CSA Notice and Request for Comment: Proposed Amendments to NI 41-101 General Prospectus Requirements and Proposed Consequential Amendments
CSA Notice and Request for Comment: Proposed Amendments to NI 41-101 General Prospectus Requirements and Proposed Consequential Amendments
PROPOSED AMENDMENTS TO
NATIONAL INSTRUMENT 41-101 GENERAL PROSPECTUS REQUIREMENTS
NATIONAL INSTRUMENT 44-101 SHORT FORM PROSPECTUS DISTRIBUTIONS
NATIONAL INSTRUMENT 44-102 SHELF DISTRIBUTIONS AND
NATIONAL INSTRUMENT 81-101 MUTUAL FUND PROSPECTUS DISCLOSURE
AND RELATED COMPANION POLICIES
AND
PROPOSED CONSEQUENTIAL AMENDMENTS
CSA Notice and Request for Comment
Appendices
Appendix A
Schedule A-1 -- Proposed Amendments to National Instrument 41-101 General Prospectus Requirements
Schedule A-2 -- Proposed Amendments to Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements
Appendix B
Schedule B-1 -- Blackline Showing Proposed Changes to National Instrument 41-101 General Prospectus Requirements
Schedule B-2 -- Blackline Showing Proposed Changes to Form 41-101F1 Information Required in a Prospectus
Schedule B-3 -- Blackline Showing Proposed Changes to Form 41-101F2 Information Required in an Investment Fund Prospectus
Schedule B-4 -- Blackline Showing Proposed Changes to Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements
Appendix C
Schedule C-1 -- Proposed Amendments to National Instrument 44-101 Short Form Prospectus Distributions
Schedule C-2 -- Proposed Amendments to Companion Policy 44-101CP to National Instrument 44-101 Short Form Prospectus Distributions
Appendix D
Schedule D-1 -- Blackline Showing Proposed Changes to National Instrument 44-101 Short Form Prospectus Distributions
Schedule D-2 -- Blackline Showing Proposed Changes to Form 44-101F1 Short Form Prospectus
Schedule D-3 -- Blackline Showing Proposed Changes to Companion Policy 44-101CP to National Instrument 44-101 Short Form Prospectus Distributions
Appendix E
Schedule E-1 -- Proposed Amendments to National Instrument 44-102 Shelf Distributions
Schedule E-2 -- Proposed Amendments to Companion Policy 44-102CP to National Instrument 44-102 Shelf Distributions
Appendix F
Proposed Amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure
Appendix G
Schedule G-1 -- Blackline Showing Proposed Changes to National Instrument 81-101 Mutual Fund Prospectus Disclosure
Schedule G-2 -- Blackline Showing Proposed Changes to Form 81-101F2 Contents of Annual Information Form
Appendix H
Schedule H-1 -- Proposed Amendments to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
Schedule H-2 -- Proposed Amendments to Companion Policy 52-107CP to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
Appendix I
Schedule I-1 -- Blackline Showing Proposed Changes to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
Schedule I-2 -- Blackline Showing Proposed Changes to Companion Policy 52-107CP to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
Appendix J
Proposed Amendments to National Instrument 51-102 Continuous Disclosure Obligations
Appendix K
Proposed Amendments to National Instrument 13-101 System for Electronic Document and Analysis Retrieval
Appendix L
Information required by local securities legislation
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CSA Notice and Request for Comment
NOTICE AND REQUEST FOR COMMENT
PROPOSED AMENDMENTS TO
NATIONAL INSTRUMENT 41-101 GENERAL PROSPECTUS REQUIREMENTS AND COMPANION
POLICY 41-101CP TO NATIONAL INSTRUMENT 41-101 GENERAL PROSPECTUS
REQUIREMENTS
AND
PROPOSED AMENDMENTS TO
NATIONAL INSTRUMENT 44-101 SHORT FORM PROSPECTUS DISTRIBUTIONS AND
COMPANION POLICY 44-101CP TO NATIONAL INSTRUMENT 44-101 SHORT FORM
PROSPECTUS DISTRIBUTIONS
AND
PROPOSED AMENDMENTS TO
NATIONAL INSTRUMENT 44-102 SHELF DISTRIBUTIONS AND
COMPANION POLICY 44-102CP TO NATIONAL INSTRUMENT 44-102
SHELF DISTRIBUTIONS
AND
PROPOSED AMENDMENTS TO
NATIONAL INSTRUMENT 81-101 MUTUAL FUND PROSPECTUS DISCLOSURE
AND
RELATED COMPANION POLICIES
AND
PROPOSED CONSEQUENTIAL AMENDMENTS
July 15, 2011
Introduction
We, the Canadian Securities Administrators (CSA), are publishing for a 90-day comment period proposed amendments to:
• National Instrument 41-101 General Prospectus Requirements (NI 41-101);
• Companion Policy 41-101CP Companion Policy to National Instrument 41-101 General Prospectus Requirements (41-101CP);
• National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101);
• Companion Policy 44-101CP to National Instrument 44-101 Short Form Prospectus Distributions (44-101CP);
• National Instrument 44-102 Shelf Distributions (NI 44-102);
• Companion Policy 44-102CP to National Instrument 44-102 Shelf Distributions (44-102CP); and
• National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101).
We are also publishing proposed consequential amendments to:
• National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107);
• Companion Policy 52-107CP to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (52-107 CP);
• National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102); and
• National Instrument 13-101 System for Electronic Document and Analysis Retrieval (NI 13-101).
The references above to a national instrument include its form(s).
The proposed amendments to NI 41-101, 41-101CP, NI 44-101, 44-101CP, NI 44-102, 44-102CP and NI 81-101 are collectively referred to in this notice as the "Proposed Amendments".
Proposed Text
The text of the Proposed Amendments is contained in the following Appendices A to K.
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Appendix A
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Proposed Amendments to NI 41-101 and 41-101CP
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Appendix B
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Blackline Showing Proposed Changes to NI 41-101 and 41-101CP
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Appendix C
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Proposed Amendments to NI 44-101 and 44-101CP
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Appendix D
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Blackline Showing Proposed Changes to NI 44-101 and 44-101CP
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Appendix E
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Proposed Amendments to NI 44-102 and 44-102CP
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Appendix F
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Proposed Amendments to NI 81-101
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Appendix G
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Blackline Showing Proposed Changes to NI 81-101
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Appendix H
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Proposed Consequential Amendments to NI 52-107 and 52-107CP
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Appendix I
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Blackline Showing Proposed Changes to NI 52-107 and 52-107CP
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Appendix J
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Proposed Consequential Amendments to NI 51-102
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Appendix K
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Proposed Consequential Amendments to NI 13-101
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We invite comment on the Proposed Amendments.
Background
NI 41-101 provides a comprehensive set of prospectus requirements for issuers. NI 44-101 sets out requirements for an issuer intending to file a prospectus in the form of a short form prospectus. NI 44-102 sets out requirements for a distribution under a short form prospectus using shelf procedures. NI 81-101 sets out requirements for an issuer that is a mutual fund to file a simplified prospectus, annual information form and fund facts document. NI 41-101, NI 44-101, NI 44-102 and NI 81-101 are collectively referred to in this notice as the "Prospectus Rules".
Purpose of the Proposed Amendments
The primary purpose of the Proposed Amendments is to amend the Prospectus Rules and their related companion policies to address user experience and the CSA's experience with the Prospectus Rules since the implementation of the general prospectus rule, NI 41-101, on March 17, 2008. As part of a post-adoption process following implementation of NI 41-101, the CSA has tracked issues that have arisen in connection with NI 41-101 and other Prospectus Rules and has developed amendments to address those issues where warranted.
The Proposed Amendments to the Prospectus Rules are intended to:
• clarify certain provisions of the Prospectus Rules;
• address significant identified gaps in the Prospectus Rules;
• modify certain requirements in the Prospectus Rules to enhance their effectiveness;
• remove or streamline certain requirements in the Prospectus Rules that are burdensome for issuers and of limited utility for investors or securityholders; and
• codify prospectus relief that has been granted in the past.
Summary of Key Proposed Amendments
This section describes the key Proposed Amendments. It is not a complete list of all the Proposed Amendments.
Certain key Proposed Amendments apply to all issuers other than investment funds. These are described below in Part I under sections (a) through (k). Other key Proposed Amendments apply specifically to investment funds. These are described below in Part II under sections (l) through (s).
Part I -- Key Proposed Amendments Generally Applicable to Issuers
(a) No Minimum Offering Amount
In the course of conducting prospectus reviews, the CSA identified concerns with certain best effort offerings that were not subject to a minimum offering amount by issuers that:
• faced significant short-term non-discretionary expenditures or significant short-term capital or contractual commitments, and
• did not appear to have other readily accessible resources to satisfy those expenditures or commitments.
While an issuer may not propose to provide a minimum offering amount, the CSA has determined that additional disclosure is warranted in such cases. The CSA therefore proposes enhanced requirements in connection with the issuer's use of proceeds, as set out in proposed new subsections 6.3(3) and (4) of Form 41-101F1 Information Required in a Prospectus (Form 41-101F1) and equivalent new subsections 4.2(3) and (4) of Form 44-101F1 Short Form Prospectus (Form 44-101F1). However, regulators may still expect an issuer to provide a minimum offering amount in certain circumstances depending on the severity of the issuer's financial situation, results of the regulator's review and the application of receipt refusal provisions under securities law. This is clarified in a Proposed Amendment to section 2.2.1 of 41-101CP.
(b) Personal Information Form Reforms
In order to help regulators determine the suitability of directors and executive officers of an issuer filing a prospectus, the CSA introduced a detailed personal information form (PIF) for directors and executive officers in 2008. Since that time, we have identified a number of issues with the PIF filing requirement. For instance, under the current rules, an issuer is not required to submit a new PIF for an individual even if a number of years has passed since the filing of the previous PIF, nor is an issuer required to confirm that the previously filed PIF is still correct. Additionally, the rules do not permit us to accept the PIF that a different issuer may have filed for the same individual.
The CSA therefore proposes the following changes to the PIF:
1. We propose to define a "personal information form" in NI 41-101 to formally include a TSX or TSX Venture Exchange PIF, provided that an NI 41-101 certificate and consent is appended to it and the information contained in the PIF continues to be correct at the time that the NI 41-101 certificate and consent is executed.
2. We propose to require that an issuer file a PIF with the regulator for an individual (i.e. director, executive officer, etc. as prescribed under subparagraph 9.1(b)(ii) of NI 41-101) at the time of each prospectus filing.
3. We propose to exempt the issuer from the requirement described in paragraph 2 above if, at the time of the prospectus filing:
(a) an issuer filed a PIF of that individual with the regulator within the past 3 years;
(b) the responses of that individual to certain key questions in his or her PIF (questions 4(b) and (c) and questions 6 through 9 of the current PIF and questions 6 through 10 of the proposed amended PIF) have not changed; and
(c) a certificate is filed by the issuer identifying the previous PIF filing (by either appending the previously filed PIF to the certificate or providing certain information) and giving the confirmation in paragraph (b) above.
4. We propose to make minor amendments to the PIF to remove certain personal questions that are of limited utility and to align with the TSX and TSX Venture Exchange PIFs.
(c) Contractual Rights of Rescission
The CSA has identified an investor protection concern that arises where the distribution of a convertible, exchangeable or exercisable security is qualified under a prospectus and the subsequent conversion, exchange or exercise is made on a prospectus-exempt basis within a short period of time following the purchase of the original security under the prospectus. Under provincial securities legislation in effect in most provinces, the purchaser does not have a right of rescission in respect of the underlying security.
For this reason, we propose to modify the guidance in section 2.9 of 41-101CP to clarify that in certain circumstances, the issuer should provide the purchaser with a contractual right of rescission in respect of the issuance of the underlying security where the conversion, exchange or exercise of the security could occur within a short period of time (generally within 180 days) of the purchase of the security under the prospectus.
(d) Interaction of Items 32 and 35 in Form 41-101F1: Significant Acquisitions that Are Also Acquisitions of a Primary Business or Predecessor Entity
A proposed or completed significant acquisition by an issuer filing a prospectus in the form of Form 41-101F1 may also constitute an acquisition of a primary business for the issuer or a predecessor entity of the issuer. For example, this is generally the case where the significance of the acquisition to the issuer exceeds 100%. In these circumstances, the issuer must include financial statements pursuant to Item 32 of Form 41-101F1 (by operation of section 32.1 of Form 41-101F1), rather than Item 35 of Form 41-101F1.
However, the interaction of Items 32 and 35 of Form 41-101F1 -- both of which could apply to a significant acquisition by an issuer have been confusing to some users, particularly in the case of reporting issuers.
We have therefore clarified in both Items 32 and 35 of Form 41-101F1 that a non-reporting issuer or a shell reporting issuer that has carried out a significant acquisition that constitutes the acquisition of a primary business or predecessor entity of the issuer is required to disclose the financial statements under Item 32 and not under Item 35. The imposition of this clarifying provision regarding subsequent prospectus filings by shell reporting issuers does not represent a substantive new requirement because these issuers would generally have already had to report the significant acquisition in a previously filed information circular containing Item 32 prospectus-level disclosure for the significant acquisition.
The Proposed Amendments also clarify the circumstances when an issuer must provide pro forma financial statements if it has made an acquisition that constitutes the acquisition of a primary business or predecessor entity of the issuer.
Pursuant to new proposed section 32.7 of Form 41-101F1, we will only require the pro forma financial statement disclosure to reflect the effect of a proposed or completed acquisition of a primary business or predecessor entity by an issuer if such pro forma statements are necessary for full, true and plain disclosure of all material facts relating to the securities being distributed.
(e) Exemption from Incorporation by Reference of Reports/Opinions Produced in Information Circular
The CSA proposes to codify relief we have granted to issuers allowing them to exclude from their prospectuses reports or opinions of experts that are incorporated by reference into the prospectus indirectly through the incorporation by reference of a special meeting information circular. These circulars generally relate to a restructuring transaction or other special business of the issuer where the issuer or its board of directors engaged an expert to provide advice that is specific to the business transacted at the special meeting.
For example, a board may retain a firm to provide a fairness opinion to assist the board in determining whether to recommend that a proposed transaction be approved by the issuer's shareholders. Similarly, an issuer may include a tax opinion that is specific to the proposed transaction. Given the limited purpose and nature of the expert's engagement, the CSA has determined that in some cases it is not necessary to incorporate by reference those types of reports or opinions that are specific in nature and scope. This proposed exemption is set out in proposed new subsection 11.1(3) of Form 44-101F1.
(f) Prior Sales and Trading Price and Volume Disclosure
The CSA proposes to modify the prospectus disclosure relating to prior sales information and trading price and volume information contained in Item 13 of Form 41-101F1 and Item 7A of Form 44-101F1 as follows:
• clarify that if an issuer is distributing a series of debt under the prospectus, it must provide prior sales and trading price and volume disclosure in respect of that series of debt; and
• streamline the prior sales and trading price and volume disclosure so that it only applies to the class or series of securities that is being distributed under the prospectus, as that information is the most relevant to the investor purchasing that security.
(g) Non-Issuer's Submission to the Jurisdiction and Appointment of Agent for Service
We propose to amend the requirement to file a non-issuer's submission to the jurisdiction and appointment of an agent for service contained in subparagraph 9.2(a)(vii) of NI 41-101, Appendix C of NI 41-101 and subparagraph 4.2(a)(vi) of NI 44-101. Under the current requirement in subparagraph 9.2(a)(vii) of NI 41-101, a person or company residing outside Canada that is required to sign or provide a certificate must submit to our jurisdiction and appoint an agent in Canada.
We propose to expand the existing requirement to all foreign directors of the issuer, as all directors are liable in our statutory liability regime for misrepresentations contained in the prospectus. The proposed amendments will be made to subparagraph 9.2(a)(vii) of NI 41-101 and subparagraph 4.2(a)(vi) of NI 44-101.
We also propose amendments to clarify the related disclosure on enforceability of judgments against foreign persons and companies in sections 1.12 of Form 41-101F1 and 1.11 of Form 44-101F1 accordingly.
Potential further extension of filing requirement to foreign experts
CSA staff are also considering, as part of the Proposed Amendments, to further extend the requirement to file a non-issuer's submission to the jurisdiction and appointment of an agent for service form to all foreign experts (such as, for example, "qualified persons" or auditors) who have consented to the disclosure in a prospectus of information from a report, opinion or statement made by them. These persons are liable under our statutory liability regime for misrepresentations in the prospectus that are derived from report, opinion or statement.
In order to effect this potential amendment subparagraph 9.2(a)(vii) of NI 41-101 would be amended to include "each person required to file a consent under section 10.1" and section 1.12 of Form 41-101F1 would be amended to encompass "a person who is required to file a consent under section 10.1 of the Instrument". Corresponding changes would also be made to NI 44-101 and Form 44-101F1.
We are interested in your comments on this potential change. Please refer to the "Comments" section of this Notice for our specific questions on the potential extension of the non-issuer's submission to the jurisdiction and appointment of an agent for service form filing requirement to all foreign experts. Upon consideration of public comments, CSA staff may determine to implement this change as part of the Proposed Amendments.
(h) Successor Issuer
Based on our prospectus reviews, we have reconsidered the successor issuer criteria for purposes of short-form eligibility. In the Proposed Amendments we have modified the successor issuer definition to address areas where further clarification was required, including:
• in circumstances where the successor issuer acquired a business from a predecessor that represented less than all of the predecessor's business, we have clarified that substantially all of the business must have been divested by the predecessor to the successor in order for the issuer to be considered a successor issuer. This amendment is intended to ensure that an issuer will only be considered a successor issuer (and thereby become short-form eligible despite its fairly recent status as a reporting issuer) if the historical financial statements of its predecessor are a relevant, accurate proxy for the successor issuer's financial statements; and
• we have clarified that a successor issuer can include a reverse takeover (RTO) acquiree, i.e. an issuer can be a successor to itself.
We have also expanded the application of section 2.7 of NI 44-101 to permit a capital pool company listed on the TSX Venture Exchange to be considered short-form eligible under this provision if it is a successor issuer and has filed a filing statement in connection with an RTO or a qualifying transaction.
(i) Primary Business Oil & Gas Exemption to Provide Operating Statements
We propose to extend the exemption available to oil and gas issuers carrying out acquisitions that would be considered acquisitions of a primary business or predecessor entity to rely on operating statements (in lieu of financial statements) when providing financial statement disclosure about the acquisition. This proposed exemption is found in new proposed section 32.9 of Form 41-101F1.
Also, based on prior requests for relief which we have granted, we have developed a provision to exempt an oil and gas issuer from having to provide an audited operating statement the third year back if a recent independent reserves evaluation (in the forms of Form 51-101F1 Statement of Reserves Data and Other Oil and Gas Information, Form 51-101F2 Report on Reserves Data by Independent Qualified Reserves Evaluator or Auditor and Form 51-101F3 Report of Management and Directors on Oil and Gas Disclosure) has been prepared (and included in the prospectus) with an effective date within 6 months of the preliminary prospectus receipt date.
(j) Notice of Intention Exemption
Presently an issuer that is new to the short form prospectus regime must file a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the filing of the preliminary short form prospectus. We propose to exempt a successor issuer from having to wait the 10 business day period to file its preliminary prospectus if its predecessor issuer previously filed the notice of intention. The successor issuer would still need to file the notice of intention either prior to or concurrently with the filing of the preliminary prospectus. We also propose a similar exemption for a credit support issuer which relies upon the continuous disclosure record of its credit supporter.
(k) Time to File Final Prospectus
Presently, pursuant to subsection 2.3(1) of NI 41-101, an issuer must file its final prospectus no later than 90 days after the date of the receipt of its preliminary prospectus. We propose to clarify that if an issuer files an amendment to a preliminary prospectus, the 90-day time period will recommence from the date of the receipt of the amendment to the preliminary prospectus. However, irrespective of the filing of one or more amendments to the preliminary prospectus, an issuer shall not be permitted to file the final prospectus more than 180 days after the date of the receipt for the preliminary prospectus.
Part II -- Key Proposed Amendments Applicable to Investment Funds
(l) Non-Canadian Investment Funds
We propose to extend the existing disclosure requirement for foreign investment fund managers to foreign investment funds and any other non-Canadian entity required to provide a certificate under Part 5 of NI 41-101 or other securities legislation.
(m) Leverage Disclosure for Investment Funds
We propose to enhance the disclosure requirements relating to the use of leverage as an investment strategy in the prospectus summary and body of a prospectus in the form of Form 41-101F2 Information Required in an Investment Fund Prospectus (Form 41-101F2). The enhanced disclosure requirements are intended to provide investors with a better understanding of how the investment fund intends to utilize leverage and the nature of the leverage that may be used by the investment fund.
We propose to modify the prospectus disclosure in paragraph 3.3(1)(e) of Form 41-101F2 and paragraph 6.1(1)(b) of Form 41-101F2 as follows:
• for leverage created through borrowing or the issuance of preferred securities, the investment fund must disclose the maximum amount of leverage it may use as a ratio of its maximum total assets divided by its net asset value; and
• if leverage is created through the use of specified derivatives or similar instruments, the investment fund must disclose the maximum amount of leverage the investment fund may use as a multiple of net assets and explain how the investment fund uses the term "leverage" and the significance of the maximum and minimum amounts of leverage to the investment fund.
