Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemptive relief from continuous disclosure (other than requirements to file a material change report), certification and audit committee requirements -- As a result of a privatization transaction the Filer is wholly-owned by a single entity that owns the only outstanding Trust Unit of the Filer, the Filer's Trust Units were delisted from the TSX and the Filer has no operating business and does not intend to operate a business in the future -- Filer has issued and outstanding convertible unsecured subordinated debentures due September 30, 2018 -- As a result of the defeasance of the debentures, the debentures are no longer payment obligations of the Filer and Filer's disclosure is of minimal relevance to the debenture holders -- Filer required to file alternative annual disclosure in the form of a statement of property that provides the aggregate principal amount of debentures that remain outstanding and a report by the debenture trustee setting out the type, maturity date, face amount and coupon rate for each security held by the debenture trustee for purposes of satisfying the obligations pursuant to the debentures -- Filer also granted exemptive relief from participation fees.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations.

National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filing.

National Instrument 52-110 Audit Committee.

National Instrument 58-101 Disclosure of Corporate Governance Practices.

OSC Rule 13-502 Fees.

October 17, 2013

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
TRANSGLOBE APARTMENT REAL ESTATE
INVESTMENT TRUST
(the Filer)

DECISION

Background

Continuous disclosure obligations

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for a decision that the requirements of

(a) National Instrument 51-102 Continuous Disclosure Obligations (other than Part 7 thereof),

(b) National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings,

(c) National Instrument 52-110Audit Committees, and

(d) National Instrument 58-101Disclosure of Corporate Governance Practices

(collectively, the CD Requirements) not apply to the Filer (the CD Relief).

Participation fees

The Director in the Jurisdiction has received an application from the Filer for a decision under section 6.1 of OSC Rule 13-502 Fees that the Filer be exempt from paying participation fees, subject to certain conditions (theParticipation Fee Relief).

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

(i) the Ontario Securities Commission is the principal regulator for this application (the Principal Regulator); and

(ii) 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 each of the other Provinces and Territories of Canada (together with Ontario, the Jurisdictions).

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

1. The Filer is a is an unincorporated, open-ended real estate investment trust established under, and governed by, the laws of the Province of Ontario pursuant to a declaration of trust dated April 8, 2010, as amended and restated as at May 6, 2010, September 1, 2011, May 24, 2012 and June 27, 2012.

2. The Filer's principal, registered and head office is at 401 The West Mall, Suite 1100, Toronto, Ontario, M9C 5J5.

3. The Filer is a reporting issuer in each Jurisdiction. Except as described in paragraph 21 below, the Filer is not in default of its obligations under the securities legislation of any Jurisdiction.

4. The Filer does not have any securities outstanding, including debt securities, other than:

(a) a Trust Unit (defined below) privately held by PD Kanco LP, and

(b) 5.40% extendible convertible unsecured subordinated debentures due September 30, 2018 (the Debentures).

5. Prior to the Privatization (defined below), the Filer had outstanding units (Trust Units) which were listed for trading on the Toronto Stock Exchange (TSX).

6. On June 29, 2012, the Filer completed a previously announced privatization transaction pursuant to acquisition agreements with Starlight Investments Ltd. and PD Kanco LP (the Privatization). As a result, the Filer paid a special cash distribution on the Trust Units of $4.82 per Trust Unit and redeemed all publicly held Trust Units for a cash redemption price of $9.43 per Trust Unit.

7. Upon completion of the Privatization, the only outstanding Trust Unit is privately held by PD Kanco LP. As a result, the Trust Units were subsequently delisted from the TSX on June 29, 2012.

8. The Debentures were sold through a public offering on July 29, 2011. The Debentures were issued pursuant to a trust indenture (the Indenture) made as of July 29, 2011 between the Filer and BNY Trust Company of Canada (the Debenture Trustee). The Debentures are listed for trading on the TSX.

9. In connection with the completion of the Privatization, on June 29, 2012, the REIT defeased all of the outstanding Debentures in accordance with section 10.5 of the Indenture (the Defeasance).

10. On June 29, 2012, in connection with the Defeasance and pursuant to section 10.5 of the Indenture:

(a) the REIT deposited with the Debenture Trustee debt securities issued or guaranteed by the Government of Canada, the obligations of which together with the income to accrue and reinvestment thereof, would be sufficient to pay and discharge the entire amount of principal and accrued and unpaid interest to maturity or any repayment date of all such Debentures;

(b) Deloitte LLP provided a Report of the Public Accountant's Findings On An Agreed-Upon Procedures Engagement (the Deloitte Opinion) stating that cash receipts from the securities the Filer deposited with the Debenture Trustee are higher than the payments required on the Debentures;

(c) upon the deposit of the securities and the provision of the Deloitte Opinion, the Debenture Trustee acknowledged the full payment, satisfaction and discharge of the Debentures (the Acknowledgement).

