PrimeWest Energy Trust - MRRS Decison

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications -- Open-end 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.

Applicable Ontario Statutory Provisions

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

Applicable Multilateral Instruments

Multilateral Instrument 45-102 Resale of Securities,(2001) 24 OSCB 7029.

Applicable National Instruments

National Instrument 14-101 Definitions, (2002)25 OSCB 8461.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, SASKATCHEWAN,MANITOBA,

ONTARIO, QUEBEC, NEW BRUNSWICK,NOVA SCOTIA,

NEWFOUNDLAND AND LABRADOR,AND

PRINCE EDWARD ISLAND

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

PRIMEWEST ENERGY TRUST

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the Decision Maker) in each of BritishColumbia, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia,New Brunswick, Prince Edward Island and Newfoundland and Labrador(the Jurisdictions) has received an application from PrimeWestEnergy Trust (the Trust) for a decision, pursuant to the securitieslegislation of the Jurisdictions (the Legislation), that therequirements contained in the Legislation to be registered totrade in a security (the Registration Requirement) and to fileand obtain a receipt for a preliminary prospectus and a finalprospectus (the Prospectus Requirement) shall not apply to certaintrades in trust units of The Trust issued pursuant to a distributionreinvestment plan;

AND WHEREAS pursuant to 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 Quebec Securities CommissionNotice 14-101;

AND WHEREAS the Trust has representedto the Decision Makers that:

1. The Trust is an open-end investment trustcreated under the laws of Alberta pursuant to a declarationof trust dated August 2, 1996, as amended and restated November6, 2002 (the Declaration of Trust);

2. Computershare Trust Company of Canada isthe trustee of the Trust (in such capacity, the Trustee) andPrimeWest Energy Inc. (PrimeWest) is the authorized attorneyof the Trust;

3. The principal undertaking of the Trustis to acquire and hold, directly and indirectly, interestsin petroleum and natural gas properties and assets relatedthereto. The Trust's primary asset is a royalty entitlingthe Trust to receive 99% of the net cash flow generated bythe petroleum and natural gas interest held by PrimeWest,after certain costs, expenditures and deductions (DistributableIncome);

4. Under the Declaration of Trust, the Trustis authorized to issue an unlimited number of transferable,non-redeemable trust units (Trust Units), of which there were46,120,145 Trust Units outstanding as at August 31, 2003;

5. Each Trust Unit represents an equal fractionalundivided beneficial interest in the net assets of the Trust,and entitles its holder (a Unitholder) to one vote at meetingsof Unitholders and to participate equally with respect toany and all distributions made by the Trust, including distributionsof net income and net realized capital gains, if any;

6. The Trust has been a reporting issuer,or the equivalent, in each of the Jurisdictions since 1996and is not in default of any requirement under the Legislation;

7. The Trust is a qualifying issuer withinthe meaning of Multilateral Instrument 45-102 Resale ofSecurities (MI 45-102);

8. The Trust Units are listed and posted fortrading on the Toronto Stock Exchange (the TSX) under thesymbol PWI.UN and on the New York Stock Exchange under thesymbol PWI;

9. Under the Declaration of Trust, each monththe Trust distributes to Unitholders the Distributable Incomegenerated during the previous month;

10. The Trust is not a mutual fund as definedin the Legislation because the Unitholders are not entitledto receive on demand an amount computed by references to thevalue of a proportionate interest in the whole or in partof the net assets of the Trust as contemplated by the definitionof mutual fund contained in the Legislation;

11. The Trust currently has in place a distributionreinvestment and optional Trust Unit purchase plan (the OldDRIP) which enables eligible Unitholders who elect to participatein the Old DRIP to direct that cash distributions paid ontheir existing Trust Units (Cash Distributions) be automaticallyapplied to the purchase of additional Trust Units (DRIP Units)from treasury (the Reinvestment Option);

12. The Old DRIP also entitles Unitholderswho have elected to participate in the Reinvestment Optionto make, at their discretion, additional cash payments (OptionalCash Payments) which are invested in additional DRIP Unitson the same basis as distributions are reinvested pursuantto the Reinvestment Option (the Cash Payment Option);

13. At the time the Old DRIP was implemented,the Trust obtained exemptive relief from the RegistrationRequirement and Prospectus Requirement in those Jurisdictionsin which such relief was necessary;

14. The Trust intends to establish a new PremiumDRIP which will retain the Reinvestment Option and Cash PaymentOption but will also enable eligible Unitholders who decideto reinvest Cash Distributions to authorize and direct ComputershareTrust Company of Canada, in its capacity as agent under thePlan (or such other trust company that is appointed agentunder the Plan) (in such capacity, the Plan Agent),to pre-sell through a designated broker (the Plan Broker),for the account of the Unitholders who so elect, that numberof Trust Units equal to the number of DRIP Units issuableon such reinvestment, and to settle such pre-sales with theDRIP Units issued on the applicable distribution payment datein exchange for a cash payment equal to 102% of the reinvestedCash Distributions (the Premium Distribution Option). ThePlan Broker will be entitled to retain for its own accountthe difference between the proceeds realized in connectionwith the pre-sales of such Trust Units and the cash paymentto the Plan Agent equal to 102% of the reinvested Cash Distributions;