An instruction in Form 41-101F2 states that for the purposes of the above disclosure requirements, the term "specified derivative" has the same meaning as in National Instrument 81-102 Mutual Funds.
(n) Investment Fund Trading Expense Ratio Disclosure
In addition to the current requirement to disclose an investment fund's annual returns and management expense ratio for the past five years in subsection 3.6(4) of Form 41-101F2 and Item 11 of Form 41-101F2, we propose a requirement that the investment fund's trading expense ratio for the past five years be disclosed. An investment fund's trading expense ratio represents the total trading commissions and costs of the investment fund as a percentage of its net assets. This disclosure requirement will better enable investors to determine the full costs of owning an investment fund or compare the historical costs of different investment funds.
(o) Organization and Management Details of the Investment Fund
We propose to amend the current disclosure required by Item 19 of Form 41-101F2 relating to the organizational and management details of an investment fund to require the disclosure of the following additional information:
• an expanded requirement to disclose current or past bankruptcies of and cease trade orders against any issuer, as opposed to the current disclosure requirement that only applies to investment fund issuers, where the directors or executive officers of the investment fund or its investment fund manager were directors of or held specified executive positions with the issuer,
• enhanced disclosure of ownership interests in the investment fund and its investment fund manager for directors and executive officers of the investment fund and investment fund manager and members of the investment fund's independent review committee; and
• a new disclosure requirement relating to principal distributors of investment funds and a requirement that principal distributors of investment funds sign a prospectus certificate in the same form as the investment fund.
(p) Principal Securityholders
We propose to amend the disclosure of principal securityholders of the investment fund as required by subsection 28.1(1) of Form 41-101F2, to limit disclosure to circumstances where this information is known or ought to be known by the investment fund or its investment fund manager. This amendment will predominantly affect exchange traded funds in continuous distribution (ETFs), who may not be able to readily determine their beneficial owners. Disclosure of this information has less utility for ETFs because it would only reflect ownership at a moment in time and beneficial securityholders of ETFs may change very quickly. The amendment is also consistent with exemptive relief from certain takeover bid requirements that many ETFs have received.
(q) Mutual Fund Personal Information Form Reforms
We have drafted reforms to the PIF delivery requirements in NI 81-101 that correspond with the proposed NI 41-101 reforms relating to the PIF. These amendments are intended to address the issues described above and conform the PIF delivery requirements for conventional mutual funds with those for other issuers.
(r) Documents Incorporated by Reference in a Mutual Fund Prospectus
We propose to amend section 3.1 of NI 81-101 to require the incorporation by reference, where a mutual fund has not yet filed interim or annual financial statements, of the audited balance sheet filed with the mutual fund's simplified prospectus. We also propose to require the incorporation by reference of a mutual fund's interim financial statements and interim management report of fund performance (MRFP), where the mutual fund has not yet filed its annual comparative financial statements and annual MRFP.
(s) Principal Distributor Certificate for Mutual Funds
We propose to amend the principal distributor certificate required by Form 81-101F2 Contents of Annual Information Form to require a principal distributor of a mutual fund to provide the same certificate as the mutual fund and the manager of the mutual fund.
Consequential Amendments
(a) Consequential Amendments to NI 52-107
We propose amendments to NI 52-107 to ensure that the operating statements which a prospectus filer is permitted to provide under new proposed section 32.9 of Form 41-101F1 (described under section (i) in Part I of the Summary of Key Proposed Amendments above) can benefit from the financial reporting framework available in NI 52-107 for oil and gas operating statements.
We also propose to repeal the financial reporting framework for carve-out financial statements presently found in subsection 3.11(6) of NI 52-107. As corroborated by external feedback, we do not feel it is necessary for the CSA to prescribe a separate financial reporting framework for carve-out financial statements. It is our view that auditors will generally be able to confirm that the carve-out financial statements have been prepared in accordance with International Financial Reporting Standards, and that instances in which this is not the case will be relatively rare.
(b) Consequential Amendments to NI 51-102
Presently an issuer is permitted to utilize operating statements, in lieu of financial statements, if it complies with the requirements of section 8.10 of NI 51-102. One requirement is that the acquisition must be an asset acquisition. We propose to expand this provision's application to a share acquisition in certain restricted circumstances. Specifically, the vendor must have transferred the applicable oil and gas assets to a corporation that will be considered the transferor of the transaction and was created for the sole purpose of facilitating the acquisition, and this transferor had no assets or operations other than those attributable to the transferred oil and gas assets. A parallel proposed amendment is provided in section 32.9 of Form 41-101F1 for an acquisition that constitutes the acquisition of a primary business of the issuer.
(c) Consequential Amendments to NI 13-101
We propose amendments to NI 13-101 to update the terminology used for various types of prospectus forms referenced in Appendix A of NI 13-101. Certain of these references are out-of-date.
Anticipated Costs and Benefits
We are proposing the Proposed Amendments to the Prospectus Rules because of issues identified in prospectus reviews, applications for exemptive relief from prospectus requirements and recurring inquiries from prospectus filers or CSA staff concerning certain prospectus requirements.
The Proposed Amendments are designed to enhance the effectiveness of the prospectus disclosure standards, clarify the requirements, address significant identified gaps, and modify or streamline requirements where warranted. The CSA anticipates that these modifications will ease the process and burden of prospectus disclosure for issuers while at the same time delivering effective, relevant and meaningful disclosure to investors.
Alternatives Considered
We considered maintaining the status quo. However, as discussed above, many of the Proposed Amendments are intended to clarify the Prospectus Rules or to modify or streamline Prospectus Rule requirements where warranted.
Therefore, to provide the appropriate degree of certainty, clarity and consistency among affected issuers, we considered it preferable to amend, replace and add provisions to the Prospectus Rules and associated guidance.
Unpublished Materials
In developing the Proposed Amendments to the Prospectus Rules, we have not relied on any significant unpublished study, report, or other written materials.
Local Notices
Certain jurisdictions will publish other information required by local securities legislation in Appendix L to this notice.
Comments
We request your comments on the Proposed Amendments to the Prospectus Rules. In addition to any general comments you have, we also invite comments on the following specific topic:
Questions relating to Non-Issuer's Submission to the Jurisdiction and Appointment of Agent for Service
As described in paragraph (g) of the "Summary of Key Proposed Amendments" section of this Notice, we are considering further extending the requirement to file a non-issuer's submission to the jurisdiction and appointment of an agent for service form to all foreign experts who have consented to the disclosure in a prospectus of information from a report, opinion or statement made by them.
We are interested in your general comments on this potential change. In particular, we welcome your comments on the following questions:
(a) Do you believe that it is appropriate to extend the requirement to file a non-issuer's submission to the jurisdiction and appointment of an agent for service form to foreign experts who have consented to the disclosure in a prospectus of information from a report, opinion or statement made by them given that these persons are liable under our statutory liability regime for misrepresentations in the prospectus that are derived from that report, opinion or statement? Why or why not?
(b) If foreign experts are required to file a non-issuers' submission to the jurisdiction and appointment of an agent for service form, do you anticipate that this obligation will impose any significant practical or financial burden on these experts or issuers? If so, please explain why. Would your response change if the form requirement for foreign experts only concerned either submission to the jurisdiction or an appointment of an agent for service?
Please provide your comments in writing by October 14, 2011. Regardless of whether you are sending your comments by email, you should also send or attach your submissions in an electronic file in Microsoft Word, Windows format.
Address your submissions to the following Canadian securities regulatory authorities:
Deliver your comments only to the address that follows. Your comments will be distributed to the other participating CSA member jurisdictions.
Please note that comments received will be made publicly available and posted at www.albertasecurities.com and the websites of certain other securities regulatory authorities. We cannot keep submissions confidential because securities legislation in certain provinces requires that a summary of the written comments received during the comment period be published.
Questions
A. Questions relating to Investment Funds
Certain Proposed Amendments apply only to investment funds. These amendments are found in Form 41-101F2 Information Required in an Investment Fund Prospectus and NI 81-101 including Form 81-101F2 Contents of Annual Information Form. Also, the key Proposed Amendments applicable to investment funds are described above under Part II of the Summary of Key Proposed Amendments. If your questions relate to these Proposed Amendments, please refer your questions to any of:
B. All Other Questions relating to the Proposed Amendments
Certain Proposed Amendments apply to issuers other than investment funds. These amendments are found in NI 41-101 including Form 41-101F1 Information Required in a Prospectus, NI 44-101 including Form 44-101F1 Short Form Prospectus, NI 44-102 and the Consequential Amendments to NI 52-107, NI 51-102 and NI 13-101. Also, the key Proposed Amendments applicable to such issuers are described above under Part I of the Summary of Key Proposed Amendments. If your questions relate to these Proposed Amendments, please refer your questions to any of:
List of Appendices
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Appendix A
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Proposed Amendments to National Instrument 41-101 General Prospectus Requirements and Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements
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Schedule A-1
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Proposed Amendments to National Instrument 41-101 General Prospectus Requirements
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Schedule A-2
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Proposed Amendments to Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements
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Appendix B
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Blackline Showing Proposed Changes to National Instrument 41-101 General Prospectus Requirements and Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements
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Schedule B-1
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National Instrument 41-101 General Prospectus Requirements
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Schedule B-2
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Form 41-101F1 Information Required in a Prospectus
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Schedule B-3
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Form 41-101F2 Information Required in an Investment Fund Prospectus
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Schedule B-4
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Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements
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Appendix C
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Proposed Amendments to National Instrument 44-101 Short Form Prospectus Distributions and Companion Policy 44-101CP to National Instrument 44-101 Short Form Prospectus Distributions
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Schedule C-1
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Proposed Amendments to National Instrument 44-101 Short Form Prospectus Distributions
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Schedule C-2
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Proposed Amendments to Companion Policy 44-101CP to National Instrument 44-101 Short Form Prospectus Distributions
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Appendix D
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Blackline Showing Proposed Changes to National Instrument 44-101 Short Form Prospectus Distributions and Companion Policy 44-101CP to National Instrument 44-101 Short Form Prospectus Distributions
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Schedule D-1
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National Instrument 44-101 Short Form Prospectus Distributions
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Schedule D-2
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Form 44-101F1 Short Form Prospectus
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Schedule D-3
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Companion Policy 44-101CP to National Instrument 44-101 Short Form Prospectus Distributions
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Appendix E
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Proposed Amendments to National Instrument 44-102 Shelf Distributions and Companion Policy 44-102CP to National Instrument 44-102 Shelf Distributions
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Schedule E-1
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Proposed Amendments to National Instrument 44-102 Shelf Distributions
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Schedule E-2
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Proposed Amendments to Companion Policy 44-102CP to National Instrument 44-102 Shelf Distributions
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Appendix F
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Proposed Amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure
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Appendix G
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Blackline Showing Proposed Changes to National Instrument 81-101 Mutual Fund Prospectus Disclosure
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Schedule G-1
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National Instrument 81-101 Mutual Fund Prospectus Disclosure
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Schedule G-2
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Form 81-101F2 Contents of Annual Information Form
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Appendix H
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Proposed Amendments to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards and Companion Policy 52-107CP to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standard
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Schedule H-1
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Proposed Amendments to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
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Schedule H-2
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Companion Policy 52-107P to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
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Appendix I
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Blackline Showing Proposed Changes to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards and Companion Policy 52-107CP to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
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Schedule I-1
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National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
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Schedule I-2
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Companion Policy 52-107CP Companion Policy to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
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Appendix J
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Proposed Amendments to National Instrument 51-102 Continuous Disclosure Obligations
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Appendix K
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Proposed Amendments to National Instrument 13-101 System for Electronic Document and Analysis Retrieval
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Appendix L
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Information required by local securities legislation
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Schedule A-1 -- Proposed Amendments to National Instrument 41-101 General Prospectus Requirements
APPENDIX A
SCHEDULE A-1
AMENDMENTS TO
NATIONAL INSTRUMENT 41-101 GENERAL PROSPECTUS REQUIREMENTS
1. National Instrument 41-101 General Prospectus Requirements is amended by this Instrument.
2. Section 1.1 is amended by
(a) in the definition of "executive officer",
(i) adding "or an investment fund manager," after "means, for an issuer",
(ii) inserting "(a.1) a chief executive officer or chief financial officer" after "(a) a chair, vice-chair or president,", and
(iii) in paragraph (c), adding "or investment fund manager" after "issuer".
(b) after the definition of "over-allotment option", adding the following definition:
""personal information form" means in respect of an individual,
(a) a completed Schedule 1 of Appendix A, or
(b) A TSX/TSXV personal information form submitted by an individual to the Toronto Stock Exchange or to the TSX Venture Exchange to which is attached a completed certificate and consent in the form set out in Schedule 1 -- Part B of Appendix A, if the personal information in the form continues to be correct at the time that the certificate and consent is executed by the individual;", and
(c) after the definition of "transition year", adding the following definition:
""TSX/TSXV personal information form" means a completed personal information form of an individual in compliance with the requirements of Form 4 for the Toronto Stock Exchange or Form 2A for the TSX Venture Exchange, as applicable, each as amended from time to time;".
3. Subsection 2.3(1) is amended by
(a) replacing "a final prospectus" with "an amendment to a preliminary prospectus", and
(b) deleting "that relates to the final prospectus".
4. Section 2.3 is amended by adding the following subsections after subsection 2.3(1):
"(1.1) An issuer must not file a final prospectus more than 90 days after the date of the receipt for the preliminary prospectus or an amendment to the preliminary prospectus which relate to the final prospectus.
(1.2) If an issuer files an amendment pursuant to subsection (1), the total period of time permitted to file the final prospectus under subsection (1.1) must not exceed 180 days from the date of the receipt of the preliminary prospectus.".
5. Part 5 is amended by adding the following section after section 5.10:
"Certificate of principal distributor
5.10.1(1) If the issuer is an investment fund that has a principal distributor, a prospectus must contain a certificate, in the applicable issuer certificate form, signed by the principal distributor.
(2) If the principal distributor is a company, the certificate must be signed by any officer or director of the principal distributor duly authorized to sign."
6. Section 9.1 is amended by renumbering it as subsection 9.1(1).
7. Subparagraph 9.1(1)(b)(ii) is amended by
(a) replacing "Appendix A" with "personal information form", and
(b) replacing "for;" with "for".
8. Clause 9.1(1)(b)(ii)(D) is amended by replacing "for whom the issuer has not previously filed or delivered," with "; and".
9. Clause 9.1(1)(b)(ii)(E) is deleted.
10. Clause 9.1(1)(b)(ii)(F) is deleted.
11. Clause 9.1(1)(b)(ii)(G) is deleted.
12. Section 9.1 is amended by adding the following subsection after subsection (1):
"(2) Despite subparagraph 9.1(1)(b)(ii), an issuer is not required to file a personal information form for an individual if all of the following are satisfied:
(a) a personal information form of the individual has been executed by the individual within three years preceding the date of the filing of the preliminary or pro forma long form prospectus;
(b) the personal information form was delivered to the regulator or, in Québec, the securities regulatory authority
(i) by an issuer on behalf of the individual on or after [insert effective date of amendments]; or
(ii) by the issuer on behalf of the individual after March 16, 2008 but before [insert effective date of amendments] in the form set out in Appendix A to NI 41-101 in effect during this period;
(c) the information concerning the individual contained in the responses to
(i) questions 6 through 10 of the personal information form referenced in subparagraph (b)(i) remains correct as at the date of the certificate referred to in paragraph (d); or
(ii) questions 4(B) or (C) and questions 6 through 9 of the personal information form referenced in subparagraph (b)(ii) remains correct as at the date of the certificate referred to in paragraph (d);
(d) the issuer delivers to the regulator or, in Québec, the securities regulatory authority, concurrently with the filing of the preliminary or pro forma long form prospectus, a certificate of the issuer in the form set out in Schedule 4 of Appendix A stating that the individual has provided the issuer with confirmation in respect of the requirement contained in paragraph (c);
(e) the certificate referenced in paragraph (d) is dated no earlier than 30 days before the filing of the preliminary or pro forma long form prospectus.".
13. Subparagraph 9.2(a)(vii) is amended by
(a) deleting "and" in clause (A),
(b) adding the following clause after clause (A)
"(A.1) each director of the issuer, and", and
(c) replacing "each person or company required to sign a certificate under Part 5" in clause (B) with "any other person or company that provides or signs a certificate under Part 5".
14. Subparagraph 9.2(a)(xii) is amended by
(a) after "Undertaking to File",replacing "Documents and Material Contracts" with "Agreements, Contracts and Material Contracts",
(b) replacing "a document referred to in subparagraph (ii), (iii) or (iv)" with "an agreement, contract or declaration of trust under subparagraph (ii) or (iv) or a material contract under subparagraph (iii)",
(c) deleting "or become effective" wherever it appears,
(d) replacing "to file the document" with "to file the agreement, contract, declaration of trust or material contract", and
(e) replacing "within seven days after the completion of the distribution; and" with "no later than seven days after execution of the agreement, contract, declaration of trust or material contract;".
15. Paragraph 9.2(a) is amended by adding the following subparagraph after subparagraph 9.2(a)(xii):
"(xii.1) Undertaking to File Unexecuted Documents - if a document referred to in subparagraph (ii) will not be executed in order to become effective and has not become effective before the filing of the final long form prospectus, but will become effective on or before the completion of the distribution, the issuer must file with the securities regulatory authority, no later than the time of filing of the final long form prospectus, an undertaking of the issuer to the securities regulatory authority to file the document promptly and in any event no later than seven days after the document becomes effective; and"
16. Subsection 10.1(1) is amended by
(a) replacing "An issuer" with "Subject to subsection (1.1), an issuer".
(b) adding a period at the end of paragraph (c), and
(c) deleting the following:
"if that person or company is named in a prospectus or an amendment to a prospectus, directly or, if applicable, in a document incorporated by reference,
(d) as having prepared or certified any part of the prospectus or the amendment,
(e) as having opined on financial statements from which selected information included in the prospectus has been derived and which audit opinion is referred to in the prospectus directly or in a document incorporated by reference, or
(f) as having prepared or certified a report, valuation, statement or opinion referred to in the prospectus or the amendment, directly or in a document incorporated by reference."
17. Section 10.1 is amended by adding the following subsection after subsection (1):
"(1.1) Subsection (1) only applies if the person or company is named in a prospectus or an amendment to a prospectus, directly or, if applicable, in a document incorporated by reference,
(a) as having prepared or certified any part of the prospectus or the amendment,
(b) as having opined on financial statements from which selected information included in the prospectus has been derived and which audit opinion is referred to in the prospectus directly or in a document incorporated by reference, or
(c) as having prepared or certified a report, valuation, statement or opinion referred to in the prospectus or the amendment, directly or in a document incorporated by reference.".
18. Section 11.2 is amended by replacing "No" with "Except as required under section 11.3, no".
19. Paragraph 11.2(b) is amended by adding "on an as-if converted basis" after "offering".
20. Section 13.3 is amended by
(a) in paragraph (d), adding "fundamental" before "investment objective(s)", and
(b) adding the following paragraph after paragraph (h):
"(i) whether the security is or will be a qualified investment for a registered retirement savings plan, registered retirement income fund, registered education savings plan or tax free savings account or qualifies or will qualify the holder for special tax treatment.".
21. Section 14.5 is amended by
(a) in subsection 14.5(1), replacing "agreements between the investment fund and the custodian or the custodian and the sub-custodian" with "custodian agreements and sub-custodian agreements",
(b) in subparagraph 14.5(1)(g), striking out "," after "sub-custodian", and
(c) in subsection 14.5(3), replacing "An agreement between an investment fund and a custodian or a custodian and a sub-custodian respecting the portfolio assets" with "A custodian agreement or sub-custodian agreement concerning the portfolio assets of an investment fund".
22. Paragraph 19.3(2)(a) is amended by adding "pro forma or" after "the filing of the" wherever it occurs.
23. Appendix A is amended by repealing the following:
"PERSONAL INFORMATION FORM AND AUTHORIZATION OF
INDIRECT COLLECTION, USE AND DISCLOSURE OF
PERSONAL INFORMATION
In connection with an issuer's (the "Issuer") filing of a prospectus, the attached Schedule 1 contains information (the "Information") concerning every individual for whom the Issuer is required to provide the Information under Part 9 of this Instrument or Part 4 of NI 44-101. The Issuer is required by provincial and territorial securities legislation to deliver the Information to the regulators listed in Schedule 3.
