Proposed Companion Policy - 44-801: NI - 44-101 - Short Form Prospectus Distributions

Request for Comment National Instrument

February 20, 1998

COMPANION POLICY 44-101CP
TO NATIONAL INSTRUMENT 44-101
PROMPT OFFERING QUALIFICATION SYSTEM
TABLE OF CONTENTS

PART 1 INTRODUCTION AND DEFINITIONS
1.1 Introduction and Purpose
1.2 Simplified Prospectus in Quebec
1.3 Interrelationship With Local Securities Legislation
1.4 Interrelationship With NP1
1.5 Interrelationship With Expedited Review and Selective Review
1.6 Interrelationship With Shelf and PREP (National Instrument 44-102)
1.7 Definitions

PART 2 ELIGIBILITY TO PARTICIPATE IN THE POP SYSTEM
2.1 Basic Eligibility Criteria: Issuers that have been Reporting Issuers for 12 Months in a Jurisdiction, other than the Local Jurisdiction (Paragraph 1(b) ofsection 2.2 of National Instrument 44-101)
2.2 Alternative Eligibility Criteria: Issuers that have not been Reporting Issuers for 12 Months in any Jurisdiction (Sections 2.3, 2.5, 2.6, 2.7, and 2.8 of NationalInstrument 44-101)
2.3 Calculation of the Aggregate Market Value of an Issuer's Equity Securities (Section 2.9 of National Instrument 44-101)
2.4 Alternative Eligibility Criteria for Substantial Canadian Issuers (Section 2.3 of National Instrument 44-101)
2.5 Alternative Eligibility Criteria for Issues of Guaranteed Debt Securities, Preferred Shares and Cash Settled Derivatives (Sections 2.5 and 2.6 of NationalInstrument 44-101)
2.6 Alternative Eligibility Criteria for Asset-Backed Securities (Section 2.7 of National Instrument 44-101)
2.7 Reorganizations (Section 2.8 of National Instrument 44-101)

PART 3 AIF
3.1 Initial AIF Review Procedures (Section 3.1 of National Instrument 44-101)
3.2 Renewal AIF Review Procedures (Section 3.2 of National Instrument 44-101)
3.3 Supporting Documents (Section 3.3 of National Instrument 44-101)

PART 4 FILING AND RECEIPTING OF SHORT FORM PROSPECTUS
4.1 Refusal to Issue Prospectus Receipt
4.2 Requirements Applicable to Filing of Short Form Prospectus (Section 4.1 National Instrument 44-101)
4.3 Supporting Documents (Section 4.2 of National Instrument 44-101)
4.4 Confidential Material Change Reports
4.5 Short Form Prospectus Review Procedures
4.6 National Instrument 44-101 Receipt System

PART 5 EXEMPTIONS
5.1 Procedure to Obtain an Exemption

PART 6 CONTENT OF AIF - ASSET-BACKED SECURITIES
6.1 Content of AIF - Asset-backed Securities

PART 7 CONTENT OF SHORT FORM PROSPECTUS
7.1 Prospectus Liability
7.2 Firm Commitment Underwritings
7.3 Minimum Offering Size
7.4 Business Acquisitions
7.5 Distribution of Asset-backed Securities
7.6 Distribution of Cash Settled Derivatives
7.7 Financial Statements
7.8 Certificates

APPENDIX A
APPENDIX B

COMPANION POLICY 44-101CP
TO NATIONAL INSTRUMENT 44-101
PROMPT OFFERING QUALIFICATION SYSTEM

PART 1 INTRODUCTION AND DEFINITIONS⁽¹⁾

1.1 Introduction and Purpose - National Instrument 44-101 replaces National Policy Statement No. 47 ("NP47") and sets out the substantive requirements ofthe prompt offering qualification system that apply in all jurisdictions of Canada, other than Quebec where existing regulation already reflects the substance ofNational Instrument 44-101. The purpose of National Instrument 44-101 is the same as NP47's: to shorten the time period in which, and streamline theprocedures by which, eligible issuers and their selling securityholders can obtain access to the Canadian capital markets through a prospectus offering.

British Columbia, Alberta, Ontario and Nova Scotia have adopted National Instrument 44-101 by way of rule. Saskatchewan has adopted it by way of regulation.All other jurisdictions, other than Quebec, have adopted National Instrument 44-101 by way of related blanket ruling or order. Each jurisdiction implementsNational Instrument 44-101 by one or more instruments forming part of the law of that jurisdiction (referred to as the "implementing law of the jurisdiction").Depending on the jurisdiction, the implementing law of the jurisdiction can take the form of regulation, rule, ruling or order.

This Companion Policy to National Instrument 44-101 (also referred to as "this Policy") provides information relating to the manner in which the provisions ofthe National Instrument are intended to be interpreted or applied by the Canadian securities regulatory authorities and as to the exercise of discretion underNational Instrument 44-101. Terms used and not defined in the Companion Policy that are defined or interpreted in the National Instrument or a definitioninstrument in force in the jurisdiction should be read in accordance with the National Instrument or definition instrument, unless the context otherwise requires.

To the extent that any provision of this Policy is inconsistent or conflicts with the applicable provisions of National Instrument 44-101 in those jurisdictions thathave adopted National Instrument 44-101 by way of related blanket ruling or order, the provisions of National Instrument 44-101 prevail over the provisions ofthis Policy.

1.2 Simplified Prospectus in Quebec - The Commission des valeurs mobilières du Québec (the "CVMQ") agrees with the purpose and intent of NationalInstrument 44-101 and this Policy, but has not adopted the National Instrument or this Policy, as its Act, Regulation and policy statements currently provide foraccessibility to a simplified prospectus procedure by any issuer that has been a reporting issuer for 12 months and has filed a permanent information record. TheCVMQ will be conducting a review of its legislation to determine if changes are advisable as a result of implementation of the National Instrument in order toachieve greater consistency between its legislation and National Instrument 44-101. The CVMQ agrees with the procedures contained in this Policy for thereview of initial AIFs, renewal AIFs and short form prospectuses and generally intends to operate within the framework established by these procedures. ThisPolicy also contains some references to Quebec securities legislation and procedures for clearing an AIF or short form prospectus in Quebec. Issuers arereminded to refer specifically to the Quebec legislation when considering a distribution of securities in the Province of Quebec and concurrently in otherjurisdictions under National Instrument 44-101.

1.3 Interrelationship With Local Securities Legislation - To the extent not specifically excluded or modified by National Instrument 44-101 or theimplementing law of the jurisdiction, the securities legislation of the various jurisdictions relating to prospectus disclosure, filing and clearance continue to apply.

1.4 Interrelationship With NP1 - The review procedures contained in National Policy Statement No. 1 ("NP1") for initial AIFs, short form prospectuses andthe NP1 Receipt System have been moved into National Instrument 44-101 and this Policy.

1.5 Interrelationship With Expedited Review and Selective Review - Members of the CSA are parties to a Memorandum of Understanding for ExpeditedReview of Short Form Prospectuses and Renewal AIFs dated December 18, 1996, (the "MOU") that is designed to expedite the review and receipt of short formprospectuses and the review and acceptance of renewal AIFs filed under the POP system in more than one jurisdiction, and to achieve increased harmonizationand the elimination of duplication in the current securities regulatory system. The MOU sets out the procedures to be followed by an eligible issuer or sellingsecurityholder to obtain a receipt for a preliminary and short form prospectus on an expedited basis and for an eligible issuer to have a renewal AIF accepted onan expedited basis. The MOU contains procedures designed to serve as an alternative to clearing a short form prospectus under National Instrument 44-101.

The provisions in the MOU for acceptance of a renewal AIF have been moved to National Instrument 44-101 and this Policy and replace the provisions in NP47relating to the acceptance of renewal AIFs. The provisions of this Policy relating to clearance of a short form prospectus are subject to the MOU and, if there is aconflict between this Policy and the MOU, the provisions of the MOU prevail.

In addition, in 1994, the Ontario Securities Commission adopted a system of selective review relating to certain documents, including initial AIFs, renewal AIFs,short form prospectuses and amendments to prospectuses. Under the selective review system, these documents will be subject to an initial screening to determinewhether they will be reviewed and, if reviewed, whether they will be subject to a full review, an issue oriented review or an issuer review. At this time, Ontario isthe only jurisdiction that has adopted a system of selective review. Application of the selective review system in Ontario, taken together with the expeditedreview system, may result in certain initial AIFs, renewal AIFs and short form prospectuses not being reviewed.

1.6 Interrelationship With Shelf and PREP (National Instrument 44-102) -National Instrument 44-102 is the proposed National Instrument containing theshelf system and post receipt pricing procedures (the "PREP procedures"). Issuers eligible under National Instrument 44-101 to participate in the POP systemand their shareholders can use the shelf system provisions and the PREP procedures of National Instrument 44-102 to distribute securities.

