Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications - Waiver grantedpursuant to section 4.5 of National Policy Statement No. 47 (and equivalent Quebeclegislation) to enable issuer to participate in the POP System and the Shelf System (ascontemplated in National Policy Statement No. 44 (and equivalent Quebec legislation) todistribute asset-backed securities in accordance with proposed National Instruments 44-101 and 44-102.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c.S.5, as am.

Regulations Cited

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am.,

Policies Cited

National Policy Statement No. 47 - Prompt Offering Qualification System.

National Policy Statement No. 44 - Rules for Shelf Prospectus Offerings and for PricingOfferings After the Final Prospectus is Receipted.

Proposed National Instrument 44-101- Short Form Prospectus Distributions (1999), 22OSCB (POP Supp 2).

Proposed National Instrument 44-102 - Shelf Distribution (1998), 21 OSCB 6206.


IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA,ONTARIO, QUEBEC, NEW BRUNSWICK, NOVA SCOTIA, PRINCE EDWARD ISLAND AND NEWFOUNDLAND

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
BOREALIS INFRASTRUCTURE TRUST

MRRS DECISION DOCUMENT


WHEREAS the local securities regulatory authority or regulator (the "DecisionMaker") in each of the provinces of British Columbia, Alberta, Saskatchewan, Manitoba,Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland(the "Jurisdictions") has received an application from Borealis Infrastructure Trust (the"Issuer") for a decision pursuant to section 4.5 of Canadian Securities Administrators'National Policy Statement No. 47 ("NP 47") - Prompt Offering Qualification System andpursuant to the applicable securities legislation of Quebec, including but not limited to,those set forth in Title II and Title III of the Securities Act and Regulation (Quebec) (the"POP Requirements") (and together with Canadian Securities Administrators' NationalPolicy Statement No. 44 ("NP 44") - Rules for Shelf Prospectus Offerings and theapplicable securities legislation of Quebec, including but not limited to those set forth inTitle II and Title III of the Securities Act and Regulation (Quebec) (the "ShelfRequirements"), collectively, the POP Requirements and the Shelf Requirements arereferred to as the "Policies") that the eligibility requirements (the "EligibilityRequirements") contained in the Policies for participation in the Prompt OfferingQualification System (the "POP System"), participation in the shelf system (the "ShelfSystem"), use of the Shelf Procedures (as defined in the Shelf Requirements) with anApproved Rating by an Approved Rating Organization (all as defined in the POPRequirements), and for the utilization of annual information forms (each , an "AIF"), apreliminary short form base shelf prospectus ("preliminary Shelf Prospectus") or apreliminary short form prospectus ("preliminary Short Form Prospectus"), a final short formbase shelf prospectus ("final Shelf Prospectus") or a final short form prospectus ("finalShort Form Prospectus"), shelf prospectus supplements (each a "Prospectus Supplement")and any necessary supporting documents shall not apply to the Issuer and that the Issuermay participate in the POP System and the Shelf System with respect to the issuance ofAsset-Backed Securities (as defined below) from time to time to the public.

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for this application;

AND WHEREAS the Issuer has represented to the Decision Makers that:

1. The Issuer is a special purpose trust established by Borealis Infrastructure TrustManagement Inc. (the "Issuer Trustee") pursuant to a declaration of trust, datedApril 29, 1999, governed by the laws of the province of Ontario (the "Declaration ofTrust"). The Issuer's principal office is located at One University Avenue, Suite802, Toronto, Ontario, M5J 2P1.

2. Pursuant to the Declaration of Trust, the business activities of the Issuer arespecifically limited to the financing, acquisition and administration of interests ininfrastructure projects and related programs, for the purpose of producing incometherefrom, and the funding of such activities through the issuance of Asset-BackedSecurities (as defined below) evidencing indebtedness of the Issuer pursuant to theterms of a trust indenture, dated June 8, 1999, (the "Trust Indenture") between theIssuer and The Trust Company of Bank of Montreal, as indenture trustee. TheIssuer does not carry on any activities other than those permitted under theDeclaration of Trust.

