Conversions

Overview

In May 2015, Sprott made an offer that would have entailed an acquisition by Sprott Physical Gold Trust of all the units of Central GoldTrust, with the GoldTrust unitholders being provided a choice between a taxable exchange of their units for Sprott units, or participating in a s. 132.2 rollover merger. GoldTrust responded in this Circular by seeking Unitholder approval for its conversion from a closed-end investment fund to an ETF (i.e., an exchange-traded, continuously offered, open-ended fund) whose units will accord those with units equal to the value of at least one London Good Delivery Bar to redeem their units for gold bullion plus top-up cash (and also will have the right to redeem units in cash at a 5% discount to NAV). In the meantime, a non-discounted cash redemption right would also be added to the units to be available until the ETF conversion occurs. The Canadian tax disclosure stated that GoldTrust would report any gains realized on its gold bullion, as a result of honouring redemption demands, as capital gains, and indicated uncertainty as to whether, if CRA at a subsequent juncture assessed on the basis that such gains were realized on income account, the additional trust income could be pushed out to the resident unitholders (and that there would be Part XIII tax exposure where the redeemed units instead were those of non-residents).

Management and administration

GoldTrust has agreed with Purpose Investments Inc. ("Purpose") and GoldTrust's administrator, Central Gold Managers Inc. (the "Administrator") that the ETF will be managed by Purpose and administered by the Administrator (who will administer the ETF's physical gold bullion.) A bank, trust company or other entity will be appointed trustee of the ETF with the approval of Purpose.

GoldTrust

A mutual fund trust trading on the TSX and NYSE MKT and holding mostly gold bullion. Its units are redeemable in cash for the lesser of 90% of the their weighted average trading price for the 10 trading days commencing immediately following the date on which they are tendered for redemption and 100% of their closing market price on such date.

Sprott offer

Sprott Asset Management Gold Bid LP, an Ontario limited partnership that is owned and controlled by Sprott Asset Management LP, the manager of Sprott Physical Gold Trust, made an offer to purchase all of the issued and outstanding GoldTrust units (other than those held directly or indirectly by the Offeror). The Offer comprises an exchange offer alternative and a ITA s. 132.2 merger alternative. The Trustees of GoldTrust are instead recommending the proposed addition of the redemption rights and the ETF conversion for GoldTrust as a way to substantially eliminate the discount at which GoldTrust units trade to NAV.

Redemption amendments

Immediately following Unitholder approval and subject to regulatory approvals, GoldTrust will amend the redemption rights provisions in the Declaration of Trust:

1. A new cash redemption feature which will allow all Unitholders to redeem their Units on a biweekly basis for cash at 100% of net asset value ("NAV"), less any costs associated with the redemption including the liquidation of GoldTrust's bullion to fund the redemption (the "100% Cash Redemption Right Amendment"); and,
2. A further new cash redemption feature will allow all Unitholders to redeem their Units on a daily basis for cash at 95% of NAV, less any costs as in 1 (the "95% Cash Redemption Right Amendment").

The other amendments required to fully implement the ETF conversion will become effective once a receipt for a final prospectus is obtained and all other regulatory and exchange approvals are received. In the interim, GoldTrust will trade with the 100% and 95% Cash Redemption Right Amendments in place. As part of the ETF Conversion Amendments, GoldTrust intends to further amend the redemption rights provisions in the Declaration of Trust by providing Unitholders holding such number of Units with a value in excess of one London Good Delivery bar with the ability to exchange their Units for physical gold bullion and cash at 100% of NAV less any costs associated with the redemption (the "Physical Redemption Right Amendment." The Physical Redemption Right Amendment will replace the 100% Cash Redemption Right Amendment as and from completion of the ETF Conversion.

Securities laws

As soon as reasonably practicable following the mailing of the Circular, GoldTrust intends to file a preliminary long form prospectus for Units of the ETF, and a registration statement for Units of the ETF in the U.S. In the U.S., the ETF Conversion will require the NYSE Arca or another U.S. national securities exchange to file and obtain approval from the SEC for a "rule change" to its listing standards and the ETF will be required to meet existing exemptive relief from certain rules under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), or seek new relief. With respect to a rule change, before the ETF may trade on a U.S. national securities exchange, that exchange must agree to list the Units for trading on its market and it must have SEC-approved initial and continued listing standards that permit listing of a "class" of exchange-traded security….For a nongeneric listing standard, which the ETF would fall under, the NYSE Arca or another U.S. national securities exchange must file, and the SEC must approve, a proposed rule change that is specific to the new security. The filing is made under Section 19(b)(1) of the Exchange Act and Rule 19b-4 thereunder.

