Borealis Retail Real Estate Investment Trust - MRRS Decision

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications -- real estate investment trust exempt fromprospectus and registration requirements in connection withissuance of units to existing unit holders pursuant to distributionreinvestment plan whereby distributions are reinvested in additionalunits of the trust, subject to certain conditions - first tradein additional units deemed a distribution unless made in compliancewith certain provisions of MI 45-102.

Applicable Ontario Statutory Provisions

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

Ontario Rules

Multilateral Instrument 45-102 Resale of Securities(2001), 24 OSCB 5522.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, MANITOBA,

ONTARIO, QUEBEC, NOVA SCOTIA,NEW BRUNSWICK,

PRINCE EDWARD ISLAND, NEWFOUNDLANDAND LABRADOR,

YUKON, NORTHWEST TERRITORIESAND NUNAVUT

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

BOREALIS RETAIL REAL ESTATEINVESTMENT TRUST

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatoryauthority or regulator (the "Decision Maker")in each of British Columbia, Alberta, Saskatchewan, Manitoba,Ontario, Quebec, Nova Scotia, New Brunswick, Prince Edward Island,Newfoundland and Labrador, Yukon, Northwest Territories andNunavut (the "Jurisdictions") has receivedan application from Borealis Retail Real Estate Investment Trust(the "REIT") for a decision pursuant to thesecurities 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 final prospectus (the "Registrationand Prospectus Requirements") shall not apply to thedistribution and resale of units of the REIT ("Units")pursuant to a distribution reinvestment plan to be implementedby the REIT (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, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice14-101;

AND WHEREAS the REIT has representedto the Decision Makers that:

1. The REIT is an unincorporated, open-endedinvestment trust established under the laws of the Provinceof Ontario by a declaration of trust dated March 28, 2003.

2. The beneficial interests in the REIT aredivided into a single class of Units and the REIT is authorizedto issue an unlimited number of Units. As of the date hereof,one Unit is issued and outstanding.

3. Each Unit represents a proportionate undividedbeneficial interest in the REIT and entitles holders of Units("Unitholders") to one vote at any meetingof Unitholders and to participate pro rata in any distributionsby the REIT and, in the event of termination of the REIT,in the net assets of the REIT remaining after satisfactionof all liabilities.

4. The REIT has applied to have the Unitslisted and posted for trading on the Toronto Stock Exchange(the "TSX").

5. The REIT is not a "mutual fund"as defined in the Legislation because the Unitholders arenot entitled to receive on demand an amount computed by referenceto the value of a proportionate interest in the whole or inpart of the net assets of the REIT as contemplated in thedefinition of "mutual fund" in the Legislation.

6. The REIT is not currently a reporting issuerunder the Legislation. On June 2, 2003, the REIT filed a preliminaryprospectus in connection with an initial public offering ofUnits in each of the Jurisdictions. An amended and restatedpreliminary prospectus was filed by the REIT in each of theJurisdictions on June 12, 2003. Upon issuance of a receiptfor the final prospectus, the REIT will become a reportingissuer under the Legislation.

7. The REIT has been formed to directly orindirectly own, manage, lease and develop (where appropriate)retail properties, primarily in Canada. A portfolio of sixretail centres will be acquired by the REIT on completionof the offering and related transactions.

8. The specific objectives of the REIT are:(i) to generate stable and growing cash distributions on atax efficient basis; (ii) to enhance the value of the REIT'sassets and maximize long-term Unit value through the activemanagement of its assets; and (iii) to expand the asset baseof the REIT and increase its distributable income throughan accretive acquisition program by accessing the networkof relationships and depth of commercial property and financingexperience offered by Borealis Capital Corporation and itssubsidiaries.

9. The REIT currently intends make cash distributionsto Unitholders monthly equal to, on an annual basis, approximately85% of its distributable income.

10. The REIT intends to establish the DRIPpursuant to which Unitholders may, at their option, investcash distributions paid on their Units in additional Units("Additional Units"). The DRIP will not beavailable to Unitholders who are not Canadian residents.

11. Distributions due to participants in theDRIP ("DRIP Participants") will be paid toCIBC Mellon Trust Company in its capacity as agent under theDRIP (in such capacity, the "DRIP Agent")and applied to purchase Additional Units. All Additional Unitspurchased under the DRIP will be purchased by the DRIP Agentdirectly from the REIT.

12. DRIP Participants will receive a furtherdistribution, payable in Units, equal in value to 3% of eachcash distribution that is reinvested under the DRIP.

13. No commissions, service charges or brokeragefees will be payable by DRIP Participants in connection withthe DRIP and all administrative costs will be borne by theREIT.

14. DRIP Participants may terminate theirparticipation in the DRIP at any time by providing prior writtennotice to their broker. Such notice, if actually receivedat least five business days prior to a distribution recorddate, will have effect in respect of the next distributiondate. If a DRIP Participant elects to terminate his or herparticipation in the DRIP, he or she will receive all furtherdistributions in cash.

15. The REIT 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 termination.

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 Additional Units ofthe REIT to the DRIP Agent for the account of the DRIP Participantsshall not be subject to the Registration and Prospectus Requirementsof the Legislation provided that:

(a) at the time of the trade the REIT is areporting issuer or the equivalent under the Legislation,where applicable, and is not in default of any requirementsof the Legislation;

(b) no sales charge is payable in respectof the trade;

(c) the REIT has caused to be sent to theperson or company to whom the Additional Units are traded,not more 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 Unitson the making of a distribution of income by the REIT; and

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

(d) except in Quebec, the first trade in AdditionalUnits acquired pursuant to this Decision in a Jurisdictionshall be deemed a distribution or primary distribution tothe public under the Legislation of such Jurisdiction unlessthe conditions in paragraphs 2 through 5 of subsections 2.6(3)of Multilateral Instrument 45-102 Resale of Securitiesare satisfied; and

(e) in Quebec, the first trade (alienation)in Additional Units acquired pursuant to this Decision shallbe deemed a distribution or primary distribution to the publicunless:

(i) at the time of the first trade, theREIT is a reporting issuer in Quebec and is not in defaultof any requirement of the Legislation of Quebec;

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

(iii) no extraordinary commission or considerationis paid to a person or company in respect of the trade;and

(iv) if the seller of the Additional Unitsis an insider of the REIT, the seller has reasonable groundsto believe that REIT is not in default of any requirementof the Legislation of Quebec.

August 1, 2003.