Harvest Energy Trust - MRRS Decision
Headnote
Mutual Reliance Review System for ExemptiveRelief Applications - Open-ended investment trust exempt fromprospectus and registration requirements in connection withissuance of units to existing unitholders under a distributionreinvestment plan whereby distributions of income are reinvestedin additional units of the trust, subject to certain conditions- first trade relief provided for additional units of trust,subject to certain conditions.
Statues Cited
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53, 72(5), 74(1).
Rules Cited
Rule 45-502 Dividend or Interest Reinvestmentand Stock Dividend Plans 21 OSCB 3685.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, SASKATCHEWAN,MANITOBA, ONTARIO,
QUÉBEC, NEW BRUNSWICK,NOVA SCOTIA, NEWFOUNDLAND AND LABRADOR,
PRINCE EDWARD ISLAND, YUKON,NUNAVUT AND NORTHWEST TERRITORIES
AND
THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
HARVEST ENERGY TRUST
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Saskatchewan, Manitoba, Ontario, Québec,Nova Scotia, New Brunswick, Prince Edward Island, Newfoundlandand Labrador, Yukon, Nunavut and Northwest Territories (the"Jurisdictions") has received an application fromHarvest Energy Trust ("Harvest") for a decision, underthe securities legislation of the Jurisdictions (the "Legislation"),that the requirements contained in the Legislation to be registeredto trade in a security and to file and obtain a receipt fora preliminary prospectus and a prospectus (the "Registrationand Prospectus Requirements") shall not apply to certaintrades in units of Harvest issued under a distribution reinvestmentplan;
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 Harvest has represented tothe Decision Makers that:
1. Harvest is an open-ended investment trustformed under the laws of the province of Alberta under a trustindenture dated September 27, 2002 (the "Trust Indenture");
2. Harvest is a reporting issuer in each ofthe provinces of Canada other than Quebec. To its knowledge,Harvest is not in default of any requirements under the legislationof any of the Jurisdictions;
3. the trustee of Harvest is Valiant TrustCompany. The entire beneficial interest in Harvest is heldby the holders of trust units ("Units") issued byHarvest;
4. Harvest Operations Corp. (the "Corporation"),a wholly-owned subsidiary of Harvest, manages and administratesHarvest;
5. the Units are listed and posted for tradingon the Toronto Stock Exchange (the "TSX");
6. Harvest currently makes and expects tocontinue to make monthly distributions of distributable income("Cash Distributions"), if any, to the holders ofUnits ("Unitholders"). The distributable incomeof Harvest for any month is a function of the amounts receivedby Harvest under certain royalties, other income and certainexpenses;
7. Harvest is not a "mutual fund"under the Legislation as the holders of Units are not entitledto receive on demand an amount computed by reference to thevalue of a proportionate interest in the whole or in partof the net assets of Harvest, as contemplated by the definitionof "mutual fund" in the Legislation;
8. Harvest has authorized the establishmentof a plan (the "Plan") under which eligible Unitholdersmay, at their option, purchase additional Units ("AdditionalUnits") of Harvest by directing that Cash Distributionsbe applied to the purchase of Additional Units (the "DistributionReinvestment Option") or by making optional cash payments(the "Cash Payment Option");
9. except as provided in paragraph 10 below,all Additional Units purchased under the Plan will be purchasedby the Valiant Trust Company (the "Plan Agent")directly from Harvest on the relevant distribution paymentdate at a price determined by reference to the Average MarketPrice (defined in the Plan as the arithmetic average of thedaily volume weighted average trading prices of the Unitson the TSX for the trading days from and including the secondbusiness day following the distribution record date to andincluding the second business day prior to the distributionpayment date on which at least a board lot of Units was tradedsuch period not to exceed 20 trading days). Additional Unitspurchased under the Distribution Reinvestment Option willbe purchased at a 5% discount to the Average Market Price.Additional Units purchased under the Cash Payment Option willbe purchased at the Average Market Price;
10. at the discretion of the Corporation,Additional Units purchased under the Plan or under the DistributionReinvestment Option will either be acquired from treasuryat 95% of Average Market Price or will be purchased at prevailingmarket prices through the facilities of the TSX followingthe distribution record date. Additional Units which are purchasedthrough the facilities of the TSX will be acquired duringthe 20 business day period following the relevant distributionrecord date but will only be acquired at prices that are equalto or less than 115% of the volume weighted trading priceof the Units on the TSX for the 10 trading days immediatelypreceding the date that Units are purchased;
11. the Cash Payment Option is available toeligible Unitholders who elect to reinvest their Cash Distributionsunder the Distribution Reinvestment Option;
12. under the Distribution Reinvestment Option,Cash Distributions will be paid to the Plan Agent and appliedby the Plan Agent to the purchase of Additional Units, whichwill be held under the Plan for the account of eligible Unitholderswho have chosen to participate in the Plan ("Participants");
13. under the Cash Payment Option, a Participantmay, through the Plan Agent, purchase Additional Units upto a stipulated maximum dollar amount per month and subjectto a minimum amount per remittance. The aggregate number ofAdditional Units that may be purchased under the Cash PaymentOption by all Participants in any financial year of Harvestwill be limited to a maximum of 2% of the number of Unitsissued and outstanding at the start of the financial year;
