Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the requirement to include financial statements and management's discussion and analysis in an information circular for an entity participating in an arrangement -- the information circular will be sent to the trust's unitholders in connection with a proposed internal reorganization pursuant to which its business operations will be conducted through a corporate entity -- the arrangement does not contemplate the acquisition of any additional interest in any operating assets or the disposition of any of the trust's existing interests in operating assets.

Exemption granted from the current annual financial statement and current AIF short form prospectus qualification criteria and the requirement to file a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the filing of a preliminary short form prospectus -- relief granted as disclosure regarding the predecessor issuer will effectively be the disclosure of the successor issuer -- predecessor issuer is qualified to file a short form prospectus.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1.

Form 51-102F5 Information Circular, Item 14.2.

National Instrument 44-101 Short Form Prospectus Distributions, s. 8.1.

Citation: AltaGas Income Trust, Re, 2010 ABASC 194

May 3, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

ALTAGAS INCOME TRUST (the Trust) AND

ALTAGAS LTD. (AltaGas and, together with

the Trust, the Filers)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation):

(a) exempting the Trust from the requirement under Item 14.2 of Form 51-102F5 Information Circular (the Circular Form) of the Legislation to include the AltaGas Financial Statements (as defined below) and the AltaGas MD&A (as defined below) in the management information circular (the Circular) to be prepared by the Trust and delivered to the holders (Unitholders) of units of the Trust (Trust Units) and to the holders (LP #1 B Unitholders and, together with the Unitholders, the Securityholders) of Class B limited partnership units (LP #1 B Units) of AltaGas Holding Limited Partnership No. 1 (AltaGas LP #1) in connection with an annual and special meeting (the Meeting) of Securityholders to be held on June 3, 2010 for the purposes of, among other things, considering a plan of arrangement under the Canada Business Corporations Act (the CBCA) (the Arrangement) resulting in the internal reorganization of the Trust's trust structure into a corporate structure (the Circular Relief);

(b) exempting New AltaGas Amalco (as defined below) from the qualification criteria for short form prospectus eligibility contained in Subsection 2.2(d) of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) following completion of the Arrangement until the earlier of: (a) March 31, 2011; and (b) the date upon which New AltaGas Amalco (as defined below) has filed both its annual financial statements and annual information form for the year ended December 31, 2010 pursuant to NI 51-102 Continuous Disclosure Obligations (NI 51-102) (the Qualification Relief); and

(c) exempting New AltaGas Amalco (as defined below) from the requirement to file a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the filing of its first preliminary short form prospectus after the notice (the Prospectus Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this Application;

(b) the Filers have provided notice that Subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

The Trust, AltaGas, the General Partner, New AltaGas, and AltaGas LP #1

The Trust

1. The Trust is an unincorporated open-ended investment trust governed by the laws of Alberta pursuant to a declaration of trust dated as of March 26, 2004, between the settlor and Computershare Trust Company of Canada, as trustee (the Trustee), as from time to time amended, supplemented or restated. The principal office of the Trust is located in Calgary, Alberta.

2. The Trust is a reporting issuer or the equivalent under the securities legislation of each of the provinces of Canada. The Trust is not in default of securities legislation in any jurisdiction of Canada.

3. The Trust Units are listed on the Toronto Stock Exchange (TSX) under the symbol "ALA.UN".

4. The Trust has filed a "current AIF" and has "current annual financial statements" (as such terms are defined in NI 44-101) for the financial year ended December 31, 2009.

AltaGas

5. AltaGas is a corporation amalgamated under the CBCA and both the principal operating entity for the Trust and the administrator of the Trust. The principal office of AltaGas is located in Calgary, Alberta.

6. AltaGas is an indirect, wholly-owned subsidiary of the Trust.

7. AltaGas is not a reporting issuer in any jurisdiction and is not in default of applicable securities legislation in any jurisdiction of Canada.

