Aliant Inc. and Aliant Telecom Inc. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications - Information Circular (prospectus-level disclosure) - An issuer wants relief from the requirement to include prospectus-level disclosure in an information circular to be circulated in connection with an arrangement, reorganization, acquisition or amalgamation - Alternate financial information will be provided that is consistent with the financial information required in the continuous disclosure context for significant acquisitions - Information will be provided about the parties to the transaction sufficient for shareholders to assess the transaction as a whole.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, Form 51-102F5 -- Information Circular, Item 14.2.

April 6, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

NEW BRUNSWICK AND ONTARIO

(collectively, the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

ALIANT INC. ("ALIANT")

AND

ALIANT TELECOM INC. ("ALIANT TELECOM")

(collectively, the "Filers")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the "Legislation") for an exemption from the continuous disclosure requirements of the Legislation such that the following requirements shall not apply in respect of the Circular to be provided to shareholders and other interested parties of Aliant in connection with the Meeting to approve, among other things, the Transaction:

(a) the requirement for Aliant to include in the Circular pro forma financial statements of Aliant and Aliant Telecom to reflect the acquisition of the Rural Wireline Operations from Bell Canada; and

(b) the requirement to include in the Circular three years of historical financial statements for BNG;

(collectively, the "Requested Relief").

Application of Principal Regulator System

Under Multilateral Instrument 11-101, Principal Regulator System ("MI 11-101") and the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the New Brunswick Securities Commission is the principal regulator for the Filers,

(b) the Filers are relying on the exemption in Part 3 of MI 11-101 in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, Prince Edward Island and Newfoundland and Labrador, and

(c) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101, Definitions have the same meaning in this decision unless they are defined in this decision.

In this decision

"Acquisitionco" means a newly formed corporation to be incorporated as a wholly-owned subsidiary of Holdings LP;

"Aliant Amalco" means the corporation to be formed by the amalgamation of Aliant, Aliant Telecom and certain other wholly-owned subsidiaries of Aliant;

"Aliant Common Shares" means common shares in the capital of Aliant;

"Aliant Preferred Shares" means the preference shares, Series 2 in the capital of Aliant;

"Aliant Telecom Common Shares" means common shares in the capital of Aliant Telecom;

"BCE" means BCE Inc.;

"Bell Canada" means The Bell Telephone Company of Canada or Bell Canada, a corporation continued under the CBCA;

"BNG" means Bell Nordiq Group Inc.;

"CBCA" means the Canada Business Corporations Act;

"Circular" means the management information circular to be provided to shareholders and other interested parties of Aliant in connection with the Meeting;

"Circular Financial Disclosure" has the meaning set out in Section 28 hereto;

"Combined Business" means the business resulting from the combination of Aliant's wireline telecommunications operations in the Atlantic Provinces with Bell Canada's Rural Wireline Operations and a 63.4% interest in Télébec, Limited Partnership and NorthernTel, Limited Partnership, the two operating partnerships of Bell Nordiq Income Fund, held through BNG;

"GP Co." means a corporation to be formed under the CBCA, to be the general partner of Holdings LP";

"Holdings LP" means a limited partnership to be formed under the laws of the Province of Québec with Holdings Trust as a limited partner and GP Co. as the general partner;

"Holdings Trust" means a trust to be formed under the laws of the Province of Québec which will be wholly-owned by Parent Trust;

"Meeting" means the annual and special meeting of Aliant shareholders held to approve, among other things, the Transaction;

"NI 44-101" means National Instrument 44-101, Short Form Prospectus Distributions;

"NI 51-102" means National Instrument 51-102, Continuous Disclosure Obligations;

"OSC Rule 61-501" means Ontario Securities Commission Rule 61-501, Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions;

"Parent Trust" means the new income trust that will result from the Transaction, and which will hold an indirect interest in the Combined Business;

"PEA Agreement" means the Property Exchange and Arrangement Agreement dated March 6, 2006 among Aliant, BCE and Bell Canada;

"Rural Wireline Operations" means Bell Canada's wireline telecommunications operations in certain regional territories in Ontario and Québec;

"Transaction" means the proposed transaction that would combine Aliant's wireline telecommunications operations in the four Atlantic Provinces with Bell Canada's Rural Wireline Operations in Wireline LP, and Bell Canada's indirect 63.4 per cent interest in Télébec, Limited Partnership and NorthernTel, Limited Partnership, the two operating partnerships of Bell Nordiq Income Fund, held by BNG, a subsidiary of Bell Canada, and result in the conversion of Aliant into a new income trust which will be constituted under the laws of Ontario, and is referred to herein as "Parent Trust";

"Wireline GP" means the corporation to be formed by the amalgamation of Aliant Amalco and Acquisitionco; and

"Wireline LP" means Wireline Limited Partnership, a limited partnership under the laws of the Province of Manitoba, to be formed with Bell Canada and a subsidiary of Aliant Amalco as limited partners and Aliant Amalco as the general partner (also holding a limited partnership interest).