15. The Cash Payment Option will only be availableto Unitholders that have elected to have their Cash Distributionsreinvested in DRIP Units under either the Reinvestment Optionor Premium Distribution Option (Participants). In addition,PrimeWest shall have the right to determine from time to timewhether the Cash Payment Option will be available;

16. The Premium DRIP will supercede the OldDRIP. All Unitholders who are enrolled in the Old DRIP atthe time that the Premium DRIP becomes effective will, subjectto any contrary elections made by such Unitholders, be automaticallyenrolled in the Reinvestment Option of the Premium DRIP;

17. All DRIP Units purchased under the PremiumDRIP will be purchased by the Plan Agent directly from theTrust on the relevant distribution payment date at a pricedetermined by reference to the Average Market Price (definedin the Plan as the arithmetic average of the daily volumeweighted average trading prices of the Trust Units on theTSX for the trading days starting on the second business dayfollowing the distribution record date and ending on the secondbusiness day immediately prior to the distribution paymentdate on which at least a board lot of Trust Units was traded,such period not to exceed 20 trading days);

18. DRIP Units purchased under the ReinvestmentOption, the Premium Distribution Option or the CashPayment Option will be purchased at a 5% discount to the AverageMarket Price;

19. The Plan Broker's prima facie returnunder the Premium Distribution Option will be approximately3% of the reinvested Cash Distributions (based on pre-salesof Trust Units having a market value of approximately 105%of the reinvested Cash Distributions and a fixed cash paymentto the Plan Agent, for the account of applicable Participants,of an amount equal to 102% of the reinvested Cash Distributions).The Plan Broker may, however, realize more or less than thisprima facie amount, as the actual return will varyaccording to the prices the Plan Broker is able to realizeon the pre-sales of Trust Units. The Plan Broker bears theentire risk of adverse changes in the market, as Participantswho have elected the Premium Distribution Option are assureda cash payment equal to 102% of the reinvested Cash Distributions;

20. All activities of the Plan Broker on behalfof the Plan Agent that relate to pre-sales of Trust Unitsfor the account of Participants who elect the Premium DistributionOption will be in compliance with applicable Legislation andthe rules and policies of the TSX (subject to any exemptiverelief granted). The Plan Broker will also be a member ofthe Investment Dealers Association of Canada, and will beregistered under the Legislation of any Jurisdiction wherethe first trade in DRIP Units pursuant to the Premium DistributionOption makes such registration necessary;

21. The Premium DRIP will not be availableto Unitholders who are residents of the United States;

22. Participants who choose to participatein the Premium DRIP may elect either the Reinvestment Optionor the Premium Distribution Option in respect of their CashDistributions at their sole option, and are free to terminatetheir participation under either option, or to change theirelection, in accordance with the terms of the Premium DRIP;

23. Under the Reinvestment Option, Cash Distributionswill be paid to the Plan Agent and applied by the Plan Agentto the purchase of DRIP Units, which will be held under thePremium DRIP for the account of the appropriate Participantswho have elected to participate in that component of the PremiumDRIP;

24. Under the Premium Distribution Option,Cash Distributions will be paid to the Plan Agent and appliedby the Plan Agent to the purchase of DRIP Units for the accountof the appropriate Participants who have elected to participatein that component of the Premium DRIP, but the DRIP Unitspurchased thereby will be automatically transferred to thePlan Broker to settle pre-sales of Trust Units made by thePlan Broker on behalf of the Plan Agent for the account ofsuch Participants in exchange for a cash payment equal to102% of the reinvested Cash Distributions;

25. Under the Cash Payment Option, a Participantmay, through the Plan Agent, purchase DRIP Units up to a stipulatedaggregate maximum dollar amount per year of $100,000 and subjectto a minimum amount per remittance of $100. The aggregatenumber of DRIP Units that may be purchased under the CashPayment Option by all Participants in any financial year ofthe Trust will be limited to a maximum of 2% of the numberof Trust Units issued and outstanding at the start of thefinancial year;

26. No brokerage fees or service charges willbe payable by Participants in connection with the purchaseof DRIP Units under the Premium DRIP;

27. DRIP Units purchased under the PremiumDRIP will be credited to a Participant's account, and allCash Distributions on Trust Units enrolled in the PremiumDRIP will be automatically reinvested in DRIP Units underthe Reinvestment Option or exchanged for a cash payment underthe Premium Distribution Option, as applicable, in accordancewith the terms of the Premium DRIP and the current electionof that Participant;

