Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications and Rule 54-501. In connection with a businesscombination, relief granted from the requirement to includecertain financial statements in a joint information circular.

Rules Cited

Ontario Securities Commission Rule 54-501 ProspectusDisclosure.

Ontario Securities Commission Rule 41-501 GeneralProspectus Requirements.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ONTARIOAND QUÉBEC

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

KYRGOIL HOLDING CORPORATION

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Ontario and Québec (collectively,the "Jurisdictions") has received an application fromKyrgoil Holding Corporation ("Kyrgoil" or the "Filer")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that the requirementsin the Legislation to include in the joint information circular(the "Information Circular") of Kyrgoil and Asia PetroleumDevelopment Limited ("Asia-PD"), Petroleum DevelopmentAssociates (Asia) LLC ("PDA-Asia"), Petroleum DevelopmentAssociates LLC ("PDA") and Petroleum Development AssociatesSpain LLC ("PDA Spain") (collectively, the "PDAGroup") audited annual financial statements for the companiesin the PDA Group for the three financial years preceding thedate of closing of the proposed business combination (the "BusinessCombination") between Kyrgoil and the PDA Group, or forcompleted financial years preceding the date of closing of theBusiness Combination for such companies if they have not completedthree financial years, shall not apply, subject to certain conditions;

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

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 Filer has representedto the Decision Makers that:

1. Kyrgoil was originally incorporated underthe Business Corporations Act (Ontario), but was continuedas an international business company under the InternationalBusiness Companies Act ("IBCA") of the BritishVirgin Islands ("BVI") effective November 20, 2000.

2. Kyrgoil is a reporting issuer in the Provincesof British Columbia, Alberta and Ontario.

3. The authorized capital of Kyrgoil consistsof an unlimited number of common shares ("Kyrgoil Shares").As of the date hereof, 132,444,141 Kyrgoil Shares and 3,690,000options to acquire Kyrgoil Shares are issued and outstanding.

4. Kyrgoil's primary asset is the ownershipof 50% of the outstanding common shares ("KPC Shares")of the Kyrgyz Petroleum Company ("KPC"),which owns and operates an oil refinery in the Kyrgyz Republic.A company controlled by the government of the Kyrgyz Republicowns the other 50% of the outstanding KPC Shares. PetrofacResources International Limited ("Petrofac") managesthe refinery pursuant to a management agreement with Kyrgoil.

5. Petrofac also currently owns 85,302,104Kyrgoil Shares, or approximately 64.4% of the outstandingKyrgoil Shares.

6. Kyrgoil is proposing to complete the BusinessCombination with the PDA Group, a group of companies thatis engaged in the exploration for and extraction of oil andnatural gas in Indonesia, Malaysia, Spain and the United Kingdom.

7. The PDA Group consists of the followingcompanies:

(a) Asia-PD, a corporation incorporatedunder the laws of BVI on September 2, 2002;

(b) PDA-Asia, a corporation incorporatedunder the laws of Delaware on December 4, 2001;

(c) PDA, a corporation incorporated underthe laws of Delaware on June 22, 2000; and

(d) PDA-Spain, a corporation incorporatedunder the laws of Delaware on October 11, 2001;

8. None of the PDA Group of companies is areporting issuer in any of the Jurisdictions.

9. The Business Combination will include thefollowing steps:

(a) the shareholders of Asia-PD, PDA-Asia,PDA and PDA-Spain will transfer their shares in those companiesto a new holding company ("PDA Holdco") incorporatedin the BVI under the IBCA; and

(b) PDA Holdco will amalgamate with Kyrgoilunder the IBCA to form an amalgamated corporation ("Amalco")on the following basis:

(i) the shares of PDA Holdco will be exchangedfor an aggregate of 36,422,635 common shares of Amalco("Amalco Shares");

(ii) outstanding Kyrgoil Shares will beexchanged on a one-for-ten basis for Amalco Shares (13,244,414Amalco Shares);

(iii) outstanding options to acquire KyrgoilShares will be exchanged on a one-for-ten basis for optionsto acquire Amalco Shares; and

(iv) the exact number of Amalco Sharesto be issued will be adjusted based on the financial positionof the PDA Group and Kyrgoil as at or immediately priorto the closing of the Business Combination.