The Companion Policy to National Instrument 44-102 explains that the distribution of securities under the shelf system is to be governed by the requirements andprocedures of the POP system and securities legislation, except as supplemented or varied by National Instrument 44-102. That policy also explains that thedistribution of securities under the PREP procedures is to be governed by the requirements and procedures of the POP system, if the distribution is made underthe POP system. Therefore, issuers eligible to use the POP system and selling securityholders of those issuers that wish to distribute securities under the shelfsystem or PREP procedures should have regard to National Instrument 44-101 and this Policy first and then refer to National Instrument 44-102 and theaccompanying policy for any specific requirements imposed by National Instrument 44-102.

1.7 Definitions

(1) AIF - The required form of AIF is Form 44-101F1. An alternative form is permitted under section 3.4 of National Instrument 44-101 for issuers that havesecurities registered under section 12 of the 1934 Act or have a reporting obligation under section 15(d) of the 1934 Act.

(2) Approved rating - Cash settled derivatives are covenant-based instruments that may be rated on a similar basis to debt securities. In addition to thecreditworthiness of the issuer, other factors such as the continued subsistence of the underlying interest or the volatility of the price, value or level of theunderlying interest may be reflected in the rating analysis for cash settled derivatives. These additional factors may be described by a rating agency by way of asuperscript or other notation to a rating. The inclusion of such notations for covenant-based instruments that otherwise fall within one of the categories of anapproved rating do not detract from the rating being considered to be an approved rating for the purposes of National Instrument 44-101.

(3) Asset-backed security - The definition of "asset-backed security" is virtually identical to the definition adopted in the October, 1992 amendments to FormS-3 of the 1933 Act, permitting issuers of "investment grade" asset-backed securities access to the U.S. short-form registration statement and related procedures.

The definition is designed to be flexible to accommodate future developments in asset-backed securities. For example, it does not include a list of "eligible" assetsthat can be securitized. Instead, the definition is broad, referring to "receivables or other financial assets" that by their terms convert into cash within a finite timeperiod. These would include, among other things, notes, leases, instalment contracts and interest rate swaps, as well as other financial assets, such as loans, creditcard receivables, accounts receivable and franchise or servicing arrangements. The reference to "and any rights or other assets..." in the definition is sufficientlybroad to include "ancillary" or "incidental" assets, such as guarantees, letters of credit, financial insurance or other instruments provided as a credit enhancementfor the securities of the issuer or which support the underlying assets in the pool, as well as cash arising upon collection of the underlying assets that may bereinvested in short-term debt obligations.

The reference to a "discrete pool" of assets is qualified by the phrase "fixed or revolving" to clarify that the definition covers "revolving" credit arrangements,such as credit card and short-term trade receivables, where balances owing revolve due to periodic payments and write-offs.

While typically a pool of securitized assets will consist of financial assets owed by more than one obligor, the definition does not currently include a limit on thepercentage of the pool of securitized assets that can be represented by one or more financial assets owing by the same or related obligors (sometimes referred toas an "asset concentration test").⁽²⁾

(4) Regulator⁽³⁾ - The regulator for each jurisdiction is listed in Appendix A to National Instrument 14-101 Definitions. In practice, that person has oftendelegated his or her powers to act under National Instrument 44-101 to another staff member of the same Canadian securities regulatory authority or, under therelevant statutory framework, another person is permitted to exercise those powers. Generally, the person exercising the powers of the regulator for the purposesof National Instrument 44-101 holds, as of the date of this Policy, the following position in each jurisdiction:

Jurisdiction Position

Alberta Director, Capital Markets

British Columbia Director, Corporate Finance (except for applications for exemptions from Part 2 of National Instrument 44-101, for which the regulator is theDirector, Exemptions and Orders)

Manitoba Deputy Director, Corporate Finance
New Brunswick Administrator of Securities
Newfoundland Director of Securities
Northwest Territories Deputy Registrar of Securities
Nova Scotia Director of Securities
Ontario Manager, Market Operations
Prince Edward Island Registrar of Securities

Quebec Directeur de la Direction des Marchés des Capitaux

Saskatchewan Director (except for applications for exemptions from Part 2 of National Instrument 44-101, for which the regulator is the SaskatchewanSecurities Commission)

Yukon Territory Registrar of Securities

Further delegation may take place among staff or under securities legislation.

(5) Short Form Prospectus - Although not a defined term, the required form of short form prospectus is Form 44-101F2.

(6) Successor Issuer - The definition of "successor issuer" requires that the issuer exist "as a result of a reorganization". In the case of an amalgamation, theamalgamated corporation is regarded by the Canadian securities regulatory authorities as existing "as a result of" the amalgamation. Also, if a corporation isincorporated for the sole purpose of facilitating a reorganization, the Canadian securities regulatory authorities regard the new corporation as "existing as a resultof a reorganization" despite the fact that the corporation may have been incorporated before the reorganization. The definition of "successor issuer" also containsan exclusion applicable to divestitures. A POP eligible issuer may carry out a reorganization that results in the distribution to securityholders of a portion of itsbusiness or the transfer of a portion of its business to another issuer. An entity that carries on the portion of the business that was "spun-off" is not a successorissuer within the meaning of the definition.

PART 2 ELIGIBILITY TO PARTICIPATE IN THE POP SYSTEM

2.1 Basic Eligibility Criteria: Issuers that have been Reporting Issuers for 12 Months in a Jurisdiction, other than the Local Jurisdiction (Paragraph1(b) of section 2.2 of National Instrument 44-101) - Paragraph 1(b) of section 2.2 of National Instrument 44-101 provides that an issuer that has been areporting issuer in another jurisdiction for 12 months, but either has not been a reporting issuer in the local jurisdiction for that period of time or is not areporting issuer in the local jurisdiction at all, may nonetheless be POP eligible. Subparagraph 1(b)(i) of section 2.2 requires such an issuer to file in the localjurisdiction all of the continuous disclosure documents that it was required to file in any of the other jurisdictions in which it is a reporting issuer, in the 12months preceding the date of filing its AIF in the local jurisdiction. An issuer that has already filed with the Canadian securities regulatory authority of the localjurisdiction some or all of the continuous disclosure documents contemplated in this clause is not required to file those documents again. Subparagraph 1(b)(ii) ofsection 2.2 of National Instrument 44-101 further requires, in the case of an issuer that is not a reporting issuer in the local jurisdiction, that the issuer apply to bedeemed to be, or designated as, a reporting issuer in the local jurisdiction. As of the coming into force date of this Policy, only the provinces of Alberta, BritishColumbia, Quebec, Nova Scotia and Saskatchewan have the statutory power to deem an issuer to be, or to designate an issuer as, a reporting issuer. If an issuerwishes to become eligible to use the POP system in a jurisdiction that does not have this power, that issuer should refer to clause 1(b)(ii)(B) of section 2.2 ofNational Instrument 44-101.

2.2 Alternative Eligibility Criteria: Issuers that have not been Reporting Issuers for 12 Months in any Jurisdiction (Sections 2.3, 2.5, 2.6, 2.7, and 2.8of National Instrument 44-101) - Issuers that have not been reporting issuers for 12 months in any jurisdiction may nonetheless be POP eligible under thefollowing alternative eligibility criteria of National Instrument 44-101:

1. Section 2.3, which applies to certain substantial Canadian issuers.

2. Section 2.5, which applies to issuers of non-convertible debt securities, non-convertible preferred shares and cash settled derivatives that are guaranteed byanother issuer that meets the criteria contained in that section.

3. Section 2.6, which applies to issuers of convertible debt securities or convertible preferred shares if the securities are convertible into securities of anotherissuer that satisfies the criteria contained in that subsection and guarantees the securities.

4. Section 2.7, which applies to issuers of asset-backed securities.

5. Section 2.8, which applies to successor issuers.

Under sections 2.5, 2.6 and 2.7 of National Instrument 44-101, an issuer is not required to be a reporting issuer in any jurisdiction in order to be POP eligible.Under sections 2.3 and 2.8 of National Instrument 44-101, an issuer is not required to have been a reporting issuer in a jurisdiction for any minimum period oftime in order to be POP eligible. Paragraph 2 of section 2.3 and paragraph 2.8(1) 2 require the issuer to be a reporting issuer in a local jurisdiction and, if not inthe local jurisdiction then the issuer is required to file all continuous disclosure documents in the local jurisdiction that it was required to file in the otherjurisdictions in which it is a reporting issuer and, depending on the jurisdiction, to make an application to be deemed to be, or designated as, a reporting issuer inthe local jurisdiction.

2.3 Calculation of the Aggregate Market Value of an Issuer's Equity Securities (Section 2.9 of National Instrument 44-101)

(1) Section 2.9 of National Instrument 44-101 sets out how the calculation is to be made as to whether an issuer satisfies the market value criteria contained inPart 2 of National Instrument 44-101. Subsection 2.9(2) requires the exclusion of certain securities. The following examples are provided to assist issuers andtheir advisers in determining which securities are to be excluded under subsection 2.9(2):

Example (1):

A portfolio manager manages a pension fund. The pension fund holds 11% of the equity securities of the issuer.

