Securities Law & Instruments

Headnote

MutualReliance Review System for Exemptive Relief Applications - relieffrom registration, prospectus and issuer bid requirements andapplicable fees granted for trades in connection with a businesscombination involving real estate investment trusts - relief fromprohibition on collateral benefits granted in connection withconcurrent take-over bid in respect of agreements to appoint certainpersons to offeror's board of trustees and to provide transitionalinsurance coverage, where agreements are made for reasons otherthan to increase the value of the consideration paid to the affectedunitholders.

ApplicableOntario Statutory Provisions

SecuritiesAct, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1), 95, 96,97, 98, 100 and 104(2)(a).


ApplicableOntario Rule Rule45-501 Exempt Distributions, s. 2.8.

MultilateralInstruments Cited

MI 45-102Resale of Securities, ss. 2.6 and 2.8.

INTHE MATTER OF

THESECURITIES LEGISLATION OF

ALBERTA,BRITISH COLUMBIA, MANITOBA, NEW BRUNSWICK,

NEWFOUNDLANDAND LABRADOR, THE NORTHWEST TERRITORIES,

NOVASCOTIA, NUNAVUT, ONTARIO, PRINCE EDWARD ISLAND,

QUÉBEC,SASKATCHEWAN AND THE YUKON TERRITORY

AND

INTHE MATTER OF

THEMUTUAL RELIANCE REVIEW SYSTEM

FOREXEMPTIVE RELIEF APPLICATIONS

AND

INTHE MATTER OF

RETIREMENTRESIDENCES REAL ESTATE INVESTMENT TRUST

ANDCPL LONG TERM CARE REAL ESTATE INVESTMENT TRUST

MRRSDECISION DOCUMENT

WHEREASthe Canadian securities regulatory authority or regulator(the "Decision Maker") in each of Alberta, British Columbia, Manitoba,Saskatchewan, Ontario, Quebec, Nova Scotia, Newfoundland, PriceEdward Island, New Brunswick the Northwest Territories, Nunavut,and the Yukon Territory (the "Jurisdictions") has received anapplication from Retirement Residences Real Estate InvestmentTrust ("Retirement REIT") and CPL Long Term Care Real Estate InvestmentTrust ("CPL REIT", and together with Retirement REIT, the "Applicants")for a decision pursuant to the securities legislation of the Jurisdictions(the "Legislation") that:

(a)the registration and prospectus requirements contained in theLegislation shall not apply to the proposed distribution of trustunits of Retirement REIT to untiholders of CPL REIT;

(b)the issuance of trust units of Retirement REIT to CPL REIT pursuantto an acquisition agreement between CPL REIT and Retirement REITdated February 12, 2002 (the "Agreement") shall be exempt fromthe applicable fee requirements of the Legislation;

(c)the acquisition of trust units of Retirement REIT by RetirementREIT pursuant to the Agreement shall be exempt from the provisionsin the Legislation relating to delivery of an offer and issuerbid circular and any notices of change or variation thereto, minimumdeposit periods and withdrawal rights, take-up of and paymentfor securities tendered to an issuer bid, disclosure, restrictionsupon purchases of securities, identical consideration and collateralbenefits (collectively, the "Issuer Bid Requirements"); and

(d)the provision in the Legislation that prohibits an offeror whomakes or intends to make a take-over bid and any person actingjointly or in concert with the offeror from entering into anycollateral agreement, commitment or understanding with any holderor beneficial owner of securities of the offeree issuer that hasthe effect of providing to the holder or owner a considerationof greater value than that offered to other holders of the sameclass of securities (the "Prohibition on Collateral Agreements")shall not apply to the Transitional Arrangements (as defined below);

ANDWHEREAS pursuant to the Mutual Reliance Review Systemfor Exemptive Relief Applications (the "System"), the OntarioSecurities Commission is the principal regulator for this application;

ANDWHEREAS the Applicants have represented to the DecisionMakers as follows:

1.Retirement REIT has made an offer to purchase all of the issuedand outstanding trust units of CPL REIT by way of take-over bid(the "Bid") and merger transaction (the "Transaction").