The Issuer confirms that each individual who has completed a Schedule 1:
(a) has been notified by the Issuer
(i) of the Issuer's delivery to the regulator of the Information in Schedule 1 pertaining to that individual,
(ii) that the Information is being collected indirectly by the regulator under the authority granted to it by provincial and territorial securities legislation or provincial legislation relating to documents held by public bodies and the protection of personal information,
(iii) that the Information collected from each director and executive officer of the investment fund manager may be used in connection with the prospectus filing of the Issuer and the prospectus filing of any other issuer managed by the investment fund manager,
(iv) that the Information is being collected and used for the purpose of enabling the regulator to administer and enforce provincial and territorial securities legislation, including those obligations that require or permit the regulator to refuse to issue a receipt for a prospectus if it appears to the regulator that the past conduct of management, an investment fund manager or promoter of the Issuer affords reasonable grounds for belief that the business of the Issuer will not be conducted with integrity and in the best interests of its securityholders, and
(v) of the contact, business address and business telephone number of the regulator in the local jurisdiction as set out in the attached Schedule 3, who can answer questions about the regulator's indirect collection of the Information;
(b) has read and understands the Personal Information Collection Policy attached hereto as Schedule 2; and
(c) has, by signing the certificate and consent in Schedule 1, authorized the indirect collection, use and disclosure of the Information by the regulator as described in Schedule 2.
Date: ________________________________________Name of IssuerPer: ________________________________________Name____________________Official Capacity(Please print the name of the person signing on behalf of the issuer)".
24. Schedule 1 of Appendix A is amended by renumbering it as Schedule 1, Part A.
25. Part A of Schedule 1 of Appendix A is amended by
(a) deleting the following from the end of Part A:
- - - - - - - - - - - - - - - - - - - -
"CERTIFICATE AND CONSENT
- - - - - - - - - - - - - - - - - - - -
I, ____________________ (Please Print -- Name of Individual) hereby certify that:
(a) I have read and understood the questions, cautions, acknowledgement and consent in this Form, and the answers I have given to the questions in this Form and in any attachments to it are true and correct, except where stated to be to the best of my knowledge, in which case I believe the answers to be true;
(b) I have read and understand the Personal Information Collection Policy attached hereto as Schedule 2 (the "Personal Information Collection Policy");
(c) I consent to the collection, use and disclosure of the information in this Form and to the collection, use and disclosure of further personal information in accordance with the Personal Information Collection Policy; and
(d) I understand that I am providing this Form to a regulator listed in Schedule 3 attached hereto and I am under the jurisdiction of the regulator to which I submit this Form, and it is a breach of securities legislation to provide false or misleading information to the regulator.
____________________Date [within 30 days of the date of the preliminary prospectus]____________________Signature of Person Completing this Form", and(b) by replacing in the paragraph preceding the General Instructions of Part A of Schedule 1 of Appendix A
". Where an individual has submitted a personal information form (an "Exchange Form") to the Toronto Stock Exchange or the TSX Venture Exchange and the information has not changed, the Exchange Form may be delivered in lieu of this Form; provided that the certificate and consent of this Form is completed and attached to the Exchange Form."
with "or Part 2 of National Instrument 81-101 Mutual Fund Prospectus Disclosure.".
26. Part A of Schedule 1 of Appendix A, General Instructions, is amended by
(a) in "All Questions"
(i) adding "will not be accepted" after ""Not Applicable"", and
(ii) replacing "2B(iii) and 5 will not be accepted" with the following:
"2(iii) and (v) and 5.
For the purposes of answering the questions in this Form, the term "issuer" includes an investment fund manager.",
(b) in the title Questions 6 to 9, replacing "9" with "10", and
(c) in Questions 6 to 10,
(i) replacing "check" with "place a checkmark", and
(ii) replacing "questions 6 to 9" with "questions 6 to 10".
27. Part A of Schedule 1 of Appendix A, Definitions, is amended by
(a) in paragraph (b) of the definition of "Offence",adding "Canadian or foreign" before "jurisdiction",
(b) in paragraph (d)of the definition of "Offence", adding "other" before "foreign",
(c) in the NOTE to the definition of "Offence",
(i) replacing "and it has not been revoked" with "for an Offence that relates to fraud (including any type of fraudulent activity), misappropriation of money or other property, theft, forgery, falsification of books or documents or similar Offences,", and
(ii) replacing "offence" with "Offence",
(d) in paragraph (a) of the definition of "Proceedings",adding "which is currently" after "inquiry",
(e) in paragraph (d) of the definition of "Proceedings"
(i) replacing "self-regulatory organization" wherever it occurs with "self-regulatory entity",
(ii) replacing "and their representatives" with "(including where applicable, issuers listed on a stock exchange) and individuals associated with those members and issuers",
(iii) replacing "by-laws or rules" with "by-laws, rules or policies", and
(iv) replacing "for a hearing" with "to be heard",
(f) in the definition of "securities regulatory authority or (SRA)"
(i) deleting the brackets surrounding "(SRA)",
(ii) replacing "in any jurisdiction or in any foreign jurisdiction" with "in any Canadian or foreign jurisdiction", and
(iii) replacing "or professional organization" with "entity",
(g) in the definition of "securities regulatory or professional organization",replacing "or professional organization" with ""entity" or "SRE"",
(h) in paragraph (a) of the definition of "securities regulatory entity or "SRE"",adding "derivatives," after "stock,",
(i) in paragraph (e) of the definition of "securities regulatory entity or "SRE",
(i) replacing "self-regulatory entity" with "self-regulatory organization",
(ii) adding "policies," after "rules,", and
(iii) replacing "a self-regulatory or professional organization" with "an SRE".
28. Section 1.A. of Part A of Schedule 1 of Appendix A is amended by replacing "MIDDLE NAME(S) (If none, please state)" with "FULL MIDDLE NAME(S) (No initials. If none, please state)".
29. Section 1.E. of Part A of Schedule 1of Appendix A is amended by
(a) adding an asterisk immediately after "E-MAIL", and
(b) adding "*Please provide an email address that the regulator may use to contact you regarding this PIF. This email address may be used to exchange personal information relating to you." below the last information field.
30. Section 1.F. of Part A of Schedule 1 of Appendix A is amended by replacing "correctly identify" with "recall".
31. Section 2.A. of Part A of Schedule 1 of Appendix A is amended by
(a) deleting the title "A. CANADIAN CITIZENSHIP",
(b) in subparagraph(i), replacing "Citizen" with "citizen", and
(c) after subparagraph (iii), adding the following:
"(iv) Do you hold citizenship in any country other than Canada?
(v) If "Yes" to Question 2(iv), the name of the country(ies):".
32. Section 2.B. of Part A of Schedule 1 of Appendix A is repealed.
33. The introduction of section 3 of Part A of Schedule 1 of Appendix A is amended by
(a) adding "complete" before "employment history",
(b) replacing "10" with "5", and
(c) after the last sentence, adding "If you were unemployed during this period of time, please state this and identify the period of unemployment.".
34. Section 4 of Part A of Schedule 1 of Appendix A is amended by replacing
"4. POSITIONS WITH OTHER ISSUERS
YES
NO
A.
While you were a director, officer or insider of an issuer, did any exchange or self-regulatory organization ever refuse approval for listing or quotation of that issuer (including a listing resulting from a qualifying transaction, reverse takeover, backdoor listing or change of business)? If yes, attach full particulars.
_____
_____
B.
Has your employment in a sales, investment or advisory capacity with any firm or company engaged in the sale of real estate, insurance or mutual funds ever been terminated for cause?
_____
_____
C.
Has a firm or company registered under the securities laws of any jurisdiction or of any foreign jurisdiction as a securities dealer, broker, investment advisor or underwriter, suspended or terminated your employment for cause?
_____
_____
D.
Are you or have you during the last 10 years ever been a director, officer, promoter, insider or control person for any reporting issuer?
_____
_____
with the following:
"4. INVOLVEMENT WITH ISSUERS
YES
NO
A.
Are you or have you during the last 10 years ever been a director, officer, promoter, insider or control person for any reporting issuer?
_____
_____
35. Section 5.A. of Part A of Schedule 1 of Appendix A is amended by replacing
"A.
PROFESSIONAL DESIGNATION(S) -- Provide any professional designation held and professional associations to which you belong. For example, Barrister & Solicitor, C.A., C.M.A., C.G.A., P.Eng., P.Geol., and CFA, etc. and indicate which organization and the date the designations were granted.
PROFESSIONAL DESIGNATION And MEMBERSHIP NUMBER
GRANTOR OF DESIGNATION And JURISDICTION OR FOREIGN JURISDICTION
DATE GRANTED
ACTIVE?
MM
DD
YY
YES
NO"
_______________
_______________
___
___
___
___
___
_______________
_______________
___
___
___
___
___
_______________
_______________
___
___
___
___
___
with the following:
"A.
PROFESSIONAL DESIGNATION(S) -- Identify any professional designation held and professional associations to which you belong, for example, Barrister & Solicitor, C.A., C.M.A., C.G.A., P.Eng., P.Geol., CFA, etc. and indicate which organization and the date the designations were granted.
PROFESSIONAL DESIGNATION And MEMBERSHIP NUMBER
GRANTOR OF DESIGNATION And CANADIAN OR FOREIGN JURISDICTION
DATE GRANTED
MM
YY
____________________
____________________
___
_____
____________________
____________________
___
_____
____________________
____________________
___
_____
Describe the current status of any designation and/or association (e.g. active, retired, non-practicing, suspended)".
- - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
36. Section 6 of Part A of Schedule 1 of Appendix A is amended by replacing
"6. OFFENCES - If you answer "YES" to any item in Question 6, you must provide complete details in an attachment.
YES
NO
A.
Have you ever pleaded guilty to or been found guilty of an offence?
___
___
B.
Are you the subject of any current charge, indictment or proceeding for an offence?
___
___
C.
To the best of your knowledge, are you or have you ever been a director, officer, promoter, insider, or control person of an issuer, in any jurisdiction or in any foreign jurisdiction, at the time of events, where the issuer:
___
___
(i)
has ever pleaded guilty to or been found guilty of an offence?
___
___
(ii)
is the subject of any current charge, indictment or proceeding for an offence?"
___
___
with the following:
"6. OFFENCES - If you answer "YES" to any item in Question 6, you must provide complete details in an attachment. If you have received a pardon under the Criminal Records Act (Canada) for an Offence that relates to fraud (including any type of fraudulent activity), misappropriation of money or other property, theft, forgery, falsification of books or documents or similar Offences, you must disclose the pardoned Offence in this Form.
YES
NO
A.
Have you ever, in any Canadian or foreign jurisdiction, pled guilty to or been found guilty of an Offence?
___
___
B.
Are you the subject of any current charge, indictment or proceeding for an Offence, in any Canadian or foreign jurisdiction?
___
___
C.
To the best of your knowledge, are you currently or have you ever been a director, officer, promoter, insider or control person of an issuer, in any Canadian or foreign jurisdiction, at the time of events, where the issuer:
___
___
(i)
pled guilty to or was found guilty of an Offence?
___
___
(ii)
is now the subject of any charge, indictment or proceeding for an Offence?".
___
___
37. The introduction of section 7 of Part A of Schedule 1 of Appendix A is amended by adding "You must answer "YES" or "NO" for EACH of (A), (B) and (C) below." after the last sentence.
38. Section 7.A. of Part A of Schedule 1 of Appendix A is amended by replacing "jurisdiction or in any foreign jurisdiction" with "Canadian or foreign jurisdiction".
39. Section 7.C. of Part A of Schedule 1 of Appendix A is amended by
(a) adding "currently" after "are you", and
(b) replacing "jurisdiction or in any foreign jurisdiction" with "Canadian or foreign jurisdiction".
40. Section 8.A. of Part A of Schedule 1 of Appendix A is amended by replacing
YES
NO
"A.
CURRENT PROCEEDINGS BY SECURITIES REGULATORY AUTHORITY OR SELF REGULATORY OR PROFESSIONAL ORGANIZATION. Are you now, in any jurisdiction or in any foreign jurisdiction, the subject of:
___
___
(i)
a notice of hearing or similar notice issued by a SRA?
___
___
(ii)
a proceeding or to your knowledge, under investigation, by an exchange or other self regulatory or professional organization?
___
___
(iii)
settlement discussions or negotiations for settlement of any nature or kind whatsoever with a SRA or any self regulatory or professional organization?"
___
___
with the following:
YES
NO
"A.
CURRENT PROCEEDINGS BY SECURITIES REGULATORY AUTHORITY OR SELF REGULATORY ENTITY. Are you now, in any Canadian or foreign jurisdiction, the subject of:
___
___
(i)
a notice of hearing or similar notice issued by an SRA or SRE?
___
___
(ii)
a proceeding or to your knowledge, under investigation, by an SRA or SRE?
___
___
(iii)
settlement discussions or negotiations for settlement of any nature or kind whatsoever with an SRA or SRE?".
___
___
41. Section 8.B. of Part A of Schedule 1 of Appendix A is amended by replacing
YES
NO
"B.
PRIOR PROCEEDINGS BY SECURITIES REGULATORY AUTHORITY OR SELF REGULATORY OR PROFESSIONAL ORGANIZATION. Have you ever:
___
___
(i)
been reprimanded, suspended, fined, been the subject of an administrative penalty, or otherwise been the subject of any disciplinary proceedings of any kind whatsoever, in any jurisdiction or in any foreign jurisdiction, by a SRA or self regulatory or professional organization?
___
___
(ii)
had a registration or licence for the trading of securities, exchange or commodity futures contracts, real estate, insurance or mutual fund products cancelled, refused, restricted or suspended?
___
___
(iii)
been prohibited or disqualified under securities, corporate or any other legislation from acting as a director or officer of a reporting issuer?
___
___
(iv)
had a cease trading or similar order issued against you or an order issued against you that denied you the right to use any statutory prospectus or registration exemption?
___
___
(v)
had any other proceeding of any nature or kind taken against you?"
___
___
with the following:
YES
NO
"B.
PRIOR PROCEEDINGS BY SECURITIES REGULATORY AUTHORITY OR SELF REGULATORY ENTITY. Have you ever:
___
___
(i)
been reprimanded, suspended, fined, been the subject of an administrative penalty, or been the subject of any proceedings of any kind whatsoever, in any Canadian or foreign jurisdiction, by an SRA or SRE?
___
___
(ii)
had a registration or licence for the trading of securities, exchange or commodity futures contracts, real estate, insurance or mutual fund products cancelled, refused, restricted or suspended, by an SRA or SRE?
___
___
(iii)
been prohibited or disqualified by an SRA or SRE under securities, corporate or any other legislation from acting as a director or officer of a reporting issuer or been prohibited or restricted by an SRA or SRE from acting as a director, officer or employee of, or an agent or consultant to, a reporting issuer?
___
___
(iv)
had a cease trading or similar order issued against you or an order issued against you by an SRA or SRE that denied you the right to use any statutory prospectus or registration exemption?
___
___
(v)
had any other proceeding of any nature or kind taken against you by an SRA or SRE?".
___
___
42. Section 8.C. of Part A of Schedule 1 of Appendix A is amended by
(a) replacing "a" with "an" before "SRA",
(b) replacing "self regulatory or professional organization" with "SRE" wherever it appears,
(c) replacing "any jurisdiction or in any foreign jurisdiction" with "any Canadian or foreign jurisdiction",
(d) replacing "a jurisdiction or in a foreign jurisdiction" with "a Canadian or foreign jurisdiction", and
(e) adding ", by-laws or policies" after "rules".
43. Section 8.D. of Part A of Schedule 1 of Appendix A is amended by
(a) replacing "any jurisdiction or in any foreign jurisdiction" with "any Canadian or foreign jurisdiction", and
(b) replacing "self regulatory or professional organization" with "self regulatory entity".
44. Subparagraph 8.D.(v) of Part A of Schedule 1 of Appendix A is amended by replacing
"(v) taken any other proceeding of any nature or kind against the issuer, including a trading halt, suspension or delisting of the issuer (other than in the normal course for proper dissemination of information, pursuant to a reverse takeover, backdoor listing or similar transaction)?"
with the following:
"(v) commenced any other proceeding of any nature or kind against the issuer, including a trading halt, suspension or delisting of the issuer, in connection with an alleged or actual contravention of an SRA's or SRE's rules, regulations, policies or other requirements, but excluding halts imposed (i) in the normal course for proper dissemination of information, or (ii) pursuant to a business combination, reverse take-over or similar transaction involving the issuer that is regulated by an SRE or SRA, including a Qualifying Transaction, Reverse Takeover or Change of Business involving the issuer (as those terms are defined in the TSX Venture Corporate Finance Manual as amended)?".
45. Subparagraph 8.D.(vi) of Part A of Schedule 1 of Appendix A is amended by
(a) deleting "involved in", and
(b) replacing "in a jurisdiction or in a foreign jurisdiction or a self regulatory or professional organization's rules" with "or the rules, by-laws or policies of an SRE".
46. Section 9.A. of Part A of Schedule 1 of Appendix A is amended by replacing "any jurisdiction or in any foreign jurisdiction" with "any Canadian or foreign jurisdiction".
47. Subparagraph 9.A.(i) of Part A of Schedule 1 of Appendix A is amended by adding a comma after "changes".
48. Subparagraph 9.A.(ii) of Part A of Schedule 1 of Appendix A is amended by
(a) replacing "for" with "of" after "an issuer",
(b) deleting the comma after "control person", and
(c) adding a comma after "changes".
49. Subparagraph 9.B.(i) of Part A of Schedule 1 of Appendix A is amended by
(a) replacing "any jurisdiction or in any foreign jurisdiction" with "any Canadian or foreign jurisdiction",
(b) replacing "of" with "to" after "jurisdiction,", and
(c) adding a comma after "changes".
50. Subparagraph 9.B.(ii) of Part A of Schedule 1 of Appendix A is amended by
(a) adding "that is" after "an issuer",
(b) replacing "any jurisdiction or in any foreign jurisdiction" with "any Canadian or foreign jurisdiction",
(c) replacing "of" with "to" after "jurisdiction,", and
(d) adding a comma after "changes".
51. Subparagraph 9.C.(i) of Part A of Schedule 1 of Appendix A is amended by
(a) replacing "any jurisdiction or in any foreign jurisdiction" with "any Canadian or foreign jurisdiction", and
(b) adding a comma after "changes".
52. Subparagraph 9.C.(ii) of Part A of Schedule 1 of Appendix A is amended by
(a) replacing "any jurisdiction or in any foreign jurisdiction" with "any Canadian or foreign jurisdiction", and
(b) adding a comma after "changes".
53. Part A of Schedule 1 of Appendix A is amended by adding the following after section 9:
"10. INVOLVEMENT WITH OTHER ENTITIES
YES
NO
A.
Has your employment in a sales, investment or advisory capacity with any employer engaged in the sale of real estate, insurance or mutual funds ever been suspended or terminated for cause? If yes, attach full particulars.
___
___
B.
Has your employment with a firm or company registered under the securities laws of any Canadian or foreign jurisdiction as a securities dealer, broker, investment advisor or underwriter, ever been suspended or terminated for cause? If yes, attach full particulars.
___
___
C.
Has your employment as an officer of an issuer ever been suspended or terminated for cause? If yes, attach full particulars.".
___
___
54. Schedule 1 of Appendix A is amended by adding the following part after Part A of Schedule 1 of Appendix A:
"Schedule 1
Part B
- - - - - - - - - - - - - - - - - - - -
CERTIFICATE AND CONSENT
- - - - - - - - - - - - - - - - - - - -
I, ____________________ (Please Print - Name of Individual) hereby certify that:
(a) I have read and understood the questions, cautions, acknowledgement and consent in the personal information form to which this certificate and consent is attached or of which this certificate and consent forms part (the "Form"), and the answers I have given to the questions in the Form and in any attachments to it are correct, except where stated to be to the best of my knowledge, in which case I believe the answers to be correct;
(b) I have been provided with and have read and understand the Personal Information Collection Policy (the "Personal Information Collection Policy") in Schedule 2 of Appendix A to National Instrument 41-101 General Prospectus Requirements ("NI 41-101");
(c) I consent to the collection, use and disclosure by a regulator or a securities regulatory authority listed in Schedule 3 of Appendix A to NI 41-101 (collectively the "regulators") of the information in the Form and to the collection, use and disclosure by the regulators of further personal information in accordance with the Personal Information Collection Policy including the collection, use and disclosure by the regulators of the information in the Form in respect of the prospectus filings of the Issuer and the prospectus filings of any other issuer in a situation where I am or will be:
(i) a director, executive officer or promoter of such issuer,
(ii) a director or executive officer of a promoter of such issuer, if the promoter is not an individual, or
(iii) where the issuer is an investment fund, a director or executive officer of the investment fund manager; and
(d) I understand that I am providing the Form to the regulators and I am under the jurisdiction of the regulators to which I submit the Form, and it is a breach of securities legislation to provide false or misleading information to the regulators, whenever the Form is provided in respect of the prospectus filings of the Issuer or the prospectus filings of any other issuer of which I am or will be a director, executive officer or promoter.
____________________Date [within 30 days of the date of the preliminary prospectus]____________________Signature of Person Completing this Form".
55. The first paragraph of Schedule 2 of Appendix A is amended by
(a) adding "and securities regulatory authorities (the "regulators")" after "The regulators",
(b) replacing "Regulators" with "of Appendix A to National Instrument 41-101 General Prospectus Requirements ("NI 41-101")",
(c) replacing "personal information in Schedule 1 Personal Information Form" with "personal information in the personal information form as this term is defined in NI 41-101 (the "Personal Information Form"),", and
(d) replacing "information provided in Schedule 1" with "information provided in the Personal Information Form".