Result: These equity securities must be excluded in calculating the market value of the issuer's equity securities.

Example (2):

A portfolio manager (not an affiliate of the issuer) manages three mutual funds each of which holds 3% of the equity securities of the issuer. An affiliate of theportfolio manager (not an affiliate of the issuer) manages two mutual funds each of which holds 3% of the equity securities of the issuer.

Result: The aggregated equity securities (15%) do not have to be excluded in calculating the market value of the issuer's equity securities.

Example (3):

The facts are the same as in Example (2) above, except that the portfolio manager and the affiliate of the portfolio manager are affiliates of the issuer.

Result: The aggregated equity securities must be excluded in calculating the market value of the issuer's equity securities.

Example (4):

A portfolio manager (not an affiliate of the issuer) manages three non-redeemable investment funds (A, B and C). A holds 12% of the equity securities of theissuer. B and C each hold 6% of the equity securities of the issuer.

Result: The equity securities of the issuer held by A must be excluded in calculating the market value of the issuer's equity securities but the equity securities heldby B and C (12% in the aggregate) need not be excluded in calculating the market value of the issuer's equity securities.⁽⁴⁾

(2) Instalment receipts that evidence the beneficial ownership of outstanding equity securities (subject to an encumbrance to secure the obligation of theinstalment receipt holder to pay future instalments) and other similar receipts that evidence beneficial ownership of outstanding equity securities are not,themselves, equity securities. Consequently, the market value of such a receipt cannot be included in the market value calculation of an issuer's outstandingequity securities. The market value of the equity securities evidenced by the receipt is, however, included, subject to the exclusions set out in subsection 2.9(2) ofNational Instrument 44-101.⁽⁵⁾

The exclusions set out in subsection 2.9(2) of National Instrument 44-101 include equity securities of an issuer over which control or direction is exercised bypersons or companies that exercise control or direction over more than 10 percent of the outstanding equity securities of the issuer. Instalment receipttransactions typically involve a custodian holding a security interest in the securities the beneficial ownership of which is evidenced by instalment receipts. TheCanadian securities regulatory authorities do not regard the custodian, by virtue of holding a security interest, as exercising "control or direction" over thesecurities for the purposes of subsection 2.9(2) of the National Instrument if the custodian is not entitled to the exercise any voting rights attached to thesecurities or dispose of the securities without the beneficial owner's consent.

2.4 Alternative Eligibility Criteria for Substantial Canadian Issuers (Section 2.3 of National Instrument 44-101) - Paragraph 2(b) of section 2.3 ofNational Instrument 44-101 requires substantial Canadian issuers, that are not reporting issuers in the local jurisdiction, to be reporting issuers in anotherjurisdiction and to comply with the filing requirements in subparagraphs 1(b)(i) and (ii) of section 2.2. The filing requirement in subparagraph 1(b)(i) requires anissuer to file all continuous disclosure documents that it was required to file for the 12 calendar months preceding the date of filing of the issuer's AIF. If theissuer has been a reporting issuer in the other jurisdiction for less than 12 calendar months, the issuer is only required to file in the local jurisdiction thecontinuous disclosure documents that it was required to file in the other jurisdiction for the lesser period.

.5 Alternative Eligibility Criteria for Issues of Guaranteed Debt Securities, Preferred Shares and Cash Settled Derivatives (Sections 2.5 and 2.6 ofNational Instrument 44-101) - Sections 2.5 and 2.6 of National Instrument 44-101 allow an issuer to participate in the POP system based on a guarantee. TheCanadian securities regulatory authorities are of the view that an issuer that guarantees payment of securities is not, simply by providing that guarantee, issuing asecurity.

2.6 Alternative Eligibility Criteria for Asset-Backed Securities (Section 2.7 of National Instrument 44-101)

(1) In order to be POP eligible under section 2.7 of National Instrument 44-101, an issuer must have been established in connection with a distribution ofasset-backed securities. Ordinarily, asset-backed securities are issued by special purpose issuers established for the sole purpose of purchasing financial assetswith the proceeds of one or more offerings of these securities. This ensures that the credit and performance attributes of the asset-backed securities aredependant on the underlying financial assets, rather than upon concerns relating to ancillary business activities and their attendant risks. Access to the POPsystem under this section has been limited to special purpose issuers to avoid the possibility that an otherwise ineligible issuer would structure securities fallingwithin the definition of "asset-backed security".

(2) The eligibility criteria for distribution of asset-backed securities under the POP system are intended to provide sufficient flexibility to accommodate futuredevelopments. To qualify under section 2.7 of National Instrument 44-101, the securities must satisfy the following two criteria:

1. First, the payment obligations on the securities must be serviced primarily by the cash flows of a pool of discrete liquidating assets such as accounts receivable,instalment sales contracts, leases or other assets that by their terms convert into cash within a specified period of time.

2. Second, the securities must receive an approved rating on issuance. At the time of filing an AIF, the issuer must have a reasonable expectation that thiscondition will ultimately be satisfied in respect of all asset-backed securities that it may distribute under the POP system.

The eligibility criteria do not distinguish between pass-through (i.e., equity) and pay-through (i.e., debt) asset-backed securities. Consequently, both pay-throughand pass-through securities, as well as residual or subordinate interests, may be distributed under the POP system if all other applicable requirements are met.

(3) Canadian securities legislation contains definitions of "promoter" and requires, in certain circumstances, a promoter of an issuer to assume statutory liabilityfor prospectus disclosure. Asset-backed securities are commonly issued by a "special purpose" entity, established for the sole purpose of facilitating one or moreasset-backed offerings. The Canadian securities regulatory authorities are of the opinion that special purpose issuers of asset-backed securities will have apromoter because someone will typically have taken the initiative in founding, organizing or substantially reorganizing the business of the issuer. The Canadiansecurities regulatory authorities interpret the business of such issuers to include the business of issuing asset-backed securities and entering into the supportingcontractual arrangements.

For example, in the context of a securitization program under which assets of one or more related entities are financed by issuing asset-backed securities(sometimes called a "single seller program"), an entity transferring or originating a significant portion of such assets, an entity initially agreeing to provideon-going collection, administrative or similar services to the issuer, and the entity for whose primary economic benefit the asset-backed program is establishedwill be a promoter of the issuer if it took the initiative in founding, organizing or substantially reorganizing the business of the issuer. Persons or companiescontracting with the issuer to provide credit enhancements, liquidity facilities, hedging arrangements or to be a replacement servicer of assets, and investors whoacquire subordinated investments issued by the issuer will not typically be promoters of the issuer by virtue of such involvement.

In the context of a securitization program established to finance assets acquired from numerous unrelated entities (sometimes called a "multi-seller program"),the person or company (frequently a bank or an investment bank) establishing and administering the program in consideration for the payment of an on-going fee,for example, will be a promoter of the issuer if it took the initiative in founding, organizing or substantially reorganizing the business of the issuer. Individualsellers of the assets into a multi-seller program are not ordinarily considered to be promoters of the issuer, despite the economic benefits accruing to such personsor companies from utilizing the program. As with single-seller programs, other persons or companies contracting with the issuer to provide services or otherbenefits to the issuer of the asset-backed securities will not typically be promoters of the issuer by virtue of such involvement.

2.7 Reorganizations (Section 2.8 of National Instrument 44-101)

(1) Section 2.8 of National Instrument 44-101 provides alternative eligibility criteria for successor issuers in two regards.

First, a successor issuer may be POP eligible under subsection 2.8(1) of National Instrument 44-101 even though it has not been a reporting issuer in anyjurisdiction for 12 months. The successor issuer can nonetheless be POP eligible if, among other things, it is a reporting issuer in the local jurisdiction and, at thetime of the reorganization, at least one of the participants in the reorganization satisfied the 12 month reporting issuer requirement.

Second, subsection 2.8(2) of National Instrument 44-101 enables a successor issuer to elect to use the current AIF of a participant in the reorganization as aresult of which the successor issuer exists. By doing so, a successor issuer is considered under subsection 2.8(3) to have a current AIF. It is not relevant whetherthe participant continues to exist after the reorganization. If the participant, whose current AIF is used by a successor issuer, continues to exist after thereorganization, the use by the successor issuer of the current AIF of the participant does not preclude the participant from continuing to use the AIF. Undersubsection 2.8(2) of National Instrument 44-101, a successor issuer may choose to use the current AIF of more than one participant in the reorganization thatgave rise to the successor issuer. This may be appropriate in circumstances where the successor issuer succeeded to the businesses of two participants whereeach participant had a current AIF. A successor issuer may always file its own AIF in order to have a current AIF. The first AIF filed by a successor issuer will bean initial AIF.