8. The issued and outstanding common shares of AltaGas are not listed or posted for trading on any exchange or quotation and trade reporting system.

The General Partner

9. AltaGas General Partner Inc. (the General Partner) is a corporation amalgamated under the CBCA. The principal office of the General Partner is located in Calgary, Alberta.

10. The General Partner is a direct, wholly-owned subsidiary of the Trust, the delegate of the Trustee of the Trust and the general partner of AltaGas LP #1.

11. The General Partner is not a reporting issuer in any jurisdiction and is not in default of applicable securities legislation in any jurisdiction of Canada.

New AltaGas

12. AltaGas Conversion Inc. (New AltaGas) is a corporation incorporated under the CBCA for the sole purpose of participating in the Arrangement. The principal office of New AltaGas will be located in Calgary, Alberta.

13. New AltaGas will not be a reporting issuer in any jurisdiction prior to the completion of the transactions contemplated by the Arrangement.

14. New AltaGas Shares (as defined below) are not listed or posted for trading on any exchange or quotation and trade reporting system, however, application has been made to have New AltaGas Shares to be issued in connection with the Arrangement listed on the TSX, as well as the New AltaGas Amalco Shares (as defined below) which such New AltaGas Shares will become pursuant to the Amalgamation (as defined below).

AltaGas LP #1

15. AltaGas LP #1 is a limited partnership created pursuant to the laws of Alberta pursuant to a limited partnership agreement dated as of June 28, 2005 among the General Partner, AltaGas Holding Trust and the limited partners thereof from time to time, as from time to time amended, supplemented or restated.

16. AltaGas LP #1 has two classes of securities, Class A limited partnership units (all of which are beneficially owned by the Trust) and LP #1 B Units (which are held by the public).

17. AltaGas LP #1 is not a reporting issuer in any jurisdiction and is not in default of applicable securities legislation in any jurisdiction of Canada.

18. The LP #1 B Units are non-transferable and are exchangeable into Trust Units on a one-for-one basis. The LP #1 B Units are not listed or posted for trading on any exchange or quotation and trade reporting system.

Arrangement

19. Pursuant to the Arrangement, (i) each of AltaGas LP #1 and the Trust will be dissolved; (ii) the LP #1 B Units and the Trust Units will be cancelled; (iii) common shares of the General Partner will be distributed to Unitholders and ultimately exchanged for common shares of New AltaGas (New AltaGas Shares) on a one-for-one basis; (iv) New AltaGas Shares will be distributed to LP #1 B Unitholders on a one-for-one basis; (v) New AltaGas will amalgamate (the Amalgamation) with AltaGas and AltaGas Conversion #2 Inc., a corporation newly formed solely to participate in the Arrangement, to form AltaGas Ltd. (New AltaGas Amalco); (vi) pursuant to the Amalgamation, the New AltaGas Shares will become common shares in the capital of New AltaGas Amalco (New AltaGas Amalco Shares); and (vii) New AltaGas Amalco will own, directly or indirectly, all of the existing assets and assume all of the existing liabilities of the Trust, effectively resulting in the internal reorganization of the Trust's trust structure into a corporate structure.

20. Following the completion of the Arrangement: (i) the sole business of New AltaGas Amalco will be the current business of the Trust, as conducted through AltaGas; (ii) New AltaGas Amalco will be a reporting issuer or the equivalent under the securities legislation in all of the provinces of Canada; and (iii) the New AltaGas Amalco Shares will, subject to approval by the TSX, be listed on the TSX.

21. The Arrangement does not contemplate the acquisition of any additional operating assets or the disposition of any existing operating assets.

22. Pursuant to the Declaration of Trust, the CBCA and applicable securities laws, the Securityholders will be required to approve the Arrangement at the Meeting. The Arrangement must be approved by not less than two-thirds of the votes cast by Securityholders at the Meeting. The Meeting will take place on June 3, 2010 and the Circular is expected to be mailed on or about May 5, 2010.