56. The second paragraph of Schedule 2 of Appendix A is amended by replacing "Schedule 1" with "the Personal Information Form".
57. The third paragraph of Schedule 2 of Appendix A is amended by
(a) replacing "Schedule 1" with "the Personal Information Form" wherever it occurs, and
(b) at the end of the paragraph, adding the following:
"Your consent would also extend to the collection, use and disclosure of the Information as described above in respect of other prospectus filings of the Issuer and the prospectus filings of any other issuer in a situation where you are or will be:
(a) a director, executive officer or promoter of such issuer,
(b) a director or executive officer of a promoter of such issuer, if the promoter is not an individual, or
(c) where the issuer is an investment fund, a director or executive officer of the investment fund manager.".
58. The title of Schedule 3 of Appendix A is amended by adding "and Securities Regulatory Authorities" after "Regulators".
59. Schedule 3 of Appendix A is amended to replace the contact information of the Alberta Securities Commission with the following:
"Securities Review OfficerAlberta Securities CommissionSuite 600250 -- 5th Street S.W.Calgary, Alberta T2P 0R4Telephone: (403) 297-6454E-mail: [email protected]www.albertasecurities.com".
60. Appendix A is amended by adding the following schedule after Schedule 3:
"Schedule 4
PREVIOUSLY FILED PERSONAL INFORMATION FORMS
CERTIFICATE
In connection with the issuer's (the "Issuer") filing of a prospectus, the personal information forms of the individuals named in the table below (the "Individuals") were previously delivered to one or more regulators or securities regulatory authority listed in Schedule 3 (the "Regulators") of Appendix "A" to NI 41-101 (the "Personal Information Forms"). The Personal Information Forms contain information concerning the Individuals for whom an issuer was previously required to provide the information under Part 9 of NI 41-101, Part 4 of NI 44-101 or Part 2 of NI 81-101.
The Issuer confirms that
(a) a true copy of the Personal Information Form of each of the Individuals
(i) is attached to this certificate, as noted in the table below, or
(ii) was filed under the issuer name and associated SEDAR project number referenced in the table below*;
Name of Individual
Issuer Name and Associated SEDAR project number (if known)
Personal Information Form (check the box if attached)
_______________
____________________
__________
_______________
____________________
__________
_______________
____________________
__________
_______________
____________________
__________
_______________
____________________
__________
(b) each of the Individuals has advised the Issuer that the individual's responses to the following questions in his/her Personal Information Form remain correct as at the date noted below:
(i) questions 4(B) and (C) and questions 6 through 9 if the Personal Information Form was delivered to the Regulator before [insert effective date of amendments]; and
(ii) all of questions 6 through 10 if the Personal Information Form was delivered to the Regulator after [insert effective date of amendments]; and
(c) each Individual has advised the Issuer of the Individual's understanding that his or her statement as to the correctness of the above-noted responses in the Individual's Personal Information Form under paragraph (b) is provided to a Regulator listed in Schedule 3 of Appendix "A" to NI 41-101 and that it is a breach of securities legislation to provide false or misleading information to such Regulator.
Date: ___________________________ [within 30 days of the date of the preliminary prospectus]
____________________Name of IssuerPer: ________________________________________Name____________________Official Capacity(Please print the name of the person signing on behalf of the issuer)
• If the Personal Information Form for an Individual was not previously filed with the principal regulator of the Issuer (as the term "principal regulator" is defined in National Instrument 11-102 Passport System), the Issuer must attach a true copy of the Personal Information Form to this Certificate in accordance with subparagraph (a)(i) above, and may not rely on the option available under subparagraph (a)(ii) above. If such form was not previously filed with a non-principal regulator and the Issuer wishes to file its prospectus with the non-principal regulator, the non-principal regulator may request a copy of the Personal Information Form as contemplated in subparagraph (a)(i) above.".
61. Appendix C is amended by replacing "The undersigned accepts the appointment as agent for service of process of [insert name of Issuer]" with "The undersigned accepts the appointment as agent for service of process of [insert name of Filing Person]".
62. Subsection 1.4(2) of Form 41-101F1 Information Required in a Prospectusis amended by replacing
"(a) disclose that a purchaser who acquires securities forming part of the underwriters' over-allocation position acquires those securities under this prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the over-allotment option or secondary market purchases, and
(b) describe the terms of any over-allotment option or an option to increase the size of the distribution before closing."
with the following:
"(a) describe the terms of the option, and
(b) provide the following disclosure:
"A purchaser who acquires [insert type of securities qualified for distribution under the prospectus] forming part of the underwriters' over-allocation position acquires those securities under this prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the over-allotment option or secondary market purchases.""
63. Subsection 1.4(3) of Form 41-101F1 is amended by replacing ", provide totals for both the minimum and maximum offering amount, if applicable." with "and a minimum offering amount
(a) is required for the issuer to achieve one or more of the purposes of the offering, provide totals for both the minimum and maximum offering amount, or
(b) is not required for the issuer to achieve any of the purposes of the offering, state the following in boldface type:
"There is no minimum amount of funds that must be raised under this offering. This means that the issuer could complete this offering after raising only a small proportion of the offering amount set out above."".
64. Subsection 1.9(1) of Form 41-101F1 is amended by adding "or series" after "class".
65. Section 1.12 of Form 41-101F1 is amended by
(a) replacing "International issuers" with "Enforcement of judgments against foreign persons or companies",
(b) adding "a director of the issuer," after "If the issuer,",
(c) adding "other" before "person",
(d) by replacing "required to provide" with "that is signing or providing", and
(e) replacing "The [issuer, selling securityholder, or person or company providing a certificate" with "The [issuer, director of the issuer, selling securityholder, or any other person or company signing or providing a certificate".
66. Section 5.4 of Form 41-101F1 is amended by adding "For the purposes of this section, the alternative disclosure permitted in Instruction (ii) to section 5.4 of Form 51-102F2 does not apply." after "Form 51-102F2.".
67. Subsection 6.3(2) of Form 41-101F1 is amended by
(a) replacing "subscription" with "offering amount", and
(b) replacing "subscriptions" with "offering amounts".
68. Section 6.3 of Form 41-101F1 is amended by adding the following subsections after subsection (2):
"(3) If all of the following apply, disclose how the proceeds will be used by the issuer, with reference to various potential thresholds of proceeds raised, in the event that the issuer raises less than the maximum offering amount:
(a) the closing of the distribution is not subject to a minimum offering amount;
(b) the distribution of the securities is to be on a best efforts basis; and
(c) the issuer has significant short-term non-discretionary expenditures including those for general corporate purposes, or significant short-term capital or contractual commitments, and may not have other readily accessible resources to satisfy those expenditures or commitments.
(4) If the issuer is required to provide disclosure under subsection (3), the issuer must discuss, in respect of each threshold, the impact (if any) of raising this amount on its liquidity, operations, capital resources and solvency.
INSTRUCTIONS
If the issuer is required to disclose the use of proceeds at various thresholds under subsections 6.3(3) and (4), include as an example a threshold that reflects the receipt of a small portion of the offering.".
69. Section 8.5 of Form 41-101F1 is amended by replacing "32.6(1)" with "32.6(2)".
70. Section 10.5 of Form 41-101F1 is amended by
(a) replacing "disclose" with "provide the following disclosure in the prospectus to indicate", and
(b) deleting "and provide the following disclosure in the prospectus, with the bracketed information completed".
71. Section 13.1 of Form 41-101F1 is amended by
(a) adding "or series" after "each class",
(b) adding "or exchangeable" after "convertible", and
(c) adding "or series" after "those classes".
72. Subsection 13.2(1) of Form 41-101F1 is amended by
(a) replacing "each class of" with "the following",
(b) replacing "is traded" with "are traded",
(c) adding "for the securities" after "quotation", and
(d) replacing "occurs." with the following:
"occurs;
(a) each class or series of securities of the issuer distributed under the prospectus;
(b) securities of the issuer into which those classes or series of securities are convertible or exchangeable.".
73. Subsection 13.2(2) of Form 41-101F1 is amended by
(a) replacing "If a class of" with "For the following",
(b) replacing "issuer is" with "issuer that are",
(c) replacing "is traded" with "are traded",
(d) adding "for the securities" after "quotation", and
(e) replacing "occurs." with the following:
"occurs;
(a) each class or series of securities of the issuer distributed under the prospectus;
(b) securities of the issuer into which those classes or series of securities are convertible or exchangeable.".
74. Item 30 is amended by adding the following section after section 30.2:
"Convertible, exchangeable or exercisable securities
30.3 In the case of an offering of convertible, exchangeable or exercisable securities, provide a statement in the following form:
"In an offering of [state name of convertible, exchangeable or exercisable securities], investors are cautioned that the statutory right of action for damages for a misrepresentation contained in the prospectus is limited, in certain provincial [or territorial] securities legislation, to the price at which the [state name of convertible, exchangeable or exercisable securities] is offered to the public under the prospectus offering. This means that, under the securities legislation of certain provinces [or territories], if the purchaser pays additional amounts upon [conversion, exchange or exercise] of the security, those amounts may not be recoverable under the statutory right of action for damages that applies in such provinces [or territories]. The purchaser should refer to the applicable provisions of the purchaser's province [or territory] for the particulars of this right of action for damages or consult with a legal adviser.""
75. Section 32.1 of Form 41-101F1 is amended by
(a) renumbering it as subsection 32.1(1),
(b) replacing "The" with "Subject to subsection (2), the", and
(c) adding the following subsection after subsection (1):
"(2) A reporting issuer is not required to include the financial statements for an acquisition to which paragraph (1)(a) or (b) applies if
(a) the issuer was a reporting issuer in any jurisdiction of Canada
(i) on the date of the acquisition, in the case of a completed acquisition; or
(ii) immediately before the filing of the prospectus, in the case of a proposed acquisition;
(b) the issuer's principal asset is not cash, cash equivalents, or its exchange listing; and
(c) the issuer provides disclosure in respect of the proposed or completed acquisition in accordance with Item 35.".
76. Section 32.4 of Form 41-101F1 is amended by renumbering it subsection 32.4(1) and by adding the following subsection after subsection (1):
"(2) Paragraphs (1)(a), (b) and (d) do not apply to an issuer
(a) whose principal asset is cash, cash equivalents or its exchange listing; or
(b) in respect of financial statements of a reverse takeover acquirer for a completed or proposed transaction by the issuer that was or will be accounted for as a reverse takeover.".
77. Subparagraph 32.5(b)(i) of Form 41-101F1 is amended by deleting "and" after "issuer,".
78. Paragraph 32.5(b) of Form 41-101F1 is amended by adding the following subparagraph after subparagraph (i):
"(i.1) an auditor has not issued an auditor's report on those financial statements, and".
79. Item 32 of Form 41-101F1 is amended by adding the following sections after subsection 32.6(2):
"Pro forma financial statements for an acquisition
32.7(1) Include the pro forma financial statements prescribed in subsection (2) in respect of a completed or proposed acquisition for which financial statement disclosure is required under section 32.1 if
(a) less than nine months of the acquired business operations have been reflected in the issuer's most recent audited financial statements included in the prospectus; and
(b) the inclusion of the pro forma financial statements is necessary for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities to be distributed.
(2) For the purposes of subsection (1), include the following:
(a) a pro forma statement of financial position of the issuer, as at the date of the issuer's most recent statement of financial position included in the prospectus, that gives effect, as if it had taken place as at the date of the pro forma statement of financial position, to the acquisition that has been completed, or that will be completed, but is not reflected in the issuer's most recent statement of financial position for an annual or interim period;
(b) a pro forma income statement of the issuer that gives effect to the acquisition completed, or that will be completed, since the beginning of the issuer's most recently completed financial year for which it has included financial statements in its prospectus, as if it had taken place at the beginning of that financial year, for each of the following periods:
(i) the most recently completed financial year for which the issuer has included financial statements in its prospectus; and
(ii) the interim period for which the issuer has included an interim financial report in its prospectus, that started after the after the financial year referred to in subparagraph (i) and ended
(A) in the case of a completed acquisition, immediately before the acquisition date or, in the issuer's discretion, after the acquisition date; and
(B) in the case of a proposed acquisition, immediately before the date of the filing of the prospectus, as if the acquisition had been completed before the filing of the prospectus and the acquisition date were the date of the prospectus; and
(c) pro forma earnings per share based on the pro forma financial statements referred to in paragraph (b).
(3) If an issuer is required to include pro forma financial statements in its prospectus under subsections (1) and (2),
(a) the issuer must identify in the pro forma financial statements each acquisition, if the pro forma financial statements give effect to more than one acquisition,
(b) the issuer must include in the pro forma financial statements
(i) adjustments attributable to the acquisition for which there are firm commitments and for which the complete financial effects are objectively determinable;
(ii) adjustments to conform amounts for the business to the issuer's accounting policies; and
(iii) a description of the underlying assumptions on which the pro forma financial statements are prepared, cross-referenced to each related pro forma adjustment;
(c) if the financial year-end of the business differs from the issuer's year-end by more than 93 days, for the purpose of preparing the pro forma income statement of the issuer's most recently completed financial year, the issuer must construct an income statement of the business for a period of 12 consecutive months ending no more than 93 days before or after the issuer's year-end, by adding the results for a subsequent interim period to a completed financial year of the business and deducting the comparable interim results for the immediately preceding year;
(d) if a constructed income statement is required under paragraph (c), the pro forma financial statements must disclose the period covered by the constructed income statement on the face of the pro forma financial statements and must include a note stating that the financial statements of the business used to prepare the pro forma financial statements were prepared for the purpose of the pro forma financial statements and do not conform with the financial statements for the business included elsewhere in the prospectus;
(e) if an issuer is required to prepare a pro forma income statement for an interim period required by paragraph (2)(b), and the pro forma income statement for the most recently completed financial year includes results of the business which are also included in the pro forma income statement for the interim period, the issuer must disclose in a note to the pro forma financial statements the revenue, expenses, and profit or loss from continuing operations included in each pro forma income statement for the overlapping period; and
(f) a constructed period referred to in paragraph (c) does not have to be audited.
Pro forma financial statements for multiple acquisitions
32.8 Despite subsection 32.7(1), an issuer is not required to include in its prospectus the pro forma financial statements otherwise required for each acquisition, if the issuer includes in its prospectus one set of pro forma financial statements that
(a) reflects the results of each acquisition since the beginning of the issuer's most recently completed financial year for which financial statements of the issuer are included in the prospectus, and
(b) is prepared as if each acquisition had occurred at the beginning of the most recently completed financial year of the issuer for which financial statements of the issuer are included in the prospectus.
Exemption from financial statement disclosure for oil & gas acquisitions
32.9(1) The issuer is exempt from sections 32.2, 32.3 and 32.7 that apply to a completed or proposed acquisition by operation of section 32.1 if
(a) the acquisition is an acquisition of a business which is an interest in an oil and gas property;
(b) the acquisition is an acquisition to which section 32.1 applies;
(c) the acquisition is not an acquisition of securities of another issuer, unless the vendor transferred the business referenced in paragraph (1)(a) to such other issuer which
(i) was created for the sole purpose of facilitating the acquisition; and
(ii) other than assets or operations relating to the transferred business, has no
(A) substantial assets; or
(B) operating history;
(d) the issuer is unable to provide the financial statements in respect of the acquisition otherwise required under sections 32.2 and 32.3 because those financial statements do not exist or because the issuer does not have access to those financial statements;
(e) the acquisition does not constitute a reverse takeover;
(f) subject to subsections (2) and (3), in respect of the business for each of the financial periods for which financial statements would, but for this section, be required under sections 32.2 and 32.3, the prospectus includes
(i) an operating statement for the business prepared in accordance with section 3.17 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;
(ii) a pro forma operating statement of the issuer that gives effect to the acquisition completed or to be completed since the beginning of the issuer's most recently completed financial year for which financial statements are required to have been filed, as if the acquisition had taken place at the beginning of that financial year, for each of the financial periods referred to in paragraph 32.7(2)(b), unless
(A) more than nine months of the acquired business operations have been reflected in the issuer's most recent audited financial statements included in the prospectus; or
(B) the inclusion of the pro forma financial statements is not necessary for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities to be distributed;
(iii) a description of the property or properties and the interest acquired by the issuer; and
(iv) disclosure of the annual oil and gas production volumes from the business;
(g) the operating statement for the three most recently completed financial years has been audited;
(h) the prospectus discloses
(i) the estimated reserves and related future net revenue attributable to the business, the material assumptions used in preparing the estimates and the identity and relationship to the issuer or to the vendor of the person who prepared the estimates; and
(ii) the estimated oil and gas production volumes from the business for the first year reflected in the estimated disclosure under subparagraph (i).
(2) An issuer is exempted from subparagraphs (1)(f)(i), (ii) and (iv), if
(a) production, gross revenue, royalty expenses, production costs and operating income were nil, or are reasonably expected to be nil for the business for each financial period; and
(b) the prospectus discloses the applicable facts referred to in paragraph (a).
(3) An issuer is exempted from paragraphs 32.9(1)(f) and (g) in respect of the third most recently completed financial year if the issuer has completed the acquisition and has included in the prospectus the following:
(a) information in accordance with Form 51-101F1 as of a date commencing on or after the acquisition date and within 6 months of the date of the preliminary prospectus;
(b) a report in the form of Form 51-101F2 on the reserves data included in the disclosure required under paragraph (a);
(c) a report in the form of Form 51-101F3 that refers to the information disclosed under paragraph (a).".
80. Subsection 35.1(1) of Form 41-101F1 is amended by replacing
"35.1(1) This Item does not apply to a completed or proposed transaction by the issuer that was or will be a reverse takeover or a transaction that is a proposed reverse takeover that has progressed to a state where a reasonable person would believe that the likelihood of the reverse takeover being completed is high."
with the following:
"35.1(1) This Item does not apply to
(a) a completed or proposed transaction by the issuer that was or will be a reverse takeover or a transaction that is a proposed reverse takeover that has progressed to a state where a reasonable person would believe that the likelihood of the reverse takeover being completed is high; or
(b) a completed or proposed acquisition
(i) by the issuer if
(A) the issuer's principal asset is cash, cash equivalents or its exchange listing; or
(B) the issuer was not a reporting issuer in any jurisdiction
(I) on the acquisition date, in the case of a completed acquisition; and
(II) immediately before filing the prospectus, in the case of a proposed acquisition; and
(iii) to which Item 32 applies by operation of section 32.1.".
81. Paragraph 35.1(1)(a) of Form 41-101F1 is amended by replacing "high" with "high; or".
82. Subsection 35.1(2) of Form 41-101F1 is repealed.
83. Paragraph 35.3(1)(d) of Form 41-101F1 is amended by
(a) adding "date" after "acquisition", and
(b) deleting "completed".
84. General Instruction (7) of Form 41-101F2 Information Required in an Investment Fund Prospectusis amended by replacing
"(7) The disclosure required in this Form must be presented in the order and using the headings specified in the Form. However, scholarship plans may make modifications to the disclosure items in order to reflect the special nature of their investment structure and distribution mechanism."
with the following:
"(7) The disclosure required in this Form must be presented in the order and using the headings specified in the Form. If no sub-heading for an Item is stipulated in this Form, an investment fund may include sub-headings, under the required headings, at its option."
85. Subsection 1.4(3) of Form 41-101F2 is amended by replacing
"(a) disclose that a purchaser who acquires securities forming part of the underwriters' over-allocation position acquires those securities under this prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the over-allotment option or secondary market purchases, and
(b) describe the terms of the option."
with the following:
"(a) describe the terms of the option, and
(b) provide the following disclosure:
"A purchaser who acquires [insert type of securities qualified for distribution under the prospectus] forming part of the underwriters' over-allocation position acquires those securities under this prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the over-allotment option or secondary market purchases.""
86. Subsection 1.4(4) of Form 41-101F2 is amended by replacing "provide totals for both the minimum and maximum offering amount, if applicable." with "and a minimum offering amount
(a) is required for the issuer to achieve one or more of the purposes of the offering, provide totals for both the minimum and maximum offering amount, or
(b) is not required for the issuer to achieve any of the purposes of the offering, state the following in boldface type:
"There is no minimum amount of funds that must be raised under this offering. This means that the issuer could complete this offering after raising only a small proportion of the offering amount set out above."".
87. Subsection 1.11(2) of Form 41-101F2 is amended by deleting "Underwriting Conflicts".
88. Subsection 1.12(4) of Form 41-101F2 is amended by adding "of" after "execution, delivery and clearing".
89. Section 1.14 of Form 41-101F2 is amended by replacing
"1.14 -- Non-Canadian Manager
If the investment fund manager is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, state the following with the bracketed information completed:
"The manager is incorporated, continued or otherwise governed under the laws of a foreign jurisdiction or resides outside Canada. Although the manager has appointed [name and address of agent for service] as its agent for service of process in Canada, it may not be possible for investors to realize on judgements obtained in Canada against the manager.""
with the following:
"1.14 -- Non-Canadian Investment Fund
If the investment fund, investment fund manager or any other person or company required to provide a certificate under Part 5 of the Instrument or other securities legislation, is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, state the following on the cover page or under a separate heading elsewhere in the prospectus, with the bracketed information completed:
"The [investment fund, investment fund manager or any other person or company required to provide a certificate under Part 5 of the Instrument or other securities legislation] is incorporated, continued or otherwise governed under the laws of a foreign jurisdiction or resides outside Canada. Although the [person or company described above] has appointed [name(s) and address(es) of agent(s) for service] as its agent for service of process in [list jurisdictions], it may not be possible for investors to realize on judgments obtained in Canada against the [person or company described above]."".
