Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - relief from the requirement to includein an information circular financial statements of certain acquiredproperties.

Ontario Rule Cited

Rule 54-501 Prospectus Disclosure in CertainInformation Circulars (2000), 23 OSCB 8519, section 3.1.

Rule 41-501 General Prospectus Requirements(2000), 23 OSCB 761.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ALBERTA, BRITISH COLUMBIA,ONTARIO, QUEBEC, SASKATCHEWAN,

NEW BRUNSWICK, PRINCE EDWARDISLAND, NEWFOUNDLAND AND

LABRADOR, NORTHWEST TERRITORIESAND NUNAVUT

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

T.G.S. PROPERTIES LTD.

 

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatoryauthority or regulator (collectively, the "Decision Makers")in each of Alberta, British Columbia, Ontario, Quebec, Saskatchewan,New Brunswick, Prince Edward Island, Newfoundland and Labrador,Northwest Territories and Nunavut (the "Jurisdictions")has received an application from T.G.S. Properties Ltd. ("TGS")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that TGS be exempt from the requirementto include in its Information Circular (the "InformationCircular") to be mailed to Securityholders in connectionwith a proposed reorganization of the business and affairs andshare capital of TGS, financial statements of TGS consistingof 3 years of audited consolidated financial statements forthe years ended December 31, 2001, the 11 months ended December31, 2000 and the year ended January 31, 2000 and unaudited consolidatedfinancial statements for the 6 months ended June 30, 2002 and2001, as required by the information circular form and the prospectusform prescribed by the Legislation;

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System")the Alberta Securities Commission is the principal regulatorfor this application;

AND WHEREAS TGS has represented to theDecision Makers that:

1. TGS is a corporation incorporated underthe laws of Alberta;

2. The authorized capital of TGS consistsof an unlimited number of common shares and an unlimited numberof preferred shares;

3. As at September 15, 2002 37,351,428 commonshares were issued and outstanding;

4. TGS is a reporting issuer in Alberta, BritishColumbia, Saskatchewan, Manitoba, Ontario and Quebec;

5. The common shares of TGS are presentlylisted on the Toronto Stock Exchange;

6. TGS intends to deliver to shareholders,holders ("Debentureholders") of its 8% convertibledebenture due 2005 and holders of options ("Optionholders")to acquire common shares of TGS (collectively, the "Securityholders")an Information Circular in respect of a proposed reorganizationof the business and affairs and share capital of TGS (the"Reorganization");

7. The Reorganization will include, amongother things the sale by TGS of certain commercial real estateproperties (the "Existing TGS Properties") to areal estate investment trust, TGS North American Real EstateInvestment Trust (the "REIT"), and an arrangement(the "Arrangement") pursuant to which shareholderswill acquire Units of the REIT and common shares of TGS PropertiesInc. ("TGSPI"), a new public company which willcontinue the land development business of TGS. Also pursuantto the Arrangement Debentureholders and Optionholders willreceive Debentures and Options, as applicable, of TGSPI whichwill be identical in all material respects to the securitiesthey currently hold other than the exercise price and theconversion price, as applicable, will be reduced taking intoaccount the post-Reorganization value of TGSPI;

8. Upon completion of the Reorganization TGSPIwill become the parent holding company of TGS;

9. Contemporaneously with the Reorganizationthe REIT will complete an initial public offering of unitsby way of prospectus (the "IPO"). The closing ofthe IPO is a condition to the completion of the Reorganization;

10. The REIT will use the proceeds from theIPO to purchase five (5) additional commercial real estateproperties in the United States (the "Acquisition Properties");

11. Subject to paragraph 12, the InformationCircular will contain the information that would be includedin a prospectus of TGS together with a detailed descriptionof the Reorganization and the securities being issued thereunder;

12. Based on pre-filing discussions and correspondencewith staff, TGS intends to include the same financial statementswhich are to be included in the REIT's IPO prospectus in theInformation Circular instead of the financial statements thatwould be required in a prospectus of TGS, as prescribed bythe Legislation.

13. The Information Circular will containthe following financial statements:

(a) combined financial statements for theExisting TGS Properties consisting of:

(i) audited balance sheets as at December31, 2001 and 2000;

(ii) unaudited interim balance sheet asat June 30, 2002;

(iii) audited statements of income, cashflows and retained earnings for the years ended December31, 2001, 2000 and 1999; and

(iv) unaudited interim statements of income,distributable income, cash flows and retained earningsfor the 6 months ended June 30, 2002 and 2001

(collectively, the "Existing TGS PropertiesFinancial Statements").

The Existing TGS Properties Financial Statementswill also contain segmented note disclosure by propertyand by year detailing the operations of each property forthe full 3 year period (including the results from thoseyears that the properties were not subject to common control)and supplemental note disclosure in column schedule formatpertaining to salient financial operating and physical characteristicsof each property including net rentable area, historicalnet book value, historical revenues and operating expenses;

(b) for the 2 Acquisition Properties whichare under common control of one vendor:

(i) audited combined balance sheets asat December 31, 2001 and 2000;

(ii) unaudited combined interim balancesheet as at June 30, 2002;

(iii) audited combined statements of income,distributable income, cash flows and retained earningsfor the years ended December 31, 2001, 2000 and 1999;and

(iv) unaudited combined interim statementsof income, distributable income, cash flows and retainedearnings for the 6 months ended June 30, 2002 and 2001

(collectively, the "Combined AcquisitionProperties Financial Statements").

The Combined Acquisition Properties FinancialStatements will include segmented note disclosure by propertydetailing the operations of each property and supplementalnote disclosure in column schedule format pertaining tosalient financial operating and physical characteristicsof each property including net rentable area, historicalnet book value, historical rental revenues and operatingexpenses;

(c) separate sets of financial statementsfor each of the remaining three (3) Acquisition Propertiesconsisting of:

(i) audited balance sheets as at December31, 2001 and 2000;

(ii) unaudited interim balance sheet asat June 30, 2002;

(iii) audited statements of income, distributableincome, cash flows and retained earnings for the yearsended December 31, 2001, 2000 and 1999; and

(iv) unaudited interim statements of income,distributable income, cash flows and retained earningsfor the 6 months ended June 30, 2002 and 2001.

(d) pro forma financial statements consistingof:

(i) unaudited pro forma balance sheetof the REIT at June 30, 2002;

(ii) unaudited pro forma statement ofincome of the REIT for the year ended December 31, 2001;and

(iii) unaudited pro forma statement ofincome of the REIT for the 6 months ended June 30, 2002

(collectively, the "Pro Forma FinancialStatements").

(e) pro forma balance sheet for TGSPI asat December 31, 2001 and as June 30, 2002 taking into accountthe Reorganization;

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 underthe Legislation is that TGS is exempt from the requirement toinclude in the Information Circular financial statements ofTGS consisting of 3 years of audited consolidated financialstatements for the years ended December 31, 2001 and 2000 andJanuary 31, 2000 and unaudited consolidated financial statementsfor the 6 months ended June 30, 2002 and 2001 as required bythe information circular form and the prospectus form prescribedby the Legislation, provided that the Information Circular containsthe financial statements referred to in representation 12.

September 27, 2002.

"Agnes Lau"