Contrans Income Fund - MRRS Decision

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications -- open-end investment trust -- trades oftrust units to existing unit holders under a distribution reinvestmentplan exempt from prospectus and registration requirements --trades of trust units to holders of limited partnership unitsunder a distribution reinvestment plan exempt from prospectusand registration requirements -- partnership units economicequivalent of trust units -- relief subject to conditions.

Statues Cited

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53, 74(1).

Multilateral Instruments Cited

Multilateral Instrument 45-102 Resale of Securities24 OSCB 7029.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ONTARIO, ALBERTA, BRITISHCOLUMBIA, MANITOBA,

NEW BRUNSWICK, NEWFOUNDLANDAND LABRADOR,

NORTHWEST TERRITORIES, NOVASCOTIA, NUNAVUT,

PRINCE EDWARD ISLAND, QUÉBEC,SASKATCHEWAN AND YUKON

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

CONTRANS INCOME FUND

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof the provinces of Ontario, Alberta, British Columbia, Manitoba,New Brunswick, Newfoundland and Labrador, Nova Scotia, PrinceEdward Island, Québec and Saskatchewan and in each ofthe Northwest Territories, the Yukon and Nunavut (the "Jurisdictions")has received an application from Contrans Income Fund (the "Fund")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that the requirementcontained in the Legislation to be registered to trade in asecurity and to file and obtain a receipt for a preliminaryprospectus and a prospectus (the "Registration and ProspectusRequirements") shall not apply to the distribution of subordinatevoting trust units of the Fund (the "Units") pursuantto a distribution reinvestment plan (the "DRIP");

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 Fund has representedto the Decision Makers that:

1. The Fund is an unincorporated, open-endlimited purpose trust established under the laws of the Provinceof Ontario pursuant to a declaration of trust dated as ofApril 16, 2002. The Fund was created for the purpose of acquiringand holding certain investments.

2. The only activity currently carried onby the Fund is the holding of units and notes of ContransOperating Trust (the "Operating Trust"), a trustwholly-owned by the Fund.

3. The Fund is not a "mutual fund"as defined in the Legislation because the holders of Units(the "Unitholders") are not entitled to receiveon demand an amount computed by reference to the value ofa proportionate interest in the whole or in a part of thenet assets of the Fund as contemplated in the definition of"mutual fund" in the Legislation.

4. The beneficial interests in the Fund aredivided into interests of three classes designated as Units,non-transferable Series A special voting rights (the "SubordinateVoting Rights") and non-transferable Series B specialvoting rights (the "Multiple Voting Rights"). TheFund is authorized to issue an unlimited number of Units andSubordinate Voting Rights and a limited number of MultipleVoting Rights. As of March 31, 2003, 16,790,710, 5,464,182and 1,467,724 Units, Subordinate Voting Rights and MultipleVoting Rights are issued and outstanding, respectively.

5. The Fund became a reporting issuer underthe Legislation on July 15, 2002 when it obtained a FinalDecision Document for its prospectus dated July 12, 2002.As of the date hereof, the Fund is not in default of any requirementsunder the Legislation.

6. The Units are listed and posted for tradingon the Toronto Stock Exchange under the symbol "CSS.UN".The Subordinate Voting Rights and the Multiple Voting Rightsare not listed or posted on any stock exchange.

7. The Fund makes distributions of its availablecash to Unitholders and intends to make monthly cash distributionsof substantially all of the amounts received by the Fund fromthe Operating Trust in each month. Cash distributions arepayable monthly to Unitholders of record on the last businessday of each month and are paid on or about the 15^thday of the following month.

8. Contrans Holding Limited Partnership (the"Partnership") is a limited partnership formed underthe laws of the Province of Ontario.

9. The Partnership is authorized to issuethree classes of partnership interests, Class A, B and C limitedpartnership units (collectively, the "Partnership Units").

10. The Partnership is not a reporting issuer(or its equivalent) in any of the Jurisdictions and thereis no intention for the Partnership to become a reportingissuer (or its equivalent).

11. The Partnership Units are not listed orposted for trading on any stock exchange.

12. Partnership Units are intended to be,to the greatest extent practicable, the economic equivalentof the Units and were initially created solely for Canadiantax purposes. Holders of Partnership Units (the "PartnershipUnitholders") are entitled to receive distributions paidby the Partnership, which distributions are equal, to thegreatest extent practicable, to distributions paid by theFund to Unitholders. Partnership Units are exchangeable foran equal number of Units at any time and are required to beexchanged for an equal number of Units in certain circumstances.

13. Cash distributions are payable monthlyto Partnership Unitholders of record on the last businessday of each month and will be paid on or about the 15^thday of the following month.

14. The Fund intends to establish the DRIPpursuant to which all Unitholders and Partnership Unitholders(other than United States residents) may, at their option,invest cash distributions paid on their Units and PartnershipUnits in additional Units (the "Plan Units") asan alternative to receiving cash distributions. The DRIP willnot be available to Unitholders and Partnership Unitholderswho are resident in the United States.