90. Section 3.3 is amended by:
(a) in paragraph 3.3(1)(e), replacing
"(e) the use of leverage, including any restrictions and the maximum amount of leverage the fund could use expressed as a ratio as follows: (total long positions including leveraged positions plus total short positions) divided by the net assets of the investment fund,"
with the following:
"(e) the use of leverage, including the following:
(i) if leverage is created through borrowing or the issuance of preferred securities, disclose any restrictions on the leverage used or to be used and whether the investment fund will borrow a minimum amount. Disclose the maximum amount of leverage the investment fund may use as a ratio calculated by dividing the maximum total assets of the investment fund by the net asset value of the investment fund, and
(ii) if leverage is created through the use of specified derivatives or by other means not disclosed in subparagraph (i), disclose any restrictions on the leverage used or to be used by the investment fund and whether the investment fund will use a minimum amount of leverage. Disclose the maximum amount of leverage the fund may use as a multiple of net assets. Provide a brief explanation of how the investment fund uses the term "leverage" and the significance of the maximum and minimum amounts of leverage to the investment fund,", and
(b) inserting the following after subsection (2):
"INSTRUCTIONS
(1) For the purposes of Item 3.3(1)(e)(i), a fund must calculate its maximum total assets by aggregating the maximum value of its long positions, short positions and the maximum amount that may be borrowed.
(2) For the purposes of the disclosure required by Item 3.3(1)(e)(ii), the term "specified derivative" has the same meaning as in NI 81-102. The description of an investment fund's use of leverage under Item 3.3(1)(e)(ii) must provide investors with sufficient information to understand the magnitude of the market exposure of the investment fund as compared to the amount of money raised by the investment fund from investors."
91. Subsection 3.4(1) of Form 41-101F2 is amended by replacing "registrar and transfer agent and auditor" with "registrar and transfer agent, auditor and principal distributor".
92. Subsection 3.6(4) of Form 41-101F2 is amended by replacing
"(4) Under the sub-heading "Annual Returns and Management Expense Ratio", provide, in the following table, returns for each of the past five years and the management expense ratio for each of the past five years as disclosed in the most recently filed annual management report of fund performance of the investment fund:
[specify year]
[specify year]
[specify year]
[specify year]
[specify year]
Annual Returns
_____
_____
_____
_____
_____
MER
_____
_____
_____
_____
_____
"MER" means management expense ratio."
with the following:
"(4) Under the sub-heading "Annual Returns, Management Expense Ratio and Trading Expense Ratio", provide, in the following table, returns for each of the past five years, the management expense ratio for each of the past five years and the trading expense ratio for each of the past five years as disclosed in the most recently filed annual management report of fund performance of the investment fund:
[specify year]
[specify year]
[specify year]
[specify year]
[specify year]
Annual Returns
_____
_____
_____
_____
_____
MER
_____
_____
_____
_____
_____
TER
_____
_____
_____
_____
_____
"MER" means management expense ratio and is based on total expenses (excluding commissions and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net asset value.
"TER" means trading expense ratio and represents total commissions and portfolio transaction costs expressed as an annualized percentage of daily average net asset value."
93. Section 6.1 of Form 41-101F2 is amended by:
(a) in paragraph 6.1(1)(b), replacing
"(b) the use of leverage, including any restrictions and the maximum amount of leverage the fund can use, expressed as a ratio as follows: (total long positions including leveraged positions plus total short positions) divided by the net assets of the investment fund, and"
with the following:
"(b) the use of leverage, including the following:
(i) if leverage is created through borrowing or the issuance of preferred securities, disclose any restrictions on the leverage used or to be used and whether the investment fund will borrow a minimum amount. Disclose the maximum amount of leverage the investment fund may use as a ratio calculated by dividing the maximum total assets of the investment fund by the net asset value of the investment fund, and
(ii) if leverage is created through the use of specified derivatives or by other means not disclosed in subparagraph (i), disclose any restrictions on the leverage used or to be used by the investment fund and whether the investment fund will use a minimum amount of leverage. Disclose the maximum amount of leverage the fund may use as a multiple of net assets. Provide a brief explanation of how the investment fund uses the term "leverage" and the significance of the maximum and minimum amounts of leverage to the investment fund, and", and
(b) inserting the following after subsection (5):
"INSTRUCTIONS:
(1) For the purposes of Item 6.1(1)(b)(i), a fund must calculate its maximum total assets by aggregating the maximum value of its long positions, short positions and the maximum amount that may be borrowed.
(2) For the purposes of the disclosure required by Item 6.1(1)(b)(ii), the term "specified derivative" has the same meaning as in NI 81-102. The description of an investment fund's use of leverage under Item 6.1(1)(b)(ii) must provide investors with sufficient information to understand the magnitude of the market exposure of the investment fund as compared to the amount of money raised by the investment fund from investors."
94. Section 11.1 of Form 41-101F2 is replaced with the following:
"11.1 -- Annual Returns, Management Expense Ratio and Trading Expense Ratio
Under the heading "Annual Returns, Management Expense Ratio and Trading Expense Ratio", provide, in the following table, returns for each of the past five years, the management expense ratio for each of the past five years and the trading expense ratio for each of the past five years as disclosed in the most recently filed annual management report of fund performance of the investment fund:
[specify year]
[specify year]
[specify year]
[specify year]
[specify year]
Annual Returns
_____
_____
_____
_____
_____
MER
_____
_____
_____
_____
_____
TER
_____
_____
_____
_____
_____
"MER" means management expense ratio and is based on total expenses (excluding commissions and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net asset value.
"TER" means trading expense ratio and represents total commissions and portfolio transaction costs expressed as an annualized percentage of daily average net asset value."
95. Section 19.1 of Form 41-101F2 is amended by
(a) repealing paragraph 19.1(1)(c),
(b) replacing "investment fund" with "issuer" after the words "officer of any other" in subsection 19.1(2),
(c) replacing "investment fund" with "issuer" after the words "executive officer of any" in paragraph 19.1(4)(a),
(d) adding the following after subsection (9):
"(10) Under the heading "Ownership of Securities of the Investment Fund and of the Manager" disclose
(a) the percentage of securities of each class or series of voting or equity securities beneficially owned, directly or indirectly, in aggregate, by all the directors and executive officers of the investment fund
(i) in the investment fund if the aggregate level of ownership exceeds 10 percent,
(ii) in the manager, or
(iii) in any person or company that provides services to the investment fund or the manager; and
(b) the percentage of securities of each class or series of voting or equity securities beneficially owned, directly or indirectly, in aggregate, by all the directors and executive officers of the manager of the investment fund
(i) in the investment fund if the aggregate level of ownership exceeds 10 percent,
(ii) in the manager, or
(iii) in any person or company that provides services to the investment fund or the manager; and
(c) the percentage of securities of each class or series of voting or equity securities beneficially owned, directly or indirectly, in aggregate, by all the independent review committee members of the investment fund
(i) in the investment fund if the aggregate level of ownership exceeds 10 percent,
(ii) in the manager, or
(iii) in any person or company that provides services to the investment fund or the manager.
(11) If the management functions of the investment fund are carried out by employees of the investment fund, provide for those employees the disclosure concerning executive compensation that is required to be provided for executive officers of an issuer under securities legislation.
(12) Describe any arrangements under which compensation was paid or payable by the investment fund during the most recently completed financial year of the investment fund, for the services of directors of the investment fund, members of an independent board of governors or advisory board of the investment fund and members of the independent review committee of the investment fund, including the amounts paid, the name of the individual and any expenses reimbursed by the investment fund to the individual
(a) in that capacity, including any additional amounts payable for committee participation or special assignments; and
(b) as consultant or expert.
(13) For an investment fund that is a trust, describe the arrangements, including the amounts paid and expenses reimbursed, under which compensation was paid or payable by the investment fund during the most recently completed financial year of the investment fund for the services of the trustee or trustees of the investment fund.", and
(e) inserting the following after Instruction (4):
"(5) The disclosure required under Item 19.1(10) regarding executive compensation for management functions carried out by employees of an investment fund must be made in accordance with the disclosure requirements of Form 51-102F6.".
96. Section 19 of Form 41-101F2 is amended by adding the following after section 19.9:
"19.10 -- Principal Distributor
(1) If applicable, state the name and address of the principal distributor of the investment fund.
(2) Describe the circumstances under which any agreement with the principal distributor of the investment fund may be terminated and include a brief description of the essential terms of this agreement."
97. Paragraph 21.2(f) of Form 41-101F2 is amended by replacing "dividends" with "distributions".
98. Subsection 21.6(1) of Form 41-101F2 is amended by replacing "the" with "a" after the words "proposes to distribute under".
99. Subsection 28.1(1) of Form 41-101F2 is amended by adding ", if known or if ought to be known by the investment fund or the manager" after the words "securityholder of the investment fund".
100. Section 33.2 of Form 41-101F2 is amended by adding the following after subsection 33.2(3):
"(4) Despite subsection (1), an auditor who is independent in accordance with the auditor's rules of professional conduct in a jurisdiction of Canada or has performed an audit in accordance with US GAAS is not required to provide the disclosure in subsection (1) if there is disclosure that the auditor is independent in accordance with the auditor's rules of professional conduct in a jurisdiction of Canada or that the auditor has complied with the SEC's rules on auditor independence."
101. Section 39 of Form 41-101F2 is amended by adding the following after section 39.4:
"39.4.1 -- Certificate of the Principal Distributor
If there is a principal distributor of the investment fund, include a certificate in the same form as the certificate of the investment fund."
102. This Instrument comes into force on •, 2012.
Schedule A-2 -- Proposed Amendments to Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements
APPENDIX A
SCHEDULE A-2
AMENDMENTS TO
COMPANION POLICY 41-101CP TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
1. Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements is amended.
2. Subsection 1.2(5) is amended by replacing "Companion Policy" with "companion policy".
3. The following section is added after section 2.2:
"Minimum offering amount
2.2.1 If the distribution of securities is being done on a best efforts basis, an issuer will need to determine if a minimum offering is required for the issuer to achieve one or more of the stated purposes of the offering, as expressed in the "Use of Proceeds" section of the prospectus. If this is the case, the issuer will need to provide a minimum and maximum offering amount. Otherwise, the issuer is required to provide the cautionary statement prescribed in paragraph 1.4(3)(b) of Form 41-101F1.
Although an issuer may determine that a minimum offering amount is not necessary for the prospectus offering, a regulator may reasonably infer that a minimum offering amount is appropriate in certain circumstances. This could occur, for example, if we have concerns that a minimum amount of proceeds must be raised in order for the issuer to achieve its stated objectives. Also, if we have concerns about an issuer continuing as a going concern, we may take the view that the issuer cannot achieve its stated objectives unless a minimum offering amount is raised. The imposition of a minimum offering amount by a regulator derives from the general responsibility of a regulator under securities laws to refuse a receipt for a prospectus if it appears that the aggregate of the proceeds from the sale of the securities under the prospectus and other resources of the issuer are insufficient to accomplish the purposes stated in the prospectus, or if it would not be in the public interest to issue a receipt. A benefit of the imposition of a minimum offering amount is that if the issuer fails to raise the minimum amount, investors benefit from an investor protection mechanism that facilitates the return of their subscription funds to them, if previously deposited.".
4. Section 2.9 is replaced with the following:
"Offerings of convertible, exchangeable or exercisable securities
2.9 Investor protection concerns may arise where the distribution of a convertible, exchangeable or exercisable security is qualified under a prospectus and the subsequent conversion, exchange or exercise of this security is made on a prospectus-exempt basis. Specifically, this concern arises when the subsequent conversion, exchange or exercise occurs within a short period of time -- generally 180 days or less -- following the purchase of the original security.
The concerns arise because the conversion, exchange or exercise feature of the security may operate to limit or "strip away" the remedies available to an investor for a misrepresentation in a prospectus.
In particular, we are concerned about offerings of subscription receipts, or other types of securities which may be convertible, exchangeable or exercisable within a short period of time following the purchase of the original security (generally 180 days or less), where the investor, when purchasing the subscription receipt, or other similar type of security, is in effect also making an investment decision in respect of the underlying security.
Public interest concerns arise if the subsequent distribution of the underlying security is not part of the initial distribution and is not qualified by the prospectus. These concerns arise because when the security is converted, exchanged or exercised prior to the end of the statutory period for a right of action for rescission under securities legislation (which in many jurisdictions is 180 days from the date of purchase of the original security), the purchaser of a convertible, exchangeable or exercisable security does not retain the same rights to rescission because the convertible, exchangeable or exercisable security that was issued under the prospectus has been replaced by the underlying security. In these circumstances, the original purchaser should retain the benefit of any remaining statutory right of rescission that would otherwise apply in respect of the convertible, exchangeable or exercisable security. As such, the issuer should provide the original purchaser of the convertible, exchangeable or exercisable security with a contractual right of rescission in respect of the conversion, exchange or exercise transaction.
In some cases, the subsequent distribution of the underlying security may be part of the initial distribution as it is part of a series of transactions involving further purchases and sales in the course of or incidental to a distribution. If this is the case the issuer should consider whether its prospectus should qualify the distribution of both the subscription receipt, or other similar type of security, as well as the underlying security.
The guidance above would not apply to an offering of warrants where the warrants may reasonably be regarded as incidental to the offering as a whole. For example, in the case of a typical special warrant offering, the special warrant converts into i) a common share, and ii) a common share purchase warrant (or a fraction thereof). In such cases, we have generally accepted that the common share purchase warrant component merely represents a "sweetener", and that the primary investment decision relates to the common share underlying the special warrant. This would also generally be the case with a unit offering where the unit consists of a common share, and a common share purchase warrant. Therefore, the regulator would not generally request that the issuer provide the original purchaser with a contractual right of rescission in respect of the sweetener warrants."
5. The second paragraph of section 3.4 is amended by replacing "10.1(1)" with "10.1(1.1)".
6. Section 4.2 is amended by adding the following subsection after subsection (2):
"(3) If a minimum offering amount is not provided and the issuer faces significant short-term expenditures or commitments, the issuer must provide additional disclosure as required under subsections 6.3(3) and (4) of Form 41-101F1 or subsections 4.2(3) and (4) of Form 44-101F1. The issuer must provide disclosure of how it will use the proceeds at different thresholds, describing what business objectives will be accomplished at each threshold as well as the priority of how the proceeds will be used. In describing the use of proceeds under each threshold, the disclosure must also include an assessment of the impact of raising this amount on the issuer's liquidity, operations, capital resources and solvency.
Disclosures that may be necessary to understand this impact may include the following examples:
(a) for issuers without significant revenue and available working capital, disclose the anticipated length of time that the proceeds at each threshold will suffice to meet expected cash requirements;
(b) for issuers that have or anticipate having within the next 12 months any cash flow or liquidity problems, disclose how the proceeds at each threshold may impact the issuer's ability to continue in operation for the foreseeable future and realize assets and discharge liabilities in the normal course of operations;
(c) for issuers that have significant projects that have not yet commenced operations and the projects have therefore not yet generated revenue, describe how the proceeds at each threshold may impact the anticipated timing and costs of the project and other critical milestones;
(d) for issuers that have exploration and development expenditures or research and development expenditures required to maintain properties or agreements in good standing, describe how the proceeds at each threshold may impact these properties or agreements.
If the issuer anticipates additional funds from other sources are to be used in conjunction with the proceeds and the available working capital, the issuer will need to sufficiently describe the amounts of those funds, the source of those funds and whether those funds are firm or contingent. If the funds are contingent, the issuer should describe the nature of the contingency.
Depending on the particular circumstances of the issuer, one or more of the above examples may require the provision of a minimum offering amount in the prospectus. Refer to section 2.2.1 of this Policy for additional guidance.".
7. Subsection 5.3(1) is amended by
(a) in the first paragraph, adding the following after the first sentence:
"However, if the issuer is a reporting issuer whose principal assets are not cash, cash equivalents or an exchange listing, and the acquisition of the primary business represents a significant acquisition for the issuer, the reporting issuer is subject to the requirements of Item 35 in respect of the financial statement and other disclosure for the acquisition.
An acquisition does not include a reverse takeover, as defined in NI 41-101 which cross-references the meaning of acquisition as used in Part 8 of NI 51-102. Therefore a reporting issuer cannot rely on the exemption in subsection 32.1(2) if the applicable transaction is a reverse takeover.", and
(b) in the third paragraph, adding ", thereby triggering the application of Item 32," before "are when the acquisition(s) was".
8. Subsection 5.3(2) is amended by adding the following paragraph at the end:
"The issuer must also consider the necessity of including pro forma financial statements pursuant to section 32.7 of Form 41-101F1 to illustrate the impact of the acquisition of the primary business on the issuer's financial position and results of operations. For additional guidance, an issuer should refer to section 5.10 of this Policy.".
9. Subsection 5.4(1) is amended by replacing "In these circumstances, the issuer should consider including pro forma financial statements in the prospectus giving effect to the recently completed or proposed acquisition of a predecessor entity." with the following:
"However, if the issuer is a reporting issuer whose principal assets are not cash, cash equivalents or an exchange listing, and the acquisition of the predecessor entity represents a significant acquisition for the issuer, the reporting issuer is subject to the requirements of Item 35 in respect of the financial statement and other disclosure for the acquisition.
The issuer must also consider the necessity of including pro forma financial statements pursuant to section 32.7 of Form 41-101F1 to illustrate the impact of the acquisition of the predecessor entity on the issuer's financial position and results of operations. For additional guidance, an issuer should refer to section 5.10 of this Policy.".
10. Subsection 5.9(7) is amended by
(a) adding "to" before "private enterprises in certain circumstances.", and
(b) adding "and the issuer must provide financial statements for this acquisition under Item 32" after "predecessor of the issuer".
11. Section 5.10 is replaced with the following:
"Financial statements for acquisitions of a predecessor entity, a business or businesses acquired by reporting and non-reporting issuers
5.10(1) The financial statements for acquisitions of a predecessor entity, a business or businesses acquired by the issuer, or other entity must be included in the prospectus under Item 32 of Form 41-101F1, if the entities or businesses satisfy the conditions of paragraph 32.1(1)(a), (b), or (c) of Form 41-101F1 and
(a) the issuer was not a reporting issuer in any jurisdiction on the acquisition date in the case of a completed acquisition or immediately prior to the prospectus filing in the case of a proposed acquisition, as set out in section 35.1 of Form 41-101F1; or
(b) the issuer was a reporting issuer with only cash, cash equivalents or an exchange listing as its principal asset.
If the issuer was a reporting issuer prior to the filing of the prospectus, but its principal asset was not cash, cash equivalents or its exchange listing, the issuer would be eligible to disclose the above-noted acquisitions in accordance with Item 35. The disclosure requirements applicable to a reporting issuer in Item 35 are intended to reflect the requirements that would be prescribed for such acquisitions in the reporting issuer's business acquisition report.
(2) An issuer that is subject to Item 32 must also consider the necessity of including pro forma financial statements pursuant to section 32.7 of Form 41-101F1 to illustrate the impact of the acquisition on the issuer's financial position and results of operations. However, these pro forma financial statements are only required if their inclusion is necessary for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities being distributed. Examples of when pro forma financial statements would likely be necessary are in cases where:
(a) the issuer has acquired multiple businesses over the relevant period; or
(b) the issuer has an active business and has acquired another business that will constitute its primary business going forward.
In certain circumstances, an issuer may need to disclose multiple acquisitions in its prospectus where the acquisitions include an acquisition of a primary business or predecessor entity to which section 32.1 of Form 41-101F1 applies and a significant acquisition to which only item 35 of Form 41-101F1 applies. In this case, the issuer may wish to present one set of pro forma financial statements reflecting the results of all of the acquisitions, as contemplated separately in each of sections 32.8 and 35.7 of Form 41-101F1. The securities regulatory authority or regulator would not generally object to providing this relief. However the issuer must request the relief when filing its preliminary prospectus.".
