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 annual information form 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.

Exemption granted to a successor issuer from the requirement to deliver personal information forms for individuals for whom the trust previously delivered personal information forms.

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: Pengrowth Energy Trust, Re, 2010 ABASC 528

November 9, 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

PENGROWTH ENERGY TRUST

(THE FILER)

DECISION

Background

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

(a) exempting the Filer from the requirement under section 14.2 of Form 51-102F5 Information Circular (the Circular Form) to provide: (i) an income statement, a statement of retained earnings and a cash flow statement of Pengrowth Corporation (the Corporation) for each of the financial years ended December 31, 2009, December 31, 2008 and December 31, 2007 as well as a balance sheet of the Corporation as at the end of December 31, 2009 and December 31, 2008 (the Annual Financial Statements); (ii) a comparative income statement, a statement of retained earnings, and cash flow statement of the Corporation for the interim period ended September 30, 2010, as well as a balance sheet of the Corporation as at the end of September 30, 2010 and December 31, 2009 (the Interim Financial Statements); and (iii) the management's discussion and analysis of the Corporation corresponding to each of the financial years ended December 31, 2009 and December 31, 2008 and the interim period of September 30, 2010 (the MD&A, and together with the Annual Financial Statements and Interim Financial Statements, the Financial Information) in the management information circular (the Circular) to be prepared by the Filer and delivered to the holders of units and class A units of the Filer (Unitholders) and holders of exchangeable shares of the Corporation (Shareholders) in connection with a special meeting (the Meeting) of Unitholders and Shareholders expected to be held December 16, 2010 for the purposes of considering a plan of arrangement under the Business Corporations Act (Alberta) (the Arrangement) resulting in the internal reorganization of the Filer's trust structure into a corporate structure (the Circular Relief);

(b) exempting Pengrowth Energy (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: (i) March 30, 2012; and (ii) the date upon which Pengrowth Energy, as successor issuer to the Filer and which is anticipated to become a reporting issuer on January 1, 2011, has filed, or was required to file, both its annual financial statements and annual information form for the year ended December 31, 2011 pursuant to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) (the Qualification Relief);

(c) exempting the corporation to be known as "Pengrowth Energy Corporation" (Pengrowth Energy), which will be the corporation resulting from the amalgamation of 1562803 Alberta Ltd. (Newco), the Corporation and certain direct and indirect wholly-owned subsidiaries of the Filer pursuant to the terms of the Arrangement, from the requirement applicable to Pengrowth Energy contained in section 2.8 of NI 44-101 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); and

(d) exempting Pengrowth Energy from the requirement under subsection 4.1(b) of NI 44-101 for Pengrowth Energy to file a Personal Information Form and Authorization to Collect, Use and Disclose Personal Information in the form attached as Appendix A to National Instrument 41-101General Prospectus Requirements (NI 41-101) for each director and executive officer of Pengrowth Energy at the time of filing a preliminary short form prospectus for whom the Filer has previously delivered any of the documents described in paragraphs 4.1(b)(i)(E) through (G) of NI 44-101 at the time of filing such preliminary short-form prospectus (the PIF 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 Filer has 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, Newfoundland and Labrador, and Prince Edward Island; 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 Filer:

The Filer, the Corporation, Newco, and Pengrowth Energy

The Filer

1. The Filer is an unincorporated open-ended limited purpose trust established under the laws of Alberta on December 2, 1988, pursuant to a trust indenture dated December 2, 1988, as amended and restated from time to time. The principal office of the Filer is located in Calgary, Alberta.

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

3. The authorized capital of the Filer includes an unlimited number of trust units (Trust Units), an unlimited number of Class A trust units (Class A Units) and a special voting unit (Special Voting Unit). As at October 18, 2010, there were 321,142,032 Trust Units, 999 Class A Units and 1 Special Voting Unit issued and outstanding.

4. The Trust Units are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).

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

The Corporation

6. The Corporation is a corporation amalgamated under the laws of Alberta. The principal office of the Corporation is located in Calgary, Alberta.

