL SANDS LIMITEDAND

CANADIAN OIL SANDS TRUST

 

MRRS DECISION DOCUMENT

1. WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") ineach of British Columbia, Alberta, Saskatchewan, Manitoba,Ontario, Quebec, New Brunswick, Newfoundland and Labradorand Nova Scotia (the "Jurisdictions") has receivedan application from Canadian Oil Sands Limited (the "Corporation")and Canadian Oil Sands Trust (the "Trust" and, togetherwith the Corporation, the "Applicant") for a decisionunder the securities legislation of the Jurisdictions (the"Legislation") that the requirements contained inthe Legislation:

1.1 that the Corporation file with the DecisionMakers and, where applicable, send to its securityholdersaudited annual comparative financial statements (includingwithout limitation management's discussion and analysisthereon) or annual reports containing such statements;

1.2 that the Corporation file with the DecisionMakers and, where applicable, send to its securityholdersunaudited interim comparative financial statements (includingwithout limitation management's discussion and analysisthereon);

1.3 that the Corporation issue and filea news release and file a report with the Decision Makersupon the occurrence of a material change; and

1.4 that the Corporation comply with theproxy and proxy solicitation requirements, including therequirement to file with the Decision Makers and send toholders of its voting securities a form of proxy and informationcircular in the required form or an annual report or filingin lieu thereof, as applicable,

(collectively, the "Reporting Requirements")shall not apply to the Corporation; and

1.5 that, where applicable, a person orcompany that is an insider of the Corporation file reportswith the Decision Makers disclosing such person's or company'sdirect or indirect beneficial ownership of, or control ordirection over, securities of the Corporation (the "InsiderRequirements") shall not apply to any insiders of theCorporation;

2. AND WHEREAS under the Mutual Reliance ReviewSystem for Exemptive Relief Applications (the "System")created pursuant to National Policy 12-201, the Alberta SecuritiesCommission is the principal regulator for this application;

3. AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 or in Quebec Commission Notice 14-101;

4. AND WHEREAS the Applicant has representedto the Decision Makers that:

4.1 The Trust is an unincorporated open-endedinvestment trust formed under the laws of the Province ofAlberta pursuant to a trust indenture dated October 5, 1995,as amended and restated as of July 5, 2001 and as furtheramended by a supplemental indenture dated as of August 7,2001 and a notice of change in quarterly distribution datesdated December 10, 2001 (the "Trust Indenture").The trustee of the Trust is Computershare Trust Companyof Canada ("Computershare").

4.2 The Trust has been a reporting issueror the equivalent in each of the Jurisdictions since 1995,and to its knowledge is not in default of any requirementsunder the Legislation of any such Jurisdiction.

4.3 The entire beneficial interest in theTrust is held by the holders of its trust units ("Units"),of which a maximum of 500,000,000 Units may be authorizedand issued pursuant to the Trust Indenture. As of April8, 2003, there were 79,538,258 Units issued and outstanding.

4.4 The Units are participating equity securitiesof the Trust and currently trade on the Toronto Stock Exchange.

4.5 As at the date hereof, the Trust hasthree wholly-owned subsidiary entities, namely the Corporation,Canadian Oil Sands Commercial Trust ("CT") and834541 Alberta Ltd. The Corporation and CT are directlyowned by the Trust, and 834541 Alberta Ltd. is directlyowned by CT.

4.6 The Trust indirectly holds an aggregate31.74% working interest in the Syncrude oil sands projectnear Fort McMurray, Alberta through the Corporation (whichhas a direct 21.74% interest), CT (which has a direct 9.5%interest) and 834541 Alberta Ltd. (which has a direct 0.5%interest).

4.7 The Trust has no material assets otherthan its interests in the Syncrude project.

4.8 The Corporation is a corporation organizedand subsisting under the laws of Alberta. The Corporation'sprincipal and registered offices are located in Calgary,Alberta.