12. These amendments become effective on •, 2012.
Schedule B-1 -- Blackline Showing Proposed Changes to National Instrument 41-101 General Prospectus Requirements
APPENDIX B
SCHEDULE B-1
NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
PART 1: Definitions and Interpretations
Definitions
1.1 In this Instrument:
"acquisition" has the same meaning as in Part 8 of NI 51-102;
"acquisition date" has the same meaning as in section 1.1 of NI 51-102;
"acquisition of related businesses" has the same meaning as in Part 8 of NI 51-102;
"alternative credit support" has the same meaning as in section 13.4 of NI 51-102;
"approved rating organization" has the same meaning as in section 1.1 of NI 51-102;
"asset-backed security" has the same meaning as in section 1.1 of NI 51-102;
"base offering" means the number or principal amount of the securities distributed under a prospectus by an issuer or selling securityholder, excluding
(a) any over-allotment option granted in connection with the distribution, or the securities issuable on the exercise of any such over-allotment option, and
(b) securities issued or paid as compensation to a person or company for acting as an underwriter in respect of securities that are distributed under the prospectus, on an "as-if-converted" basis if these securities include securities that are convertible or exchangeable securities;
"board of directors" has the same meaning as in section 1.1 of NI 51-102;
"business acquisition report" has the same meaning as in section 1.1 of NI 51-102;
"business day" means any day other than a Saturday, a Sunday or a statutory holiday;
"class" has the same meaning as in section 1.1 of NI 51-102;
"credit supporter" has the same meaning as in section 13.4 of NI 51-102;
"custodian" means the institution appointed by an investment fund to act as custodian of the portfolio assets of the investment fund;
"date of transition to IFRS" has the same meaning as in section 1.1 of NI 51-102;
"derivative" means an instrument, agreement or security, the market price, value or payment obligation of which is derived from, referenced to, or based on an underlying interest;
"designated foreign jurisdiction" has the same meaning as in section 1.1 of NI 52-107;
"equity investee" has the same meaning as in section 1.1 of NI 51-102;
"equity security" means a security of an issuer that carries a residual right to participate in the earnings of the issuer and, on the liquidation or winding up of the issuer, in its assets;
"executive officer" means, for an issueror an investment fund manager, an individual who is
(a) a chair, vice-chair or president,
(a.1) a chief executive officer or chief financial officer,
(b) a vice-president in charge of a principal business unit, division or function including sales, finance or production, or
(c) performing a policy-making function in respect of the issuer
;or investment fund manager;"financial statements" includes interim financial reports;
"first IFRS financial statements" has the same meaning as in section 1.1 of NI 51-102;
"foreign disclosure requirements" has the same meaning as in section 1.1 of NI 52-107;
"Form 41-101F1" means Form 41-101F1Information Required in a Prospectus of this Instrument;
"Form 41-101F2" means Form 41-101F2Information Required in an Investment Fund Prospectus of this Instrument;
"Form 44-101F1" means Form 44-101F1 Short Form Prospectus of NI 44-101;
"Form 51-101F1" means Form 51-101F1 Statement of Reserves Data and Other Oil and Gas Information of NI 51-101;
"Form 51-101F2" means Form 51-101F2 Report on Reserves Data by Independent Qualified Reserves Evaluator or Auditor of NI 51-101;
"Form 51-101F3" means Form 51-101F3 Report of Management and Directors on Oil and Gas Disclosure of NI 51-101;
"Form 51-102F1" means Form 51-102F1 Management's Discussion & Analysis of NI 51-102;
"Form 51-102F2" means Form 51-102F2 Annual Information Form of NI 51-102;
"Form 51-102F4" means Form 51-102F4 Business Acquisition Report of NI 51-102;
"Form 51-102F5" means Form 51-102F5 Information Circular of NI 51-102;
"Form 51-102F6" means Form 51-102F6 Statement of Executive Compensation of NI 51-102;
"Form 52-110F1" means Form 52-110F1 Audit Committee Information Required in an AIF of NI 52-110;
"Form 52-110F2" means Form 52-110F2 Disclosure by Venture Issuers of NI 52-110;
"Form 58-101F1" means Form 58-101F1 Corporate Governance Disclosure of NI 58-101;
"Form 58-101F2" means Form 58-101F2 Corporate Governance Disclosure (Venture Issuers) of NI 58-101;
"full and unconditional credit support" means
(a) alternative credit support that
(i) entitles the holder of the securities to receive payment from the credit supporter, or enables the holder to receive payment from the issuer, within 15 days of any failure by the issuer to make a payment, and
(ii) results in the securities receiving the same credit rating as, or a higher credit rating than, the credit rating they would have received if payment had been fully and unconditionally guaranteed by the credit supporter, or would result in the securities receiving such a rating if they were rated, or
(b) a full and unconditional guarantee of the payments to be made, as interpreted in section 1.5, by the issuer of securities, as stipulated in the terms of the securities or in an agreement governing rights of holders of the securities, that results in the holder of such securities being entitled to receive payment from the credit supporter within 15 days of any failure by the issuer to make a payment;
"independent review committee" means an independent review committee under NI 81-107;
"information circular" has the same meaning as in section 1.1 of NI 51-102;
"interim period" has the same meaning as in
(a) section 1.1 of NI 51-102 for an issuer other than an investment fund, or
(b) section 1.1 of NI 81-106 for an investment fund;
"IPO venture issuer" means an issuer that
(a) files a long form prospectus,
(b) is not a reporting issuer in any jurisdiction immediately before the date of the final long form prospectus, and
(c) at the date of the long form prospectus, does not have any of its securities listed or quoted, has not applied to list or quote any of its securities, and does not intend to apply to list or quote any of its securities, on
(i) the Toronto Stock Exchange,
(ii) a U.S. marketplace, or
(iii) a marketplace outside of Canada and the United States of America, other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc;
"issuer's GAAP" has the same meaning as in section 1.1 of NI 52-107;
"junior issuer" means an issuer
(a) that files a preliminary prospectus,
(b) that is not a reporting issuer in any jurisdiction,
(c) whose total consolidated assets as at the date of the most recent statement of financial position of the issuer included in the preliminary prospectus are less than $10,000,000,
(d) whose consolidated revenue as shown in the most recent annual statement of comprehensive income of the issuer included in the preliminary prospectus is less than $10,000,000, and
(e) whose equity as at the date of the most recent statement of financial position of the issuer included in the preliminary prospectus is less than $10,000,000,
taking into account all adjustments to asset, revenue and equity calculations necessary to reflect each significant proposed acquisition of a business or related business by an issuer that has progressed to a state where a reasonable person would believe that the likelihood of the issuer completing the acquisition is high, and each completed significant acquisition of a business or related business that was completed,
(f) for paragraphs (c) and (e), before the date of the preliminary prospectus and after the date of the issuer's most recent statement of financial position included in the preliminary prospectus as if each acquisition had taken place as at the date of the issuer's most recent statement of financial position included in the preliminary prospectus, and
(g) for paragraph (d), after the last day of the most recent annual statement of comprehensive income of the issuer included in the preliminary prospectus as if each acquisition had taken place at the beginning of the issuer's most recently completed financial year for which a statement of comprehensive income is included in the preliminary prospectus;
"labour sponsored or venture capital fund" has the same meaning as in section 1.1 of NI 81-106;
"long form prospectus" means a prospectus filed in the form of Form 41-101F1 or Form 41-101F2;
"marketplace" has the same meaning as in section 1.1 of NI 51-102;
"material contract" means any contract that an issuer or any of its subsidiaries is a party to, that is material to the issuer;
"mineral project" has the same meaning as in section 1.1 of NI 43-101;
"NI 14-101" means National Instrument 14-101 Definitions;
"NI 33-105" means National Instrument 33-105 Underwriting Conflicts;
"NI 43-101" means National Instrument 43-101 Standards of Disclosure for Mineral Projects;
"NI 44-101" means National Instrument 44-101 Short Form Prospectus Distributions;
"NI 44-102" means National Instrument 44-102 Shelf Distributions;
"NI 44-103" means National Instrument 44-103 Post-Receipt Pricing;
"NI 45-106" means National Instrument 45-106 Prospectus and Registration Exemptions;
"NI 51-101" means National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities;
"NI 51-102" means National Instrument 51-102 Continuous Disclosure Obligations;
"NI 52-107" means National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;
"NI 52-110" means National Instrument 52-110 Audit Committees;
"NI 58-101" means National Instrument 58-101 Disclosure of Corporate Governance Practices;
"NI 81-101" means National Instrument 81-101 Mutual Fund Prospectus Disclosure;
"NI 81-102" means National Instrument 81-102 Mutual Funds;
"NI 81-106" means National Instrument 81-106 Investment Fund Continuous Disclosure;
"NI 81-107" means National Instrument 81-107 Independent Review Committee for Investment Funds;
"non-voting security" means a restricted security that does not carry the right to vote generally, except for a right to vote that is mandated, in special circumstances, by law;
"old financial year" means the financial year of an issuer that immediately precedes a transition year;
"over-allocation position" means the amount, determined as at the closing of a distribution, by which the aggregate number or principal amount of securities that are sold by one or more underwriters of the distribution exceeds the base offering;
"over-allotment option" means a right granted to one or more underwriters by an issuer or a selling securityholder of the issuer in connection with the distribution of securities under a prospectus to acquire, for the purposes of covering the underwriter's over-allocation position, a security of an issuer that has the same designation and attributes as a security that is distributed under such prospectus, and which
(a) expires not later than the 60th day after the date of the closing of the distribution, and
(b) is exercisable for a number or principal amount of securities that is limited to the lesser of
(i) the over-allocation position, and
(ii) 15% of the base offering;
"personal information form" means in respect of an individual,
(a) a completed Schedule 1 of Appendix A, or
(b) a TSX/TSXV personal information form submitted by an individual to the Toronto Stock Exchange or to the TSX Venture Exchange to which is attached a completed certificate and consent in the form set out in Schedule 1 - Part B of Appendix A, if the personal information in the form continues to be correct at the time that the certificate and consent is executed by the individual;
"principal securityholder" means a person or company who beneficially owns, or controls or directs, directly or indirectly, voting securities carrying 10% or more of the voting rights attached to any class of voting securities of the issuer;
"private issuer" has the same meaning as in section 2.4 of NI 45-106;
"profit or loss attributable to owners of the parent" has the same meaning as in Canadian GAAP applicable to publicly accountable enterprises;
"profit or loss from continuing operations attributable to owners of the parent" has the same meaning as in Canadian GAAP applicable to publicly accountable enterprises;
"publicly accountable enterprise" has the same meaning as in Part 3 of NI 52-107;
"related credit supporter" of an issuer means a credit supporter of the issuer that is an affiliate of the issuer;
"restricted security" means an equity security that is not a preferred security of an issuer if any of the following apply:
(a) there is another class of securities of the issuer that carries a greater number of votes per security relative to the equity security,
(b) the conditions attached to the class of equity securities, the conditions attached to another class of securities of the issuer, or the issuer's constating documents have provisions that nullify or significantly restrict the voting rights of the equity securities,
(c) the issuer has issued another class of equity securities that entitle the owners of securities of that other class to participate in the earnings or assets of the issuer to a greater extent, on a per security basis, than the owners of the first class of equity securities, or
(d) except in Ontario and British Columbia, the regulator determines that the equity security is a restricted security;
"restricted security reorganization" means any event resulting in the creation of restricted securities, directly or through the creation of subject securities or securities that are, directly or indirectly, convertible, or exercisable or exchangeable for, restricted securities or subject securities or any change in the rights attaching to restricted securities, subject securities or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, restricted securities or subject securities, including
(a) any
(i) amendment to an issuer's constating documents,
(ii) resolution of the board of directors of an issuer setting the terms of a series of securities of the issuer, or
(iii) restructuring, recapitalization, reclassification, arrangement, amalgamation or merger, or
(b) if the issuer has one or more classes of restricted securities outstanding, an amendment to an issuer's constating documents to increase
(i) the per security voting rights attached to any class of securities without at the same time making a proportionate increase in the per security voting rights attached to any other securities of the issuer, or
(ii) the number of a class of securities authorized, other than a restricted security;
"restricted security term" means each of the terms "non-voting security", "subordinate voting security", and "restricted voting security";
"restricted voting security" means a restricted security that carries a right to vote subject to a restriction on the number or percentage of securities that may be voted or owned by one or more persons or companies, unless the restriction is
(a) permitted or prescribed by statute or regulation, and
(b) is applicable only to persons or companies that are not citizens or residents of Canada or that are otherwise considered as a result of any law applicable to the issuer to be non-Canadians;
"restructuring transaction" has the same meaning as in section 1.1 of NI 51-102;
"retrospective" has the same meaning as in section 1.1 of NI 51-102;
"retrospectively" has the same meaning as in section 1.1 of NI 51-102;
"reverse takeover" has the same meaning as in section 1.1 of NI 51-102;
"reverse takeover acquirer" has the same meaning as in section 1.1 of NI 51-102;
"SEC issuer" has the same meaning as in section 1.1 of NI 52-107;
"short form prospectus" means a prospectus filed in the form of Form 44-101F1;
"special warrant" means a security that, by its terms or the terms of an accompanying contractual obligation,
(a) entitles or requires the holder to acquire another security without payment of material additional consideration and obliges the issuer of either security to undertake efforts to file a prospectus to qualify the distribution of the other security, or
(b) entitles or requires the holder to acquire another security without payment of material additional consideration and the issuer files a prospectus to qualify the distribution of the other security;
"subject security" means a security that results, or would result if and when issued, in an existing class of securities being considered restricted securities;
"subordinate voting security" means a restricted security that carries a right to vote, if there are securities of another class outstanding that carry a greater right to vote on a per security basis;
"transition year" means the financial year of an issuer or business in which the issuer or business changes its financial year-end;
"TSX/TSXV personal information form" means a completed personal information form of an individual in compliance with the requirements of Form 4 for the Toronto Stock Exchange or Form 2A for the TSX Venture Exchange, as applicable, each as amended from time to time;
"U.S. AICPA GAAS" has the same meaning as in section 1.1 of NI 52-107;
"U.S. GAAP" has the same meaning as in section 1.1 of NI 52-107;
"U.S. marketplace" has the same meaning as in section 1.1 of NI 51-102;
"U.S. PCAOB GAAS" has the same meaning as in section 1.1 of NI 52-107;
"venture issuer" has the same meaning as in section 1.1 of NI 51-102 except the "applicable time" is the date the prospectus is filed;
"waiting period" means the period of time between the issuance of a receipt by the regulator for a preliminary prospectus and the issuance of a receipt by the regulator for a final prospectus.
Interpretation of "prospectus", "preliminary prospectus", "final prospectus", "long form prospectus", and "short form prospectus"
1.2 (1) In this Instrument, a reference to a "prospectus" includes a preliminary long form prospectus, a final long form prospectus, a preliminary short form prospectus, and a final short form prospectus.
(2) In this Instrument, a reference to a "preliminary prospectus" includes a preliminary long form prospectus and a preliminary short form prospectus.
(3) In this Instrument, a reference to a "final prospectus" includes a final long form prospectus and a final short form prospectus.
(4) In this Instrument, a reference to a "long form prospectus" includes a preliminary long form prospectus and a final long form prospectus.
(5) In this Instrument, a reference to a "short form prospectus" includes a preliminary short form prospectus and a final short form prospectus.
(6) Despite subsections (1), (2), and (3), in Form 41-101F1 and Form 41-101F2,
(a) a reference to a "prospectus" only includes a preliminary long form prospectus and a final long form prospectus,
(b) a reference to a "preliminary prospectus" only includes a preliminary long form prospectus, and
(c) a reference to a "final prospectus" only includes a final long form prospectus.
Interpretation of "business"
1.3 In this Instrument, unless otherwise stated, a reference to a business includes an interest in an oil and gas property to which reserves, as defined in NI 51-101, have been specifically attributed.
Interpretation of "affiliate"
1.4 In this Instrument, an issuer is an affiliate of another issuer if the issuer would be an affiliate of the other issuer under subsection 1.1(2) of NI 51-102.
Interpretation of "payments to be made"
1.5 For the purposes of the definition of "full and unconditional credit support", payments to be made by an issuer of securities as stipulated in the terms of the securities include
(a) any amounts to be paid as dividends in accordance with, and on the dividend payment dates stipulated in, the provisions of the securities, whether or not the dividends have been declared, and
(b) any discretionary dividends, provided that the terms of the securities or an agreement governing rights of holders of the securities expressly provides that the holder of the securities will be entitled, once the discretionary dividend is declared, to receive payment from the credit supporter within 15 days of any failure by the issuer to pay the declared dividend.
PART 2: Requirements for All Prospectus Distributions
Application of the Instrument
2.1 (1) Subject to subsection (2), this Instrument applies to a prospectus filed under securities legislation and a distribution of securities subject to the prospectus requirement.
(2) This Instrument does not apply to a prospectus filed under NI 81-101 or a distribution of securities under such a prospectus.
Language
2.2 (1) An issuer must file a prospectus and any other document required to be filed under this Instrument or NI 44-101 in French or in English.
(2) In Québec, a prospectus and any document required to be incorporated by reference into a prospectus must be in French or in French and English.
(3) Despite subsection (1), if an issuer files a document only in French or only in English but delivers to an investor or prospective investor a version of the document in the other language, the issuer must file that other version not later than when it is first delivered to the investor or prospective investor.
(4) If an issuer files a document under this Instrument that is a translation of a document prepared in a language other than French or English, the issuer must
(a) attach a certificate as to the accuracy of the translation to the filed document, and
(b) make a copy of the document in the original language available on request.
General requirements
2.3 (1) An issuer must not file
a finalan amendment to a preliminary prospectus more than 90 days after the date of the receipt for the preliminary prospectusthat relates to the final prospectus.(1.1) An issuer must not file a final prospectus more than 90 days after the date of the receipt for the preliminary prospectus or an amendment to the preliminary prospectus which relate to the final prospectus.
(1.2) If an issuer files an amendment to a preliminary prospectus pursuant to subsection (1), the total period of time permitted to file the final prospectus under subsection (1.1) must not exceed 180 days from the date of the receipt of the preliminary prospectus.
(2) An issuer must not file
(a) a prospectus more than three business days after the date of the prospectus, and
(b) an amendment to a prospectus more than three business days after the date of the amendment to the prospectus.
Special warrants
2.4 (1) An issuer must not file a prospectus or an amendment to a prospectus to qualify the distribution of securities issued upon the exercise of special warrants or other securities acquired on a prospectus-exempt basis unless holders of the special warrants or other securities have been provided with a contractual right of rescission.
(2) A contractual right of rescission under subsection (1) must provide that, if a holder of a special warrant who acquires another security of the issuer on exercise of the special warrant as provided for in the prospectus is, or becomes, entitled under the securities legislation of a jurisdiction to the remedy of rescission because of the prospectus or an amendment to the prospectus containing a misrepresentation,
(a) the holder is entitled to rescission of both the holder's exercise of its special warrant and the private placement transaction under which the special warrant was initially acquired,
(b) the holder is entitled in connection with the rescission to a full refund of all consideration paid to the underwriter or issuer, as the case may be, on the acquisition of the special warrant, and
(c) if the holder is a permitted assignee of the interest of the original special warrant subscriber, the holder is entitled to exercise the rights of rescission and refund as if the holder was the original subscriber.
PART 3: Form of Prospectus
Form of prospectus
3.1 (1) Subject to subsection (2) and (3), an issuer filing a prospectus must file the prospectus in the form of Form 41-101F1.
(2) An issuer that is an investment fund filing a prospectus must file the prospectus in the form of Form 41-101F2.
(3) An issuer that is qualified to file a short form prospectus may file a short form prospectus.
PART 4: Financial Statements and Related Documents in a Long Form Prospectus
Application
4.1 (1) An issuer, other than an investment fund, that files a long form prospectus must include in the long form prospectus the financial statements and the management's discussion and analysis required by this Instrument.
(2) Subject to Part 15, an investment fund that files a long form prospectus must include in the long form prospectus the financial statements and the management reports of fund performance required by this Instrument.
(3) For the purposes of this Part, "financial statements" do not include pro forma financial statements.
Audit of financial statements
4.2 (1) Any financial statements included in a long form prospectus filed in the form of Form 41-101F1 must be audited in accordance with NI 52-107 unless an exception in section 32.5 or subsection 35.1(3) of Form 41-101F1 applies.
(2) Any financial statements, other than an interim financial report, included in or incorporated by reference into a long form prospectus of an investment fund filed in the form of Form of 41-101F2 must meet the audit requirements of Part 2 of NI 81-106.
Review of unaudited financial statements
4.3 (1) Subject to subsection (2) and (3), any unaudited financial statements included in, or incorporated by reference into, a long form prospectus must have been reviewed in accordance with the relevant standards set out in the Handbook for a review of financial statements by the person or company's auditor or a review of financial statements by a public accountant.
(2) Subsection (1) does not apply to an investment fund's unaudited financial statements filed after the date of filing of the prospectus that are incorporated by reference into the prospectus under Part 15.
(3) If NI 52-107 permits the financial statements of the person or company in subsection (1) to be audited in accordance with
(a) U.S. AICPA GAAS, the unaudited financial statements may be reviewed in accordance with the review standards issued by the American Institute of Certified Public Accountants,
(a.1) U.S. PCAOB GAAS, the unaudited financial statements may be reviewed in accordance with the review standards issued by the Public Company Accounting Oversight Board (United States of America),
(b) International Standards on Auditing, the unaudited financial statements may be reviewed in accordance with International Standards on Review Engagement issued by the International Auditing and Assurance Standards Board, or
(c) auditing standards that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the person or company is subject, the unaudited financial statements
(i) may be reviewed in accordance with review standards that meet the foreign disclosure requirements of the designated foreign jurisdiction, or
(ii) do not have to be reviewed if
(A) the designated foreign jurisdiction does not have review standards for unaudited financial statements, and
(B) the long form prospectus includes disclosure that the unaudited financial statements have not been reviewed.