7. The authorized capital of the Corporation includes an unlimited number of common shares. All common shares of the Corporation are held by the Filer.

8. The authorized capital of the Corporation also includes 4,994,496 series A exchangeable shares (Exchangeable Shares). The Exchangeable Shares are publicly held. As at October 18, 2010 there were 3,750,510 Exchangeable Shares issued and outstanding.

9. The Corporation is a reporting issuer in all provinces of Canada with the exception of Newfoundland and Labrador and Prince Edward Island and is not in default of applicable securities legislation in any such jurisdiction.

10. The common shares and Exchangeable Shares of the Corporation are not listed or posted for trading on any exchange or quotation and trade reporting system.

Newco and Pengrowth Energy

11. Newco is a corporation incorporated under the laws of Alberta. The principal office of Newco is located in Calgary, Alberta.

12. Newco is a wholly-owned subsidiary of the Filer and has been incorporated solely to participate in the Arrangement, including to issue common shares of Newco to former Unitholders and Shareholders and to amalgamate with the Corporation and certain other direct and indirect subsidiaries of the Filer to form Pengrowth Energy, as a result of which the former Unitholders and Shareholders will hold common shares of Pengrowth Energy (Pengrowth Energy Shares) following the completion of the Arrangement.

13. Newco is not a reporting issuer in any jurisdiction and is not in default of applicable securities legislation in any jurisdiction of Canada. Following completion of the Arrangement, Pengrowth Energy, as amalgamation successor to the Corporation and Newco, will be a reporting issuer in each of the provinces of Canada.

14. None of the common shares issued by Newco will be listed or posted for trading on any exchange or quotation system and trade reporting system. Applications will be made to have Pengrowth Energy Shares to be issued in connection with the Arrangement listed with the TSX and the NYSE.

Arrangement

15. As part of the Arrangement, (i) the Trust Units and Class A Units (collectively the Units) will be exchanged for common shares of Newco on a one-for-one basis; (ii) the Exchangeable Shares will be exchanged for common shares of Newco on the basis of the exchange ratio to be determined immediately prior to the exchange; (iii) the Filer will be dissolved and the Units and Special Voting Unit will be cancelled; (iv) the Corporation, Newco and certain other direct and indirect subsidiaries will amalgamate to form Pengrowth Energy; (v) the common shares of Newco will continue as Pengrowth Energy Shares and the Exchangeable Shares will be cancelled; and (vi) Pengrowth Energy will own, directly or indirectly, all of the existing assets and assume all of the existing liabilities of the Filer and the Corporation, effectively resulting in the internal reorganization of the Filer's trust structure into a corporate structure.

16. Following the completion of the Arrangement: (i) the sole business of Pengrowth Energy will be the current business of the Filer; (ii) Pengrowth Energy would be a reporting issuer or the equivalent under the securities legislation in each of the provinces of Canada; and (iii) the Pengrowth Energy Shares would, subject to approval by the TSX and NYSE, be listed on the TSX and NYSE respectively.

17. The Arrangement does not contemplate the acquisition of any additional operating assets or the disposition of any existing operating assets and will not result in a change in the ultimate beneficial ownership of the assets and liabilities of the Filer. The Arrangement will be an internal reorganization undertaken without dilution to the Unitholders or Shareholders or additional debt or interest expense.

18. Pursuant to the Filer's and the Corporation's constating documents and applicable securities laws, the Unitholders and Shareholders 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 Unitholders and Shareholders at the Meeting. The Meeting is anticipated to take place December 16, 2010 and the Circular is expected to be mailed in mid-November 2010.

19. The Arrangement will be a "restructuring transaction" under NI 51-102 in respect of the Filer and therefore would require compliance with section 14.2 of the Circular Form.