3. The Issuer proposes to offer (the "Offerings") under the POP System or the ShelfSystem, from time to time to the public in Canada, securities ("Asset-BackedSecurities") having an Approved Rating that are primarily serviced by the cash flowsof discrete pools of receivables that by their terms convert into cash within a finitetime period, and any rights or other assets designed to assure the servicing ortimely distribution of proceeds to security holders, to finance the purchase by theIssuer from time to time of certain payment rights or other income-producinginterests ("Payment Interests") in infrastructure projects and related programs.

4. The Issuer currently has no assets or liabilities other than the Payment Interestspurchased in connection with the Nova Scotia Learning Centres Program(described in paragraph 5 below), the liability in respect of the Series 1 Bonds(described in paragraph 5 below) and the other rights and obligations of the Issuerunder certain of the material contracts relating to the Nova Scotia Learning CentresProgram.

5. The Series 1 Bonds are the first series of Asset-Backed Securities issued under theTrust Indenture and a Supplemental Indenture. The Issuer used the proceeds ofthe offering of the Series 1 Bonds to purchase from Borealis Penco (Nova Scotia)Inc., a real estate company incorporated under the Companies Act (Nova Scotia)("Penco"), certain Payment Interests in respect of the construction, developmentand maintenance of learning centres in the province of Nova Scotia (the "NovaScotia Learning Centres Program"). The amounts received by the Issuer in respectof such Payment Interests are applied to the payment of the principal of, interest onand any other amounts due in respect of the Series 1 Bonds. The Series 1 Bondswere assigned a final rating of A- from each of CBRS Inc. ("CBRS") and Standardand Poor's Rating Services ("S&P"), the same rating assigned by each of CBRSand S&P to the long-term, unsecured debt obligations of the Province of NovaScotia.

6. As a special purpose trust, the Issuer will have no assets other than the PaymentInterests purchased in connection with the Nova Scotia Learning Centres Programand the Payment Interests to be purchased from time to time in connection with anyfuture Offering and the Issuer will not carry on any activities other than purchasingand holding such Payment Interests and issuing Asset-Backed Securities inconnection therewith.

7. Holders of Asset-Backed Securities of the Issuer will only have recourse to aspecific and segregated pool of assets and undertaking of the Issuer identified ina Supplemental Indenture and will not have any further recourse to the Issuer.

8. The Issuer would not be eligible to participate in the POP System without thisdecision because it does not satisfy the 12 month reporting issuer history set outin paragraph 4.1(1)(a) of NP 47.

9. In connection with each proposed Offering by the Issuer :

(a) the Issuer will have a current AIF;

(b) at the time of the filing of its most recent AIF, preliminary Short FormProspectus, preliminary Shelf Prospectus, final Short Form Prospectus orfinal Shelf Prospectus, as applicable, the Issuer will not be in default of anyrequirement of the Legislation;

(c) if the Issuer is filing a preliminary Short Form Prospectus more than 90 daysafter the end of its most recently completed financial year, the Issuer willhave filed financial statements for that year;

(d) in the case of an Offering made under the POP System that is not anOffering under the Shelf System, the Asset-Backed Securities to bedistributed will have:

(i) received an Approved Rating, on a provisional basis;

(ii) not been the subject of an announcement by an Approved RatingOrganization of which the Issuer is or ought to be aware that theApproved Rating given by the organization may be down-graded toa rating category that would not be an Approved Rating; and

(iii) not received a provisional or final rating lower than an ApprovedRating from any Approved Rating Organization; and

(e) in the case of an Offering under the Shelf System, at the respective times ofthe filing of its preliminary Shelf Prospectus and final Shelf Prospectus, theIssuer will have reasonable grounds for believing that:

(i) all Asset-Backed Securities that it may distribute under the final ShelfProspectus will receive an Approved Rating from at least oneApproved Rating Organization; and

(ii) no Asset-Backed Securities that it may distribute under the final ShelfProspectus will receive a rating lower than an Approved Rating fromany Approved Rating Organization.