Canadian tax consequences.

Amendments

The proposed amendments should not change the income tax status or treatment of GoldTrust, including its mutual fund trust status or taxation, nor result in a disposition of GoldTrust Units by Unitholders.

Gains on redemptions

If the Redemption Rights Amendments are adopted, GoldTrust could be required to deliver physical bullion or permitted gold certificates to a Unitholder to satisfy any redemption in respect of which the Unitholder elects to receive physical delivery of bullion or permitted gold certificates. GoldTrust will be required to include in its income for the year, any gain realized by it on any sale or disposition of bullion or permitted gold certificates, including any bullion or permitted gold certificates delivered to a Unitholder upon a redemption of Units. GoldTrust intends to treat gains and losses on the disposition of physical bullion or permitted gold certificates as capital gains or capital losses unless there is a change of circumstances.

Allocation of gains

If GoldTrust were to allocate the taxable capital gain attributable to a redemption of Units to a redeeming Unitholder and the CRA were to subsequently successfully assess GoldTrust on the basis that the gains realized by it on the disposition of physical gold bullion or permitted gold certificates are fully taxable as income rather than as capital gains, it is unclear to what extent GoldTrust would be able to allocate the additional income to the redeeming Unitholder. If it were unable to do so, it would be required to pay Part I tax on such additional income. In addition, if any gain realized by GoldTrust in connection with a redemption of Units is allocated to a non-resident of Canada and the CRA were to assess GoldTrust on the basis that the gain is taxable as income rather than as a capital gain, GoldTrust could be liable to pay Canadian non-resident withholding tax on such allocation under Part XIII of the Tax Act.

U.S. tax consequences

Amendments. Each of the Proposed Amendments should be treated as a non-taxable amendment of the terms of the Units or as a deemed exchange of the existing Units for new amended Units qualifying as a tax-free recapitalization and/or as a tax-free stock exchange for Code purposes. If the Proposed Amendments are treated as a nontaxable amendment, such event(s) will not result in a disposition of Units by U.S. Unitholders. If the Proposed Amendments are treated as a recapitalization and/or as a tax-free stock exchange, then, subject to the PFIC rules, the following consequences will result for U.S. Unitholders: (a) a U.S. Unitholder will not recognize gain or loss on the deemed exchange(s); (b) the aggregate tax basis of a U.S. Unitholder in the new amended Units will be equal to such U.S. Unitholder’s aggregate tax basis in the Units deemed exchanged therefor; (c) the holding period of a U.S. Unitholder for the new amended Units should include such U.S. Unitholder’s holding period for the Units surrendered in deemed exchange therefor; and (d) U.S. Unitholders generally will be required to report certain information to the U.S. Internal Revenue Service on their U.S. federal income tax returns for the tax year in which each of the Proposed Amendments occur, and to retain certain records related to the Proposed Amendments.

PFIC rules

GoldTrust believes that it was a PFIC during all of its prior tax years and that it will be a PFIC for its current tax year ending December 31, 2015 and for the foreseeable future. U.S. Unitholders who have made a timely and effective election to treat GoldTrust as a "qualified electing fund" under Section 1295 of the Code (a "QEF", and such an election, a "QEF Election") should not be required recognize gain under the PFIC rules as a result of the deemed exchange. A QEF Election will generally be treated as "timely" if such QEF Election is made for the first year in the U.S. Unitholder’s holding period for the Units in which GoldTrust was a PFIC. U.S. Unitholders who have made a timely and effective "mark-to-market election" under Section 1296 of the Code (a "Mark-to-Market Election") should not be required recognize gain under the PFIC rules as a result of the deemed exchange. A U.S. Unitholder may make a Mark-to-Market Election by filing the appropriate Mark-to-Market Election documents at the time such U.S. Unitholder files a U.S. federal income tax return for such year. A timely and effective Mark-to-Market Election made before the Proposed Amendments should remain effective and apply to the New Units.