4.9 Pursuant to the terms of the Trust Indenture,the Corporation is the manager of the Trust and is thereforeresponsible for the management of the business and affairsof the Trust, including the provision of finance, legal,engineering, accounting, treasury and investor relationsservices. The Corporation is also the manager of CT.

4.10 The business of the Corporation isto oversee the Trust's indirect 31.74% working interestin the Syncrude project through its role as the managerof both the Trust and CT. The Corporation does not haveany material operations that are independent of this role.

4.11 The Corporation currently holds a direct21.74% interest in Syncrude. Subject to receipt of a favourabletax opinion or ruling from Canada Customs and Revenue Agency,the Trust intends to effect a reorganization of its interestspursuant to which the Corporation will ultimately becomethe direct or indirect holder of the Trust's entire 31.74%indirect interest in Syncrude.

4.12 The authorized share capital of theCorporation consists of an unlimited number of common sharesand an unlimited number of preferred shares, issuable inseries.

4.13 All of the issued and outstanding sharesof the Corporation are held by the Trust. The Corporationhas no other securities outstanding as at the date of thisapplication except USD $70 million of 7.625% Senior Notesdue 2007, USD $250 million of 7.9% Senior Notes due 2021and USD $74 million of 8.2% Senior Notes due 2027 (collectively,the "Senior Notes") and CAD $150 million of 5.75%unsecured medium term notes due 2008 issued under the ShelfProspectus (as defined in paragraph 4.15 below).

4.14 All of the Senior Notes were sold ona private placement basis to purchasers in the United Statespursuant to exemptions from the registration requirementsof the United States Securities Act of 1933.

4.15 The Corporation became a reportingissuer or the equivalent in each of the Jurisdictions onMarch 27, 2003 upon the issuance of a receipt for a shortform base shelf prospectus (the "Shelf Prospectus")under National Instrument 44-102 Shelf Distributions("NI 44-102") relating to the sale of up to CAD$750,000,000 of unsecured medium term notes (the "Notes").

4.16 The Notes will be issued under a trustindenture dated as of April 2, 2003 between the Corporationand Computershare (the "Note Indenture").

4.17 Pursuant to a guarantee agreement (the"Guarantee") dated as of April 2, 2003 betweenthe Trust and Computershare, as trustee under the Note Indenture,any payments to be made by the Corporation as stipulatedin the terms of the Notes or in an agreement governing therights of the holders of Notes ("Noteholders")will be fully and unconditionally guaranteed by the Trust,such that the Noteholders shall be entitled to receive paymentthereof from the Trust within 15 days of any failure bythe Corporation to make a payment as stipulated. Until suchtime as the 9.5% interest in Syncrude that is currentlyheld directly by CT is transferred, directly or indirectly,to the Corporation, the Notes will be similarly guaranteedby CT.

4.18 The Corporation was qualified underNational Instrument 44-101 Short Form Prospectus Distributions("NI 44-101") to file a prospectus in the formof a short form prospectus on the basis that the Notes are,pursuant to the Guarantee, guaranteed non-convertible debtsecurities as contemplated by Section 2.5 thereof.

4.19 In accordance with NI 44-101 and NI44-102, the Shelf Prospectus provides disclosure about theconsolidated business and operations of the Trust and incorporatesby reference the required disclosure documents of the Trust.

4.20 The Shelf Prospectus provides disclosurewith respect to both the Trust and CT guarantees of theNotes, and each of the Trust and CT signed the certificatepage as credit supporters within the meaning of NI 44-101.

4.21 The Notes have been assigned approvedratings within the meaning of NI 44-101, namely "Baa2"with a negative outlook by Moody's Investors Service, Inc.and "BBB+" with a negative outlook by Standard& Poor's Corporation.