Representations

This decision is based on the following facts represented by the Filers:

1. Aliant is a corporation incorporated under the CBCA on March 9, 1999. The corporate head office of Aliant is located at 1 Brunswick Square, Saint John, New Brunswick.

2. Aliant Telecom is a corporation incorporated under the CBCA on August 4, 1999. The corporate head office of Aliant Telecom is located at 1 Brunswick Square, Saint John, New Brunswick.

3. Each of Aliant and Aliant Telecom is a reporting issuer or equivalent under the securities legislation in all of the Provinces of Canada and is not in default of any requirements of such legislation.

4. The authorized capital of Aliant consists of an unlimited number of common shares and an unlimited number of preference shares. As at March 6, 2006 there were 127,197,912 Aliant Common Shares and 7,000,000 Series 2 Aliant Preferred Shares outstanding. To the knowledge of Aliant, Bell Canada owns approximately 53.2 per cent of the outstanding Aliant Common Shares.

5. The authorized capital of Aliant Telecom consists of an unlimited number of common shares. As at March 6, 2006 there were 10,668,385 Aliant Telecom Common Shares outstanding, all of which are held by Aliant.

6. As of March 6, 2006, Aliant Telecom had issued and outstanding debt securities consisting of four series of medium term notes, four series of unsecured debentures and six series of secured bonds.

7. The Aliant Common Shares are listed and posted for trading on the Toronto Stock Exchange under the symbol AIT and the Aliant Preferred Shares are listed and posted for trading on the Toronto Stock Exchange under the symbol AIT.PR.A.

8. The financial year end of both Aliant and Aliant Telecom is December 31.

9. BCE is a corporation incorporated under the CBCA on February 25, 1970. The corporate head office of BCE is located at 1000 de La Gauchetiere Ouest, Suite 3700, Montreal, Québec H3B 4Y7.

10. Bell Canada is a corporation existing under the laws of Canada. The corporate head office of Bell Canada is located at 1050 côte du Beaver Hall, Montréal, Québec H2Z 1S4. Bell Canada is an indirect subsidiary of BCE.

11. Each of BCE and Bell Canada is a reporting issuer or equivalent in all of the Provinces of Canada.

12. On March 7, 2006, Aliant and BCE announced a proposed business combination transaction that would combine Bell Canada's Rural Wireline Operations with Aliant's wireline telecommunications operations in the four Atlantic Provinces and Bell Canada's indirect 63.4 per cent interest in Télébec, Limited Partnership and NorthernTel, Limited Partnership, the two operating partnerships of Bell Nordiq Income Fund, held by BNG, an indirect subsidiary of Bell Canada, and result in the formation of a new income trust, currently referred to as Parent Trust that would hold an indirect interest in the Combined Business.

13. Aliant, BCE and Bell Canada have entered into the PEA Agreement in connection with the proposed Transaction.

14. Pursuant to the PEA Agreement, it is expected that the Transaction will proceed by plan of arrangement under section 192 of the CBCA which will require approval: (i) by at least two-thirds of the aggregate votes cast by holders of Aliant Common Shares and (if so ordered by the Court) holders of Aliant's Preferred Shares present in person or by proxy, voting together as a single class at the Meeting; and (ii) by the Supreme Court of Nova Scotia.

15. In addition, the Transaction is a related party transaction for the purposes of OSC Rule 61-501 and Québec Regulation Q-27 respecting the Protection of Minority Securityholders in the Course of Certain Transactions and will require approval by a "majority of the minority" holders of Aliant Common Shares as required by OSC Rule 61-501 and Quebec Regulation Q-27.

16. The proposed Transaction involves several steps that are summarized below:

(a) Aliant, Aliant Telecom and certain other wholly-owned subsidiaries of Aliant will be amalgamated to form Aliant Amalco.