10. Each AIF of the Issuer will be prepared in accordance with Appendix A of NP 47,with the following additional amendments:

(a) the disclosure in AIFs filed by the Issuer will be modified to reflect thespecial purpose nature of its business;

(b) if the Issuer has not completed its first financial year, the Issuer may presentthe information contained in its initial AIF as at a date within 30 days beforethe date that the initial AIF is filed; and

(c) if the Issuer has Asset-Backed Securities outstanding that were issuedpursuant to a prospectus, the AIF filed by the Issuer will disclose:

(i) a description of any events, covenants, standards or preconditionsthat are dependent or based on the economic performance of theunderlying pool of financial assets and that may impact on the timingor amount of payments or distributions to be made under the Asset-Backed Securities;

(ii) for the Issuer's two most recently completed financial years or suchlesser period commencing on the first date on which the Issuer hadAsset-Backed Securities outstanding, information on the underlyingpool of financial assets relating to:

(A) the composition of the pool as of the end of the financial yearor partial period;

(B) income and losses from the pool, on at least a quarterly basis;

(C) the payment, prepayment and collection experience of the poolon a quarterly basis; and

(D) any significant variances experienced in the matters referredto in subclauses (A), (B) and (C);

(iii) if any of the information disclosed under clause (ii) has been audited,the existence and results of the audit;

(iv) the investment parameters applicable to investments of any cash flowsurpluses;

(v) the amount of payments made in respect of principal and interest orcapital and yield, each stated separately, on its Asset-BackedSecurities outstanding during the most recently completed financialyear or partial period;

(vi) the occurrence of any events that have led or with the passage oftime could lead to the accelerated payment of principal or capital ofAsset-Backed Securities; and

(vii) the identity of any principal obligors for the outstanding Asset-BackedSecurities of the Issuer at the end of the most recent financial year orpartial period, the percentage of the underlying pool of financingassets represented by obligations of each principal obligor andwhether the principal obligor, if any, has filed an AIF in anyjurisdiction or a Form 10-K or Form 20-F in the United States.

11. Each preliminary Short Form Prospectus, preliminary Shelf Prospectus, final ShortForm Prospectus and final Shelf Prospectus, as applicable, filed by the Issuer willbe prepared in accordance with Appendix B of NP 47 and Schedule IV to theregulation made under the Securities Act (Quebec), with such amendments inconnection with the Shelf System as are specified in subsection 2.3(b), Section 3and Appendix B of NP 44 and Section III.1 of Division III, Chapter 1, Title II of theregulation made under the Securities Act (Quebec), with the following additionalamendments:

(a) the disclosure in the preliminary Short Form Prospectus, preliminary ShelfProspectus, final Short Form Prospectus and final Shelf Prospectus filed bythe Issuer will be modified to reflect the special nature of its business;

(b) the preliminary Short Form Prospectus, preliminary Shelf Prospectus, finalShort Form Prospectus and final Shelf Prospectus will describe or set out:

(i) the material attributes and characteristics of the Asset-BackedSecurities to be offered, including details on:

(A) the rate of interest or stipulated yield and any premium;

(B) the date for repayment of principal or return of capital and anycircumstances in which payments of principal or capital maybe made before such date, including any redemption or pre-payment obligations or privileges of the Issuer and any eventsthat may trigger early liquidation or amortization of theunderlying pool of financial assets;

(C) provisions for the accumulation of cash flows to provide for therepayment of principal or return of capital;

(D) provisions permitting or restricting the issuance of additionalsecurities and any other material negative covenantsapplicable to the Issuer;

(E) the nature, order and priority of the entitlements of holders ofAsset-Backed Securities and any other entitled persons orcompanies to receive cash flows generated from theunderlying pool of financial assets; and

(F) any events, covenants, standards or preconditions that aredependant or based on the economic performance of theunderlying pool of financial assets and that may impact on thetiming or amount of payment or distributions to be made underthe Asset-Backed Securities;

