Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - Issuer exempt from including comparativebalance sheet as at December 31, 2001, provided that it includesa "fresh start" comparative balance sheet as at January31, 2002. Issuer also exempted from including comparative interimincome and cash flow statements, and statement of retained earningsto the end of each of the three, six and nine month periodsduring the 2002 and 2003 fiscal years, provided that it includescomparative financial statements which are segregated to disclosefinancial information on a pre- and post-reorganization basis.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.s. 83, ss. 77, 80(b)(iii).

Applicable Ontario Rules Cited

OSC Rule 52-501 - Financial Statements - Parts2.1, 2.2(1)(a), 2.2(2), 4.1.

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA,
SASKATCHEWAN, MANITOBA, ONTARIO,
QUEBEC, NOVA SCOTIA, AND
NEWFOUNDLAND AND LABRADOR

AND

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

AND

IN THE MATTER OF
ALGOMA STEEL INC.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,Quebec, Nova Scotia and Newfoundland and Labrador (the "Jurisdictions")has received an application from Algoma Steel Inc. (the "Filer")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that certain requirementscontained in the Legislation requiring the Filer to file itscomparative interim financial statements for the fiscal periodsending (or ended, as the case may be) March 31, June 30 andSeptember 30, 2002 and 2003, respectively, and to file its comparativeannual statements for the years ending December 31, 2002 and2003, respectively, shall not apply to the Filer;

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 the Filer has representedto each Decision Maker that:

1. The Filer is organized under the laws ofthe Province of Ontario, and is a reporting issuer in each ofthe Jurisdictions that provides for a reporting issuer regimeand is not on the list of defaulting reporting issuers maintainedby the Jurisdictions.

2. On April 23, 2001, the Filer filed for protectionunder the Companies' Creditors Arrangement Act (Canada). Anorder was granted on such date by the Superior Court of Justicein Bankruptcy and Insolvency (Commercial List) of Ontario (the"Court") respecting, among other things, a stay ofall actions, suits and proceedings, and the appointment of Ernst& Young Inc. as monitor.

3. The Filer's proposed plan of arrangementand reorganization pursuant to the Companies' Creditors ArrangementAct (Canada) and Section 186 of the Business Corporations Act(Ontario) was filed with the Court in October, 2001, a secondamended and restated plan was filed with the Court in November,2001; and a third amended and restated plan (the "Plan")was filed with the Court on December 10, 2001. The Plan wasaccepted by the Filer's creditors on December 17, 2001. ThePlan was subsequently sanctioned by the Court on December 19,2001, and was effective as of January 29, 2002.

4. Pursuant to the Plan, the Filer cancelledall of its then issued and outstanding shares, and issued 19million new common shares, of which 15 million were issued toformer holders of the Filer's 12 3/8% First Mortgage Notes ("Notes"),approximately four million were issued to employees of the Filerin accordance with an option granted pursuant to the Plan, andapproximately one million were issued to certain unsecured creditorsof the Filer.

5. Pursuant to the Plan, holders of the Notesreceived, in addition to common shares, their pro rata portionof U.S.$125 million in aggregate principal amount of newly issued11% secured notes due 2009 of the Filer and of U.S.$62.5 millionin aggregate principal amount 1% secured convertible notes due2030 of the Filer. All of the U.S.$349 million in aggregateprincipal amount of Notes that were outstanding prior to theimplementation of the Plan, together with all accrued and unpaidinterest on the Notes, were cancelled.

6. The Filer has also entered into new collectivebargaining agreements with the United Steelworkers of America,and has entered into arrangements to restructure its pensionplan liabilities.

7. Approximately $333 million of secured indebtednessof the Filer was extinguished upon completion of the Plan. TheFiler's pension obligations were also significantly reduced.In addition, as a result of the implementation of the Plan,except perhaps for a few exceptions, former holders of sharesof the Filer no longer hold any shares therein, and former holdersof the Notes now hold approximately 75% of the common sharesof the Filer.

8. The new common shares of the Filer were listedand posted for trading on The Toronto Stock Exchange on February21, 2002.

9. Failure to present the financial informationof the Filer for the periods before and after the reorganizationon a segregated columnar basis could subject the financial statementsof the Filer to misinterpretation by investors.

10. The Filer accounted for the implementationof the Plan as at January 31, 2002 on a "fresh start"basis in accordance with the guidelines set forth by the CanadianInstitute of Chartered Accountants (the "CICA"), whichcontemplates that figures for a prior period may be excludedfrom a company's financial statements where that company hasundergone a financial reorganization resulting in a substantialrealignment of its non-equity and equity interests.

11. The balance sheet required to be includedin the interim financial statements for the first, second andthird quarters of 2002 and the balance sheet required to beincluded in the annual financial statements for the year endingDecember 31, 2002 of the Filer are not and will not be comparableto the balance sheet as at December 31, 2001 due to the reorganizationof the Filer pursuant to the Plan.