4.22 The Notes will not be listed on anysecurities exchange.

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

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

7. THE DECISION of the Decision Makers pursuantto the Legislation is that the Reporting Requirements shallnot apply to the Corporation and the Insider Requirementsshall not apply to any insider of the Corporation, so longas:

7.1 the business of the Corporation continuesto be the same as the business of the Trust, in that thebusiness of the Corporation continues to be the managementand oversight, through ownership or control, of all of thematerial assets of the Trust, including, without limitation,the Trust's entire investment in the Syncrude project;

7.2 the Trust remains a reporting issueror the equivalent under the Legislation and continues tocomply with all timely and continuous disclosure requirementsthereunder;

7.3 all financial statements filed by theTrust under the Legislation are prepared on a consolidatedbasis in accordance with Canadian GAAP;

7.4 the Corporation shall comply with therequirements of the Legislation to issue a news releaseand file a report with the Decision Makers upon the occurrenceof a material change in the affairs of the Corporation thatis not a material change in the affairs of the Trust;

7.5 the Trust remains the direct or indirectbeneficial owner of all of the issued and outstanding votingsecurities of the Corporation;

7.6 the Trust continues to fully and unconditionallyguarantee the Notes as to the payments required to be madeby the Corporation to the holders of the Notes;

7.7 the Corporation does not distributeadditional securities other than: (i) the Notes or otherdebt securities contemplated by paragraph 7.8 below; (ii)to the Trust or to entities that are wholly-owned, directlyor indirectly, by the Trust; or (iii) debt securities ona private placement basis pursuant to exemptions from theprospectus requirements of applicable Legislation;

7.8 if the Corporation hereafter distributesadditional debt securities (other than debt securities thatare issued to the Trust or to entities that are wholly-owned,directly or indirectly, by the Trust or are distributedon a private placement basis pursuant to exemptions fromthe prospectus requirements of applicable Legislation),the Trust shall fully and unconditionally guarantee suchdebt securities as to the payments required to be made bythe Corporation to the holders of such debt securities;

7.9 the Corporation files the annual comparativeaudited consolidated financial statements of the Trust and,either separately or as a note to the consolidated financialstatements of the Trust, a comparative audited summary ofthe Corporation's financial results for its most recentlycompleted financial year, including the following line items:

(a) oil and gas revenue;

(b) net earnings from continuing operationsbefore extraordinary items;

(c) operating income before other expenses;

(d) net earnings;

(e) current assets;

(f) non-current assets;

(g) current liabilities; and

(h) non-current liabilities,

and including as a note thereto a briefexplanation of the percentage ownership interest of theCorporation in the Syncrude project and the proportion suchownership interest bears to the aggregate ownership interestof the Trust in the Syncrude project;

7.10 the Corporation files the interim comparativeconsolidated financial statements of the Trust and, eitherseparately or as a note to the financial statements of theTrust, a comparative summary of the Corporation's financialresults for its most recently completed interim period,including the following line items:

(a) oil and gas revenue;

(b) operating income before other expenses;

(c) net earnings from continuing operationsbefore extraordinary items; and

(d) net earnings;

and including as a note thereto a briefexplanation of the percentage ownership interest of theCorporation in the Syncrude project and the proportion suchownership interest bears to the aggregate ownership interestof the Trust in the Syncrude project;

7.11 if, in the future, the Legislationis amended to require or the Decision Makers make rulesrequiring interim financial statements to include a balancesheet, the disclosure included in paragraph 7.10 above wouldalso be required to include a summary of the Corporation'sbalance sheet, including the following line items:

(a) current assets;

(b) non-current assets;

(c) current liabilities; and

(d) non-current liabilities;

7.12 the filings referred to in paragraphs7.9, 7.10 and 7.11 above are to be made within the timelimits and in accordance with applicable fees required bythe Legislation for the filing of audited annual comparativefinancial statements and unaudited interim comparative financialstatements, respectively, provided that the first filingto be made by the Corporation under paragraph 7.10 shallbe in respect of the second quarter ending June 30, 2003and the first filing to be made by the Corporation underparagraph 7.9 shall be in respect of the financial yearending December 31, 2003.

May 21, 2003.

"Agnes Lau"