Arbour Glen Apartments Limited -- ss. 25, 53, 74(1) and 83 of the Act and s. 1(6) of the OBCA

Headnote

Issuer that operates apartment building deemed to have ceased to be a reporting issuer under the Securities Act (Ontario) and deemed to have ceased to be offering its securities to the public under the Business Corporations Act (Ontario). Issuer became a reporting issuer in 1971 when it filed a prospectus to qualify "units" comprising shares of the issuer and occupancy rights to apartment suites in the building. Issuer holds title as bare trustee for the beneficial owners of the apartment building. In order to purchase an apartment suite, a purchaser must also purchase the corresponding shares from the existing owner occupant of the apartment suite and enter into a new occupancy agreement with the issuer. Shares not quoted or listed on a marketplace. Primary reason to own shares is to secure personal living space and not for investment purposes.

Relief from the registration and prospectus requirements also granted under subsection 74(1) of the Securities Act (Ontario) for future trades of shares to purchasers of apartment suites, subject to conditions.

Fee relief granted for application under subsection 74(1).

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as amended, ss. 25, 53, 74(1) and 83.

Business Corporations Act, R.S.O. 1990, c. B.16, as amended, s. 1(6).

Ontario Rules

Ontario Securities Commission Rule 13-502 - Fees, section 6.1.

April 29, 2005

IN THE MATTER OF

THE SECURITIES ACT

R.S.O 1990, CHAPTER S.5, AS AMENDED (the "Act")

AND

IN THE MATTER OF

THE BUSINESS CORPORATIONS ACT

R.S.O. 1990, CHAPTER B.16, AS AMENDED (the "OBCA")

AND

IN THE MATTER OF

ONTARIO SECURITIES COMMISSION RULE 13-502 -- FEES (the "Fees Rule")

AND

IN THE MATTER OF

ARBOUR GLEN APARTMENTS LIMITED

ORDER

UPON the application of Arbour Glen Apartments Limited (the "Applicant") for the following:

1. an order of the Ontario Securities Commission (the "Commission") pursuant to section 83 of the Act that the Applicant be deemed to have ceased to be a reporting issuer under the Act;

2. an order of the Commission pursuant to subsection 1(6) of the OBCA that the Applicant be deemed to have ceased to be offering its securities to the public for the purposes of the OBCA;

3. a ruling of the Commission pursuant to subsection 74(1) of the Act that trades in Arbour Glen Shares (as defined below) are not subject to sections 25 or 53 of the Act (the "Section 74 Application") subject to certain conditions; and

4. an order of the Director pursuant to section 6.1 of the Fees Rule that the Applicant be exempt from paying the required fees for the Section 74 Application;

AND UPON considering the application and the recommendation of the staff of the Commission;

AND UPON the Applicant having represented to the Commission and the Director that:

1. The Applicant is a corporation existing under the OBCA;

2. The Applicant was incorporated on September 22, 1970 for the purpose of taking title to, and holding as bare trustee for the beneficial owners, the lands, premises and apartment building erected at 120 Rosedale Valley Road/16 Rosedale Road, Toronto, Ontario (the "Building");

3. The Applicant became a reporting issuer in Ontario as a result of filing a prospectus dated January 11, 1971 qualifying the initial distribution of its securities (the "Original Prospectus");

4. The Applicant is not a reporting issuer in any other jurisdiction in Canada;

5. The authorized capital of the Applicant is fixed at 1,725 shares without par value (the "Arbour Glen Shares"). There are currently 1,725 Arbour Glen Shares issued and outstanding;

6. 1,710 of the 1,725 authorized Arbour Glen Shares were offered pursuant to the Original Prospectus and subsequent prospectus offerings during the years 1971 to 1975. Each prospectus qualified "units" comprising Arbour Glen Shares and occupancy rights to apartment suites in the Building. The remaining 15 Arbour Glen Shares, which had been held in trust for the Superintendent of Arbour Glen, appear to have been transferred to an Owner Occupant sometime during the early 1970s;

7. Other than the Arbour Glen Shares, the Applicant does not have any securities, including debt securities, outstanding;