Approval of financial statements and related documents
4.4 (1) An issuer must not file a long form prospectus unless each financial statement, each management's discussion and analysis, and each management report of fund performance, as applicable, of a person or company included in, or incorporated by reference into, the long form prospectus has been approved by the board of directors of the person or company.
(2) An investment fund that is a trust must not file a long form prospectus unless each financial statement and each management report of fund performance of the investment fund included in, or incorporated by reference into, the long form prospectus has been approved by the trustee or trustees of the investment fund or another person or company authorized to do so by the constating documents of the investment fund.
PART 5: Certificates
Interpretation
5.1 For the purposes of this Part,
(a) "issuer certificate form" means a certificate in the form set out in
(i) section 37.2 of Form 41-101F1,
(ii) section 39.1 of Form 41-101F2,
(iii) section 21.2 of Form 44-101F1,
(iv) NI 44-102 in
(A) section 1.1 of Appendix A,
(B) section 2.1 of Appendix A,
(C) section 1.1 of Appendix B, or
(D) section 2.1 of Appendix B, or
(v) NI 44-103 in
(A) paragraph 7 of subsection 3.2(1), or
(B) paragraph 3 of subsection 4.5(2), and
(b) "underwriter certificate form" means a certificate in the form set out in
(i) section 37.3 of Form 41-101F1,
(ii) section 39.3 of Form 41-101F2,
(iii) section 21.3 of Form 44-101F1,
(iv) NI 44-102 in
(A) section 1.2 of Appendix A,
(B) section 2.2 of Appendix A,
(C) section 1.2 of Appendix B, or
(D) section 2.2 of Appendix B, or
(v) NI 44-103 in
(A) paragraph 8 of subsection 3.2(1), or
(B) paragraph 4 of subsection 4.5(2).
Date of certificates
5.2 The date of the certificates in a prospectus or an amendment to a prospectus must be the same as the date of the prospectus or the amendment to the prospectus, as applicable.
Certificate of issuer
5.3 (1) Except in Ontario, a prospectus must contain a certificate signed by the issuer.
[Note: In Ontario, section 58 of the Securities Act (Ontario) imposes a similar requirement that a prospectus contain a certificate of the issuer.]{1}
(2) A prospectus certificate that is required to be signed by the issuer under this Instrument or other securities legislation must be in the applicable issuer certificate form.
Corporate issuer
5.4 (1) Except in Ontario, if the issuer is a company, a prospectus certificate that is required to be signed by the issuer under this Instrument or other securities legislation must be signed
(a) by the chief executive officer and the chief financial officer of the issuer, and
(b) on behalf of the board of directors, by
(i) any two directors of the issuer, other than the persons referred to in paragraph (a) above, or
(ii) if the issuer has only three directors, two of whom are the persons referred to in paragraph (a), all of the directors of the issuer.
(2) Except in Ontario, if the regulator is satisfied that either or both of the chief executive officer or chief financial officer cannot sign a certificate in a prospectus, the regulator may accept a certificate signed by another officer.
[Note: In Ontario, section 58 of the Securities Act (Ontario) imposes similar requirements regarding who must sign the issuer certificate.]
Trust issuer
5.5 (1) If the issuer is a trust, a prospectus certificate that is required to be signed by the issuer under this Instrument or other securities legislation must be signed by
(a) the individuals who perform functions for the issuer similar to those performed by the chief executive officer and the chief financial officer of a company, and
(b) two trustees of the issuer, on behalf of the trustees of the issuer.
(2) If a trustee that is signing the certificate of the issuer is
(a) an individual, the individual must sign the certificate,
(b) a company, the certificate must be signed
(i) by the chief executive officer and the chief financial officer of the trustee, and
(ii) on behalf of the board of directors of the trustee, by
(A) any two directors of the trustee, other than the persons referred to in subparagraph (i), or
(B) if the trustee has only three directors, two of whom are the persons referred to in subparagraph (i), all of the directors of the trustee,
(c) a limited partnership, the certificate must be signed by each general partner of the limited partnership as described in subsection 5.6(2) in relation to an issuer that is a limited partnership, or
(d) not referred to in paragraphs (a), (b) or (c), the certificate may be signed by any person or company with authority to bind the trustee.
(3) Despite subsections (1) and (2), if the issuer is an investment fund and the declaration of trust, trust indenture or trust agreement establishing the investment fund delegates the authority to do so, or otherwise authorizes an individual or company to do so, the certificate may be signed by the individual or company to whom the authority is delegated or that is authorized to sign the certificate.
(4) Despite subsections (1) and (2), if the trustees of an issuer, other than an investment fund, do not perform functions for the issuer similar to those performed by the directors of a company, the trustees are not required to sign the prospectus certificate of the issuer provided that at least two individuals who do perform functions for the issuer similar to those performed by the directors of a company sign the certificate.
(5) If the regulator is satisfied that an individual who performs functions for the issuer similar to those performed by either the chief executive officer or the chief financial officer of a company cannot sign a certificate in a prospectus, the regulator may accept a certificate signed by another individual.
Limited partnership issuer
5.6 (1) If the issuer is a limited partnership, a prospectus certificate that is required to be signed by the issuer under this Instrument or other securities legislation must be signed by
(a) the individuals who perform functions for the issuer similar to those performed by the chief executive officer and the chief financial officer of a company, and
(b) each general partner of the issuer.
(2) If a general partner of the issuer is
(a) an individual, the individual must sign the certificate,
(b) a company, the certificate must be signed
(i) by the chief executive officer and the chief financial officer of the general partner, and
(ii) on behalf of the board of directors of the general partner, by
(A) any two directors of the general partner, other than the persons referred to in subparagraph (i), or
(B) if the general partner has only three directors, two of whom are the persons referred to in subparagraph (i), all of the directors of the general partner,
(c) a limited partnership, the certificate must be signed by each general partner of the limited partnership and, for greater certainty, this subsection applies to each general partner required to sign,
(d) a trust, the certificate must be signed by the trustees of the general partner as described in subsection 5.5(2) in relation to an issuer that is a trust, or
(e) not referred to in paragraphs (a) to (d), the certificate may be signed by any person or company with authority to bind the general partner.
(3) If the regulator is satisfied that an individual who performs functions for the issuer similar to those performed by either the chief executive officer or the chief financial officer of a company cannot sign a certificate in a prospectus, the regulator may accept a certificate signed by another individual.
Other issuer
5.7 If an issuer is not a company, trust or limited partnership, a prospectus certificate that is required to be signed by the issuer under this Instrument or other securities legislation must be signed by the persons or companies that, in relation to the issuer, are in a similar position or perform a similar function to the persons or companies required to sign under sections 5.4, 5.5 and 5.6.
Reverse takeovers
5.8 Except in Ontario, if an issuer is involved in a proposed reverse takeover that has progressed to a state where a reasonable person would believe that the likelihood of the reverse takeover being completed is high, a prospectus must contain a certificate, in the applicable issuer certificate form, signed
(a) by the chief executive officer and the chief financial officer of the reverse takeover acquirer, and
(b) on behalf of the board of directors of the reverse takeover acquirer, by
(i) any two directors of the reverse takeover acquirer, other than the persons referred to in paragraph (a) above, or
(ii) if the reverse takeover acquirer has only three directors, two of whom are the persons referred to in paragraph (a), all of the directors of the reverse takeover acquirer.
Certificate of underwriter
5.9 (1) Except in Ontario, a prospectus must contain a certificate signed by each underwriter who, with respect to the securities offered by the prospectus, is in a contractual relationship with the issuer or a securityholder whose securities are being offered by the prospectus.
[Note: In Ontario, subsection 59(1) of the Securities Act (Ontario) imposes a similar requirement that a prospectus contain a certificate signed by each underwriter in a contractual relationship with the issuer.]
(2) A prospectus certificate that is required to be signed by an underwriter under this Instrument or other securities legislation must be in the applicable underwriter certificate form.
(3) Except in Ontario, with the consent of the regulator, a certificate in a prospectus may be signed by the underwriter's agent duly authorized in writing by the underwriter.
[Note: In Ontario, subsection 59(2) of the Securities Act (Ontario) provides a similar discretion to the Director to permit the certificate to be signed by an underwriter's agent.]
Certificate of investment fund manager
5.10 (1) If the issuer has an investment fund manager, a prospectus must contain a certificate, in the applicable issuer certificate form, signed by the investment fund manager.
(2) If the investment fund manager is a company, the certificate must be signed
(a) by the chief executive officer and the chief financial officer of the investment fund manager, and
(b) on behalf of the board of directors, by
(i) any two directors of the investment fund manager, other than the persons referred to in paragraph (a) above, or
(ii) if the investment fund manager has only three directors, two of whom are the persons referred to in paragraph (a), all of the directors of the investment fund manager.
(3) If the investment fund manager is a limited partnership, the certificate must be signed by the general partner of such limited partnership as described in subsection 5.6(2) in relation to an issuer that is a limited partnership.
Certificate of principal distributor
5.10.1 (1) If the issuer is an investment fund that has a principal distributor, a prospectus must contain a certificate, in the applicable issuer certificate form, signed by the principal distributor.
(2) If the principal distributor is a company, the certificate must be signed by any officer or director of the principal distributor duly authorized to sign.
Certificate of promoter
5.11 (1) Except in Ontario, a prospectus must contain a certificate signed by each promoter of the issuer.
[Note: In Ontario, subsection 58(1) of the Securities Act (Ontario) imposes a similar requirement that a prospectus shall contain a certificate signed by each promoter of the issuer.]
(2) A prospectus certificate required to be signed by a promoter under this Instrument or other securities legislation must be in the applicable issuer certificate form.
(3) Except in Ontario, the regulator may require any person or company who was a promoter of the issuer within the two preceding years to sign a certificate to the prospectus, in the applicable issuer certificate form.
[Note: In Ontario, subsection 58(6) of the Securities Act (Ontario) provides the Director with similar discretion to require a person or company who was a promoter of the issuer within the two preceding years to sign a prospectus certificate, subject to such conditions as the Director considers proper.]
(4) Despite subsection (3), in British Columbia, the powers of the regulator with respect to the matters described in subsection (3) are set out in the Securities Act (British Columbia).
(5) Except in Ontario, with the consent of the regulator, a certificate of a promoter in a prospectus may be signed by an agent duly authorized in writing by the person or company required to sign the certificate.
[Note: In Ontario, subsection 58(7) of the Securities Act (Ontario) provides the Director with similar discretion to permit a certificate in a prospectus to be signed by an agent of a promoter.
Certificate of credit supporter
5.12 (1) If there is a related credit supporter of the issuer or a subsidiary of the issuer, a prospectus must contain a certificate of the related credit supporter, in the applicable issuer certificate form, signed
(a) by the chief executive officer and the chief financial officer of the credit supporter, and
(b) on behalf of the board of directors of the credit supporter, by
(i) any two directors of the credit supporter, other than the persons referred to in paragraph (a) above, or
(ii) if the credit supporter has only three directors, two of whom are the persons referred to in paragraph (a), all of the directors of the credit supporter.
(2) With the consent of the regulator, a certificate in a prospectus may be signed by the credit supporter's agent duly authorized in writing by the credit supporter.
(3) Except in Ontario, the regulator may require any other person or company that is a credit supporter of either the issuer or a subsidiary of the issuer to sign a certificate to the prospectus, in the applicable issuer certificate form.
[Note: In Ontario, subsection 58(6) of the Securities Act (Ontario) provides the Director with similar discretion to require a person or company who is a guarantor of the securities being distributed to sign a prospectus certificate, subject to such conditions as the Director considers proper.]
(4) Despite subsection (3), in British Columbia, the powers of the regulator with respect to the matters described in subsection (3) are set out in the Securities Act (British Columbia).
Certificate of selling securityholders
5.13 (1) Except in Ontario, the regulator may require any person or company that is a selling securityholder to sign a certificate to the prospectus, in the applicable issuer certificate form.
(2) Despite subsection (1), in British Columbia, the powers of the regulator with respect to the matters described in subsection (1) are set out in the Securities Act (British Columbia).
Certificate of operating entity
5.14 (1) For the purposes of this section, the term "operating entity" means, in relation to an issuer, a person or company through which the business of the issuer, or a material part of the business of the issuer, is conducted and for which the issuer is required under securities legislation, or has undertaken, to provide to its securityholders separate financial statements of the person or company if the issuer's financial statements do not include consolidated information concerning the person or company.
(2) A prospectus of an issuer that is a trust must contain a certificate, in the applicable issuer certificate form, signed
(a) by the chief executive officer and the chief financial officer of the operating entity, and
(b) on behalf of the board of directors of the operating entity, by
(i) any two directors of the operating entity, other than the persons referred to in paragraph (a) above, or
(ii) if the operating entity has only three directors, two of whom are the persons referred to in paragraph (a), all of the directors of the operating entity.
Certificate of other persons
5.15 (1) Except in Ontario, the regulator may, in its discretion, require any person or company to sign a certificate to the prospectus, in the form that the regulator considers appropriate.
(2) Despite subsection (1), in British Columbia, the powers of the regulator with respect to the matters described in subsection (1) are set out in the Securities Act (British Columbia).
PART 6: Amendments
Form of amendment
6.1 (1) An amendment to a prospectus must be either
(a) an amendment that does not fully restate the text of the prospectus, or
(b) an amended and restated prospectus.
(2) An amendment to a prospectus must be identified as follows:
(a) for an amendment that does not restate the text of the prospectus:
"Amendment no. [insert amendment number] dated [insert date of amendment] to [identify prospectus] dated [insert date of prospectus being amended]."; or
(b) for an amended and restated prospectus:
"Amended and restated [identify prospectus] dated [insert date of amendment], amending and restating [identify prospectus] dated [insert date of prospectus being amended]."
Required documents for filing an amendment
6.2 An issuer that files an amendment to a prospectus must
(a) file a signed copy of the amendment,
(b) deliver to the regulator a copy of the prospectus blacklined to show the changes made by the amendment, if the amendment is also a restatement of the prospectus,
(c) file or deliver any supporting documents required under this Instrument or other securities legislation to be filed or delivered with a prospectus, unless the documents originally filed or delivered with the prospectus are correct as of the date the amendment is filed, and
(d) in case of an amendment to a final prospectus, file any consent letter required to be filed with a final prospectus, dated as of the date of the amendment.
Auditor's comfort letter
6.3 An issuer must deliver a new auditor's comfort letter, if an amendment to
(a) a preliminary long form prospectus materially affects, or relates to, an auditor's comfort letter delivered under subparagraph 9.1(b)(iii),
(b) a preliminary short form prospectus materially affects, or relates to, an auditor's comfort letter delivered under subparagraph 4.1(b)(ii) of NI 44-101.
Delivery of amendments
6.4 Except in Ontario, an issuer must deliver an amendment to a preliminary prospectus as soon as practicable to each recipient of the preliminary prospectus according to the record of recipients required to be maintained under securities legislation.
[Note: In Ontario, subsection 57(3) of the Securities Act (Ontario) imposes a similar requirement regarding the delivery of amendments to a preliminary prospectus.]
Amendment to a preliminary prospectus
6.5 (1) Except in Ontario, if, after a receipt for a preliminary prospectus is issued but before a receipt for the final prospectus is issued, a material adverse change occurs, an amendment to the preliminary prospectus must be filed as soon as practicable, but in any event within 10 days after the day the change occurs.
[Note: In Ontario, subsection 57(1) of the Securities Act (Ontario) imposes a similar requirement to file an amendment to a preliminary prospectus where there has been a material adverse change.]
(2) The regulator must issue a receipt for an amendment to a preliminary prospectus as soon as practicable after the amendment is filed.
Amendment to a final prospectus
6.6 (1) Except in Ontario, if, after a receipt for a final prospectus is issued but before the completion of the distribution under the final prospectus, a material change occurs, an issuer must file an amendment to the final prospectus as soon as practicable, but in any event within 10 days after the day the change occurs.
[Note: In Ontario, subsection 57(1) of the Securities Act (Ontario) imposes a similar requirement to file an amendment to a final prospectus where there has been a material change.]
(2) Except in Ontario, if, after a receipt for a final prospectus or an amendment to the final prospectus is issued but before the completion of the distribution under the final prospectus or the amendment to the final prospectus, securities in addition to the securities previously disclosed in the final prospectus or the amendment to the final prospectus are to be distributed, an amendment to the final prospectus disclosing the additional securities must be filed, as soon as practicable, but in any event within 10 days after the decision to increase the number of securities offered.
[Note: In Ontario, subsection 57(2) of the Securities Act (Ontario) imposes a similar requirement to file an amendment to a prospectus any time there is a proposed distribution of securities in addition to that disclosed under the prospectus.]
(3) Except in Ontario, the regulator must issue a receipt for an amendment to a final prospectus filed under this section unless the regulator considers that there are grounds set out in securities legislation that would cause the regulator not to issue the receipt for a prospectus.
[Note: In Ontario, subsection 57(2.1) of the Securities Act (Ontario) imposes a similar obligation for the Director to issue a receipt for an amendment to a prospectus unless there are proper grounds for refusing the receipt.]
(4) Except in Ontario, the regulator must not refuse to issue a receipt under subsection (3) without giving the issuer who filed the prospectus an opportunity to be heard.
[Note: In Ontario, subsections 57(2.1) and 61(3) of the Securities Act (Ontario) impose a similar restriction on the Director to refuse to issue a receipt for a prospectus without first giving an issuer an opportunity to be heard.]
(5) Except in Ontario, an issuer must not proceed with a distribution or additional distribution if an amendment to a final prospectus is required to be filed until a receipt for the amendment to the final prospectus is issued by the regulator.
[Note: In Ontario, subsection 57(2.2) of the Securities Act (Ontario) imposes a similar restriction in respect of a distribution or additional distribution before a receipt is issued for an amendment to the final prospectus.]
(6) Subsection (5) does not apply to an investment fund in continuous distribution.
[Note: In Ontario, section 2.2 of OSC Rule 41-801 Implementing National Instrument 41-101 General Prospectus Requirements and Consequential Amendments provides a similar exemption for an investment fund in continuous distribution from the requirement to obtain a receipt prior to making a distribution or additional distribution under an amendment to a final prospectus.]
PART 7: Non-fixed Price Offerings and Reduction of Offering Price under a Final Prospectus
Application
7.1 This Part does not apply to an investment fund in continuous distribution.
Non-fixed price offerings and reduction of offering price
7.2 (1) A person or company distributing a security under a prospectus must do so at a fixed price.
(2) Despite subsection (1), securities may be distributed for cash at non-fixed prices under a prospectus if the securities have received a rating, on a provisional or final basis, from at least one approved rating organization at the time of
(a) the filing of the preliminary short form prospectus, if the issuer is filing a prospectus in the form of a short form prospectus under NI 44-101, or
(b) the filing of the long form prospectus.
(3) Despite subsection (1), if securities are distributed for cash under a prospectus, the price of the securities may be decreased from the initial offering price disclosed in the prospectus and, after such a decrease, changed from time to time to an amount not greater than the initial offering price, without filing an amendment to the prospectus to reflect the change, if
(a) the securities are distributed through one or more underwriters that have agreed to purchase all of the securities at a specified price,
(b) the proceeds to be received by the issuer or selling securityholders are disclosed in the prospectus as being fixed, and
(c) the underwriters have made a reasonable effort to sell all of the securities distributed under the prospectus at the initial offering price disclosed in the final prospectus.
(4) Despite subsections (2) and (3), the price at which securities may be acquired on exercise of rights must be fixed.
PART 8: Best Efforts Distributions
Application
8.1 This Part does not apply to an investment fund in continuous distribution.
Distribution period
8.2 (1) Unless an amendment to the final prospectus is filed and the regulator has issued a receipt for the amendment, if securities are being distributed on a best efforts basis, the distribution must cease within 90 days after the date of the receipt for the final prospectus.
(2) Unless a further amendment to the final prospectus is filed and the regulator has issued a receipt for the further amendment, if an amendment to a final prospectus is filed and the regulator has issued a receipt for the amendment under subsection (1), the distribution must cease within 90 days after the date of the receipt for the amendment to the final prospectus.
(3) The total period of the distribution under subsections (1) and (2) must not end more than 180 days from the date of receipt for the final prospectus.
Minimum amount of funds
8.3 If securities are being distributed on a best efforts basis, other than an offering of securities to be distributed continuously, and the prospectus discloses that a minimum amount of funds must be raised,
(a) the issuer must appoint a registered dealer authorized to make the distribution, a Canadian financial institution, or a lawyer who is a practicing member in good standing with a law society of a jurisdiction in which the securities are being distributed, or a notary in Québec, to hold in trust all funds received from subscriptions until the minimum amount of funds stipulated in the final prospectus has been raised, and
(b) if the minimum amount of funds is not raised within the appropriate period of the distribution prescribed by section 8.2, the person or company holding the funds in trust referred to in paragraph (a) must return the funds to the subscribers without any deductions.
