BCSC

Exemption Orders (Discretionary)

APF ENERGY INC.

2001 BCSECCOM 388

IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF APF ENERGY INC. AND APF ENERGY TRUST

Exemption Order Under Sections 48 and 76

[para 1]
WHEREAS APF Energy Inc. (the “Offeror”) and APF Energy Trust (the “Trust”) (together, the “Applicants”) have applied to the Executive Director for an order under sections 48 and 76 of the Securities Act, R.S.B.C. 1996, c. 418 that certain intended trades in securities to be made in connection with a take over bid (the “Bid”) made by the Offeror for all issued and outstanding shares of Alliance Energy Inc. (“Alliance”) be exempt from the requirements of sections 34(1)(a) and 61 of the Act;

[para 2]
AND WHEREAS the Applicants have represented to the Executive Director that:

1. the Trust is an unincorporated open-ended investment trust created under the laws of Alberta by trust indenture, is a reporting issuer in British Columbia and is not in default of any requirements of the Act or the Securities Rules, B.C. Reg. 194/97;

2. the Trust’s most substantial asset is a royalty in petroleum and natural gas properties owned by the Offeror that entitles the Trust to receive a net royalty of 99% of the production revenues from the interests of the Offeror in any petroleum or natural gas rights, tangibles or miscellaneous interests of the Offeror, after certain costs and deductions;

3. the Trust is authorized to issue 500 million trust units (the “Trust Units”), of which approximately 10 million Trust Units are currently issued and outstanding;

4. the Trust Units are listed and posted for trading on The Toronto Stock Exchange;

5. the Offeror is a wholly-owned subsidiary of APF Energy Management Inc. and is organized under the laws of Alberta; its securities are not listed on any stock exchange and, prior to filing the take over bid circular in respect of the Bid (the "Circular"), was not a reporting issuer in any jurisdiction in Canada;

6. Alliance is a corporation organized under the laws of Alberta whose common shares are listed for trading on the Canadian Venture Exchange and is a reporting issuer in British Columbia and Alberta;

7. the authorized capital of Alliance consists of an unlimited number of common shares (the “Alliance Shares”) and an unlimited number of preferred shares, of which 20,207,965 Alliance Shares and no preferred shares were issued and outstanding as at March 4, 2001;

8. Alliance is engaged in the acquisition of interests in oil and gas properties and the exploration for, development and production of, crude oil and natural gas;

9. pursuant to an agreement between the Trust and Alliance, the Trust agreed, either directly or through the Offeror, to make the Bid to acquire all outstanding Alliance Shares in exchange for, at the option of each Alliance shareholder, cash (which will be paid by the Offeror) or Trust Units (which will be issued by the Trust) up to a maximum $35,328,531 in cash and 2,197,048 Trust Units; if Alliance shareholders elect more cash or more Trust Units than the amount available in each case, the shareholders will receive a pro rated amount of cash or Trust Units, as the case may be;

10. in the event the Offeror acquires not less than 90% of the outstanding Alliance Shares within 120 days after the date of the Bid, the Offeror intends to utilize statutory rights of acquisition under the Alberta Business Corporations Act to acquire the remaining Alliance Shares (a “Compulsory Acquisition”); if a Compulsory Acquisition occurs, the Alliance Shares not acquired by the Offeror under the Bid will be acquired by the Offeror for cash and Trust Units in the same proportion as the Bid;

11. after completion of the Bid and any Compulsory Acquisition, if all Alliance Shares are acquired, Alliance will be a wholly-owned subsidiary of the Offeror;

12. the Bid has been structured with the Offeror making the Bid rather than the Trust in order to maintain a consistent corporate structure, as currently the Trust has no operating subsidiaries and receives its revenue from the royalty from the Offeror;

13. the Circular contains prospectus-level disclosure about the Trust and the Trust Units and contains a statement that application is being made for an exemption from the registration and prospectus requirements of the Act; and

14. the Offeror and the Trust are not able to rely on the exemptions from the registration and prospectus requirements of the Act contained in sections 45(2)(28) and 74(2)(26) of the Act for the trades in the Trust Units, as the trades are not in a security of the Offeror under the Bid;

[para 3]
AND WHEREAS the Executive Director considers that it would not be prejudicial to the public interest to do so;

[para 4]
IT IS ORDERED under sections 48 and 76 of the Act that the intended trades of Trust Units by the Offeror and the Trust to Alliance shareholders under the Bid and the Compulsory Acquisition are exempt from the requirements of sections 34(1)(a) and 61 of the Act.

[para 5]
DATED April 6, 2001.

Derek E. Patterson
Acting Director