8. The Building is made up of 114 apartment suites (the "Apartment Suites"). The Applicant maintains the common elements and provides common services for the benefit of owner occupants of the Apartment Suites (the "Owner Occupants"). The beneficial ownership of the Apartment Suites and the common elements are vested in the holders of the Arbour Glen Shares, being the Owner Occupants;

9. There are currently 114 shareholders of the Applicant holding all of the issued and outstanding Arbour Glen Shares, each of whom is an Owner Occupant of one of the 114 Apartment Suites. No shareholder of the Applicant owns more than 10% of the issued and outstanding Arbour Glen Shares;

10. The Applicant does not intend to seek financing by way of a future offering of securities of the Applicant;

11. The Arbour Glen Shares are not quoted or listed on a marketplace as defined in National Instrument 21-101 - Marketplace Operation;

12. There is no market for the Arbour Glen Shares in and of themselves, and any market for the Arbour Glen Shares is incidental to the real estate value associated with the right to occupy the Apartment Suites. The Applicant does not anticipate any market for the Arbour Glen Shares themselves developing;

13. Purchasers of Arbour Glen Shares are restricted to those persons who will be Owner Occupants of an Apartment Suite. In order to become an Owner Occupant of an Apartment Suite, a purchaser must acquire the specified number of Arbour Glen Shares which are associated with that Apartment Suite. The number of Arbour Glen Shares purchased depends on, among other things, the size of the Apartment Suite being acquired. The purchased Arbour Glen Shares are transferred to a new Owner Occupant (a "Purchasing Owner Occupant") from the existing Owner Occupant (a "Selling Owner Occupant"). In selling Arbour Glen Shares associated with an Apartment Suite, the Selling Owner Occupant also assigns all of his or her rights under an occupancy agreement with the Applicant (the "Occupancy Agreement") in respect of the Apartment Suite to the Purchasing Owner Occupant. Following closing of the purchase and sale, the Purchasing Owner Occupant will enter into a new Occupancy Agreement with the Applicant;

14. The purchase price paid by a Purchasing Owner Occupant is an aggregate amount for the acquisition of both the right to occupy an Apartment Suite and the specified number of Glen Arbour Shares associated with that Apartment Suite. The purchase price paid by a Purchasing Owner Occupant reflects the value of the right to occupy the Apartment Suite and is, therefore, essentially an investment in real estate;

15. Pursuant to the standard form Occupancy Agreement entered into between each Owner Occupant and the Applicant, an Owner Occupant cannot assign his or her Arbour Glen Shares unless such Owner Occupant also assigns to the purchaser of such Arbour Glen Shares the rights under the Occupancy Agreement. In order to assign his or her rights under an Occupancy Agreement, the Owner Occupant must, among other things, obtain the consent of the majority of the members of the board of directors of the Applicant (the "Board of Directors");

16. The Occupancy Agreement provides the consent of the Board of Directors is not required for the Owner Occupant to pledge its rights under the Occupancy Agreement to secure a loan from a lender or for any sale of those rights by the lender in the event of a default under the loan;

17. The Occupancy Agreement sets out the rights and obligations of the Owner Occupants in respect of the Apartment Suites and the facilities of the Building;

18. Secondary trades in Arbour Glen Shares occur only in the following circumstances:

(a) in the event that that a Selling Owner Occupant transfers his or her right to occupy an Apartment Suite to a Purchasing Owner Occupant;

(b) in the event that the Applicant takes possession of an Apartment Suite, in accordance with the provision of the Occupancy Agreement and pursuant to a default in obligations by a current Owner Occupant, and subsequently transfers the right to occupy an Apartment Suite and the Arbour Glen Shares which are associated with such Apartment Suite to a Purchasing Owner Occupant, as agent for the defaulting Owner Occupant; or

(c) in the event that an Owner Occupant (a "Debtor Owner Occupant") defaults in its obligations to a lender under a loan that is secured by a charge on the Debtor Owner Occupant's interests in an Apartment Suite and the lender subsequently transfers the right to occupy an Apartment Suite and the Arbour Glen Shares which are associated with such Apartment Suite to a Purchasing Owner Occupant for the purpose of liquidating the loan;