2.Retirement REIT is an unincorporated "closed-end" investment trustgoverned by the laws of the Province of Ontario and constitutedpursuant to an amended and restated declaration of trust datedas of March 31, 2001, with its principal executive office in theCity of Toronto, in the Province of Ontario.

3.Retirement REIT is, and has been since April 11, 2001, a reportingissuer or equivalent in each of the Jurisdictions where the Legislationcontemplates such status, and is a qualifying issuer within themeaning of Multilateral Instrument 45-102 ("MI 45-102").

4.The outstanding trust units of Retirement REIT ("Retirement REITUnits") are listed and posted on The Toronto Stock Exchange (the"TSE") under the symbol "RRR.UN".

5.Retirement REIT is not on a list of defaulting issuers maintainedby any Decision Maker pursuant to the Legislation.

6.CPL REIT is an unincorporated "closed-end" investment trust governedby the laws of the Province of Ontario and constituted pursuantto an amended and restated declaration of trust dated as of March9, 2000, with its principal executive office in the City of Toronto,in the Province of Ontario.

7.CPL REIT is a reporting issuer or equivalent in each of the Jurisdictionswhere the Legislation contemplates such status and is a qualifyingissuer for purposes of MI 45-102.

8.The outstanding trust units of CPL REIT ("CPL REIT Units") arelisted and posted on the TSE under the symbol "CPL.UN".

9.As at February 12, 2002, the issued capital of CPL REIT consistedof 24,634,862 trust units.

10.CPL REIT is not on a list of defaulting issuers maintained byany Decision Maker pursuant to the Legislation.

11.Retirement REIT, through a subsidiary entity, is the advisor andmanager of CPL REIT, pursuant to which Retirement REIT, amongother things, advises CPL REIT on major decisions (including,without limitation, proposed acquisitions) and provides overallguidance and supervision of management, administration, regulatorycompliance and marketing on behalf of CPL REIT and/or its operatingsubsidiaries.

12.Certain trustees, officers and senior officers of CPL REIT arealso trustees, officers and/or senior officers of Retirement REIT.

13.The Bid and the Transaction (the terms and structure of whichare codified in the Agreement) form the principal parts of a proposedseries of transactions which have been designed to result (ifimplemented) in, among other things, Retirement REIT acquiringsubstantially all of the assets, and assuming certain of the liabilities,of CPL REIT, and Retirement REIT being the sole holder of CPLREIT Units, with holders of CPL REIT Units, directly or indirectly,exchanging those units for Retirement REIT Units. Each CPL REITunitholder will have the right to choose whether to exchange his,her or its CPL REIT Units directly for Retirement REIT Units bydepositing CPL REIT Units pursuant to the Bid, a taxable disposition,or to have his, her or its CPL REIT Units exchanged (on a tax-deferred "rollover" basis) by way of a redemption by CPL REITof its units where the redemption price will be satisfied by thedistribution by CPL REIT of Retirement REIT Units issued to itin connection with the asset purchase.

14.The Bid is for not more than 14,000,000 of the issued and outstandingCPL REIT Units, on the basis of 1.20 Retirement REIT Units (collectively,the "Bid Payment Units") for each CPL REIT Unit (the "ExchangeRatio"). Under the Transaction, each CPL REIT unitholder who doesnot tender under the Bid as at the time of completion of the Transactionwill receive Retirement REIT Units (collectively, the "TransferPayment Units") from CPL REIT upon redemption of his or her CPLREIT Units based on the Exchange Ratio.