(ii) information on the underlying pool of financial assets for the periodfrom the date as at which the following information was presented inthe Issuer's current AIF to a date not more than 90 days before thedate of the issuance of a receipt for the preliminary Short FormProspectus or preliminary Shelf Prospectus, as the case may be,relating to:

(A) the composition of the pool as of the end of the period;

(B) income and losses from the pool for the period, on at least aquarterly basis; and

(C) the payment, prepayment and collection experience of the poolfor the period on at least a quarterly basis;

(iii) the type or types of the financial assets, the manner in which thefinancial assets originated or will originate and, if applicable, themechanism and terms of the agreement governing the transfer of thefinancial assets comprising the underlying pool to or through theIssuer, including the consideration paid for the financial assets;

(iv) any person or company who:

(A) originated, sold or deposited a material portion of the financialassets comprising the pool, or has agreed to do so;

(B) acts, or has agreed to act, as a trustee, custodian, bailee oragent of the Issuer or any holder of the Asset-BackedSecurities, or in a similar capacity;

(C) administers or services a material portion of the financialassets comprising the pool or provides administrative ormanagerial services to the Issuer, or has agreed to do so, ona conditional basis or otherwise, if (a) finding a replacementprovider of the services at a cost comparable to the cost of thecurrent provider is not reasonably likely, (b) a replacementprovider of the services is likely to achieve materially worseresults than the current provider, (c) the current provider of theservices is likely to default in its service obligations becauseof its current financial condition, or (d) the disclosure isotherwise material;

(D) provides a guarantee, alternative credit support or other creditenhancement to support the obligations of the Issuer under theAsset-Backed Securities or the performance of some or all ofthe financial assets in the pool, or has agreed to do so; or

(E) lends to the Issuer in order to facilitate the timely payment orrepayment of amounts payable under the Asset-BackedSecurities, or has agreed to do so;

(v) the general business activities and material responsibilities under theAsset-Backed Securities of a person or company referred to inparagraph (b)(iv) of this paragraph 11;

(vi) the terms of any material relationships between:

(A) the persons or companies referred to in paragraph (b)(iv) ofthis paragraph 11 or any of their respective affiliates; and

(B) the Issuer or any of its affiliates;

(vii) any provisions relating to termination of services or responsibilities ofany of the persons or companies referred to in paragraph (iv) and theterms on which a replacement may be appointed; and

(viii) any risk factors associated with the Asset-Backed Securities,including disclosure of material risks associated with changes ininterest rates or prepayment levels, and any circumstances wherepayments on the Asset-Backed Securities could be impaired ordisrupted as a result of any reasonably foreseeable event that maydelay, divert or disrupt the cash flows dedicated to service the Asset-Backed Securities,

provided that, if any of the foregoing information will be disclosed in aProspectus Supplement, it may be omitted from the corresponding ShelfProspectus;

(c) each preliminary Shelf Prospectus and final Shelf Prospectus will contain astatement that the Issuer has filed an undertaking that it will not distributeAsset-Backed Securities of a type that, at the time of distribution, have notpreviously been distributed by prospectus ("Novel Asset-Backed Securities")without pre-clearing with the applicable Decision Maker the disclosure to becontained in a Prospectus Supplement pertaining to the distribution of suchNovel Asset-Backed Securities; and

(d) each preliminary Short Form Prospectus, preliminary Shelf Prospectus, finalShort Form Prospectus and final Shelf Prospectus will disclose any factorsor considerations previously identified by the Approved Rating Organizationas giving rise to unusual risks associated with the securities to bedistributed.

12. Prospectus Supplements will be prepared in accordance with the ShelfRequirements and will include all of the shelf information pertaining to thedistribution of Asset-Backed Securities that was omitted from the Shelf Prospectus.