(2) An issuer that was previously eligible to use the POP system under the basic eligibility criteria set out in section 2.2 of National Instrument 44-101, includingthe $75,000,000 market value requirement, and is the subject of a reorganization that results in that issuer becoming a wholly-owned subsidiary of another entity,will not be POP eligible under section 2.2 for its next financial year. This is because it cannot satisfy the $75,000,000 market value requirement. It may continueto be POP eligible under section 2.4 or section 2.5 of National Instrument 44-101 (approved rating or guaranteed securities) or section 2.7 of NationalInstrument 44-101 (asset-backed securities).

(3) An entity that carries on the portion of the business that was "spun-off" is not a successor issuer within the meaning of the definition. The Canadian securitiesregulatory authorities have, from time to time, granted relief allowing the "spun-off" entity to use the POP system even though it may not otherwise satisfycertain of the eligibility criteria. In those situations where the Canadian securities regulatory authorities have granted relief, there has been substantial auditedsegmented disclosure of the "spun-off" entity in the market place for at least one year before the reorganization. In addition, the Canadian securities regulatoryauthorities will generally look at whether the spun-off entity is described in the AIF and MD&A of the parent company. Applications for relief will be consideredon a case by case basis.

(4) Market participants are also reminded that if an issuer files a prospectus or other offering document following a material reorganization, take-over bid oracquisition of assets, the prospectus or offering document is required to contain, either directly or, if permitted, through incorporation by reference, appropriatedisclosure concerning the reorganization, take-over bid or acquisition of assets and its effect on the issuer in order for the prospectus or other offering documentto contain full, true and plain disclosure of all material facts.

PART 3 AIF

3.1 Initial AIF Review Procedures (Section 3.1 of National Instrument 44-101)⁽⁶⁾

(1) An AIF filed by either an issuer that has not previously had an AIF accepted for filing in the local jurisdiction or an issuer that previously had a current AIF inthe local jurisdiction and no longer has one, shall be treated as an initial AIF for the purpose of review by the regulator.

(2) An initial AIF and supporting documents will be reviewed by the Canadian securities regulatory authorities, including the CVMQ, in accordance with theprocedures described in this section. Compliance by issuers with these procedures, although not mandatory, will generally result in the most expeditioustreatment of initial AIFs on a national basis.

(3) An issuer should file an initial AIF, together with any supporting materials, as nearly as may be practicable, contemporaneously in each of the jurisdictions inwhich the issuer wishes to become eligible to participate in the POP system. An issuer should file an AIF in each jurisdiction identical in form and content,including dating, except that French language documents filed in Quebec need not be filed in the other jurisdictions, except as required by subsection 3.15) ofNational Instrument 44-101. (See also subsection (13) below.) The review of documents filed in Quebec in the French language, apart from substantivecomments applying to both English and French language versions, will ordinarily be dealt with between Quebec and the issuer or the issuer's agent in Quebecdirectly.

(4) Subsection 3.1(2) of National Instrument 44-101 requires an issuer that is filing an AIF in more than one jurisdiction to select from among the jurisdictionswilling to act as principal jurisdiction a jurisdiction to act as principal jurisdiction. See subsection (12) for a list of those jurisdictions unwilling to act as principaljurisdiction at the date of publication of this Policy.

(5) The principal jurisdiction will review the material filed and will use its best efforts to issue a first comment letter within ten working days from the date theAIF was received. The first comment letter will be sent by the principal jurisdiction immediately to each of the other jurisdictions in which the AIF is filed, and tothe issuer or the issuer's solicitor.⁽⁷⁾

(6) The non-principal jurisdictions will use their best efforts to advise the principal jurisdiction of any additional comments within five working days of receipt ofthe first comment letter. If a non-principal jurisdiction does not have comments, it will advise the principal jurisdiction that it has no comments or, if it is not in aposition to issue its comments at the end of the five-day period, it will advise the principal jurisdiction as to the date upon which its comments will be available.

(7) On the basis of the additional comments, the principal jurisdiction will then prepare and send a second comment letter. The second comment letter willusually be sent after all of the non-principal jurisdictions have advised the principal jurisdiction of their comments or that they have no comments. The secondcomment letter will identify the jurisdictions issuing the comments. The principal jurisdiction may, in its discretion, send comments from other jurisdictions to theissuer or the issuer's solicitor before the receipt by it from all of the non-principal jurisdictions of comments or advice that the jurisdiction has no comments.

(8) The issuer, directly or through its solicitor, should send the principal jurisdiction a response to the first comment letter. The issuer, directly or through itssolicitor, should send each non-principal jurisdiction issuing comments a response to that jurisdictions's comments, with a copy to the principal jurisdiction. Eachnon-principal jurisdiction will advise the principal jurisdiction whether it is satisfied with the response to its comments and whether it is prepared to issue a noticeof acceptance following review of a blacklined AIF (and in Quebec, the French language version) and upon the filing of a revised AIF.

(9) Issuers and their representatives should not deal directly with non-principal jurisdictions in an attempt to resolve comments without consent from theprincipal jurisdiction, which must be kept aware at all times of such dealings and their resolution.

(10) When the principal jurisdiction is satisfied that all comments have been resolved and has received a revised AIF and a blacklined copy of same, the principaljurisdiction will issue a notice of acceptance and will advise the other jurisdictions that it has issued a notice of acceptance.

(11) If revisions are necessary, an issuer should file a revised AIF, as nearly as may be practicable, contemporaneously in each of the other jurisdictions. Thenon-principal jurisdictions will issue notices of acceptance after receipt by them of an acceptable revised AIF and a blacklined copy of same and upon receipt ofthe advice that a notice of acceptance has been issued by the principal jurisdiction.

(12) Certain jurisdictions are not prepared to act as principal jurisdiction and will not normally provide comments on the AIF. As of the date of publication of thisPolicy, the Canadian securities regulatory authorities of New Brunswick, Prince Edward Island, Newfoundland, Yukon and the Northwest Territories haveindicated that they wish to be included in the process contemplated by this Policy, but will not act as principal jurisdiction and will not normally providecomments to the principal jurisdiction. The principal jurisdiction will assume that none of these jurisdictions will have comments unless comments are received bythe principal jurisdiction within the five-day period referred to in subsection (6).

(13) Subsection 3.1(5) of National Instrument 44-101 provides that if an issuer has prepared a French language version of the initial AIF, the issuer shall file themost recent French language version and any supporting documents, if requested by the regulator, or, if not requested by the regulator, then if and at the time itproposes to make use of the French language version of the initial AIF or revised initial AIF in the local jurisdiction. At the time of coming into force of NationalInstrument 44-101, New Brunswick is the only jurisdiction outside of Quebec that requests that issuers file French language documents that have been preparedby the issuer, regardless of whether the issuer is using the French language documents in New Brunswick. If the issuer has prepared a French language version ofthe initial AIF and supporting documents, they should be filed in New Brunswick concurrently with or within a few days after filing the English languagedocuments.

3.2 Renewal AIF Review Procedures (Section 3.2 of National Instrument 44-101)

(1) The definition of "the regulator" in section 3.2 of National Instrument 44-101 applies in this section.

(2) A renewal AIF that is filed for a financial year in which the issuer made an acquisition of shares or assets, howsoever effected, or was a party to areorganization that, in either case, was material to the issuer is more likely to be selected for review under subsection 3.2(7) of National Instrument 44-101.⁽⁸⁾Materiality is to be determined in the context of the issuer's overall financial position before and after the acquisition or reorganization, taking into account bothquantitative and qualitative factors. The discussion of the concept of materiality set out in subsection 7.4(2) commenting on item 11 of Form 44-101F2 applies,with necessary changes, in the context of determining whether an acquisition or a reorganization is material to the issuer.

(3) An issuer that wishes to participate in the POP system in the local jurisdiction and has previously filed an initial AIF that has been accepted for filing underNational Instrument 44-101 in another jurisdiction may file, as an initial AIF under section 3.1 of National Instrument 44-101 in the local jurisdiction, either (i)the new AIF that it is filing as a renewal AIF in the other jurisdiction, or (ii) the AIF that is a current AIF in the other jurisdiction. The issuer should notify all theother jurisdictions in which it already has a current AIF that it is filing an initial AIF in a new jurisdiction.

(4) A renewal AIF, if selected for review, will be reviewed by the Canadian securities regulatory authorities in accordance with section 3.2 of NationalInstrument 44-101 and the procedures described in this section.

(5) An issuer should file a renewal AIF, together with any supporting materials, as nearly as may be practicable, contemporaneously in each of the jurisdictions inwhich the issuer wishes to retain its eligibility to participate in the POP system. An issuer should file an AIF in each jurisdiction identical in form and content,including dating, except that French language documents filed in Quebec need not be filed in the other jurisdictions, except as otherwise provided in subsection3.2(14) of National Instrument 44-101 (see also subsection (11) below).