15.The Applicants mailed on or about March 1, 2002, among other things,a take-over bid circular and trustees' circular relating to theBid and a management information circular relating to the Transaction(the "Documents") to holders of CPL REIT Units, which Documentscontain prospectus-level disclosure regarding the business andaffairs of Retirement REIT, including pro forma financial informationgiving effect to the Bid and the Transaction. The Documents alsocontain detailed descriptions of the Bid and the Transaction,including a notice of a meeting of CPL REIT unitholders (the "SpecialMeeting") to consider and, if deemed advisable, approve the Transactionand a formal valuation, prepared in accordance with CommissionRule 61-501, of the subject matter of the proposed transactions(i.e. the CPL REIT Units and assets and the Retirement REIT Units).The Special Meeting took place on April 8, 2002 and requisiteunitholder approval was obtained. The Bid, under which CPL REITunitholder approval is a condition, will expire, subject to extension,on or about April 23, 2002, and, if all conditions of the Bidand the Transaction (they are parallel) have at that time beensatisfied or waived it is anticipated that the Transaction wouldbe closed on or about April 30, 2002.

16.Retirement REIT mailed, on or about March 1, 2002, an informationcircular, a notice of a meeting of Retirement REIT (the "RetirementREIT Special Meeting") to consider and, if deemed advisable, approvethe Transaction, and a formal valuation of the subject matterof the proposed transactions (i.e. the CPL REIT Units and assetsand the Retirement REIT Units). The Retirement REIT Special Meetingtook place on April 8, 2002 and requisite shareholder approvalwas obtained.

17.The Transaction will be carried out in accordance with the requirementscontained in section 132.2 of the Income Tax Act (Canada)("ITA Qualifying Exchange Requirements") in order to permit theeffective exchange of CPL REIT Units for Transfer Payment Unitsto occur on a tax-deferred "rollover" basis.

18.The sequence of steps under the Transaction will be as follows:

(a)Retirement REIT acquires substantially all of CPL REIT's assets,assumes certain liabilities and issues Transfer Payment Unitsbased on the Exchange Ratio and the number of CPL REIT Units remainingoutstanding following the take-up of CPL REIT Units pursuant tothe Bid; and

(b)in accordance with the ITA Qualifying Exchange Requirements, inthe second step, the CPL REIT Units will be redeemed, with theconsideration therefor to be the Transfer Payment Units. To theextent that CPL REIT unitholders become entitled to fractionalTransfer Payment Units, such fractional units will be sold inthe open market on their behalf and the proceeds of such salepaid to them forthwith. All Transfer Payment Units, which arereceived by Retirement REIT (as a CPL REIT unitholder as a resultof it having previously taken up and paid for CPL REIT Units underthe Bid), will be cancelled by Retirement REIT.

19.In order to ensure compliance with the ITA Qualifying ExchangeRequirements, the take-up of CPL REIT Units under the Bid wouldoccur after approval of the Transaction at the Special Meetingbut prior to effecting the Transaction. The Transaction (includingthe distribution of Transfer Payment Units to CPL REIT Unitholdersupon the redemption of the outstanding CPL REIT Units) will becompleted as soon as possible following the issuance of Bid PaymentUnits under the Bid so as to provide the most consistent treatmentpossible to all CPL REIT Unitholders, whether they are exchangingCPL REIT Units for Retirement REIT Units under the Bid or as aresult of the Transaction.

20.The Agreement provides for, among other things, the following(collectively, the "Transitional Arrangements"):

(a)certain of the CPL REIT trustees to be added to the RetirementREIT board of trustees at closing (the "Board Changes"); and

(b)trailing fidelity insurance for trustees and officers of CPL REIT,on terms consistent with pre-transaction coverage (the "InsuranceProvision").

21.Each of the proposed Transitional Arrangements are for commercialreasons entirely unrelated to providing any CPL REIT unitholderwith consideration of greater value. Specifically, the Board Changeswould be intended to reflect continuity of representation of CPLREIT minority unitholders, and the Insurance Provision as proposedis a customary element in transactions of the nature to ensurethat executives are not exposed to liability where they wouldnot otherwise have been as a consequence of the transaction.

