Trilogy Energy Trust

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions - exemption granted from the requirement to include historical financial statements for an issuer for which securities are being distributed in connection with a restructuring transaction -- the business, directors and management of the resulting entity immediately following the completion of the business combination will be exactly the same as the reporting issuer's business, directors and management immediately before the completion of the business combination

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1, Form 51-102F5 Information Circular, Item 14.2

December 10, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

PROCESS FOR EXEMPTIVE RELIEF

APPLICATION IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

TRILOGY ENERGY TRUST

(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the requirement under section 14.2 of Form 51-102F5 Information Circular (Form 51-102F5) of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) to provide historical and pro forma financial statements of 360networks (Cdn fiber) ltd. (360 fiber) in the management information circular of the Filer which may be delivered to unitholders of the Filer (the Unitholders) in connection with a special meeting of the Unitholders which may be held to approve a proposed restructuring transaction involving the Filer and 360 fiber under which securities of the Filer and 360 fiber would be changed, exchanged, issued or distributed (the Exemption Sought); and

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

(a) the Alberta Securities Commission is the principal regulator for the application;

(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, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut; and

(c) the decision is the decision of the principal regulator and the decision evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 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:

Possible Business Combination

1. The Filer is in discussions with 360 fiber and its shareholders, 360networks Corporation and 360networks Canada ltd., regarding a possible business combination (the Possible Business Combination) between the Filer and 360 fiber.

2. The definitive terms and conditions of the Possible Business Combination have not yet been agreed to by the parties and neither the Filer nor 360 fiber has obtained board approval in respect of the Possible Business Combination.

3. The Possible Business Combination, if completed, would result in the Unitholders owning shares or other securities of 360 fiber (New Trilogy) with the business, directors and management of New Trilogy immediately following the completion of the Possible Business Combination to be exactly the same as the Filer's business, directors and management immediately before the completion of the Possible Business Combination.

4. New Trilogy would be a reporting issuer or the equivalent in each of the provinces and territories of Canada and, subject to the approval of the Toronto Stock Exchange (TSX), its shares would be listed on the TSX.

5. It will be a condition to the closing of the Possible Business Combination that, among other conditions, 360 fiber shall not have at closing any assets or liabilities other than its tax pools. To accomplish this, it is expected that prior to the completion of the Possible Business Combination, all of 360 fiber's assets will be spunout to, and all of its actual and contingent liabilities (other than its tax pools) will be assumed by, one or more affiliates of 360 fiber. In addition, at closing of the Possible Business Combination one or more affiliates of 360 fiber will indemnify New Trilogy in respect of certain matters (the New Trilogy Indemnity). The terms of the New Trilogy Indemnity have not as yet been discussed in detail between the Filer and 360 fiber.

6. The Possible Business Combination is anticipated to be effected by way of an arrangement requiring the approval of the Unitholders and the court and is expected to constitute a "restructuring transaction" for the Filer under applicable securities laws.

The Filer

7. The Filer is an open-ended unincorporated investment trust governed by the laws of the Province of Alberta and its head office is located in Calgary, Alberta.

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

9. The Filer is not in default of any applicable securities laws.

10. The Filer indirectly holds oil and natural gas properties and related assets, mainly in the Kaybob and Grande Prairie areas of Alberta, through directly and indirectly held wholly-owned limited partnerships.

360 fiber

11. 360 fiber is a corporation governed by the laws of the Province of British Columbia and its head office is located in Vancouver, British Columbia.

12. 360networks Corporation and 360networks Canada ltd. are the only shareholders of 360 fiber.

13. 360 fiber is not a reporting issuer or the equivalent in any jurisdiction of Canada and its shares are not listed on any stock exchange.

14. 360 fiber emerged from protection under the Companies' Creditors Arrangement Act (Canada) (CCAA) in November 2002 and subsequently sold substantially all of its assets (other than debts owing from, and investments in, affiliates of 360 fiber) in a sale to Bell Canada in November 2004 (the Bell Sale). Both before emerging from CCAA protection and after its emergence up until the Bell Sale, 360 fiber was in the telecom business.

15. In connection with the Bell Sale, 360 fiber provided an indemnity to Bell (the Bell Indemnity) for a one year duration in respect of (i) failure by 360 fiber to fulfill its covenants in the sale agreement and (ii) breaches of 360 fibers representations and warranties in the sale agreement.

16. The Bell Indemnity is indefinite in the case of fraud and the following representations of 360 fiber: (i) that 360 fiber had proper authority to enter into the sale agreement; (ii) that the authorized and issued capital of certain subsidiaries of 360 fiber was as represented in the sale agreement; and (iii) that 360 fiber did not enter into any other agreements to sell the assets and shares that were the subject of the sale agreement and that 360 fiber had proper title to such assets and shares.

17. No claims have been made by Bell under the Bell Indemnity since the Bell Sale and to the knowledge of the Filer at this time there are no other outstanding indemnities given by 360 fiber.

18. Since the Bell Sale, 360 fiber's business activities have involved the collection of receivables and attempting to realize on the value of certain residual telecom assets primarily comprised of dark fiber and associated equipment.

Proposed Trust Circular Disclosure

19. In order to obtain Unitholder approval for the arrangement to effect the Possible Business Combination, the Filer must send an information circular to the Unitholders (the Trust Circular) that complies with Form 51-102F5.

20. The Filer will include in the Trust Circular, in lieu of the historical and pro forma financial statements of 360 fiber required pursuant to section 14.2 of Form 51-102F5 (the 360 fiber Financials), a pro forma balance sheet as at the date of the most recent balance sheet of the Filer to be incorporated by reference in the Trust Circular which will give effect to the Possible Business Combination as if it had taken place as at such date (the Proposed Pro Forma Balance Sheet), with subsequent events and pro forma adjustments.

21. The Trust Circular will otherwise comply with applicable securities laws and will contain disclosure regarding 360 fiber's tax pools and how the tax position of New Trilogy following the completion of the Possible Business Combination will differ from the tax position of the Filer prior to the completion of the Possible Business Combination.

22. The Trust Circular will contain disclosure regarding the Bell Indemnity and the New Trilogy Indemnity as well as the risks related to such indemnities.

23. Including the 360 fiber Financials in the Trust Circular will not assist the Unitholders with their assessment of the Possible Business Combination since:

(a) 360 fiber will have no assets or liabilities other than its tax pools at closing of the Possible Business Combination; and

(b) following the completion of the Possible Business Combination New Trilogy will not carry on any of the business previously carried on by 360 fiber.

24. Including the disclosure detailed in paragraph 20 above in the Trust Circular will provide Unitholders with all of the material information they need to assess the Possible Business Combination and will ensure that Unitholders understand that following the completion of the Possible Business Combination New Trilogy will not have any assets or liabilities of 360 fiber other than its tax pools nor will it carry on any of the business previously carried on by 360 fiber.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that the Filer includes in the Trust Circular the Proposed Pro Forma Balance Sheet.

Furthermore, the decision of the principal regulator and the securities regulatory authority or regulator in Ontario is that the Application and this decision be kept confidential and not be made public until the earlier of: (i) the date on which the Filer publicly announces that it has entered into a definitive agreement in respect of the Possible Business Combination; (ii) the date the Filers advise the Decision Makers that there is no longer any need for the application in this decision to remain confidential; and (iii) the date that is 90 days after the date of this decision.