(6) After issuing a notice of acceptance for a renewal AIF, the regulator will send a copy of the notice of acceptance to each jurisdiction where the renewal AIFwas filed.

(7) If an issuer's renewal AIF is selected for review by the regulator under subsection 3.2(7) of National Instrument 44-101,

(a) the regulator will send the other jurisdictions in which the renewal AIF was filed a copy of the notice sent to the issuer stating that the issuer's renewal AIFwill be reviewed;

(b) the regulator will send its comments to the issuer or to the issuer's solicitor, with a copy to all other jurisdictions in which the renewal AIF was filed; and

(c) the issuer, directly or through its solicitor, should send the regulator a response to all comment letters received on the renewal AIF from the regulator.⁽⁹⁾

(8) If, after the regulator notifies an issuer that its renewal AIF will be reviewed under subsection 3.2(7) of National Instrument 44-101 and before the regulatorhas notified the issuer that the review has been completed under subsection 3.2(10) of National Instrument 44-101, the issuer files a preliminary short formprospectus in the designated jurisdiction, both the issuer's preliminary short form prospectus and its renewal AIF will be reviewed at the same time in accordancewith the time limits applicable to the review of a short form prospectus contained in section 4.5 of this Policy. In that case, comments arising in the course of thereview of the renewal AIF will be taken into account during the review of the preliminary short form prospectus. The notice that the review of the renewal AIFhas been completed will be issued before, or concurrently with, the issuance of the receipt for the short form prospectus. A receipt for the short form prospectuswill not be issued until the review of the renewal AIF has been completed.

(9) An issuer that intends to file a preliminary short form prospectus within 10 days of filing its renewal AIF should notify the regulator of this intention at thetime of filing its renewal AIF or, if the decision is not yet made at that time, then immediately upon making the decision.

(10) The regulator that receives a notice under subsection (9) of an issuer's intention to file a preliminary short form prospectus will as soon as practicable notifythe issuer and all the other jurisdictions in which the renewal AIF has been filed, if it intends to review the issuer's renewal AIF. In that case, the issuer'spreliminary short form prospectus and its renewal AIF will be reviewed in accordance with the procedures set out in subsection (8). The accelerated reviewprocedure contemplated by this subsection will not be extended to an issuer if any of the Canadian securities regulatory authorities consider that the issuer hasabused or is abusing the provision. For example, the Canadian securities regulatory authorities may consider it abusive if an issuer gives notice under subsection(9) and no short form prospectus is filed.

(11) With respect to subsection 3.2(14) of National Instrument 44-101 and the filing of a French language version of a renewal AIF, please refer to subsection3.1(13) above.

3.3 Supporting Documents (Section 3.3 of National Instrument 44-101)

There is no regulatory requirement for auditor involvement with respect to the preparation of an AIF. No solicitor's, auditor's, accountant's, engineer's,appraiser's or other consent is required to be filed with an AIF. However, reporting issuers may choose to involve their auditors. The auditing profession'sstandards may require limited auditor involvement in certain circumstances. Subsection 4.2(2) of National Instrument 44-101 does require the filing of consentswith a short form prospectus. In order to be able to provide the necessary consent letter on a short form prospectus, an auditor will be obliged to comply withapplicable requirements of the Handbook and of the Canadian securities legislation of the jurisdictions in which the AIF is filed.

PART 4 FILING AND RECEIPTING OF SHORT FORM PROSPECTUS

4.1 Refusal to Issue Prospectus Receipt - The regulator has the discretion under securities legislation to refuse, in the public interest, to issue a receipt for aprospectus. Despite acceptance by a regulator of an issuer's AIF, if, at the time the issuer files a preliminary short form prospectus, a regulator has concernsabout the adequacy or timeliness of the disclosure in the AIF and the disclosure is not supplemented in the prospectus, the regulator may refuse to issue a receiptfor the short form prospectus.

4.2 Requirements Applicable to Filing of Short Form Prospectus (Section 4.1 National Instrument 44-101) - If an issuer files a short form prospectusbefore its directors have approved the audited annual financial statements for its last completed financial year, subsection 4.1(4) of National Instrument 44-101permits an issuer to include the interim financial statements for the third quarter, instead of the financial statements for the entire financial year. The Canadiansecurities regulatory authorities are of the view that directors of issuers should endeavour to consider and approve financial statements in a timely manner andshould not delay the approval and release of the statements for the purpose of avoiding their inclusion in a prospectus. Issuers are also reminded of theirobligation to disclose all material facts relating to the securities to be distributed. For example, if the fourth quarter results are or are expected by the issuer to bematerially different from the results of the fourth quarter in previous years, or would have a material impact on the results for the financial year as a whole, or areotherwise materially different from the market's expectations, the issuer is expected to discuss the fourth quarter results in its short form prospectus.

4.3 Supporting Documents (Section 4.2 of National Instrument 44-101) - Canadian securities legislation and section 4.2 of National Instrument 44-101require supporting documents to be filed with a preliminary short form prospectus and short form prospectus and any amendment to a short form prospectus. Alist of the documents required is set out in Appendix A to this Policy.

4.4 Confidential Material Change Reports - Confidential material change reports cannot be incorporated by reference into a short form prospectus.Accordingly, an issuer may not file a confidential material change report during a distribution. However, if circumstances arise that cause an issuer to file aconfidential material change report during the distribution period of securities under the POP system, the issuer should cease all activities related to thedistribution until

(a) the material change is generally disclosed and a prospectus amendment is filed, if required; or

(b) the decision to implement the material change has been rejected and the issuer has so notified the regulator of each jurisdiction where the confidential materialchange report was filed.

If the Canadian securities regulatory authorities are aware that a distribution is taking place while the issuer has a confidential material change report on file, theywill normally take steps to cease trade the distribution.⁽¹⁰⁾

4.5 Short Form Prospectus Review Procedures⁽¹¹⁾

(1) If filed in only one jurisdiction, a preliminary short form prospectus and short form prospectus and supporting documents will, if reviewed, be reviewed inaccordance with the timetable and procedures for review by the principal jurisdiction described below. If filed in more than one jurisdiction, a preliminary shortform prospectus and short form prospectus and supporting documents will, if reviewed, be reviewed in accordance with the procedures described in this section,unless the issuer has elected to use the expedited review system.

(2) The procedures described in section 3.1 of this Policy for clearing an initial AIF in more than one jurisdiction apply with necessary modifications to theclearance of a short form prospectus in more than one jurisdiction under National Instrument 44-101, subject to the following timing and related proceduralmodifications:

1. An issuer should file documents, as nearly as may be practicable, contemporaneously in each of the jurisdictions in which the issuer or a selling securityholderproposes to distribute securities. The preliminary short form prospectus and short form prospectus filed in each jurisdiction should be identical in form andcontent, including signatures and dating. For a discussion of the filing of French language documents, please refer to subsection 3.1(13).

2. The principal jurisdiction will send any comments on the contents of the preliminary short form prospectus to the non-principal jurisdictions, as well as to theissuer, within three working days following the filing of the preliminary short form prospectus with the principal jurisdiction.

3. Within two working days from the day of receipt of the comments, if any, from the principal jurisdiction, the non-principal jurisdictions will send the principaljurisdiction any additional comments they may have on the contents of the preliminary short form prospectus. If the principal jurisdiction receives no commentsfrom a non-principal jurisdiction within the two-day period, it will assume that the non-principal jurisdiction will accept the filing of the short form prospectus infinal form.⁽¹²⁾

(3) Nothing in National Instrument 44-101 or in this Policy affects the discretion of the regulator to determine that a proposed offering of cash settledderivatives, asset-backed securities or any other securities, the review of which may raise novel, unusual or difficult issues, is too complex to be reviewed withinthe shortened time periods for review contemplated by this Policy and to apply the time periods that would otherwise apply to a long form prospectus.

(4) If the securities legislation of the local jurisdiction contains the concept of a "waiting period" such that the securities legislation requires that there be aspecified period of time between the issuance of a receipt for a preliminary short form prospectus and the issuance of a receipt for a short form prospectus, theimplementing law of the jurisdiction removes that requirement as it would otherwise apply to an offering under National Instrument 44-101.

4.6 National Instrument 44-101 Receipt System

(1) An issuer filing a short form prospectus in more than one jurisdiction may elect to receive a single National Instrument 44-101 Receipt for the filing of a shortform prospectus or an amendment to a short form prospectus. A National Instrument 44-101 Receipt is evidence of the issuance of a final receipt for the shortform prospectus or the amendment to the short form prospectus in each jurisdiction in which the short form prospectus or the amendment was filed and that didnot opt out of the National Instrument 44-101 Receipt system for the issuer's prospectus during the review process. Jurisdictions in which the document wasfiled and that have not so opted out are referred to as "participating jurisdictions" in this Policy.

Appendix B contains a chronology, illustrating the operation of the National Instrument 44-101 Receipt System procedures.