14. no brokerage fees or service charges willbe payable by Participants in connection with the purchaseof Additional Units under the Plan;
15. Additional Units purchased and held underthe Plan will be registered in the name of the Plan Agentor its nominee as agent for the Participants, and all cashdistributions on Units so held for the account of a Participantwill be automatically reinvested in Additional Units in accordancewith the terms of the Plan and the election of the Participant;
16. the Plan permits full investment of reinvestedCash Distributions and optional cash payments because fractionsof Units, as well as whole Units, may be credited to Participants'accounts with the Plan Agent;
17. Harvest reserves the right to determinefor any distribution payment date how many Additional Unitswill be available for purchase under the Plan;
18. if, in respect of any distribution paymentdate, fulfilling all of the elections under the Plan wouldresult in Harvest exceeding either the limit on AdditionalUnits set by Harvest or the aggregate annual limit on AdditionalUnits issuable under the Cash Payment Option, then electionsfor the purchase of Additional Units on such distributionpayment date will be accepted: (i) first, from Participantselecting the Distribution Reinvestment Option; and (ii) second,from Participants electing the Cash Payment Option. If Harvestis not able to accept all elections in a particular category,then purchases of Additional Units on the applicable distributionpayment date will be pro rated among all Participants in thatcategory according to the number of Additional Units soughtto be purchased;
19. if Harvest determines that no AdditionalUnits will be available for purchase under the Plan for aparticular distribution payment date, then all Participantswill receive the Cash Distribution announced by Harvest forthat distribution payment date;
20. a Participant may terminate its participationin the Plan at any time by submitting a termination form tothe Plan Agent. A termination form received between a distributionrecord date and a distribution payment date will become effectiveafter that distribution payment date;
21. Harvest reserves the right to amend, suspendor terminate the Plan at any time, provided that such actionshall not have a retroactive effect which would prejudicethe interests of the Participants. All Participants will besent written notice of any such amendment, suspension or termination;and
22. the Plan will not be available to Unitholderswho are residents of the United States and, until such timeas Harvest becomes a reporting issuer in Quebec, the Planwill not be available to Unitholders who are residents ofQuebec;
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;
AND WHEREAS the Decision of the DecisionMakers under the Legislation is that the trades of AdditionalUnits by Harvest to the Plan Agent for the account of Participantsunder the Plan shall not be subject to the Registration andProspectus Requirements of the Legislation provided that:
1. at the time of the trade Harvest is a reportingissuer or the equivalent under the Legislation and is notin default of any requirements of the Legislation;
2. no sales charge is payable in respect ofthe trade;
3. Harvest has caused to be sent to the personor company to whom the Additional Units are traded, not morethan 12 months before the trade, a statement describing:
(i) their right to withdraw from the Planand to make an election to receive cash instead of Unitson the making of a distribution of income by Harvest, and
(ii) instructions on how to exercise theright referred to in paragraph 3(i) above;
4. the aggregate number of Additional Unitsissued under the Cash Payment Option of the Plan in any financialyear of Harvest shall not exceed 2% of the aggregate numberof Units outstanding at the start of that financial year;
5. except in Québec, the first tradein Additional Units acquired under this Decision will be adistribution or primary distribution to the public unlessthe conditions in paragraphs (2) through (5) of subsections2.6(3) and (4) of Multilateral Instrument 45-102 Resale ofSecurities are satisfied; and
6. in Québec, the first trade in AdditionalUnits acquired under this Decision will be deemed a distributionunless:
(i) the issuer is and has been a reportingissuer in Québec for the 12 months preceding thealienation;
(ii) no unusual effort is made to preparethe market or to create a demand for the securities thatare the subject of the alienation;
(iii) no extraordinary commission or otherconsideration is paid in respect of the alienation;
(iv) if the seller of the securities isan insider of the issuer, the seller has no reasonable groundsto believe that the issuer is in default of any requirementof securities legislation;
7. disclosure of the initial distributionof Additional Units under this Decision is made to the relevantJurisdictions by providing particulars of the date of thedistribution of such Additional Units, the number of suchAdditional Units and the purchase price paid or to be paidfor such Additional Units in:
(i) an information circular or take-overbid circular filed in accordance with the Legislation; or
(ii) a letter filed with the Decision Makerin the relevant Jurisdiction by a person or company certifyingthat the person or company has knowledge of the facts containedin the letter; and
when Harvest distributes such Additional Unitsfor the first time Harvest will provide disclosure to the relevantJurisdictions which sets forth the date of such distribution,the number of such Additional Units and the purchase price paidfor such Additional Units, and thereafter not less frequentlythan annually, unless the aggregate number of Additional Unitsso distributed in any month exceeds 1 % of the aggregate numberof Units outstanding at the beginning of the month in whichthe Additional Units were distributed, in which case the disclosurerequired under this paragraph shall be made in each relevantJurisdiction in respect of that month within ten days of theend of such month.
January 31, 2003.
"Howard I. Wetston" "RobertL. Shirriff"