Avenir Diversified Income Trust - MRRS Decision

Headnote

Mutal Reliance Review System for Exemptive Relief Applications -- s. 13.1 of National Instrument 51-102 Continuous Disclosure Obligations and ss. 80 and 88(2) of the Securities Act (Ontario) -- exemption from the requirement in item 14.2 of Form 51-102F5 to include prospectus level disclosure in an information circular - relief granted from the requirement to include 3 years audited pre-acquisition financial statements in an information circular for 3 separate significant acquisitions - Relief granted on the condition that the existing financial statement disclosures presented in the information circular will provide some history and each of the 3 significant acquisitions are individually insignificant using an 'alternate optional' test.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S-5, as am., ss. 80, 88(2).

National Instrument 51-102 - Continuous Disclosure Obligations, ss. 9.1, 13.1.

Form 51-102F5 Information Circular, item 14.2.

May 8, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(THE JURISDICTIONS)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

AVENIR DIVERSIFIED INCOME TRUST

MRRS DECISION DOCUMENT

Background

1. The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from Avenir Diversified Income Trust (the Trust or the Filer) on behalf of the New Trust (as defined herein) for a decision under the securities legislation (the Legislation) of the Jurisdictions that the New Trust be exempt from the requirement contained in the Legislation which requires it to include three years of audited financial statements in an information circular in respect of the Indy, Eagle and Westvac acquisitions (as defined herein), (the Requested Relief).

2. Under National Instrument 11-101 Principal Regulator System (NI 11-101) and the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) the Filer is relying on the exemption in part 4 of NI 11-101 in each of British Columbia, Saskatchewan, Manitoba, New Brunswick, Newfoundland And Labrador, Prince Edward Island and Nova Scotia; and

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

Interpretation

3. Unless otherwise defined, the terms herein have the meaning set out in National Instrument 14-101 Definitions.

Representations

4. The Trust has represented to the Decision Makers that:

4.1 The Trust is an unincorporated open-ended investment trust duly formed under the laws of the Province of Alberta and the Trust's head office is located in Calgary, Alberta.

4.2 The Trust is a reporting issuer in each of the Jurisdictions.

4.3 The trust units of the Trust are listed and posted for trading on the Toronto Stock Exchange under the trading symbol "AVF.UN".

4.4 To its knowledge, the Trust is not in default of any of the requirements of the applicable securities legislation in any of the provinces in which it is a reporting issuer.

4.5 The Trust is entering into a plan of arrangement (the Arrangement) whereby the Trust will divest itself of its existing oilfield services business unit (Energy Services Division), all of which will be transferred to a new trust (the New Trust). In connection with the Arrangement it is intended that the Trust will maintain an approximate one third interest in the New Trust, with an initial approximate one third interest sold by the Trust through a secondary offering to be completed either concurrently with or shortly after the completion of the Arrangement. The balance of the units of the New Trust will be distributed to existing unitholders of the Trust (the Unitholders) (other than dissenting unitholders under the Arrangement), each of whom will receive a certain number of units of the New Trust for each currently held Trust Unit of the Trust. No new or additional assets are being acquired by any parties to the Arrangement.

4.6 The New Trust will make application to list its trust units (the New Trust Units) on the Toronto Stock Exchange.

4.7 The acquisition of the Energy Services Division by the New Trust constitutes a "significant acquisition" under the Legislation for the New Trust.

4.8 The information circular (the Information Circular) with respect to the special meeting of the Unitholders of the Trust, to be held in May, 2006 for the purpose of approving the Arrangement, will contain (or to the extent permitted, will incorporate by reference) prospectus-level disclosure in respect of the Trust and the New Trust and a detailed description of the Arrangement.

4.9 Pursuant to Section 14.2 of National Instrument 51-102F5, for the current financial year and each of the three most recently completed financial years, the Filer would be required to provide financial statements for each acquisition which collectively makes up the Energy Services Division, including financial statements for the Energy Services Division (the Disclosure Requirements).

5. On July 15, 2004 the Energy Services Division of the Trust expanded with the acquisition of all of the outstanding shares of Indy Oilfield Ltd. (Indy), a private company incorporated pursuant to the laws of Alberta, for $265,961. The acquisition provided the platform to expand the Energy Services Division's hydro-vac, steaming and vacuum truck business into the Grande Prairie area of Northwest Alberta.

6. Effective January 19, 2005, the Trust acquired through an indirect wholly owned subsidiary, 1118122 Alberta Ltd. (1118122), all of the issued and outstanding shares of Eagle Oilfield Services Inc. (Eagle) for an aggregate purchase price of $800,000 less assumed debt and working capital of approximately $150,000 paid in cash. Eagle provides steaming, vacuum and pressure truck services in the Spirit River area outside Grande Prairie, Alberta.

7. On September 1, 2005, the Trust, through a wholly owned subsidiary, acquired a 90% interest in Westvac Services Ltd. (Westvac) through a partnership structure for $9 million less debt and adjusted for working capital. This was funded through existing credit facilities and the issuance of 170,454 Trust Units. A former owner of Westvac, retains a 10% partnership interest in the acquired entity.

8. The Information Circular will include audited statements of income, retained earnings and cash flows for Energy Services Division of the Trust for the year ended December 31, 2005 and the six months ended December 31, 2004.

9. The acquisition of each of WestVac, Eagle, and Indy make up part of the Energy Services Division being transferred to the New Trust. By using the audited annual financial statements for the year ended December 31, 2005 of the Energy Services Division of the Trust (which will effectively become the New Trust) for its calculations of significance for the acquisition of each of WestVac, Eagle, and Indy, (Alternate Optional Test) none of Indy, Westvac and Eagle would individually meet the 20% significance thresholds.

10. Audited year end financial statements for January 31, 2005 for Westvac will be included in the information circular.

11. A full year's results of Eagle would be reflected in the December 31, 2005 financial statements of the Energy Services Division.

12. A full year's results of Indy would be reflected in the December 31, 2005 financial statements of the Energy Services Division and five months results of Indy would be reflected in the December 31, 2004 financial statements of the Energy Services Division.

13. Other than as provided herein, historical audited year-end financial statements for Indy, Eagle and Westvac prior to their acquisition by the Trust can't be provided as records are not available and former management is not available.

Decision

14. Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

15. The Decision of the Decision Makers under the Legislation is that the Requested Relief is granted to the Filer so long as:

15.1 The results from the Alternate Optional Test indicate that none of Indy, Westvac and Eagle would individually meet the 20% significance thresholds; and

15.2 The information circular includes the financial statements set out in representations 8 and 10.