20. Subsequent to the effective date of the Arrangement and in accordance with the timing specified in the Qualification Relief, Pengrowth Energy, as successor issuer to the Filer, will file on its SEDAR profile certain continuous disclosure documents of the Filer for the year ended December 31, 2010 that would be required to be filed by the Filer under NI 51-102 if it were still a reporting issuer 90 days after December 31, 2010, including (i) the audited annual comparative financial statements and management's discussion and analysis of Pengrowth Energy, as successor issuer of the Filer, for the financial year ended December 31, 2010; and, (ii) an annual information form of Pengrowth Energy, as successor issuer of the Filer, for the year ended December 31, 2010 (such financial statements, management's discussion and analysis and annual information form referred to as the Filer 2010 Annual Filings).

21. The Arrangement is being undertaken to reorganize the Filer following the enactment by the federal government of rules in respect of the tax treatment of specified investment flow-through trusts. Pursuant to the Arrangement, the Filer will be reorganized into Pengrowth Energy, a public growth-oriented oil and gas corporation that will own, directly or indirectly, all of the existing assets and assume all of the existing liabilities of the Filer.

22. The rights of the Unitholders and Shareholders in respect of Pengrowth Energy following the Arrangement will be substantively equivalent to the rights the Unitholders and Shareholders currently have in respect of the Filer and their relative interest in and to the business carried on by Pengrowth Energy will not be affected by the Arrangement.

23. The only securities that will be distributed to the Unitholders and Shareholders pursuant to the Arrangement will be common shares of Newco, which will continue as Pengrowth Energy Shares.

24. While changes to the consolidated financial statements of Pengrowth Energy will be required to reflect the organizational structure of the Filer following the Arrangement, the financial position of Pengrowth Energy will be substantially the same as reflected in the Filer's audited annual consolidated financial statements most recently filed or required to have been filed under Part 4 of NI 51-102 prior to the date of the Circular and the Filer's unaudited interim consolidated financial statements most recently filed or required to have been filed under Part 4 of NI 51-102 prior to the date of the Circular. In particular, the entity that exists both before and subsequent to the Arrangement would be substantially the same given the fact that the assets and liabilities of the enterprise, from both an accounting perspective and economic perspective, are not changing based on the Arrangement. However, as the tax structure will be changing from that of an income trust to a corporation, the tax advantages of the income trust structure will be lost.

Financial Statement Disclosure in the Circular

25. Section 14.2 of the Circular Form requires that the Circular contain the disclosure (including financial statements) prescribed under securities legislation and described in the form of prospectus that the Corporation would be eligible to use immediately prior to the sending and filing of the Circular for a distribution of its securities. Therefore, the Circular must contain the disclosure in respect of the Corporation prescribed by NI 41-101 and, by extension, Form 41-101F1 Information Required in a Prospectus (Prospectus Form).

26. Paragraphs 8.2(1)(a) and (b) and subsection 8.2(2) of the Prospectus Form require the Filer to include the MD&A in the Circular.

27. Subsection 32.2(1) of the Prospectus Form requires the Filer to include the Annual Financial Statements in the Circular. Subsection 32.3(1) of the Prospectus Form requires the Filer to include the Interim Financial Statements in the Circular.

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

29. The Arrangement will not result in a change in beneficial ownership of the assets and liabilities of the Filer, 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.

30. The Arrangement will be an internal reorganization undertaken without dilution to the Unitholders or Shareholders or additional debt or interest expense.

Exemptive Relief Sought

Circular Relief

31. The financial statements of the Filer are reported on a consolidated basis, which includes the financial results for the Corporation. The Corporation does not report its financial results independently from the consolidated financial statements of the Filer. The Financial Information, if prepared, would not include the accounts of the Filer. This would be misleading, since there are transactions between the Corporation and the Filer that are eliminated when consolidation is performed at the trust level. To present the Financial Information, which would exclude accounts of the Filer, would present the effects of only one side of the financing activities between the Corporation and the Filer. This would result in significant intra-group balances and intra group interest expense being reflected on the Financial Information. An agreement exists between the Trust and the Corporation whereby the Corporation pays a regular royalty to the Trust related to net resource cash flows from operations. To present the Financial Information excluding the accounts of the Filer, would present only one side of the intra-group royalty expense. 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.