28. Depending on the policies of a Participant'sbroker, investment dealer, financial institution or othernominee through which the Participant holds its Trust Units,in the case of beneficial Unitholders, the Premium DRIP permitsfull investment of reinvested Cash Distributions and OptionalCash Payments because fractions of Trust Units, as well aswhole Trust Units, may be credited to Participants' accounts;

29. PrimeWest reserves the right to determinefor any distribution payment date how many DRIP Units willbe available for purchase under the Premium DRIP;

30. If, in respect of any distribution paymentdate, fulfilling all of the elections under the Premium DRIPwould result in the Trust exceeding either the limit on DRIPUnits set by PrimeWest or the aggregate annual limit on DRIPUnits issuable pursuant to the Cash Payment Option,then elections for the purchase of DRIP Units on the nextdistribution payment date will be accepted: (i) first, fromParticipants electing the Reinvestment Option; (ii) second,from Participants electing the Premium Distribution Option;and (iii) third, from Participants electing the Cash PaymentOption. If the Trust is not able to accept all elections ina particular category, then purchases of DRIP Units on thenext distribution payment date will be pro rated among allParticipants in that category according to the number of DRIPUnits sought to be purchased;

31. If PrimeWest determines that no DRIP Unitswill be available for purchase under the Premium DRIP fora particular distribution payment date, then all Participantswill receive the Cash Distribution announced by the Trustfor that distribution payment date;

32. A Participant may terminate its participationin the Premium DRIP at any time by providing written noticeto the Plan Agent, or in the case of a beneficial Unitholder,by providing written notice to their investment advisor orbroker. A termination form received on or after the distributionrecord date will become effective after the distribution paymentdate to which such record date relates;

33. The Trust reserves the right to amend,suspend or terminate the Plan at any time, provided that suchaction shall not have a retroactive effect which would prejudicethe interests of the Participants. The Trust will notify Unitholdersof any such amendment, suspension or termination in accordancewith the Premium DRIP and applicable securities law requirements;

34. The distribution of DRIP Units by theTrust pursuant to the Premium DRIP cannot be made in relianceon existing exemptions from the Registration Requirement andProspectus Requirement contained in the Legislation as thePremium DRIP involves the reinvestment of distributions ofDistributable Income of the Trust and not the reinvestmentof dividends, interest or distributions of capital gains orout of earnings or surplus;

35. The distribution of DRIP Units by theTrust pursuant to the Premium DRIP may not be permitted tobe made in reliance on exemptions from the Registration Requirementand Prospectus Requirement contained in the Legislation fordistribution reinvestment plans of mutual funds, asthe Trust is not a mutual fund as defined in the Legislation;

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;

THE DECISION of the Decision Makers pursuantto the Legislation is that:

1. the Registration Requirement and ProspectusRequirement contained in the Legislation shall not apply totrades by the Trust of DRIP Units for the account of Participantspursuant to the Premium DRIP, provided that:

1.1 at the time of the trade the Trust isa reporting issuer or the equivalent under the Legislationand is not in default of any requirements of the Legislation;

1.2 no sales charge is payable by Unitholdersin respect of the trade;

1.3 the Trust has caused to be sent to theperson or company to whom the DRIP Units are traded, notmore than 12 months before the trade, a statement describing:

1.3.1 their right to withdraw from thePremium DRIP and to make an election to receive cash insteadof DRIP Units on the making of a distribution of incomeby the Trust (the Withdrawal Right); and

1.3.2 instructions on how to exercisethe Withdrawal Right; and

1.4 the aggregate number of DRIP Units issuedunder the Cash Payment Option of the Premium DRIP in anyfinancial year of the Trust shall not exceed 2% of the aggregatenumber of Trust Units outstanding at the start of that financialyear;

2. the first trade of the DRIP Units acquiredunder this Decision shall be deemed to be a distribution ora primary distribution to the public under the Legislation;and

3. the Prospectus Requirement contained inthe Legislation shall not apply to the first trade of DRIPUnits acquired by Participants under this Decision, providedthat:

3.1 except in Québec, the conditionsin subsection 2.6(3) of MI 45-102 are satisfied; and

3.2 in Québec:

3.2.1 at the time of the first trade theTrust is a reporting issuer in Québec and has beena reporting issuer in Québec for the 12 monthsimmediately preceding the first trade and is not in defaultof any of the requirements of the Legislation in Québec;

3.2.2 no unusual effort is made to preparethe market or to create a demand for the DRIP Units;

3.2.3 no extraordinary commission or considerationis paid to a person or company other than the vendor ofthe DRIP Units in respect of the trade; and

3.2.4 the vendor of the DRIP Units, ifin a special relationship with the Trust, has no reasonablegrounds to believe that the Trust is in default of anyrequirement of the Legislation.

September 16, 2003.