12. The Filer will prepare and file with theJurisdictions interim financial statements for the periods ending(or ended, as the case may be) March 31, June 30 and September30, 2002, which will be comprised respectively of (a) a balancesheet as at March 31, June 30 and September 30, 2002, presentedon a comparative basis with a "fresh start" openingbalance sheet as at January 31, 2002 with note disclosure forthe disclosure items specified by CICA Handbook Section 1625,and (b) comparative statements of income, retained earningsand cash flow presented on a columnar basis to reflect pre-and post-reorganization results for the relevant period as follows:(x) under the post-reorganization column (i) the two, five andeight month periods (from February 1, 2002) ending (or ended,as the case may be) March 31, June 30 and September 30, 2002,and (ii) in respect of the periods ending June 30 and September30, 2002, the relevant three month period ending on such dates,and (y) under the pre-reorganization results column (i) theone month period ended January 31, 2002 and the relevant year-to-dateperiod of 2001, and (ii) in respect of the periods ending June30 and September 30, 2002, the relevant comparative three monthperiod of 2001.

13. The Filer will prepare and file with theJurisdictions annual financial statements for the year endingDecember 31, 2002, which will be comprised of (a) a balancesheet as at December 31, 2002, presented on a comparative basiswith a "fresh start" opening balance sheet as at January31, 2002 with note disclosure for the disclosure items specifiedby CICA Handbook Section 1625, and (b) comparative statementsof income, retained earnings and cash flow presented on a columnarbasis to reflect pre- and post-reorganization results as follows:(x) under the post-reorganization column the eleven month period(from February 1, 2002) ending December 31, 2002, and (y) underthe pre-reorganization results column, the one month periodended January 31, 2002 and the relevant comparative period of2001.

14. The Filer will provide information relatingto the Filer's financial reorganization pursuant to the Planboth in its interim financial statements for the periods ending(or ended, as the case may be) March 31, June 30 and September30, 2002, and in its annual financial statements for the yearending December 31, 2002, as well as in its management's discussionand analysis of financial condition for the corresponding periods.

15. The Filer will prepare and file with theJurisdictions interim financial statements for the periods ending(or ended, as the case may be) March 31, June 30 and September30, 2003, which will be comprised respectively of (a) a balancesheet as at March 31, June 30 and September 30, 2003, presentedon a comparative basis with the Filer's balance sheet as atDecember 31, 2002 with note disclosure for the disclosure itemsspecified by CICA Handbook Section 1625, and (b) comparativestatements of income, retained earnings and cash flow presentedon a columnar basis to reflect pre- and post-reorganizationresults for the relevant period as follows: (x) under the post-reorganizationcolumn (i) the three, six and nine month periods ending March31, June 30 and September 30, 2003, (ii) the two, five and eightmonth periods (from February 1, 2002) ended March 31, June 30and September 30, 2002, and (iii) in respect of the periodsending June 30 and September 30, 2003, the relevant three monthperiod ending on such dates and the relevant comparative threemonth period of 2002, and (y) under the pre-reorganization resultscolumn, the one month period ended January 31, 2002.

16. The Filer will prepare and file with theJurisdictions annual financial statements for the year endingDecember 31, 2003, which will be comprised of (a) a balancesheet as at December 31, 2003, presented on a comparative basiswith the Filer's balance sheet as at December 31, 2002 withnote disclosure for the disclosure items specified by CICA HandbookSection 1625, and (b) comparative statements of income, retainedearnings and cash flow presented on a columnar basis to reflectpre- and post-reorganization results as follows: (x) under thepost-reorganization column (i) the year ending December 31,2003, and (ii) the eleven month period (from February 1, 2002)ended December 31, 2002, and (y) under the pre-reorganizationresults column, the one month period ended January 31, 2002.

AND WHEREAS pursuant to the System thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

AND WHEREAS each Decision Maker is satisfiedthat the test contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision hasbeen met;

THE DECISION of the Decision Makers pursuantto the Legislation is that the Filer is exempt from the applicablerequirements of the Legislation requiring the Filer to prepareand file comparative interim financial statements for the periodsending (or ended, as the case may be) March 31, June 30 andSeptember 30, 2002 and 2003, respectively, provided that:

(a) the Filer prepares and files interim financialstatements for the periods ending (or ended, as the case maybe) March 31, June 30 and September 30, 2002, which will becomprised respectively of (1) a balance sheet as at March 31,June 30 and September 30, 2002, presented in the form providedby the further decision below, and (2) comparative statementsof income, retained earnings and cash flow presented on a columnarbasis to reflect pre- and post-reorganization results for therelevant period as follows: (x) under the post-reorganizationcolumn (i) the two, five and eight month periods (from February1, 2002) ending (or ended, as the case may be) March 31, June30 and September 30, 2002, and (ii) in respect of the periodsending June 30 and September 30, 2002, the relevant three monthperiod ending on such dates, and (y) under the pre-reorganizationresults column (i) the one month period ended January 31, 2002and the relevant year-to-date period of 2001, and (ii) in respectof the periods ending June 30 and September 30, 2002, the relevantcomparative three month period of 2001; and