32. The Financial Information is not relevant to the Unitholders and the Shareholders for the purposes of considering the Arrangement as the Financial Information following the completion of the Arrangement would be substantially and materially the same as the consolidated financial statements of the Filer filed in accordance with Part 4 of NI 51-102 prior to the completion of the Arrangement because the financial position of the entity that exists both before and after the Arrangement is substantially the same.

33. The Circular will contain prospectus level disclosure in accordance with the Prospectus Form (other than the Financial Information) 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 resulting public entity and reporting issuer from the Arrangement, being Pengrowth Energy.

Prospectus Relief and Qualification Relief

34. 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.

35. Pengrowth Energy 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 Filer (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 Financial Statements and MD&A which will not be included in the Circular pursuant to the Circular Relief (assuming the Circular Relief is granted).

36. The Filer is qualified to file a prospectus in the form of a short form prospectus pursuant to subsection 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 subsection 2.8(4) of NI 44-101.

37. The Filer anticipates that Pengrowth Energy 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 common shares or other securities) of Pengrowth Energy.

38. Pursuant to the qualification criteria set forth in section 2.2 of NI 44-101, as modified by the Qualification Relief, following the Arrangement, Pengrowth Energy will be qualified to file a short form prospectus pursuant to NI 44-101.

39. Notwithstanding section 2.2 of NI 44-101, as modified by the Qualification Relief, subsection 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 ten business days prior to the issuer filing its first preliminary short form prospectus.

40. In anticipation of the filing of a preliminary short form prospectus, and assuming the Arrangement has been completed, Pengrowth Energy 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, Pengrowth Energy will not be qualified to file a preliminary short form prospectus until ten business days from the date upon which the Notice of Intention is filed.

41. The short form prospectus of Pengrowth Energy 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 Pengrowth Energy, as modified by the Qualification Relief.

PIF Relief

42. Prior to May 5, 2009, the date of the most recently filed preliminary short form prospectus by the Filer, the Filer had previously delivered the documents described in subparagraphs 4.1(b)(i)(E) through (G) of NI 44-101 for each individual acting in the capacity of director or executive officer of the Corporation, the administrator of the Filer, at such time (each a Filer PIF).

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 Pengrowth Energy pursuant to NI 44-101 during the currency of the Qualification Relief specifically incorporates by reference:

(i) the Circular and any financial statements and related management's discussion and analysis of the Filer incorporated by reference into the Circular;

(ii) if the short form prospectus is filed before the earlier of the Filer 2010 Annual Filings having been filed by Pengrowth Energy or the date that is 90 days following December 31, 2010, the unaudited comparative interim financial statements of the Filer for the three and nine months ended September 30, 2010 together with the accompanying management's discussion and analysis of the Filer;

(iii) if the short form prospectus is filed either after the Filer 2010 Annual Filings have been filed by Pengrowth Energy or on a date more than 90 days following December 31, 2010, the Filer 2010 Annual Filings; and

(iv) any continuous disclosure documents of Pengrowth Energy, as successor issuer to the Filer, required to be incorporated by reference pursuant to the Prospectus Form;

(c) the Prospectus Relief is granted, provided that at the time Pengrowth Energy files its Notice of Intention, Pengrowth Energy meets the requirements of section 2.2 of NI 44-101, as modified by the Qualification Relief; and

(d) the PIF Relief is granted, provided that:

(i) each individual who is a director or executive officer of Pengrowth Energy at the time of a prospectus filing by Pengrowth Energy and for whom the Filer has previously delivered a Filer PIF authorizes the Decision Makers, in respect of a prospectus filing by Pengrowth Energy, to collect, use and disclose the personal information that was previously provided in the Filer PIF;

(ii) Pengrowth Energy, if requested by the Decision Maker, promptly delivers such further information from each individual referred to in paragraph (i) above as the Decision Maker may require; and

(iii) the PIF Relief will terminate in any jurisdiction in which the decision is in effect on the effective date of any change to subsection 4.1(b)(i) of NI 44-101.

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