22.The compensation of the CPL REIT trustees who are added to theRetirement REIT board of trustees (the "CPL REIT Trustees") willbe commensurate with that paid to other Retirement REIT trustees,and is comparable (and depending upon the frequency of meetingspossibly lower) than the compensation that they currently areentitled to receive from CPL REIT. The Insurance Provision willbe economically equivalent (as to deductible and coverage type)and less advantageous than (as to coverage limit) existing coveragefor CPL REIT trustees. All of the CPL REIT trustees hold CPL REITUnits.

23.There are no exemptions under the Legislation to exempt the distributionof the Transfer Payment Units by CPL REIT to its unitholders fromthe prospectus and registration requirements contained in theLegislation.

24.As a real estate investment trust, rather than a corporation,Retirement REIT cannot complete the acquisition of the CPL REITUnits not deposited to the Bid on a tax-deferred "roll-over" basis(i.e. the Transaction) by way of amalgamation, arrangement orother statutory mechanism available to corporations.

25.Any issuance by Retirement REIT of Transfer Payment Units to CPLREIT is exempt from the prospectus and (except in the case ofthe first trades) registration requirements contained in the securitieslegislation of Ontario by virtue of the "accredited investor"exemption (the "Accredited Investor Exemption") contained in thesecurities legislation of Ontario and would require payment ofthe applicable fees as set out in the securities legislation ofOntario.

26.The acquisition by Retirement REIT of units of Retirement REITpursuant to the Transaction may be an issuer bid, and the acquisitionof CPL REIT units pursuant to the Bid might be an indirect issuerbid, for which there are no exemptions available from the IssuerBid Requirements.

ANDWHEREAS pursuant to the System, this MRRS Decision Documentevidences the decision of each Decision Maker (collectively, the"Decision");

ANDWHEREAS each of the Decision Makers is satisfied thatthe test contained in the Legislation that provides the DecisionMaker with the jurisdiction to make the Decision has been met;

THEDECISION of the Decision Makers pursuant to the Legislationis that:

1.the registration and prospectus requirements contained in theLegislation shall not apply to the distribution by CPL REIT ofthe Transfer Payment Units to the unitholders of CPL REIT in connectionwith the Transaction, provided that the first trade in any trustunit acquired pursuant to this Decision shall be a distributionor a primary distribution to the public under the Legislationof the Jurisdiction in which the trade takes place unless:

(i)except in Quebec,

(a)the conditions in subsections (3) or (4) of Section 2.6 of MultilateralInstrument 45-102 ("MI 45-102") are satisfied; or

(b)where such first trade is a control distribution as such termis defined in MI 45-102, such trade is made in compliance withSection 2.8 of MI45-102;

(ii)in Québec, to the extent that there is no exemption availablefrom the registration requirements and the prospectus requirementsin respect of any of the trades acquired pursuant to this Decision,the trades are not subject to the registration requirements andthe prospectus requirements, provided that the issuer is and hasbeen a reporting issuer in Québec in good standing forthe twelve months immediately preceding the trades; and no unusualeffort is made to prepare the market or to create a demand forthe trust units;

2.the issuance by Retirement REIT of Transfer Payment Units to CPLREIT under the Accredited Investor Exemption contained in theLegislation is exempt from the applicable fee requirements ofthe Legislation;

3.the acquisition by Retirement REIT of units of Retirement REITpursuant to the Transaction and the indirect acquisition of unitsof Retirement REIT units pursuant to the Bid are exempt from theIssuer Bid Requirements; and

4.the Transitional Arrangements are made for purposes other thanto increase the value of the consideration paid to the CPL REITTrustees and may be entered into notwithstanding the Prohibitionon Collateral Agreements.

April23, 2002.

"TheresaMcLeod"       "Lorne Morphy"