Overview

The Trust's Declaration of Trust is proposed to be amended to accommodate the extension of the term of the Trust to 2019 and a revised structure (reflecting the introduction of the character conversion rules) under which it will hold its subordinated bank securities (including European bank securities) and other securities directly rather than indirectly through a forward purchase and sale structure.

Requested Amendments

Unitholders are being asked to among other things to approve an extension (the ''Extension'') including amendments to the Trust Agreement to:

• extend the scheduled termination date (the ''Scheduled Termination Date'') of the Trust to November 30, 2019;
• extend the investment objectives of the Trust to include securities (including European securities) that comply with the new Basel III regulatory requirements and to enable the Trust to hold the portfolio of investments directly following the termination of the Forward Agreement; and
• provide Unitholders who do not wish to continue their investment with a special redemption right to enable such Unitholders to redeem their Units on December 1, 2014 on the same terms that would have applied had the Trust redeemed all Units on such date as originally contemplated.

Trust

The Trust is an Ontario investment fund with Aston Hill Capital Markets Inc. (formerly, Connor, Clark & Lunn Capital Markets Inc.), as manager (the ''Manager'') and RBC Investor Services Trust as trustee. Its Class A units trade on the TSX.

Portfolio

Distributions are targeted to be $1.50 per annum per Unit. The Trust obtains exposure to the performance of a portfolio (the ''Portfolio'') of Canadian capital securities held by North American Portfolio Trust (the ''Portfolio Trust''). The Trust's Manager also actively manages the Portfolio. The Portfolio consists primarily of Canadian Innovative Tier 1 Capital Securities issued by banks or entities related to banks and U.S. Financials Capital Securities. All future capital instruments have a provision that requires such instruments, at the option of the relevant authorities or by contractual provision, to either be written off or converted into common equity upon the occurrence of a trigger event. The Portfolio manager may also invest up to 15% of the Portfolio (measured at the time of investment) in other bonds with a minimum issuer rating of ''A'' by S&P.

Forward Agreement

The Trust does not hold the Portfolio directly but instead obtains exposure to the Portfolio through the forward purchase and sale agreement (the ''Forward Agreement'') with The Bank of Montreal, as counterparty. Under the Forward Agreement, the Trust will receive, on termination, a specified portfolio consisting of securities of Canadian public issuers that are ''Canadian securities'' for the purposes of the Tax Act (''Canadian Securities'') in an amount equal to the value of Portfolio Trust.

Canadian tax consequences

Special distribution/ordinary distributions. It is expected that the Trust will incur a capital gain as a result of the liquidation of Canadian securities acquired under the Forward Agreement. If the Extension occurs, to the extent the Trust realizes a capital gain which cannot otherwise be sheltered, the Trust currently intends to declare a special capital gains distribution to Unitholders of record on December 1, 2014, rather than pay tax in the Trust (the ''Special Distribution''). A portion of the Special Distribution will be paid in cash in order to offset all or part of the tax liability of Unitholders resulting from any such capital gains distribution. In addition, following the termination of the Forward Agreement, distributions paid by the Trust will be characterized primarily as income for tax purposes to the extent they exceed available non-capital losses.

DFA rules

As a result of certain grandfathering rules, the character conversion rules (introduced on December 12, 2013) should not apply to the Forward Agreement provided that it is settled prior to the end of 2014 - so that no amount will be included in computing the Trust's income as a result of the acquisition of Canadian Securities Portfolio securities under the Forward Agreement when the Forward Agreement is settled on or about November 30, 2014.

Overview

The Manager (Marret Asset Management Inc.) is seeking the approval of unitholders to approve extending the termination date of the Fund by five years to October 31, 2019 (the "Continuation"), and amending the Fund's investment objectives and management fee provisions.

Requirement to change current structure

Currently, exposure of the Fund to the Portfolio (comprised primarily of U.S., Canadian and European investment grade bonds and term loans of an underlying investment fund) is gained through a forward agreement for the sale of shares of TSX-listed public issuers (the "Forward Agreement") which will terminate no later than October 31, 2014. As a result of the character conversion rules introduced on March 21, 2013, the Forward Agreement cannot be extended past its termination date and the investment structure of the Fund must be modified to reflect direct investments in assets comprising the Portfolio (i.e., following the Continuation, the Fund will invest directly in portfolio securities which will include mainly investment grade debt securities and term loan.)