(b) the Filer prepares and files interim financialstatements for the periods ending (or ended, as the case maybe) March 31, June 30 and September 30, 2003, which will becomprised respectively of (1) a balance sheet as at March 31,June 30 and September 30, 2003, presented in the form providedby the further decision below, and (2) comparative statementsof income, retained earnings and cash flow presented on a columnarbasis to reflect pre- and post-reorganization results for therelevant period as follows: (x) under the post-reorganizationcolumn (i) the three, six and nine month periods ending March31, June 30 and September 30, 2003, (ii) the two, five and eightmonth periods (from February 1, 2002) ended March 31, June 30and September 30, 2002, and (iii) in respect of the periodsending June 30 and September 30, 2003, the relevant three monthperiod ending on such dates and the relevant comparative threemonth period of 2002, and (y) under the pre-reorganization resultscolumn, the one month period ended January 31, 2002.

May 30, 2002.

"Harold P. Hands"      "Robert W. Korthals"

 

THE FURTHER DECISION of the DecisionMakers pursuant to the Legislation is that the Filer is exemptfrom the applicable requirements of the Legislation requiringthe Filer (i) to prepare and file comparative interim financialstatements for the periods ending (or ended, as the case maybe) March 31, June 30 and September 30, 2002 and 2003, respectively;and (ii) prepare and file comparative annual financial statementsfor the years ending December 31, 2002 and 2003, respectively,provided that:

(a) the Filer prepares and files interim financialstatements for the periods ending (or ended, as the case maybe) March 31, June 30 and September 30, 2002, which will becomprised respectively of (1) a balance sheet as at March 31,June 30 and September 30, 2002, presented on a comparative basiswith a "fresh start" opening balance sheet as at January31, 2002 with note disclosure for the disclosure items specifiedby CICA Handbook Section 1625, and (2) comparative statementsof income, retained earnings and cash flow presented on a columnarbasis to reflect pre- and post-reorganization results for therelevant period as follows: (x) under the post-reorganizationcolumn (i) the two, five and eight month periods (from February1, 2002) ending (or ended, as the case may be) March 31, June30 and September 30, 2002, and (ii) in respect of the periodsending June 30 and September 30, 2002, the relevant three monthperiod ending on such dates, and (y) under the pre-reorganizationresults column (i) the one month period ended January 31, 2002and the relevant year-to-date period of 2001, and (ii) in respectof the periods ending June 30 and September 30, 2002, the relevantcomparative three month period of 2001;

(b) the Filer prepares and files annual financialstatements for the year ending December 31, 2002, which willbe comprised of (1) a balance sheet as at December 31, 2002,presented on a comparative basis with a "fresh start"opening balance sheet as at January 31, 2002 with note disclosurefor the disclosure items specified by CICA Handbook Section1625, and (2) comparative statements of income, retained earningsand cash flow presented on a columnar basis to reflect pre-and post-reorganization results as follows: (x) under the post-reorganizationcolumn the eleven month period (from February 1, 2002) endingDecember 31, 2002, and (y) under the pre-reorganization resultscolumn, the one month period ended January 31, 2002 and therelevant comparative period of 2001;

(c) the Filer provides information relatingto the Filer's financial reorganization pursuant to the Planin its financial statements and management's discussion andanalysis of financial condition for the periods ending (or ended,as the case may be) March 31, June 30, September 30 and December31, 2002;

(d) the Filer prepares and files interim financialstatements for the periods ending (or ended, as the case maybe) March 31, June 30 and September 30, 2003, which will becomprised respectively of (1) a balance sheet as at March 31,June 30 and September 30, 2003, presented on a comparative basiswith the Filer's balance sheet as at December 31, 2002 withnote disclosure for the disclosure items specified by CICA HandbookSection 1625, and (2) comparative statements of income, retainedearnings and cash flow presented on a columnar basis to reflectpre- and post-reorganization results for the relevant periodas follows: (x) under the post-reorganization column (i) thethree, six and nine month periods ending March 31, June 30 andSeptember 30, 2003, (ii) the two, five and eight month periods(from February 1, 2002) ended March 31, June 30 and September30, 2002, and (iii) in respect of the periods ending June 30and September 30, 2003, the relevant three month period endingon such dates and the relevant comparative three month periodof 2002, and (y) under the pre-reorganization results column,the one month period ended January 31, 2002; and

(e) the Filer prepares and files annual financialstatements for the year ending December 31, 2003, which willbe comprised of (1) a balance sheet as at December 31, 2003,presented on a comparative basis with the Filer's balance sheetas at December 31, 2002 with note disclosure for the disclosureitems specified by CICA Handbook Section 1625, and (2) comparativestatements of income, retained earnings and cash flow presentedon a columnar basis to reflect pre- and post-reorganizationresults as follows: (x) under the post-reorganization column(i) the year ending December 31, 2003, and (ii) the eleven monthperiod (from February 1, 2002) ended December 31, 2002, and(y) under the pre-reorganization results column, the one monthperiod ended January 31, 2002.

May 30, 2002.

"John Hughes"