(b) Wireline LP, a limited partnership under the laws of the Province of Manitoba, is to be formed with Bell Canada and a subsidiary of Aliant Amalco as limited partners and Aliant Amalco as the general partner (also holding a limited partnership interest). On the formation of Wireline LP, Bell Canada will contribute certain of its rural wireline assets to Wireline LP in exchange for Class B exchangeable limited partnership units of Wireline LP.

(c) Aliant Amalco will contribute substantially all of its assets to Wireline LP in exchange for the issuance to Aliant Amalco of Class A limited partnership units in Wireline LP and the assumption by Wireline LP of substantially all of Aliant Amalco's liabilities.

(d) Bell Canada will exchange certain other rural wireline assets with Wireline LP in exchange for certain assets in relation to Aliant's wireless telecommunications business and Aliant's DownEast Communications retail outlets. In addition, Wireline LP will (i) issue to Bell Canada a non-interest bearing demand promissory note; (ii) assume certain liabilities in relation to the Rural Wireline Operations being transferred to it; and (iii) issue to Bell Canada Class B exchangeable limited partnership units of Wireline LP.

(e) Parent Trust shall purchase all of the common shares of Aliant Amalco, other than a number of common shares to remain owned by BCE as elected by BCE, in return for units of Parent Trust to be designated as "Parent Trust Units" on the basis of one Parent Trust Unit for each common share purchased. The Parent Trust Units will represent an equal undivided beneficial interest in distributions by Parent Trust and in the net assets of Parent Trust in the event of termination or winding up.

(f) A second trust, Holdings Trust, will be formed under the laws of the Province of Québec. Parent Trust will transfer the common shares of Aliant Amalco obtained in (e) above to Holdings Trust in consideration for being issued units of Holdings Trust and Holdings Trust Series 1 notes.

(g) A second limited partnership, Holdings LP, is to be formed under the laws of the Province of Québec with Holdings Trust as a limited partner and a corporation to be formed under the CBCA, GP Co., as the general partner. Each of the remaining common shares of Aliant Amalco then held by BCE will be contributed by BCE to Holdings LP in exchange for Class 1 exchangeable limited partnership units of Holdings LP and common shares of GP Co. on a one-for-one basis.

(h) BCE will contribute all of the common shares of BNG to Holdings LP in exchange for additional Class 1 exchangeable limited partnership units of Holdings LP and additional common shares of GP Co.

(i) Parent Trust will issue to BCE and Bell Canada a number of units of Parent Trust to be designated as "Special Voting Units" equal to the number of Class 1 exchangeable limited partnership units of Holdings LP and Class B exchangeable limited partnership units of Wireline LP, respectively, held by them. Special Voting Units will not entitle the holder to any beneficial interest in distributions by, or net assets of, Parent Trust, but will each entitle the holder to one vote at any meeting of unitholders of Parent Trust.

(j) Holdings Trust will contribute the common shares of Aliant Amalco held by it to Holdings LP in return for Class 2 limited partnership units of Holdings LP and common shares of GP Co.

(k) Holdings LP will then transfer the common shares of Aliant Amalco held by it to a newly formed corporation to be incorporated as a wholly-owned subsidiary of Holdings LP, Acquisitionco, in return for promissory notes, preferred shares and common shares of Acquisitionco.

(l) Aliant Amalco and Acquisitionco will be amalgamated to form Aliant Mergeco, currently referred to as Wireline GP.

(m) Holdings LP will transfer the preferred shares of Wireline GP held by it to BNG in return for common shares of BNG and subordinated notes of BNG.

17. The Class B exchangeable limited partnership units of Wireline LP and the Class 1 exchangeable limited partnership units of Holdings LP to be held by Bell Canada and/or BCE following completion of the Transaction will be indirectly exchangeable, at the option of the holder, for Parent Trust Units.

18. Upon completion of the Transaction, it is expected that BCE and Bell Canada will hold 73.5 per cent of the Parent Trust Units (on a fully-diluted basis, assuming complete exchange of the exchangeable limited partnership units held by them). In addition, pursuant to a Securityholders' Agreement, BCE will have the right to appoint a majority of the directors of GP Co. and its operating entities and to nominate a majority of the trustees of Parent Trust as long as it owns, directly or indirectly, 30 per cent or more of the Parent Trust Units (on a fully-diluted basis) and will have the right to veto certain actions of Parent Trust and its operating entities so long as it owns, directly or indirectly, 20 per cent or more of the Parent Trust Units (on a fully-diluted basis).