AND WHEREAS under the System, this MRRS Decision Document evidences thedecision of each Decision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained inthe Legislation that provides the Decision Maker with the jurisdiction to make the Decisionhas been met;

THE DECISION of the Decision Makers pursuant to the Policies is that the EligibilityRequirements set forth in the POP Requirements shall not apply to the Issuer inconnection with the Offerings and that the Issuer may participate in the POP System andthe Shelf System to distribute Asset-Backed Securities with an Approved Rating from timeto time, and for the purposes of any such distribution to utilize AIF's, a preliminary ShelfProspectus or preliminary Short Form Prospectus, as the case may be, a final ShelfProspectus or final Short Form Prospectus, as the case may be, Prospectus Supplementsand any necessary supporting documents, with such amendments from the formrequirements of the Policies, as applicable, as are set forth herein, provided that:

(a) the Issuer complies with paragraphs 9, 10, 11 and 12 hereof;

(b) the Issuer complies with all of the filing requirements and procedures set outin the POP Requirements and the Shelf Requirements, except as suchrequirements are varied by this Decision;

(c) the Issuer files an undertaking before or concurrently with each preliminaryShelf Prospectus which states that:

(i) the Issuer will not distribute under the final Shelf Prospectus NovelAsset-Backed Securities without pre-clearing the disclosurepertaining to the distribution of such Novel Asset-Backed Securitiesin any Prospectus Supplement with the applicable Decision Maker;and

(ii) the Issuer shall not distribute such Novel Asset-Backed Securities inany Jurisdiction unless:

(A) the draft Prospectus Supplements pertaining to the distributionof such Novel Asset-Backed Securities have been delivered tothe applicable Decision Maker in substantially final form; and

(B) either:

(1) the applicable Decision Maker has confirmed his or heracceptance of each draft Prospectus Supplement insubstantially final form or in final form; or

(2) 21 days has elapsed since the date of delivery of eachdraft Prospectus Supplement in substantially final formto the applicable Decision Maker and the applicableDecision Maker has not provided written comments onthe draft Prospectus Supplement.

(d) the Issuer files with each AIF for each director and executive officer of theIssuer Trustee for whom the Issuer has not previously delivered to theDecision Makers the following information, a statement containing suchindividual's:

(i) full name;

(ii) position with or relationship to the Issuer;

(iii) employer's name and address, if other than the Issuer;

(iv) full residential address;

(v) date and place of birth; and

(vi) citizenship; and

an authorization of such individual for the collection of personal information;

(e) the Issuer files with each AIF an eligibility certificate, executed on behalf ofthe Issuer by an officer of its trustee certifying that the Issuer satisfies theeligibility requirements set out in subparagraphs 9(b) and 9(d) or 9(e), asapplicable, hereof, and which makes reference to this Decision;

(f) in the case of an Offering made under the POP System that is not anOffering under the Shelf System, at the time of filing its preliminary ShortForm Prospectus the Asset-Backed Securities to be distributed have

(i) received an Approved Rating, on a provisional basis,

(ii) not been the subject of an announcement by an Approved RatingOrganization of which the Issuer is or ought to be aware that theApproved Rating given by the organization may be down-graded toa rating category that would not be an Approved Rating, and

(iii) not received a provisional or final rating lower than an ApprovedRating from any Approved Rating Organization;

(g) in the case of an Offering under the Shelf System, at the time of the filing ofits preliminary Shelf Prospectus and final Shelf Prospectus, the Issuer hasreasonable grounds for believing that:

(i) all Asset-Backed Securities that it may distribute under the final ShelfProspectus will receive an Approved Rating from at least oneApproved Rating Organization; and

(ii) no Asset-Backed Securities that it may distribute under the final ShelfProspectus will receive a rating lower than an Approved Ratting fromany Approved Rating Organization;

(h) the Issuer files with its preliminary Short Form Prospectus or preliminaryShelf Prospectus an eligibility certificate, executed on behalf of the Issuer byone of the senior officers of the Issuer Trustee certifying that the Issuersatisfies all of the criteria on which the Issuer is relying in order to bequalified to file a prospectus in the form of a short form prospectus, andwhich makes reference to this Decision; and

(i) this Decision will automatically expire upon the latter of proposed NationalInstrument 44-101 and proposed National Instrument 44-102 coming intoforce and being adopted as a rule in Ontario.

April 25th, 2000.

"Margo Paul"