15. The DRIP will also enable Unitholdersand Partnership Unitholders to make additional cash investmentsthrough optional cash payments ("Optional Cash Payments")which will be invested in Plan Units on the same basis asthe distributions which are invested under the DRIP (exceptas to price), and any Unitholder or Partnership Unitholdermay participate by way of Optional Cash Payments. The Fundmay impose limitations on the maximum amount of Optional CashPayments in any financial year of the Fund to ensure thatthe number of Plan Units issued pursuant to the Optional CashPayments does not exceed two percent of the aggregate numberof Units and Partnership Units outstanding at the commencementof that financial year.

16. Cash distributions due to participantsin the DRIP (the "DRIP Participants") will be paidto Computershare Trust Company of Canada in its capacity asagent under the DRIP (in such capacity, the "DRIP Agent")and applied to purchase Plan Units. All Plan Units purchasedunder the DRIP will be purchased by the DRIP Agent directlyfrom the Fund. No commissions, service charges or brokeragefees will be payable by DRIP Participants in connection withthe DRIP.

17. The price of Plan Units purchased withsuch cash distributions will be 95% of the weighted averagetrading price of the Units on the TSX for the ten tradingdays immediately preceding a distribution payment date.

18. The price of Plan Units purchased withOptional Cash Payments will be the weighted average tradingprice of the Units on the TSX for the ten trading days immediatelypreceding a distribution payment date.

19. Where applicable, Participants will receiveeither fractional Plan Units or a cash equivalent paymentin lieu of such fractional Plan Units.

20. Cash distributions in respect of PlanUnits purchased under the DRIP will be held by the DRIP Agentfor the DRIP Participant's account and automatically investedunder the DRIP in Plan Units.

21. Plan Units purchased under the DRIP forthose DRIP Participants whose Units or Partnership Units arenot held by The Canadian Depository for Securities Limitedwill be registered in the name of the DRIP Agent, as agentfor the DRIP Participants.

22. DRIP Participants may terminate theirparticipation in the DRIP at any time by written notice tothe DRIP Agent and the Fund at least ten business days beforea distribution record date. Such notice, if actually receivedat least ten business days before a distribution record date,will have effect for such distribution payment date. Thereafter,distributions payable to such Unitholders or Partnership Unitholderswill be made in the customary manner.

23. The Fund may amend, suspend or terminatethe DRIP at any time, provided that such action shall nothave a retroactive effect which would prejudice the interestsof the DRIP Participants. All DRIP Participants will be sentwritten notice of any such amendment, suspension or terminationat least ten business days before the effective date of suchamendment, suspension or termination.

24. The distribution of the Plan Units bythe Fund pursuant to the DRIP cannot be made in reliance oncertain registration and prospectus exemptions contained inthe Legislation as the DRIP involves the reinvestment of incomedistributed by the Fund and the Partnership and not the reinvestmentof dividends or interest of the Fund and the Partnership.

25. The distribution of the Plan Units bythe Fund pursuant to the DRIP cannot be made in reliance onregistration and prospectus exemptions contained in the Legislationfor distribution reinvestment plans of mutual funds, as theFund is not a "mutual fund" as defined in the Legislationbecause the Unitholders are not entitled to receive on demandan amount computed by reference to the value of a proportionateinterest in the whole or in a portion of the net assets ofthe Fund;

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

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

THE DECISION of the Decision Makers pursuantto the Legislation is that the trades of Plan Units by the Fundto the DRIP Participants, including the Partnership Unitholders,pursuant to the DRIP shall not be subject to the Registrationand Prospectus Requirements of the Legislation, provided that:

(a) at the time of the trade the Fund isa reporting issuer or the equivalent under the Legislationand is not in default of any requirements of the Legislation;

(b) no sales charge is payable by DRIP Participantsin respect of the trade;

(c) the Fund has caused to be sent to theperson or company to whom the Plan Units are traded, notmore that 12 months before the trade, a statement describing:

(i) their right to withdraw from the DRIPand to make an election to receive cash instead of PlanUnits on the making of a distribution of income by theFund or the Partnership; and

(ii) instructions on how to exercise theright referred to in (1);

(d) in the financial year during which thetrade takes place, the aggregate number of Plan Units issuedpursuant to the Optional Cash Payments shall not exceedtwo percent of the aggregate number of Units and PartnershipUnits outstanding at the commencement of such financialyear;

(e) except in Québec, the first tradeor resale of Plan Units acquired pursuant to the Plan ina Jurisdiction shall be deemed to be a distribution or primarydistribution to the public under the Legislation unlessthe conditions set out in paragraphs 1 through 5 of subsection2.6(3) of Multilateral Instrument 45 -- 102 Resale ofSecurities are satisfied at the time of such first tradeor resale; and

(f) in Québec, the first trade (alienation)of Plan Units acquired pursuant to the Plan shall be deemedto be a distribution or primary distribution to the publicunless:

(i) at the time of the first trade, theFund is a reporting issuer in Québec and is notin default on any of the requirements of securities legislationin Québec;

(ii) no unusual effort is made to preparethe market or to create a demand for the Plan Units;

(iii) no extraordinary commission or considerationis paid to a person or company other than the vendor ofthe Plan Units in respect of the first trade; and

(iv) the vendor of the Plan Units, ifin a special relationship with the Fund, has no reasonablegrounds to believe that the Fund is in default of anyrequirement of the securities legislation in Québec.

April 15, 2003.