Annual redemption

Units may be surrendered for redemption during the month of May in each year for the duration of the extended term of the Fund…on the last business day of May of such year (the "Redemption Date"). Redeeming unitholders will be entitled to receive a redemption price per unit equal to the net asset value per unit determined as of the Redemption Date, less applicable expenses incurred by the Fund.

Monthly redemption

Units may be redeemed at the option of unitholders on the second last business day of each month (the "Monthly Redemption Date"), other than May for a redemption price equal to the lesser of (A) 94% of the weighted average trading price of the units on the TSX for the 10 trading days immediately preceding the Monthly Redemption Date; and (B) 100% ofthe closing price of units on the TSX on such Monthly Redemption Date.

Canadian Tax Consequences

On or before the Continuation date:

the Fund will dispose of all of its assets that are subject to the Forward Agreement. This will trigger a realization of all accrued capital gains and losses in the Fund. The Fund is expected to realize net capital gains as a result of such dispositions under the Forward Agreement. On or before the date of the Continuation, the Fund will distribute an amount to unitholders that would be sufficient to result in the Fund not being subject to tax if it earned no further income and realized no further capital gains or losses in its taxation year in which the Continuation occurs (taking into account amounts already distributed in 2014, and capital gains refunds that may arise for redemptions that occur in connection with the Continuation). Unitholders will have to include in their income for 2014 the portion of such distribution received by them as is paid from the Fund's net income or net taxable capital gains; and any remaining portion of the distribution will be a return of capital which will not have to be included in income but will reduce the adjusted cost base of the unitholders' units.

Overview

The REIT is a SIFT trust (and not a REIT for income tax purposes) indirectly carrying on a hotel business. It holds a subsidiary real estate LP (Temple LP) through a subsidiary Ontario unit trust (TR Trust). It will convert to a public corporation (New Temple) under a CBCA plan of arrangement pursuant to s. 85.1(8).

Unit exchanges

Proposed Plan of Arrangement under the Canada Business Corporations Act under which all the outstanding units of the (TSX-listed) REIT are exchanged on a one-for-one basis for common shares of a recently-incorporated CBCA corporation (New Temple) (with the one initial share of New Temple heretofore held by the REIT cancelled.) Options and deferred units also are exchanged on a one-for-one basis for options on New Temple shares and "Deferred Shares."

Stated capital reduction

New Temple will reduce the stated capital of its shares.

REIT/Trust windings-up

TR Trust will be wound-up into the REIT, and the REIT will be wound-up into New Temple, with New Temple assuming all the convertible debenture obligations of the REIT. Following such wind-up, the principal asset of New Temple will be LP units of Temple LP.

Canadian income tax consequences

Provided the Plan of Arrangement becomes effective by December 31, 2012, the REIT unitholders will be deemed under s. 85.1(8) to have disposed of their units for their cost amount. No assurance is given that CRA will not consider the benefit rules in s. 85.1(8)(c) or (d) will apply.

Units exchanges

Proposed Plan of Arrangement under the CBCA under which all the outstanding units of the (TSX-listed) Fund are exchanged on a one-for-one basis for common shares of a recently-incorporated CBCA corporation (WesternOne Inc.) (with the one initial share of WesternOne Inc. heretofore held by the Fund cancelled.)

Exchangeable units held by "Big Bash Inc." in an indirect subsidiary LP of the Fund (and a direct subsidiary LP of the subsidiary "Trust" of the Fund) are also exchanged on a one-for-one basis for common shares of WesternOne Inc. An s. 85(1) election will be filed respecting this exchange.

Fund/Trust windings-up

The Fund surrenders for cancellation all the Trust units, so that the Trust is wound up; and WesternOne Inc. surrenders for cancellation all the Fund units, so that the Fund is wound up.

Rights Plan

Although the resolutions for approval include the adoption of a unitholders' rights plan for the Fund, all the issued and outstanding rights are cancelled before the unit exchange - and then as one of the final steps in the Plan of Arrangement the rights plan is deemed to have been amended and restated to reflect the Arrangement such that from and after the termination and dissolution of the Fund, the rights plan automatically applies to the WesternOne Inc. Inc. shares and shareholders.