19. The Applicant's by-laws prohibit the Applicant from entering into an Occupancy Agreement with a proposed Owner Occupant until the proposed Owner Occupant provides an undertaking that they will personally occupy their Apartment Suite for a minimum of one year from the date of first possession. Therefore, all prospective Owner Occupants must purchase Apartment Suites for the purpose of personally residing in them;

20. The Applicant's owner's manual (the "Owner's Manual") allows Owner Occupants to rent out their Apartment Suites only where such rental is first approved by the Board of Directors. In particular, the Owner's Manual states that the purpose of the rental provision is to allow for situations where Owner Occupants may contemplate leaving the area for an extended period of time, and wish to be able to return to their Apartment Suites. The Board of Directors reviews any Apartment Suite rental both on a yearly basis and in the event of a change of circumstances of the Owner Occupant. Where it is apparent to the Board of Directors that an Owner Occupant will not return to reside in the Apartment Suite, the Board of Directors asks the Owner Occupant to sell his or her Apartment Suite. Currently, three of the 114 Apartment Suites are being rented out by Owner Occupants;

21. The purchase of Arbour Glen Shares by Owner Occupants is to secure personal living space, and not for the purpose of investment;

22. Even though it is a corporation governed by the OBCA, the Applicant is run like a non-profit cooperative. The anticipated yearly expenses of the Apartment Suites, including all taxes, insurance premiums, repairs to common elements, reserves, etc. are determined by the Board of Directors. Thereafter, the Board of Directors sets monthly carrying charges to be paid by the Owner Occupants in an amount sufficient to cover the anticipated yearly expenses. The Applicant carries on no other business activity other than the asset management of the Building and has no other sources of revenue other than the carrying charges paid by Owner Occupants;

23. Pursuant to subsection 22(3) of the OBCA, the holders of the Arbour Glen Shares have the right to vote at all meetings of shareholders, and the right to receive the remaining property of the Applicant upon dissolution;

24. Under the OBCA, the Applicant is subject to various disclosure obligations in respect of its shareholders, including the obligation:

(a) to hold annual meetings of shareholders pursuant to subsection 94(1) of the OBCA;

(b) to provide the shareholders with financial statements, prior to any annual meeting of shareholders, pursuant to subsection 154(1) of the OBCA; and

(c) to allow the shareholders to examine the Applicant's records, including its articles and by-laws, minutes of meetings and resolutions of shareholders, the register of directors and securities register, pursuant to subsection 145(1) of the OBCA;

25. The Applicant is not in default of the requirements of the Act and the rules and regulations made thereunder, except as follows:

(a) the Applicant has not filed interim certificates pursuant to Multilateral Instrument 52-109 -- Certification of Disclosure in Issuers' Annual and Interim Filings or interim management discussion and analysis pursuant to National Instrument 51-102 -- Continuous Disclosure Obligations; and

(b) the Applicant has not filed all interim financial statements as required by National Instrument 51-102;

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest,

IT IS ORDERED, pursuant to section 83 of the Act, that the Applicant is deemed to have ceased to be a reporting issuer under the Act,

AND IT IS ORDERED, pursuant to subsection 1(6) of the OBCA, that the Applicant is deemed to have ceased to be offering its securities to the public for the purposes of the OBCA,

AND IT IS RULED, pursuant to subsection 74(1) of the Act, that a trade in Arbour Glen Shares is not subject to section 25 or 53 of the Act, provided that there is no material change to the business of the Applicant and that trading in Arbour Glen Shares is limited to:

(a) trades from a Selling Owner Occupant to a Purchasing Owner Occupant;

(b) trades by the Applicant, as agent for an Owner Occupant, to a Purchasing Owner Occupant in connection with an Apartment Suite that the Applicant has taken possession of pursuant to the provisions of an Occupancy Agreement; and

(c) trades by a lender to a Purchasing Owner Occupant for the purposes of liquidating a loan secured by a charge on a Debtor Owner Occupant's interests in an Apartment Suite following a default by the Debtor Owner Occupant in its obligations under the loan.

April 29, 2005

AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest;

IT IS THE DECISION of the Director, pursuant to section 6.1 of the Fees Rule, that the Applicant is exempt from the requirement in section 4.1 of the Fees Rule to pay an activity fee for the filing of the Section 74 Application.