(2) An issuer that elects to receive a National Instrument 44-101 Receipt must file in each non-principal jurisdiction, concurrently with the preliminary short formprospectus, an undertaking to file final material together with, if applicable, the required fee, within three working days following the date of issue of the NationalInstrument 44-101 Receipt.

(3) A non-principal jurisdiction may opt out of the National Instrument 44-101 Receipt system with respect to a short form prospectus at any time before theissue of the National Instrument 44-101 Receipt. Opting out will be communicated by notification to that effect sent to the principal jurisdiction with a copy tothe issuer. An issuer must deal separately with a jurisdiction that has opted out to obtain a receipt for its short form prospectus.

(4) Unless a non-principal jurisdiction advises the principal jurisdiction otherwise, silence as of the end of the second working day next following the day onwhich the first comments were sent by the principal jurisdiction, or noon on the working day next following the day on which a change to the prospectus wasfiled, will constitute confirmation by a non-principal jurisdiction, other than Quebec, to the principal jurisdiction that, assuming the final material weresubstantially similar, a receipt would be issued in that jurisdiction. The principal jurisdiction is therefore authorized to issue a receipt that provides evidence that areceipt has (notionally) been issued in the non-principal jurisdiction, other than Quebec. The principal jurisdiction will notify the non-principal jurisdictions atonce that the National Instrument 44-101 Receipt has been issued.

(For purposes of establishing that a working day has concluded, the time zone of the relevant jurisdiction will apply. From the point of view of the principaljurisdiction, the time zone of the principal jurisdiction will establish the end of the initial three day review period, and the time zone of the most westerlynon-principal jurisdiction will establish the end of the subsequent two day review period.)

(5) Because Quebec has an obligation to clear a French language prospectus, authorization must be specifically communicated by Quebec to the principaljurisdiction before the principal jurisdiction is authorized to issue a National Instrument 44-101 Receipt that includes Quebec. Before it will communicate such anauthorization, the CVMQ requires a signed copy of both English and French versions of the final prospectus.

(6) If a non-principal jurisdiction makes comments, the comments will be communicated to the issuer directly, with a copy to the principal jurisdiction, andresolved between the issuer and the non-principal jurisdiction. However, if changes are made to a prospectus as a result of the comments and if Quebec is anon-principal jurisdiction, the CVMQ requires that blacklined copies of the relevant pages of the final prospectus in both French and English be filed in Quebec.

(7) A National Instrument 44-101 Receipt will bear on its face the following legend:

"This National Instrument 44-101 Receipt confirms that receipts of (each of the provinces or territories of Canada [except---]) have been issued."

A National Instrument 44-101 Receipt will be issued by the principal jurisdiction. It is not necessary for the issuer to obtain a separate receipt from the otherparticipating jurisdictions in order to commence distribution of its securities in those jurisdictions. However, each non-principal participating jurisdiction maysubsequently issue a receipt dated as of the same date as the National Instrument 44-101 Receipt to the issuer.⁽¹³⁾

(8) The National Instrument 44-101 Receipt System is primarily intended to facilitate national distributions of securities under "clean" (i.e. no comments) shortform prospectuses that are not altered by the issuer. Where comments are raised, or the issuer wishes to make changes before filing final material, additionalclearance procedures are involved that require additional time.

PART 5 EXEMPTIONS

5.1 Procedure to Obtain an Exemption⁽¹⁴⁾

(1) The procedure to obtain an exemption from any requirement of National Instrument 44-101, in more than one jurisdiction, is as follows:

(a) the applicant should file an application simultaneously in all jurisdictions in which it requires an exemption;

(b) the application should be filed before or at the time of filing a preliminary short form prospectus;

(c) the application should indicate each jurisdiction where the application is being filed and identify the jurisdiction that has been assigned to act as the designatedjurisdiction for review of the applicant's short form prospectus and, if no jurisdiction has agreed, the jurisdiction that last acted as principal jurisdiction for reviewof the applicant's AIF or its most recent prospectus;

(d) the designated jurisdiction or the principal jurisdiction, as the case may be, will, on behalf of the applicant, contact the other jurisdictions in which theapplication has been made for their comments concerning the application and will send all comments to the applicant; and

(e) the applicant should send its response to all comments received to the designated jurisdiction or principal jurisdiction, as the case may be, which will forwardthe response to the other jurisdictions and again coordinate comments.

(2) Subsection (1) applies with necessary changes if the issuer is filing an application in only one jurisdiction.

PART 6 CONTENT OF AIF - ASSET-BACKED SECURITIES

6.1 Content of AIF - Asset-backed Securities⁽¹⁵⁾

(1) Item 4(2) of Form 44-101F1 AIF specifies additional disclosure applicable to issuers of asset-backed securities. Form 44-101F1 leaves to asset-backedissuers the determination of which other prescribed disclosure is applicable and ought to be included in the AIF. Applicable disclosure for a special purpose issuerof asset-backed securities generally pertains to the nature, performance and servicing of the underlying pool of financial assets. The nature and extent of requireddisclosure may vary depending on the type and attributes of the underlying pool.

The following factors should be considered by an issuer of asset-backed securities in preparing its AIF:

1. The extent of disclosure respecting an issuer will depend on the extent of the issuer's on-going involvement, which in turn may vary dramatically depending onthe type and quality of the assets comprising the pool and on the overall structure of the transaction.

2. Requested disclosure respecting the business and affairs of the issuer should be interpreted to apply to the financial assets underlying the asset-backedsecurities.

3. Financial information respecting the pool of assets to be described and analyzed in the AIF will consist of information commonly set out in servicing reportsprepared to describe the performance of the pool and the specific allocations of income, loss and cash flows applicable to outstanding asset-backed securitiesmade during the relevant period.

(2) Item 4(2)(b)(i) of Form 44-101F1 AIF requires issuers of asset-backed securities to include information relating to the composition of the underlying pool offinancial assets the cash flows from which service the asset-backed securities. Disclosure respecting the composition of the pool will vary depending upon thenature and number of the underlying financial assets. For example, in a geographically dispersed pool of financial assets, it may be appropriate to providesummary disclosure based on the location of obligors. In the context of a revolving pool, it may be appropriate to provide details relating to aggregateoutstanding balances during a year in order to illustrate historical fluctuations in asset origination due to seasonality. In pools of consumer debt obligations, itmay be appropriate to provide a breakdown within ranges of amounts owing by obligors in order to illustrate limits on available credit extended. Theseconsiderations, among others, may be necessary to fully describe the material attributes of the underlying pool of financial assets.

PART 7 CONTENT OF SHORT FORM PROSPECTUS

7.1 Prospectus Liability - Nothing in the short form prospectus regime established by National Instrument 44-101 is intended to provide relief from liabilityarising under the provisions of the Canadian securities legislation of any jurisdiction in which a short form prospectus is filed if the short form prospectuscontains an untrue statement of a material fact or omits to state a material fact that is required to be stated therein or that is necessary to make a statement notmisleading in light of the circumstances in which it was made.⁽¹⁶⁾

7.2 Firm Commitment Underwritings - If an underwriter has agreed to purchase all of the securities to be distributed at a specified price, item 1.8(4) of Form44-101F2 requires the short form prospectus to contain a statement that the securities are to be taken up by the underwriter, if at all, on or before a date not laterthan 42 days after the date of the receipt for the short form prospectus. If the securities legislation of a jurisdiction requires that a prospectus indicate that thesecurities must be taken up by the underwriter within a period that is different than the period provided under National Instrument 44-101, the implementing lawof a jurisdiction exempts issuers from that requirement if they comply with National Instrument 44-101.

7.3 Minimum Offering Size - If a minimum amount of funds is required by an issuer, and the securities are proposed to be distributed on a best efforts basis,item 6(5) of Form 44-101F2 requires that the short form prospectus state that the distribution may not continue for a period of more than 90 days after the dateof receipt for the short form prospectus if subscriptions representing the minimum amount of funds are not obtained within the period unless each of the personor companies who subscribed within that period have consented. If the securities legislation of a jurisdiction requires that an distribution may not continue formore than a specified period if the minimum amount of funds are not subscribed within that period and the specified period is different than the period providedunder National Instrument 44-101, the implementing law of a jurisdiction exempts issuers from that requirement if they comply with National Instrument 44-101.

7.4 Business Acquisitions

(1) With respect to item 11 of Form 44-101F2 "Business Acquisitions", issuers should note that the Quebec securities legislation does not limit the requirementsfor pro forma financial statements to those situations where the business acquisition is material to the issuer.

(2) Materiality is a matter of judgment in the particular circumstances. An acquisition of a business will generally be considered by the Canadian securitiesregulatory authorities to be material to an issuer if it is probable that the omission of information or the misstatement of information relating to the acquiredbusiness from the financial statements would influence or change an investment decision. Measures of materiality may include gross revenues, expenses, netincome, shareholders' equity, capital assets and total assets of the acquired business relative to those of the issuer. This concept of materiality is broader than thedefinition of "material change" contained in securities legislation.