Canadian income taxation

Provided the Plan of Arrangement becomes effective by December 31, 2012, the Fund unitholders will be deemed under s. 85.1(8) to have disposed of their units for their cost amount. As units of the Fund typically will not be taxable Canadian property, s. 85.1(8)(b) typically will not apply to deem the shares of WesternOne Inc. to be taxable Canadian property.

See also Calloway REIT elimination of subtrust through s. 107.4 transfer and s. 132.2 merger (including diagram) below.

Overview

Calloway currently is a listed open-end mutual fund trust holding rental limited partnerships through a subsidiary trust ("Holdings Trust"). To facilitate "Exchangeable Securities" (including exchangeable LP units held in the subsidiary LPs as well as "development options") not being characterized as debt for accounting purposes, Calloway wishes to convert to a closed-end fund. However, to so qualify under s. 108(2)(b), Calloway must get rid of Holdings Trust, which it intends to do in 2014. Eliminating Holdings Trust presumably would increase the rental revenues which are allocated to Calloway for gross REIT revenue purposes.

For full summary see under Subsidiary S. 132.2 Mergers – Subtrust Elimination.

Overview

Artis is a Manitoba real estate investment trust holding a majority of its consolidated (office, industrial and retail) assets in Canada. Its Declaration of Trust will be amended prior to the closing of the Offering to authorize the issuance of (generally non-voting) preferred units of Artis ("Preferred Units") and to convert Artis from an "open-end" trust to a "closed-end" trust. The outstanding trust units ("Units") are listed on the TSX. A portion of its assets are held in two subsidiary LPs, the larger of which also holds a U.S. subsidiary which will be a U.S. private REIT.

See more detailed summary under Offerings - Preferred Unit Offerings.

Overview

At the beginning of June 2013, the obligation of Inter Pipeline to pay management and incentive fees to its general partner (Pipeline Management Inc., or "PMI") was effectively eliminated by the management shareholders of the sole shareholder of PMI (Pipeline Assets Corporation, or "PAC") transferring their common shares of PAC on a rollover basis to a purchasing corporation (the "Purchaser"). The Purchaser was controlled by the independent directors of PMI in their capacity of trustees of a shareholder trust (the "Trust"), but was 99.999% owned by Inter Pipeline as a non-voting shareholder. The consideration paid was the issuance of preferred shares with a redemption amount of $340 million or $240 million, depending on when two Inter Pipeline projects came into production. The conversion (the "Conversion") of Inter Pipeline into a corporation under a proposed Alberta Plan of Arrangement will be accomplished by its being wound-up under s. 98(6) into PMI, with PMI then being amalgamated with other corporations in the group, and with management's preferred shares being converted, or being convertible, into common shares of the amalgamated corporation ("New Inter Pipeline").

Inter Pipeline

Inter Pipeline is an Alberta LP whose Class A Units trade on the TSX. PMI holds Class B units representing its general partner interest. Inter Pipeline owns and operates a major energy infrastructure business. It became subject to tax under the SIFT rules effective January 1, 2011.

Management internalization transactions

In order to effectively eliminate management fees payable to its general partner (PMI), on June 1, 2013 Inter Pipeline indirectly purchased PMI. In particular:

