Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief applications in Multiple Jurisdictions -- relief from the requirements under section 3.2 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards that financial statements be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises to permit the issuer, who is not an SEC issuer, to prepare its financial statements and financial statements of its significant equity investee in accordance with U.S. GAAP for financial years that begin on or after 1 January 2012 but before 1 January 2015 -- relief granted subject to conditions.

Applicable Legislative Provisions

National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.

July 28, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

GWR GLOBAL WATER RESOURCES CORP.

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filer from the requirements under section 3.2 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) that financial statements be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises (the Exemption Sought) to permit the Filer to prepare its financial statements and the financial statements of its significant equity investee, Global Water Resources, Inc. (GWRI), in accordance with U.S. GAAP for their financial years that begin on or after January 1, 2012 but before January 1, 2015.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

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

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and NI 52-107 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

1. The Filer is a corporation incorporated under the Business Corporations Act (British Columbia) whose only business is to hold shares of GWRI and actively participate in the management, business and operations of GWRI through its representation on the board of, and shared management with, GWRI. The registered office of the Filer is located in Vancouver, British Columbia.

2. The Filer is a reporting issuer or equivalent in each of the provinces and territories of Canada.

3. The common shares of the Filer are listed on the Toronto Stock Exchange under the symbol "GWR".

4. The Filer is not an SEC issuer.

5. The Filer, to the best of its knowledge, is not in default of any requirement of securities laws in any jurisdiction in Canada.

6. The Filer owns an approximate 48.1% interest in GWRI, a Delaware corporation with a registered office in Phoenix, Arizona. GWRI is a foreign issuer. GWRI is not a reporting issuer or an SEC issuer.

7. The Filer has undertaken to the Ontario Securities Commission and to the securities regulatory authorities in each of the provinces and territories of Canada that for so long as GWRI represents a significant asset of the Filer and is not consolidated into the financial statements of the Filer, the Filer will provide its shareholders with separate audited annual consolidated financial statements and interim consolidated financial statements for GWRI, prepared in accordance with U.S. GAAP (together with a reconciliation to Canadian GAAP) or as would be required for GWRI under NI 52-107.

8. The Filer and GWRI each have "activities subject to rate regulation", as defined in the Handbook.

9. GWRI is required to file financial statements prepared in accordance with U.S. GAAP with the Arizona Corporation Commission, GWRI's principal regulator for its activities that are subject to rate regulation.

10. As "qualifying entities" for the purposes of section 5.4 of NI 52-107, the Filer and GWRI are permitted by that provision to prepare their financial statements for their financial year commencing January 1, 2011 and ending December 31, 2011 in accordance with Canadian GAAP -- Part V of the Handbook or, in the case of GWRI as a foreign issuer, in accordance with U.S. GAAP if it meets the requirements under subsection 4.9(e) of NI 52-107.

11. Were the Filer and GWRI SEC issuers, they would be permitted by section 3.7 of NI 52-107 to file their financial statements prepared in accordance with U.S. GAAP, which accords treatment of "activities subject to rate regulation" similar to that under Canadian GAAP -- Part V of the Handbook.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted for the Filer provided that:

(a) for its financial years commencing on or after January 1, 2012 but before January 1, 2015 and interim periods therein, the Filer will file financial statements on behalf of itself and GWRI in accordance with U.S. GAAP; and

(b) information for comparative periods presented in each of the financial statements referred to in paragraph (a) is prepared in accordance with U.S. GAAP.

The Exemption Sought will terminate in respect of the Filer's and GWRI's financial statements for annual and interim periods commencing on or after the earlier of:

(a) January 1, 2015; and

(b) the date on which the Filer or GWRI cease to have "activities subject to rate regulation" as defined in the Handbook as at the date of this decision.

"Kelly Gorman"
Deputy Director, Corporate Finance
Ontario Securities Commission