7.5 Distribution of Asset-backed Securities

(1) Item 8(3) of Form 44-101F2 specifies additional disclosure applicable for distributions of asset-backed securities. Applicable disclosure for a special purposeissuer of asset-backed securities generally pertains to the nature, performance and servicing of the underlying pool of financial assets, the structure of thesecurities and dedicated cash flows and any third party or internal support arrangements established to protect holders of the asset-backed securities from lossesassociated with non-performance of the financial assets or disruptions in payment. The nature and extent of required disclosure may vary depending on the typeand attributes of the underlying pool and the contractual arrangements through which holders of the asset-backed securities take their interest in such assets.

The following factors should be considered by an issuer of asset-backed securities in preparing its short form prospectus:

1. The extent of disclosure respecting an issuer will depend on the extent of the issuer's on-going involvement, which in turn may vary dramatically depending onthe type and attributes of the underlying pool and on the overall structure of the transaction.

2. Requested disclosure respecting the business and affairs of the issuer should be interpreted to apply to the financial assets underlying the asset-backedsecurities.

3. Disclosure respecting the originator or the seller of the underlying financial assets will only be relevant to investors in the asset-backed securities if it has anon-going relationship with the financial assets comprising the pool. For example, if asset-backed securities are serviced with the cash flows from a revolving poolof receivables, an evaluation of the nature and reliability of the future originator or the future sales of underlying assets by the seller to or through the issuer maybe a critical aspect of an investor's investment decision. To address this, the focus of disclosure respecting an originator or seller of the underlying financial assetsshould deal with whether there are current circumstances that indicate that the originator or seller will not or will not be able to generate adequate assets in thefuture to avoid an early liquidation of the pool and, correspondingly, an early payment of the asset-backed securities. Summary historical financial informationrespecting the originator and a seller will ordinarily be adequate to satisfy the disclosure requirements applicable to the originator or seller in circumstances wherethe originator or seller has an ongoing relationship with the assets comprising the pool.

(2) Item 8(3)(d)(i) of Form 44-101F2 requires issuers of asset-backed securities to describe any person or company who has or has agreed to originate, sell ordeposit a material portion of the financial assets comprising the underlying pool. The Canadian securities regulatory authorities consider 33% of dollar value ofthe financial assets comprising the pool to be a material portion in this context.

7.6 Distribution of Cash Settled Derivatives - Item 8(4) of Form 44-101F2 specifies additional disclosure applicable to distributions of cash settled derivatives.This prescribed disclosure is formulated in general terms for issuers to customize appropriately in particular circumstances.

7.7 Financial Statements

(1) Item 12(1) of Form 44-101F2 specifies which financial statements of an issuer are required to be incorporated by reference into an issuer's short formprospectus. The most recent interim financial statements and the most recent year end financial statements of the issuer, if they have been approved by the boardof directors of the issuer, are required to be incorporated by reference under 3(b) and 4(b) of item 12(1), even if they have not yet been filed. The Canadiansecurities regulatory authorities are of the view that directors of issuers should endeavour to consider and approve financial statements in a timely manner andshould not delay the approval and release of the statements for the purpose of avoiding their inclusion in a prospectus. Issuers are also reminded of theirobligation to disclose all material facts relating to the securities to be distributed. For example, if there have been significant variations in an issuer's financialresults, the issuer is expected to discuss the variations in its short form prospectus.

(2) Documents incorporated by reference in a short form prospectus are required under section 4.2 of National Instrument 44-101 to be filed with the short formprospectus if they have not previously been filed. This may result in financial statements that have been incorporated by reference under item 12(1) being filedearlier than would otherwise be the case under the continuous disclosure requirements of securities legislation. The implementing law of each jurisdictionprovides relief, if necessary, from the requirement of securities legislation to send these statements concurrently to securityholders and, in British Columbia, tofile written confirmation of having sent these statements. The conditions to the relief require the issuer to send the financial statements to securityholders withinthe time periods and in accordance with the other provisions of continuous disclosure requirements of securities legislation and, in British Columbia, to filewritten confirmation of sending to securityholders.

7.8 Certificates

(1) Item 19 of Form 44-101F2 requires two directors of the issuer to sign a certificate in the prescribed form on behalf of the board of directors of the issuer.Issuers that are not companies are directed to the definition of "director" in securities legislation to determine the appropriate signatories to the certificate.

(2) With respect to item 19 of Form 44-101F2 - "Certificates", reference should be made to the provisions of securities legislation of a jurisdiction that providefor a right of action against every person who signs a prospectus or an amendment to a prospectus. The Canadian securities regulatory authorities recognize that,in certain circumstances, a credit supporter may consider that its knowledge of the affairs of the issuer is not such that it considers it appropriate to sign acertificate in the form specified under item 19 of Form 44-101F2. In these circumstances, if the credit supporter is not a promoter of the issuer or a sellingsecurityholder, the Canadian securities regulatory authorities may allow the credit supporter to sign a different form of certificate. Credit supporters who wish tomake application should do so in accordance with Part 8 of National Instrument 44-101 and Part 5 of this Policy.

COMPANION POLICY 44-101CP

TO NATIONAL INSTRUMENT 44-101

APPENDIX A

TABLE OF DOCUMENTS TO BE FILED IN RESPECT

OF THE CLEARANCE OF NATIONAL ISSUES

A table of documents required to be filed in the various jurisdictions in connection with the clearance of national issues is published immediately following, and aspart of this Companion Policy to National Instrument 44-101. The Canadian Securities Administrators have agreed that compliance with the filing requirementsset out in the table and the related notes shall be considered to satisfy filing requirements associated with clearing a national issue. The table will be amendedfrom time to time by the Canadian Securities Administrators.

PRELIMINARY SHORT FORM PROSPECTUS (National Instrument 44-101)

B.C.

ALTA

SASK.

MAN.

ONT.

QUE.

N.B.

N.S.

P.E.I.

NFLD.

YUK.

NWT.

(Note4)

(a)The following typesand numbers ofdocuments should befiled with a preliminaryshort form prospectus:

Preliminaryshort formprospectus---signed

X(Eng.)

X(Fr.)

Technicalreports andcertificates ofqualification,etc, ifapplicable

---

(Note 3)

(Note 8)

Earningscoveragecalculations, ifapplicable

Eligibility certificateunder subsection 4.2(1)of National Instrument44-101

Material incorporated byreference if notpreviously filed

Undertaking to file finalmaterial and, ifapplicable, the requiredfee ithin three workingdays from ssuance ofNational Instrument4-101 Receipt (Note 2)

FINAL SHORT FORM PROSPECTUS (National Instrument 44-101)

B.C.

ALTA

SASK.

MAN.

ONT.

QUE.

N.B.

N.S.

P.E.I.

NFLD.

YUK.

NWT.

(Note4)

(b)The following typesand numbers ofdocuments should befiled with a final shortform prospectus:

Final shortformprospectus---signed

X(Eng.)

X(Fr.)

Final shortformprospectus---black-lined toshow changesfrom thepreliminaryshort formprospectus

X(Eng.)

X(Fr.)

Materialincorporatedby reference ifnot previouslyfiled

Auditors' consent

Auditors' comfort letteron unaudited interimfinancial statements (ifany) incorporated byreference or included inthe final short formprospectus

Consents of legalcounsel or other experts

FINAL SHORT FORM PROSPECTUS

B.C.

ALTA

SASK.

MAN.

ONT.

QUE.

N.B.

N.S.

P.E.I.

NFLD.

YUK.

NWT.

(Note4)

Estimate of proceeds to berealized and undertaking toprovide breakdown of sales andpayment of additional fees, ifapplicable

---

Underwriters' certificate reportion of the distributionunderwritten, if required

---

Signed copy of underwritingagreement and copy of any othermaterial contract requested byCommission staff (Note 9)

---

AMENDMENTS TO PRELIMINARY PROSPECTUS AND PROSPECTUS (SHORT FORM)

B.C.

ALTA

SASK.

MAN.

ONT.

QUE.

N.B.

N.S.

P.E.I.

NFLD.

YUK.

NWT.

(Note4)

(c) The following types andnumbers of documents shouldbe filed with an amendment to apreliminary prospectus and aprospectus:

Amendment oramended ---signed

X(Eng.)

X(Fr.)

Auditors' consent and comfortletter,---if applicable

Consent of legal counsel orother experts, if applicable

ANNUAL INFORMATION FORM FILED UNDER (National Instrument 44-101)

B.C.

ALTA

SASK.

MAN.

ONT.

QUE.

N.B.

N.S.

P.E.I.

NFLD.

YUK.

NWT.

(Note4)

(d) The following types andnumbers of documents shouldbe filed with an annualinformation form:

AnnualInformation Form

(Notes 5 and 7)

X(Eng.)

X(Fr.)