• the Trust was settled with charitable beneficiaries and its trustees were the independent directors of PMI
• the Trust incorporated Inter Pipelines Ltd. ("IPL")
• 1740974 Alberta Ltd. ("Putco") was incorporated, with each of the Trust and IPL holding 50% of its shares
• following the incorporation of the Purchaser, all its Class A Voting Shares were held by the Trust, and all of its Class B Non-Voting Common Shares of the Purchaser (representing a 99.999% equity interest) were held by Inter Pipeline
• Pipeline Assets Corporation ("PAC"), which was the sole shareholder of PMI and whose shareholders were four managers of PMI and a family holding company of the Chairman, was sold by those shareholders to the Purchaser pursuant to a share purchase agreement
• under the share purchase agreement, the Purchaser issued Preferred Shares to the vendors comprising Class A Preferred Shares having a redemption amount of $170 million and Class B Preferred Shares with a redemption amount of $170 million provided that the redemption amount of each Class B Preferred Share was multiplied by 70/170 (i.e., reducing the aggregate redemption amount to $70 million) if the "Trigger Date" had not occurred by January 1, 2017, i.e., both the Foster Creek and Christina Lake projects were not yet producing revenue
• each such Preferred Shares also: was entitled to receive cash dividends equal to the cash distributions on a Class A Unit of Inter Pipeline; was puttable for its fair market value to Putco; had a redemption and retraction amount equal to the current market price of a Class A Unit of Inter Pipeline plus unpaid distributions (subject, in the case of a Class B Preferred Share, to being multiplied by 70/170 as per above); was retractable on the first to occur of various specified dates including January 1, 2014 (in the case of the Class A Preferred Shares) or the first to occur of the Trigger Date and January 1, 2017 (in the case of the Class B Preferred Shares), and was redeemable on June 1, 2038 (or earlier on certain events)
• the Purchaser agreed that at the request of any vendor it would execute a joint s. 85(1) election form
• the Purchaser and PAC then amalgamated, with the Preferred Shares of the vendors becoming Preferred Shares of Amalco ("GP Holdco") having 32% of the total votes, with the Trust owning all of the Class A Voting Shares of GP Holdco representing a controlling 68% voting interest and with Inter Pipeline holding all the Class B Non-Voting Common Shares

Plan of Arrangement

Under the Plan of Arrangement:

• IPL will exercise a call option and acquire the one issued and outstanding voting share of Putco owned by the Trust
• each outstanding Class A Preferred Share (or Class B Preferred Share) of GP Holdco will be transferred to IPL in exchange for one Common Share (or one Convertible Share) of IPL; each Convertible Share will be automatically converted into one Common Share on the Trigger Date, or into 70/170 of a Common Share if January 1, 2017 occurs first
• each outstanding Class A unit of Inter Pipeline will be transferred to IPL in exchange for one Common Share of IPL
• the Trust will transfer its Class A Voting Shares of GP Holdco to IPL for cash consideration
• the one issued and outstanding Common Share of IPL owned by the Trust will be transferred by it to IPL for cash consideration equal to its market value
• PMI will assume all obligations of Inter Pipeline, and contribute to PMI a loan of $288.6 million owing by Inter Pipeline to PMI, in consideration for the issuance of Class B Units of Inter Pipeline
• IPL will transfer all of its Class A Units of Inter Pipeline to PMI in consideration for preferred shares of PMI with an aggregate redemption amount equal to the fair market value of the transferred units
• accordingly, Inter Pipeline will be wound-up by operation of law into PMI
• an amended DRIP will become effective
• outstanding deferred unit rights will be amended to refer to IPL
• IPL, GP Holdco, PMI and Putco will amalgamate, with the authorized capital of the amalgamated corporation (New Inter Pipeline) consisting of Preferred Shares and Common Shares, with each outstanding Common Share and Convertible Share of IPL being converted into one Common Share or Convertible Share, as the case may be, of New Inter Pipeline and with each issued and outstanding share in the capital of GP Holdco, PMI and Putco being cancelled

Canadian tax consequences

S. 85. The exchange of Class A Units for Common Shares will occur on a taxable basis unless a s. 85 election is made with IPL. The election must be provided to IPL on or before the 90th day following the effective date of the Arrangement. Amalgamation. A shareholder will not realize a capital gain or loss as a result of the amalgamation of IPL.

Background

Plazacorp, which is a TSX-listed mutual fund corporation in the business of retail property ownership and development, wishes to convert under a New Brunswick plan of arrangement to a s. 108(2)(a) mutual fund trust (so that following the conversions transactions occurring effective January 1, 2014, its remaining assets will be nominal) and to eliminate subsidiary (non-personal trust) subtrusts, including KEYreit (a REIT previously acquired by it) and Plazacorp Operating Trust and four "Direct Subtrusts." Plazacorp converted on December 11, 2002 into a mutual fund corporation from a normal public corporation.