23. The Arrangement will be a "restructuring transaction" (as such term is defined in NI 51-102) in respect of the Trust and therefore will require compliance with Item 14.2 of the Circular Form.

Financial statements and management's discussion and analysis disclosure in the Circular

24. Item 14.2 of the Circular Form requires, among other items, that the Circular contain the disclosure (including financial statements and management's discussion and analysis (MD&A)) prescribed under securities legislation and described in the form of prospectus that New AltaGas Amalco (as the entity whose securities are being distributed pursuant to the restructuring transaction and in which entity the Securityholders will have an interest after the completion of the restructuring transaction) would be eligible to use immediately prior to the sending and filing of the Circular for a distribution of its securities. However, as New AltaGas Amalco will not be in existence on the date of the Circular, Item 32.1(a) of the Prospectus Form requires that the financial statements of any predecessor entity that formed the basis of the business of New AltaGas Amalco be included. As AltaGas is the principal operating entity of the Trust and therefore will form the basis of the business of New AltaGas Amalco on completion of the Arrangement, the Circular must contain the disclosure in respect of AltaGas prescribed by Form 41-101F1 Information Required in a Prospectus (the Prospectus Form) and by NI 41-101.

25. Items 8.2(1)(a) and (b) and 8.2(2) of the Prospectus Form require the Trust to include MD&A corresponding to each of the financial years ended December 31, 2009 and December 31, 2008 and the interim period ended March 31, 2010 of AltaGas (the AltaGas MD&A) in the Circular.

26. Item 32.2(1) of the Prospectus Form requires the Trust to include certain annual financial statements of AltaGas in the Circular, including: (i) an income statement, a statement of retained earnings, and a cash flow statement of AltaGas for each of the financial years ended December 31, 2009, December 31, 2008 and December 31, 2007; and (ii) a balance sheet of AltaGas as at December 31, 2009 and December 31, 2008 (collectively, the AltaGas Annual Financial Statements). Item 32.3(1) of the Prospectus Form also requires the Trust to include certain comparative interim financial statements of AltaGas in the Circular, including: (i) an income statement, a statement of retained earnings and a cash flow statement of AltaGas for the interim periods ended March 31, 2010 and March 31, 2009; and (ii) a balance sheet of AltaGas as at the end of March 31, 2010 and December 31, 2009 (together with the AltaGas Annual Financial Statements, the AltaGas Financial Statements).

27. Subsection 4.2(1) of NI 41-101 requires that the Annual Financial Statements required to be included in the Circular must be audited in accordance with National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency.

28. The Arrangement will not result in a change in beneficial ownership of the assets and liabilities of the Trust, from both an accounting perspective and an economic perspective. Accordingly, no acquisition will occur as a result of the Arrangement and therefore the significant acquisition financial statement disclosure requirements contained in the Prospectus Form are inapplicable.

29. The Arrangement will be an internal reorganization undertaken without dilution to the Securityholders or additional debt or interest expense being incurred or assumed by New AltaGas Amalco.

Exemptions Sought

Circular Relief

30. The Trust's financial statements and related MD&A are prepared on a consolidated basis, which includes the financial results for AltaGas. To present the AltaGas Financial Statements and the AltaGas MD&A in the Circular, which would exclude accounts of the Trust, would be misleading, since there are transactions between AltaGas and the Trust that eliminate when consolidation is performed at the Trust level. To present the AltaGas Financial Statements, which would exclude the accounts of the Trust, would present the effects of only one side of the financing activities between AltaGas and the Trust. This would result in significant intra-group liabilities and large amounts of intra-group interest expense being reflected on the AltaGas Financial Statements. As a result, the presentation of these intra-group transactions, which will be eliminated upon completion of the Arrangement, would present a confusing (and potentially misleading) picture of financial performance.