10. Prior to completing the Business Combination,Kyrgoil and the PDA Group will use their reasonable best effortsto complete a private placement of common shares of PDA Holdcoto raise gross proceeds expected to be not less than US$3,000,000.

11. Kyrgoil and the PDA Group will preparethe Information Circular to be delivered to the shareholdersof Kyrgoil and PDA Holdco in respect of shareholders' meetingsto be held in October, 2003 by those companies to considerand to vote on approving the Business Combination.

12. The Information Circular is proposed tocontain the following financial statement disclosure withreconciliations, as necessary, to Canadian generally acceptedaccounting principles (collectively, the "Included FinancialStatements"):

(a) Asia-PD: (i) audited financial statementsfor the period between September 2, 2002 and December 31,2002 and (ii) unaudited financial statements for the sixmonths ended June 30, 2003;

(b) PDA-Asia: (i) audited financial statementsfor the year ended December 31, 2002 and (ii) unauditedcomparative financial statements for the six months endedJune 30, 2003;

(c) PDA: (i) audited financial statementsfor the period between June 22, 2000 and December 31, 2000,(ii) audited financial statements for the year ended December31, 2001, (iii) audited financial statements for the yearended December 31, 2002, and (iv) unaudited comparativefinancial statements for the six months ended June 30, 2003;

(d) PDA-Spain: (i) audited financial statementsfor the year ended December 31, 2002 and (ii) unauditedcomparative financial statements for the six months endedJune 30, 2003;

(e) PDA Holdco: audited financial statementsfor the newly incorporated holding company;

(f) Kyrgoil: audited financial statementsfor the three most recently completed financial years andunaudited comparative financial statements for the six monthsended June 30, 2003; and

(g) Amalco: pro forma balance sheet as atJune 30, 2003, pro forma income statements for the twelvemonths ended December 31, 2002 and six months ended June30, 2003, with a compilation report prepared by the auditorsof Amalco.

13. The Legislation also requires the followingfinancial statements to be included in the Information Circular(collectively, the "Stub Period Financial Statements"):

(a) audited financial statements for theperiod between December 4, 2001 (date of incorporation)and December 31, 2001 for PDA-Asia; and

(b) audited financial statements for theperiod between October 11, 2001 (date of incorporation)and December 31, 2001 for PDA-Spain.

14. Kyrgoil proposes not to include the StubPeriod Financial Statements in the Information Circular asKyrgoil has been advised that neither PDA-Asia nor PDA-Spainengaged in any material transactions between the date of theirrespective incorporations and December 31, 2001 and that theaudited financial statements for each of PDA-Asia and PDA-Spainfor the year ended December 31, 2002 will contain a note tosuch effect.

15. With the exception of the disclosure ofthe Stub Period Financial Statements, the Information Circularwill contain prospectus-level disclosure about Kyrgoil, PDAHoldco, the PDA Group and the securities to be issued in connectionwith the Business Combination.

16. The closing date of the Business Combinationis anticipated to be in October, 2003.

17. Representatives of Kyrgoil and the PDAGroup have met with representatives of the Toronto Stock Exchange(the "TSX") to discuss the Business Combination.It is anticipated that, upon completion of the Business Combination,the Amalco Shares will be listed and posted for trading onthe TSX.

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

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

THE DECISION of the Decision Makers underthe Legislation is that the requirements in the Legislationto include in the Information Circular the Stub Period FinancialStatements shall not apply, provided that the Information Circularcontains the Included Financial Statements.

September 5, 2003.

"Iva Vranic"