Eligibilitycertificate

Material incorporated byreference if not previously filed

X(Eng.)

X(Fr.)

Undertaking toprovide documents

X(Eng.)

(Note 6)

Revised annual informationform, if applicable

Blacklined to show changes

NOTES

1 Additional filing requirements apply to certain types of offerings. Reference should be made to the provisions of other National Policy Statements and to localpolicy statements of each jurisdiction to determine such requirements.

2 Applicable only if the issuer elects to receive a National Instrument 44-101 Receipt.

3 British Columbia does not require a copy of technical reports, unless British Columbia is acting as the principal jurisdiction.

4 Quebec only requires a French version of the annual information form and material incorporated by reference at the time of filing of the preliminary short formprospectus.

5 For all jurisdictions other than Quebec and New Brunswick, the French version of the final prospectus and final annual information form is required to be filedin such jurisdictions only if the French version is to be used in such provinces.

6 The undertaking listed is that required by subsection 3.3(2) of National Instrument 44-101 when an issuer files an AIF in the form of an annual report on Form10-K or Form 20-F.

7 The types of documents indicated apply to the filing of both an initial annual information form and a renewal annual information form.

8 Quebec legislation requires technical reports and certificates of qualification to be filed in Quebec in all cases. A reference to an independent engineer or otherqualified person in the issuer's AIF constitutes a reference to that person in the short form prospectus. Therefore the issuer must file the consent of that person.

9 Under subsection 4.2(7) of National Instrument 44-101, a signed copy of the underwriting agreement is required to be filed. Under subsection 4.2(8) ofNational Instrument 44-101, a copy of a material contract referred to in a short form prospectus is required to be delivered, upon request, to the regulator. Thematerial contract is not required to be filed.

COMPANION POLICY 44-101CP

TO NATIONAL INSTRUMENT 44-101

APPENDIX B

TIME ZONES

Time zone of principal jurisdiction

Day 1: Preliminary short form prospectus is filed in selected principal and non-principal jurisdictions. Covering letter indicates election of National Instrument44-101 Receipt.Issuer provides an undertaking to each non-principal jurisdiction to file a copy of the final material and any required additional fee within 3 working daysfollowing the day of issue of a National Instrument 44-101 Receipt on its behalf. If no National Instrument 44-101 Receipt is issued in respect of a jurisdiction,the undertaking to that jurisdiction is void.

Preliminary prospectus receipts are provided in each jurisdiction where issued.

Day 2: POP system review by principal jurisdiction.

Day 3: POP system review by principal jurisdiction.

Day 4: First comment letter sent by the principal jurisdiction to the non-principal jurisdictions.

Responses are only required from non-principal jurisdictions that have made comments, or that wish to opt out of the National Instrument 44-101 Receiptsystem.

Time zone of most westerly jurisdiction in which issuer has filed

Day 5: POP system review by non-principal jurisdictions.

Day 6: POP system review by non-principal jurisdictions.

Comments and/or "opting out" facsimile, if any, sent directly to issuer with a copy to the principal jurisdiction.

Day 7: (a) if no comments by any non-principal jurisdiction

Silence as of end of Day 6, except for Quebec, indicates authorization of the principal jurisdiction to issue a National Instrument 44-101 Receipt as evidence ofthe issuance (notionally) of a receipt in the non-principal jurisdiction, provided that the issuer makes no substantive changes in disclosure from the preliminaryprospectus. Quebec requires a signed English and French version of the final prospectus even if identical to the preliminary and will send a facsimile indicatingauthorization to the principal to issue a National Instrument 44-101 Receipt in respect of both versions.

(b) if comments by non-principal jurisdiction

Issuer and principal jurisdiction receive a comment facsimile.

Issuer subsequently responds to the comments by dealing directly with non-principal jurisdiction.

When the comments are clear, the non-principal jurisdiction notifies the principal by facsimile.

Upon receipt of the clearance facsimile, the principal jurisdiction is implicitly authorized, except by Quebec, to issue a National Instrument 44-101 Receiptevidencing the non-principal jurisdiction's issuance (notionally) of a receipt. Quebec will follow the same procedure as that described in case (a).

In neither case (a) nor (b) does the principal jurisdiction send a second comment facsimile to the issuer summarizing comments or approvals of the otherjurisdictions.

The issuer must send in advance facsimiles of the French and English versions of the changed pages to Quebec. As in case (b) above, the principal jurisdictionwill not issue a National Instrument 44-101 Receipt as evidence of Quebec's approval as non-principal jurisdiction, until it has received a facsimile from Quebecconfirming the receipt and acceptance of the facsimile material.

The issuer must also provide in advance copies of the changed pages to all other jurisdictions, but silence as of noon on the working day next following that onwhich the changes are filed will serve as notice of approval to the principal jurisdiction; of course, a facsimile indicating that the non-principal jurisdiction is clearmay be sent prior to this deadline.

Day 1: Issuer files final material and fee in the principal jurisdiction.

The decision by a non-principal jurisdiction not to notify the principal jurisdiction of any objections by Day X is, in the context of the National Instrument 44-101Receipt system procedures, a notional issue of a receipt within that jurisdiction immediately prior to the issue of the National Instrument 44-101 Receipt.

Issuer files signed copy of both English and French versions of prospectus in Quebec, if Quebec is non-principal.

Quebec notifies principal jurisdiction that it is clear.

Principal jurisdiction issues National Instrument 44-101 Receipt confirming the notional issuance of a receipt by all jurisdictions in which final material has beenfiled and that have not opted out.

The principal jurisdiction notifies all participating non-principal jurisdictions by facsimile that National Instrument 44-101 Receipt has been issued.

Some jurisdictions may also provide an additional receipt on the issue of the National Instrument 44-101 Receipt. Quebec will issue a receipt in all cases.

Distribution commences in all relevant jurisdictions.

Day X+3: Issuer files final material and the appropriate fee in each participating non-principal jurisdiction in compliance with its undertaking.

If the fee and final material are acceptable, and no receipt has yet been issued, some non-principal jurisdictions may issue a receipt to issuer, dated as of the dateof the National Instrument 44-101 Receipt.

Footnotes

1. This Part is based on portions of Part 1 of NP47 and explains the manner in which National Instrument 44-101 interrelates with the rules and orders of thevarious provinces implementing this National Instrument, this Policy, the shelf system, the multijurisdictional system, expedited and selective review, locallegislation and National Policy Statement No. 1.

2. See SEC Release Nos. 33-6964 and 34-31345, Fed. Reg. 32,461 (1992).

3. This subsection is based on the table in Appendix C of NP47.

4. The exclusionary test used in National Instrument 44-101 is a different test than that used in the proposed National Instrument 62-103 The Early WarningSystem and Related Take-Over Bid, Insider Trading and Control Block Distribution Issues as the policy rationale for the two tests are different.

5. This commentary replaces the commentary in the footnote to subsection 4.1(2) of NP47.

6. This is based on the non-mandatory aspects of section 5.1 of NP47 and portions of NP1 dealing with the filing and clearance of an initial AIF.

7. The reference in section 1 of NP1 to advising the issuer by telephone that the comment letter can be picked up has been omitted because of the increasinguse of facsimile and electronic communication.

8. This sentence is based on paragraph 5.2(3)(b) of NP47 and has been expanded to refer to a material acquisition of shares or assets, howsoever effected,instead of a take-over bid. The reference to a material reorganization is also new.

9. This subsection is based on part of subsection 5.2(6) of NP47, as modified by the MOU on expedited review.

10. This section is based on subsection 6.1(6) of NP47 (with modifications). This text appears here in this Policy, rather than in National Instrument 44-101,because it describes the administrative practices of the regulators.

11. Subsections (2) and (3) are based on NP1.

12. The reference in section 2 of NP1 to communication by telex has been omitted. Reference has been made to "sending" comments to allow for facsimile andelectronic communications.

13. The reference in section 3 of NP1 to the condition that the final material and fee payment are acceptable has been omitted.

14. This section is based on section 4.5 and section 7.3 of NP47, the footnote to subsection 4.5(1) and the footnote to section 7.3 of NP47, all of which relateto the granting of exemptive relief and waivers. A number of changes have been made to streamline the process by having the securities regulatory authority orregulator in the principal jurisdiction coordinate the process.

15. This is new and reflects the inclusion in section 2.7 of National Instrument 44-101 of POP eligibility criteria specifically applicable to a distribution ofasset-backed securities issued by a special purpose vehicle issuer.

16. This section is based on subsection 6.1(3) of NP47 and has been modified to omit the words "Except to the extent provided in section 6.1(2) of [NP 47]"as subsection 6.1(2) of NP47 is not intended to relieve an issuer from liability, but to make it clear that a statement in a prospectus can modify a prior statementin documents incorporated by reference in the prospectus. The text of this section appears in this Policy, instead of proposed National Instrument 44-101,because it is explanatory in nature.