31. The AltaGas Financial Statements and the AltaGas MD&A are not relevant to the Securityholders for the purposes of considering the Arrangement, as the AtlaGas Financial Statements and the AtlaGas MD&A, other than as discussed above, would be substantially and materially the same as the consolidated financial statements of the Trust filed in accordance with Part 4 of NI 51-102 because the financial position of the entity that exists both before and after the Arrangement is substantially the same.

32. The Circular will contain prospectus level disclosure in accordance with the Prospectus Form (other than the AltaGas Financial Statements and the AltaGas MD&A) and will contain sufficient information to enable a reasonable Securityholder to form a reasoned judgement concerning the nature and effect of the Arrangement and the nature of the resultant public entity and reporting issuer from the Arrangement, being New AltaGas Amalco.

Prospectus Relief

33. Subsection 2.7(2) of NI 44-101 contains an exemption for successor issuers from the qualification criteria for short form prospectus eligibility contained in Subsection 2.2(d) of NI 44-101, if an information circular relating to the restructuring transaction that resulted in the successor issuer was filed by the successor issuer or an issuer that was a party to the restructuring transaction, and such information circular (i) complied with applicable securities legislation, and (ii) included disclosure in accordance with Item 14.2 or 14.5 of the Circular Form of the successor issuer. New AltaGas Amalco will be a "successor issuer" (as such term is defined in NI 44-101) as a result of the Arrangement (which, as discussed above, is a restructuring transaction). The Circular will be filed by the Trust (a party to the restructuring transaction), the Circular will comply with applicable securities legislation and the Circular will include the disclosure required by Item 14.2 of the Circular Form, except for the AltaGas Financial Statements and the AltaGas MD&A which will not be included in the Circular pursuant to the Circular Relief (assuming the Circular Relief is granted).

Prospectus filing following the Arrangement

34. The Trust is qualified to file a prospectus in the form of a short form prospectus pursuant to Section 2.2 of NI 44-101 and is deemed to have filed a notice of intention to be qualified to file a short form prospectus under Section 2.8(4) of NI 44-101.

35. The Filers anticipate that they may wish to file a preliminary short form prospectus following the completion of the Arrangement, relating to the offering or potential offering of securities (including New AltaGas Amalco Shares, debt securities or subscription receipts) of New AltaGas Amalco.

36. In anticipation of the filing of a preliminary short form prospectus, and assuming the Arrangement has been completed, New AltaGas Amalco intends to file a notice of intention to be qualified to file a short form prospectus (the Notice of Intention) following completion of the Arrangement. In the absence of the Prospectus Relief, New AltaGas Amalco will not be qualified to file a preliminary short form prospectus until 10 business days from the date upon which the Notice of Intention is filed.

37. Pursuant to the qualification criteria set forth in Section 2.2 of NI 44-101 as modified in the Qualification Relief, following the Arrangement, New AltaGas Amalco will be qualified to file a short form prospectus pursuant to NI 44-101.

38. Notwithstanding Section 2.2 of NI 44-101 as modified in the Qualification Relief, Section 2.8(1) of NI 44-101 provides that an issuer is not qualified to file a short form prospectus unless it has filed a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the issuer filing its first preliminary short form prospectus.

39. The short form prospectus of New AltaGas Amalco will incorporate by reference the documents that would be required to be incorporated by reference under Item 11 of Form 44-101F1 in a short form prospectus of New AltaGas Amalco, as modified by the Qualification Relief.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that:

(a) the Circular Relief is granted;

(b) the Qualification Relief is granted provided that any short form prospectus filed by New AltaGas Amalco pursuant to NI 44-101 during the currency of the Qualification Relief specifically incorporates by reference the Circular and any financial statements and related MD&A of the Trust incorporated by reference into the Circular; and

(c) the Prospectus Relief is granted, provided that at the time New AltaGas Amalco files its Notice of Intention, New AltaGas Amalco meets the requirements of Section 2.2 of NI 44-101, as modified by the Qualification Relief.

"Blaine Young"
Associate Director, Corporate Finance
Alberta Securities Commission