Transaction overview

Plazacorp will settle a new trust (REIT) with modest assets, and distribute the units of REIT to its public shareholders, who thus will now hold assets of a "good" mutual fund trust, albeit with nominal assets. Next, Plazacorp will merge into REIT under s. 132.2, so that REIT is now the successor to substantially all its assets. However, it will not be released under its covenant under convertible debentures, although they also will be assumed by REIT. In order to eliminate the Direct Subtrusts, KEYreit and Plazacorp Operating Trust, the Direct Subtrusts will transfer their assets to Trust A (a new subtrust of Plazacorp) in reliance on the no-disposition rule in s. 248(1) – disposition, (f), and then there will be s. 107.4 transfers of assets by Trust A to KEYreit, and (following the 1st merger) by KEYreit to a further new subtrust of REIT (REIT #2), followed by a de minimis distribution of REIT #2's units by REIT to the REIT unitholders (in order to qualify REIT #2 as a mutual fund trust). REIT #2 then will be merged into REIT under s. 132.2. The same steps will then be repeated to first eliminate Plazacorp Operating Trust, then a subtrust of Plazacorp Operating Trust.

Preliminary transaction

REIT (an Ontario open-ended unit trust) was settled with $10 by Plazacorp in exchange for one unit on November 1, 2013.

Plan of Arrangement

1. Plazacorp common shares held by dissenting shareholders will be deemed to have been transferred to Plazacorp,with such shareholders thereafter only having an entitlement to receive the fair value of their shares.
2. The Direct Subtrusts will simultaneously transfer their assets to Trust A (newly formed by Plazacorp, which holds one unit) for no consideration other than the assumption of their liabilities, so that they cease to exist.
3. After the terms of the declaration of trust of KEYreit have been conformed to that of Trust A, Trust A will transfer all of its property to KEYreit for no consideration other than the assumption of secured debts.
4. REIT will complete a unit split so that its outstanding Units are equal in number to that of the Common Shares of Plazacorp minus one.
5. Plazacorp will distribute units of REIT to its shareholders on the basis of one unit for each common share, as well as distributing a nominal amount of cash on a pro rata basis (in order to permit Plazacorp to withhold Part XIII.2 tax where applicable).
6. Plazacorp will transfer all its property to REIT in exchange for (a) the assumption by REIT of all Plazacorp liabilities including the Plazacorp Convertible Debentures, and (b) the issuance of units of REIT with an aggregate fair market value equal to that of the transferred property minus the aggregate amount of assumed liabilities.
7. All the Common Shares of Plazacorp will then be disposed of by the shareholders to Plazacorp in exchange for units of REIT with an equivalent fair market value.
8. REIT will subscribe a nominal amount for one Plazacorp Common Share, and the number of REIT units then will be consolidated to equal the number of Plazacorp Common Shares outstanding immediately before 7.
9. REIT will settle REIT #2 with a nominal amount of cash in exchange for that number of units equal to the number of Plazacorp Common Shares outstanding immediately before the above merger.
10. KEYreit will transfer all of its property to REIT #2 for no consideration other than the assumption of secured debts, so that KEYreit will cease to exist.
11. REIT will make a capital distribution of units of REIT #2 to its unitholders in such numbers to meet the minimum requirements for REIT #2 to satisfy s. 132(6)(c).
12. Pursuant to a s. 132.2 merger of REIT #2 into REIT, REIT #2 will transfer all its property (other than $1.00) to REIT in exchange for the assumption of any REIT #2 liabilities and the issuance of equivalent-value REIT units.
13. To complete such merger, the units of REIT #2 (other than one unit held by REIT) will then be disposed of by their holders to REIT #2 in exchange for units of REIT, with REIT #2 directing REIT to deliver those units directly to the REIT #2 unitholders, and with the units of itself received by REIT being cancelled.
14. The outstanding REIT units will be consolidated to equal the number of Plazacorp common shares outstanding immediately before 7.
15. The steps in 9 to 14 above essentially will be repeated two times in order to transfer all the assets of a Plazacorp Operating Trust (a subtrust acquired by REIT in 6 above) to REIT, and then transfer all the assets of SR Operating Trust, a lower-tier subtrust, to REIT.
16. Current RSUs will be exchanged for new RSUs.
17. REIT will enter into an assumption agreement with the Convertible Debenture trustee pursuant to which it will assume all of the obligations of Plazacorp concurrent with 6 above.

Canadian tax consequences

Merger. Plazacorp has received a ruling in respect of the conversion. No gain on transfers in 2, 3, 10 and 15. S. 132.2 rules apply on s. 132.2 mergers.

Post-reorg

Management expects REIT to qualify under the REIT exception for 2014 and thereafter. Discussion (at p. 68) of the harmonization of Quebec SIFT rules with federal rules.