19. Aliant (or its successor) intends to redeem the Aliant Preferred Shares on June 30, 2006 in accordance with their terms.

20. It is a condition to completion of the Transaction that the Parent Trust Units be approved for listing on the TSX.

21. Parent Trust will be a "successor issuer" to Aliant under NI 44-101, will file the notice contemplated in Section 2.8(1) of NI 44-101 and will therefore be eligible, following completion of the Transaction, to file a short-form prospectus under NI 44-101.

22. Upon completion of the Transaction, Aliant and Aliant Telecom will have converted into an income trust, the operations of which will be carried on by Wireline LP and Holdings LP and will consist of the combination of Bell Canada's Rural Wireline Operations with Aliant's wireline telecommunications operations in the Atlantic provinces and a 63.4 per cent interest in Télébec, Limited Partnership and NorthernTel, Limited Partnership, the two operating partnerships of Bell Nordiq Income Fund, held through BNG, resulting in the Combined Business. As part of the Transaction, Aliant and Aliant Telecom will have transferred their wireless telecommunications operations and "DownEast" retail stores to Bell Canada.

23. Completion of the Transaction is subject to satisfaction or waiver of a number of closing conditions, including receipt of required regulatory approvals, receipt of favourable advance tax rulings from the Canada Revenue Agency, approval of the Toronto Stock Exchange to the listing of Parent Trust Units and shareholder approval by (i) special resolution of the holders of Aliant Common Shares and (if required) Aliant Preferred Shares, voting together, and (ii) a majority of the minority holders of Aliant Common Shares, as described above. It is currently expected that closing of the Transaction will occur by the third calendar quarter of 2006.

24. It is currently expected that the Meeting to consider and, if thought advisable, approve the Transaction will be held on May 17, 2006.

25. In connection with the Meeting, Aliant will prepare and deliver to holders of Aliant Common Shares and other interested parties the Circular prepared in accordance with the requirements of NI 51-102. In particular, as prescribed in Item 14 of Form 51-102F5, the Circular will contain (or, to the extent permitted, incorporate by reference) prospectus-level disclosure concerning the business to be operated by Aliant and the other entities in which Parent Trust will have an interest upon completion of the Transaction, and a detailed description of the proposed plan of arrangement pursuant to which the Transaction will be implemented, and will be prepared in conformity with the provisions of the CBCA and NI 51-102, except where relief is granted by applicable securities regulatory authorities.

26. It is expected that the acquisition of the Rural Wireline Operations by Aliant Amalco, and later, Wireline GP, each a successor to the Filers will represent a "significant acquisition" for the Filers or their successor of greater than the 40 per cent level, pursuant to the application of the tests prescribed by Part 8 of NI 51-102.

27. It is expected that the acquisition of an indirect interest in BNG by the Parent Trust (indirectly through its interest in Holdings LP), will represent a "significant acquisition" for Parent Trust (as it exists prior to completion of the Transaction) of greater than the 50 per cent level, pursuant to the application of the tests prescribed by Part 6 of Ontario Securities Commission Rule 41-501, General Prospectus Requirements.

28. The Circular will contain or incorporate by reference the following financial statements, collectively referred to as the Circular Financial Disclosure:

(a) audited consolidated financial statements of Aliant (which consolidate the financial statements of Aliant Telecom) as at and for the three years ended December 31, 2005 (incorporated by reference);

(b) audited financial statements for the Rural Wireline Operations as at and for the three years ended December 31, 2005;

(c) audited consolidated financial statements of BNG as at and for the financial year ended December 31, 2005 (incorporated by reference);

(d) an audited balance sheet of Parent Trust; and

(e) pro forma financial statements of Parent Trust and the Combined Business as at and for the year ended December 31, 2005 giving effect to the proposed Transaction.

29. It is currently anticipated that the Circular will be finalized and delivered to Aliant shareholders and other interested parties on or about April 21, 2006 and will be filed with applicable securities regulatory authorities on SEDAR.

Decision

The Decision Makers being satisfied that they have jurisdiction to make this decision and that the relevant test under the Legislation has been met, the Requested Relief is granted provided that the Circular contains the Circular Financial Disclosure.