11. As a result of the Defeasance, a holder of Debentures exercising its conversion right in respect of Debentures will receive, in lieu of Trust Units, the amount of cash that such holder would have been entitled to receive pursuant to the Privatization if such holder had been the registered holder on June 29, 2012 of the number of Trust Units that it would have been entitled to acquire upon the exercise of such conversion right. That amount is approximately $904.7619 for each $1,000 principal amount of Debentures so converted.

12. In addition, the completion of the Privatization constituted a "change of control" under the Indenture. As a result, pursuant to its obligations under the Indenture, the Filer offered to repurchase Debentures at a purchase price equal to 101% of the principal amount thereof plus accrued interest (the Put Option), in accordance with the terms and conditions set out in the Indenture. In this regard, holders of $23,000 aggregate principal amount of the Debentures exercised the Put Option. Debenture holders that did not exercise the Put Option are entitled only to continue to receive interest on the Debentures until they are redeemed at par on October 1, 2016 in accordance with the provisions of the Indenture.

13. The REIT's only outstanding public securities are the Debentures. As a result of the Defeasance, the Debentures now only constitute a right to receive payments of principal, premium and interest, up to October 1, 2016, from the funds held in trust by the Debenture Trustee for the benefit of the Debenture holders.

14. From an accounting perspective, the REIT having received the Deloitte Opinion and the Acknowledgement from the Debenture Trustee, the Debentures are legally defeased in accordance with paragraph 39 of IAS 39 Financial Instruments: Recognition and Measurement. As a result, neither the Debentures nor the assets deposited with the Debenture Trustee will be recorded on the financial statements of the Filer.

15. The Filer currently has no operating business, and does not intend to operate a business in the future. The Filer has no plans to issue securities or engage in acts in furtherance of a trade, except to the extent necessary in the course of redeeming the outstanding Debentures.

16. Under the terms of section 2.4(m) of the Indenture, the Filer has agreed to take all reasonable steps and action and do all acts and things that may be required to maintain its status as a reporting issuer in good standing. As a result, the Filer intends to remain a reporting issuer under the securities legislation in the Jurisdictions.

17. For so long as the Debentures are outstanding, within 90 days of each year end of the Filer, the Filer will file on SEDAR a statement of property (the Alternative Annual Disclosure) held by the Debenture Trustee as at the end of the Filer's most recently completed financial year. The Alternative Annual Disclosure will:

(i) state the number of Debentures that remain outstanding; and

(ii) contain a report by the Debenture Trustee setting out the type, maturity date, face amount and coupon rate for each security held by the Debenture Trustee.

18. As the Debentures are no longer the obligation of the Filer, continuous disclosure about the Filer is irrelevant to holders of the Debentures. The Alternative Annual Disclosure is disclosure that may be relevant to holders of the Debentures. Except as a condition of this decision, the Alternative Annual Disclosure is not required to be made by the Filer in accordance with its continuous disclosure obligations under securities law.

19. Upon the occurrence of a change in the affairs of the Filer or the Debenture Trustee that would reasonably be expected to have a significant effect upon the market price or value of any of the Debentures, the Filer will, forthwith upon becoming aware of such a change, issue and file a news release disclosing the nature and substance of the change.

20. On March 28, 2013, the Filer publicly announced, by way of press release, that it had filed an application for the CD Relief. The press release was also subsequently filed on SEDAR.

21. On August 14, 2012, the Filer was required to file its interim financial statements and management discussion and analysis (MD&A) for the interim period ended June 30, 2012, together with related certificates. On November 14, 2012, the Filer was required to file its interim financial statements and MD&A for the interim period ended September 30, 2012, together with related certificates. The obligation to make these filings occurred after the Defeasance and the filing of the application for this decision.

Decision

The Principal Regulator is satisfied that the decision meets the test set out in the Legislation for the Principal Regulator to make the decision.

The decision of the Principal Regulator under the Legislation is that the CD Relief is granted, provided that:

(a) the Filer complies with paragraphs 17 and 19, above, except that in respect of the Filer's financial year completed on December 31, 2012, the Filer will file the Alternative Annual Disclosure on or before the date that is two weeks after the date of this decision;

(b) all outstanding Trust Units are owned, directly or indirectly, by the Filer, its associates or affiliates; and

(c) the Filer does not issue any securities or engage in acts in furtherance of a trade except with respect to the redemption of the currently outstanding Debentures.

The decision of the Director is that the Participation Fee Relief is granted, provided that the Filer complies with the conditions to the CD Relief as set out above in paragraphs (a), (b) and (c).

"Huston Loke"
Director, Corporate Finance Branch