PART 9: Requirements for Filing a Long Form Prospectus
Required documents for filing a preliminary or pro forma long form prospectus
9.1 (1) An issuer that files a preliminary or pro forma long form prospectus must
(a) file the following with the preliminary or pro forma long form prospectus
(i) Signed Copy -- in the case of a preliminary long form prospectus, a signed copy of the preliminary long form prospectus;
(ii) Documents Affecting the Rights of Securityholders - a copy of the following documents, and any amendments to the following documents, that have not previously been filed:
(A) articles of incorporation, amalgamation, continuation or any other constating or establishing documents of the issuer, unless the constating or establishing document is a statutory or regulatory instrument,
(B) by-laws or other corresponding instruments currently in effect,
(C) any securityholder or voting trust agreement that the issuer has access to and that can reasonably be regarded as material to an investor in securities of the issuer,
(D) any securityholders' rights plans or other similar plans, and
(E) any other contract of the issuer or a subsidiary of the issuer that creates or can reasonably be regarded as materially affecting the rights or obligations of the issuer's securityholders generally;
(iii) Material Contracts - a copy of any material contract required to be filed under section 9.3;
(iv) Investment Fund Documents - if the issuer is an investment fund, the documents filed under subparagraphs (ii) and (iii) must include a copy of
(A) any declaration of trust or trust agreement of the investment fund, limited partnership agreement, or any other constating or establishing documents of the investment fund,
(B) any agreement of the investment fund or the trustee with the manager of the investment fund,
(C) any agreement of the investment fund, the manager or trustee with the portfolio advisers of the investment fund,
(D) any agreement of the investment fund, the manager or trustee with the custodian of the investment fund, and
(E) any agreement of the investment fund, the manager or trustee with the principal distributor of the investment fund;
(v) Mining Reports - if the issuer has a mineral project, the technical reports required to be filed with a preliminary long form prospectus under NI 43-101; and
(vi) Reports and Valuations - a copy of each report or valuation referred to in the preliminary long form prospectus for which a consent is required to be filed under section 10.1 and that has not previously been filed, other than a technical report that
(A) deals with a mineral project or oil and gas activities, and
(B) is not otherwise required to be filed under subparagraph (v); and
(b) deliver to the regulator, concurrently with the filing of the preliminary or pro forma long form prospectus, the following:
(i) Blacklined Copy - in the case of a pro forma prospectus, a copy of the pro forma prospectus blacklined to show changes and the text of deletions from the latest prospectus previously filed;
(ii) Personal Information Form and Authorization to Collect, Use and Disclose Personal Information - a completed
Appendix Apersonal information form for,(A) each director and executive officer of an issuer,
(B) if the issuer is an investment fund, each director and executive officer of the manager of the issuer,
(C) each promoter of the issuer, and
(D) if the promoter is not an individual, each director and executive officer of the promoter
,; and
for whom the issuer has not previously filed or delivered,
(E) a completed personal information form and authorization in the form set out in Appendix A,
(F) before March 17, 2008, a completed authorization in
(I) the form set out in Appendix B of NI 44-101,
(II) the form set out in Ontario Form 41-501F2 Authorization of Indirect Collection of Personal Information, or
(III) the form set out in Appendix A of Québec Regulation Q-28 Respecting General Prospectus Requirements, or(G) before March 17, 2008, a completed personal information form or authorization in a form substantially similar to a personal information form or authorization in clause (E) or (F), as permitted under securities legislation; and(iii) Auditor's Comfort Letter regarding Audited Financial Statements - if a financial statement of an issuer or a business included in, or incorporated by reference into, a preliminary or pro forma long form prospectus is accompanied by an unsigned auditor's report, a signed letter addressed to the regulator from the auditor of the issuer or of the business, as applicable, prepared in accordance with the form suggested for this circumstance in the Handbook.
(2) Despite subparagraph 9.1(1)(b)(ii), an issuer is not required to file a personal information form for an individual if all of the following are satisfied:
(a) a personal information form of the individual has been executed by the individual within three years preceding the date of the filing of the preliminary or pro forma long form prospectus;
(b) the personal information form was delivered to the regulator or, in Québec, the securities regulatory authority
(i) by an issuer on behalf of the individual on or after [insert effective date of amendments]; or
(ii) by the issuer on behalf of the individual after March 16, 2008 but before [insert effective date of amendments] in the form set out in Appendix A to NI 41-101 in effect during this period;
(c) the information concerning the individual contained in the responses to
(i) questions 6 through 10 of the personal information form referenced in subparagraph (b)(i) remains correct as at the date of the certificate referred to in paragraph (d); or
(ii) questions 4(B) and (C) and questions 6 through 9 of the personal information form referenced in subparagraph (b)(ii) remains correct as at the date of the certificate referred to in paragraph (d);
(d) the issuer delivers to the regulator or, in Québec, the securities regulatory authority, concurrently with the filing of the preliminary or pro forma long form prospectus, a certificate of the issuer in the form set out in Schedule 4 of Appendix A stating that the individual has provided the issuer with confirmation in respect of the requirement contained in paragraph (c);
(e) the certificate referenced in paragraph (d) is dated no earlier than 30 days before the filing of the preliminary or pro forma long form prospectus.
Required documents for filing a final long form prospectus
9.2 An issuer that files a final long form prospectus must
(a) file the following with the final long form prospectus:
(i) Signed Copy -- a signed copy of the final long form prospectus;
(ii) Documents Affecting the Rights of Securityholders - a copy of any document described under subparagraph 9.1(a)(ii) that has not previously been filed;
(iii) Material Contracts - a copy of each material contract required to be filed under section 9.3 that has not previously been filed under subparagraph 9.1(a)(iii);
(iv) Investment Fund Documents - a copy of any document described under subparagraph 9.1(a)(iv) that has not previously been filed;
(v) Other Reports and Valuations - a copy of any report or valuation referred to in the final long form prospectus, for which a consent is required to be filed under section 10.1 and that has not previously been filed, other than a technical report that
(A) deals with a mineral project or oil and gas activities of the issuer, and
(B) is not otherwise required to be filed under subparagraph 9.1(a)(v) or 9.1(a)(vi);
(vi) Issuer's Submission to Jurisdiction - a submission to jurisdiction and appointment of agent for service of process of the issuer in the form set out in Appendix B, if an issuer is incorporated or organized in a foreign jurisdiction and does not have an office in Canada;
(vii) Non-Issuer's Submission to Jurisdiction - a submission to jurisdiction and appointment of agent for service of process of
(A)
(A)each selling securityholder,(A.1) each director of the issuer, and
(B)
eachany other person or companyrequired to signthat provides or signs a certificate under Part 5 or other securities legislation, other than an issuer,in the form set out in Appendix C, if the person or company is incorporated or organized in a foreign jurisdiction and does not have an office in Canada or is an individual who resides outside of Canada;
(viii) Expert's Consents -- the consents required to be filed under section 10.1;
(ix) Credit Supporter's Consent -- the written consent of the credit supporter to the inclusion of its financial statements in the final long form prospectus, if financial statements of a credit supporter are required under Item 33 of Form 41-101F1 to be included in a final long form prospectus and a certificate of the credit supporter is not required under section 5.12 to be included in the final long form prospectus;
(x) Undertaking in Respect of Credit Supporter Disclosure -- an undertaking of the issuer to file the periodic and timely disclosure of a credit supporter similar to the disclosure provided under section 12.1 of Form 44-101F1, so long as the securities being distributed are issued and outstanding;
(xi) Undertaking in Respect of Continuous Disclosure - An undertaking of the issuer to provide to its securityholders separate financial statements for an operating entity that investors need to make an informed decision about investing in the issuer's securities if
(A) the issuer is an income trust that is formed as a mutual fund trust as that term is used in the Income Tax Act (Canada), other than an "investment fund" as defined in section 1.1 of NI 81-106,
(B) the underlying business or income producing assets of the operating entity generate net cash flow available for distribution to the issuer's securityholders, and
(C) the issuer's performance and prospects depend primarily on the performance and operations of the operating entity;
(xii) Undertaking to File
DocumentsAgreements, Contracts and Material Contracts -- if an agreement, contract or declaration of trust under subparagraph (ii) or (iv) or a material contract under subparagraph (iii) has not been executed before the filing of the final long form prospectus but will be executed on or before the completion of the distribution, the issuer must file with the securities regulatory authority, no later than the time of filing of the final long form prospectus, an undertaking of the issuer to the securities regulatory authority to file the agreement, contract, declaration of trust or material contract promptly and in any event no later than seven days after execution of the agreement, contract, declaration of trust or material contract;(xii.1) Undertaking to File Unexecuted Documents -- if a document referred to in subparagraph (ii)
, (iii) or (iv)will not be executed in order to become effective and has notbeen executed orbecome effective before the filing of the final long form prospectus, but willbe executed orbecome effective on or before the completion of the distribution, the issuer must file with the securities regulatory authority, no later than the time of filing of the final long form prospectus, an undertaking of the issuer to the securities regulatory authority to file the document promptly and in any eventwithinno later than seven days after thecompletion of the distributiondocument becomes effective; and(xiii) Undertaking in Respect of Restricted Securities -- for distributions of non-voting securities, an undertaking of the issuer to give notice to holders of non-voting securities of a meeting of securityholders if a notice of such a meeting is given to its registered holders of voting securities; and
(b) deliver to the regulator, no later than the filing of the final long form prospectus
(i) Blackline Copy -- a copy of the final long form prospectus blacklined to show changes from the preliminary or pro forma long form prospectus; and
(ii) Communication with Exchange -- if the issuer has made an application to list the securities being distributed on an exchange in Canada, a copy of a communication in writing from the exchange stating that the application for listing has been made and has been accepted subject to the issuer meeting the requirements for listing of the exchange.
Material contracts
9.3 (1) Unless previously filed, an issuer that files a long form prospectus must file a material contract entered into
(a) since the beginning of the last financial year ending before the date of the prospectus, or
(b) before the beginning of the last financial year ending before the date of the prospectus if that material contract is still in effect.
(2) Despite subsection (1), an issuer is not required to file a material contract entered into in the ordinary course of business unless the material contract is
(a) a contract to which directors, officers, promoters, selling securityholders or underwriters are parties, other than a contract of employment,
(b) a continuing contract to sell the majority of the issuer's products or services or to purchase the majority of the issuer's requirements of goods, services, or raw materials,
(c) a franchise or licence or other agreement to use a patent, formula, trade secret, process or trade name,
(d) a financing or credit agreement with terms that have a direct correlation with anticipated cash distributions,
(e) an external management or external administration agreement, or
(f) a contract on which the issuer's business is substantially dependent.
(3) A provision in a material contract filed pursuant to subsections (1) or (2) may be omitted or marked to be unreadable if an executive officer of the issuer reasonably believes that disclosure of that provision would be seriously prejudicial to the interests of the issuer or would violate confidentiality provisions.
(4) Subsection (3) does not apply if the provision relates to
(a) debt covenants and ratios in financing or credit agreements,
(b) events of default or other terms relating to the termination of the material contract, or
(c) other terms necessary for understanding the impact of the material contract on the business of the issuer.
(5) If a provision is omitted or marked to be unreadable under subsection (3), the issuer must include a description of the type of information that has been omitted or marked to be unreadable immediately after the provision in the copy of the material contract filed by the issuer.
(6) Despite subsections (1) and (2), an issuer is not required to file a material contract entered into before January 1, 2002 if the issuer is a reporting issuer in at least one jurisdiction immediately before filing the prospectus.
PART 10: Consents and Licences, Registrations and Approvals
Consents of experts
10.1(1)
AnSubject to subsection (1.1), an issuer must file the written consent of(a) any solicitor, auditor, accountant, engineer, or appraiser,
(b) any notary in Québec, and
(c) any person or company whose profession or business gives authority to a statement made by that person or company
if that(1.1) Subsection (1) only applies if the person or company is named in a prospectus or an amendment to a prospectus, directly or, if applicable, in a document incorporated by reference,(
da) as having prepared or certified any part of the prospectus or the amendment,(
eb) as having opined on financial statements from which selected information included in the prospectus has been derived and which audit opinion is referred to in the prospectus directly or in a document incorporated by reference, or(
fc) as having prepared or certified a report, valuation, statement or opinion referred to in the prospectus or the amendment, directly or in a document incorporated by reference.(2) A consent referred to in subsection (1) must
(a) be filed no later than the time the final prospectus or the amendment to the final prospectus is filed or, for the purposes of future financial statements that have been incorporated by reference in a prospectus under subsection 15.2(3), no later than the date that those financial statements are filed,
(b) state that the person or company being named consents
(i) to being named, and
(ii) to the use of that person or company's report, valuation, statement or opinion,
(c) refer to the report, valuation, statement or opinion stating the date of the report, valuation, statement or opinion, and
(d) contain a statement that the person or company referred to in subsection (1)
(i) has read the prospectus, and
(ii) has no reason to believe that there are any misrepresentations in the information contained in it that are
(A) derived from the report, valuation, statement or opinion, or
(B) within the knowledge of the person or company as a result of the services performed by the person or company in connection with the report, financial statements, valuation, statement or opinion.
(3) In addition to any other requirement of this section, the consent of an auditor or accountant must also state
(a) the dates of the financial statements on which the report of the person or company is made, and
(b) that the person or company has no reason to believe that there are any misrepresentations in the information contained in the prospectus that are
(i) derived from the financial statements on which the person or company has reported, or
(ii) within the knowledge of the person or company as a result of the audit of the financial statements.
(4) Subsection (1) does not apply to an approved rating organization that issues a rating to the securities being distributed under the prospectus.
Licences, registrations and approvals
10.2 If the proceeds of the distribution will be used to substantially fund a material undertaking that would constitute a material departure from the business or operations of the issuer and the issuer has not obtained all material licences, registrations and approvals necessary for the stated principal use of proceeds,
(a) the issuer must appoint a registered dealer authorized to make the distribution, a Canadian financial institution, or a lawyer who is a practicing member in good standing with a law society of a jurisdiction in which the securities are being distributed, or a notary in Québec, to hold in trust all funds received from subscriptions until all material licences, registrations and approvals necessary for the stated principal use of proceeds have been obtained, and
(b) if all material licences, registrations and approvals necessary for the operation of the stated principal use of proceeds have not been obtained within 90 days from the date of receipt of the final prospectus, the trustee must return the funds to subscribers.
PART 11: Over-Allocation and Underwriters
Over-allocation
11.1 Securities that are sold to create the over-allocation position in connection with a distribution under a prospectus must be distributed under the prospectus.
Distribution of securities under a prospectus to an underwriter
11.2
NoExcept as required under section 11.3, no person or company may distribute securities under a prospectus to any person or company acting as an underwriter in connection with the distribution of securities under the prospectus, other than(a) an over-allotment option granted to one or more persons or companies for acting as an underwriter in connection with the distribution or any security issuable or transferable on the exercise of such an over-allotment option; or
(b) securities issued or paid as compensation to one or more persons or companies for acting as an underwriter in respect of other securities that are distributed under the prospectus, where the number or principal amount of the securities issued as compensation, on an as-if-converted basis, does not in the aggregate exceed 10% of the total of the base offering on an as-if converted basis plus any securities that would be acquired upon the exercise of an over-allotment option.
Take-up by underwriter
11.3 If an underwriter has agreed to purchase a specified number or principal amount of the securities at a specified price, the underwriter must take up the securities, if at all, within 42 days after the date of the receipt for the final prospectus.
PART 12: Restricted Securities
Application
12.1 This Part does not apply to
(a) securities of mutual funds,
(b) securities that carry a right to vote subject to a restriction on the number or percentage of securities that may be voted or owned by persons or companies that are not citizens or residents of Canada or that are otherwise considered as a result of any law applicable to the issuer to be non-Canadians, but only to the extent of the restriction, and
(c) securities that are subject to a restriction, imposed by any law governing the issuer, on the level of ownership of the securities by a person, company or combination of persons or companies, but only to the extent of the restriction.
Use of restricted security term
12.2 (1) An issuer must not refer to a security in a prospectus by a term or a defined term that includes the word "common" unless the security is an equity security to which are attached voting rights exercisable in all circumstances, irrespective of the number or percentage of securities owned, that are not less, per security, than the voting rights attached to any other outstanding security of the issuer.
(2) An issuer must not refer in a prospectus to a term or defined term that includes the word "preference" or "preferred", unless the security is a security, other than an equity security, to which is attached a preference or right over any class of equity security of the issuer.
(3) If restricted securities are referred to in the constating documents of the issuer by a term that is different from the appropriate restricted security term, the restricted securities may be described, in one place only in the prospectus, by the term used in the constating documents of the issuer; provided that, the description is not on the front page of the prospectus and is in the same type face and type size as that used generally in the body of the prospectus.
(4) A class of securities that is or may become restricted securities must be referred to in a prospectus using a term or a defined term that includes the appropriate restricted security term.
Prospectus filing eligibility
12.3 (1) Subject to subsection (3), an issuer must not file a prospectus under which restricted securities, subject securities or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, restricted securities or subject securities, are distributed unless
(a) the distribution has received prior majority approval of the securityholders of the issuer in accordance with applicable law, including approval on a class basis if required and excluding any votes attaching at the time to securities held, directly or indirectly, by affiliates of the issuer or control persons of the issuer, or
(b) at the time of any restricted security reorganization related to the securities to be distributed
(i) the restricted security reorganization received prior majority approval of the securityholders of the issuer in accordance with applicable law, including approval on a class basis if required and excluding any votes attaching at the time to securities held, directly or indirectly, by affiliates of the issuer or control persons of the issuer,
(ii) the issuer was a reporting issuer in at least one jurisdiction, and
(iii) no purposes or business reasons for the creation of restricted securities were disclosed that are inconsistent with the purpose of the distribution.
(2) Subject to subsection (3), for each approval referred to in subsection (1), the issuer must have provided prior written disclosure in an information circular or notice to its securityholders that included
(a) the name of each affiliate of the issuer that was a beneficial owner of securities of the issuer and the number of securities beneficially owned, directly or indirectly, by the affiliate as of the date of the information circular or notice to the extent known to the issuer after reasonable inquiry,
(b) the name of each control person and the number of securities beneficially owned, directly or indirectly, by the control person as of the date of the information circular or notice, to the extent known to the issuer after reasonable inquiry,
(c) a statement of the number of votes attaching to the securities that were excluded for the purpose of the approval to the extent known to the issuer after reasonable inquiry, and
(d) the purpose and business reasons for the creation of restricted securities.
(3) Subsections (1) and (2) do not apply if
(a) the securities offered by the prospectus are of an existing class of restricted securities that were created before December 21, 1984,
(b) the issuer was a private issuer immediately before filing the prospectus,
(c) the securities offered by the prospectus are of the same class as securities distributed under a previous prospectus that was filed by an issuer that was, at the time of filing the previous prospectus, a private issuer,
(d) the securities offered by the prospectus are previously unissued restricted securities distributed by way of stock dividend in the ordinary course to securityholders instead of a cash dividend if at the time of distribution there is a published market for the restricted securities,
(e) the securities offered by the prospectus are distributed as a stock split that takes the form of a distribution of previously unissued restricted securities by way of stock dividend to holders of the same class of restricted securities if at the time of distribution there is a published market for the restricted securities and the distribution is part of a concurrent distribution by way of stock dividend to holders of all equity securities under which all outstanding equity securities of the issuer are increased in the same proportion, or
(f) as of a date not more than seven days before the date of the prospectus, the issuer expects that in each local jurisdiction in which the prospectus will be filed the number of securities of each class of equity securities held by registered holders whose last address as shown on the books of the issuer is in the local jurisdiction, or beneficially owned by persons or companies in the local jurisdiction, will be less than two percent of the outstanding number of securities of the class after giving effect to the proposed distribution.
PART 13: Advertising and Marketing in Connection with Prospectus Offerings
Legend for communications during the waiting period
13.1 (1) A notice, circular, advertisement, letter or other communication used in connection with a prospectus offering during the waiting period must contain the following legend or words to the same effect:
"A preliminary prospectus containing important information relating to these securities has been filed with securities commissions or similar authorities in certain jurisdictions of Canada. The preliminary prospectus is still subject to completion or amendment. Copies of the preliminary prospectus may be obtained from [insert name and contact information for dealer or other relevant person or entity.] There will not be any sale or any acceptance of an offer to buy the securities until a receipt for the final prospectus has been issued."
(2) If the notice, circular, advertisement, letter or other communication is in writing, set out the language in subsection (1) in boldface type that is at least as large as that used generally in the body of the text.
Legend for communications following receipt for the final prospectus
13.2 (1) A notice, circular, advertisement, letter or other communication used in connection with a prospectus offering following the issuance of a receipt for the final prospectus must contain the following legend or words to the same effect:
"This offering is only made by prospectus. The prospectus contains important detailed information about the securities being offered. Copies of the prospectus may be obtained from [insert name and contact information for dealer or other relevant person or entity.] Investors should read the prospectus before making an investment decision."
(2) If the notice, circular, advertisement, letter or other communication is in writing, set out the language in subsection (1) in boldface type that is at least as large as that used generally in the body of the text.
Advertising for investment funds during the waiting period
13.3 If the issuer is an investment fund, an advertisement used in connection with a prospectus offering during the waiting period may state only the following information:
(a) whether the security represents a share in a company or an interest in a non-corporate entity such as a trust unit or a partnership interest;
(b) the name of the issuer;
(c) the price of the security;
(d) the fundamental investment objective(s) of the investment fund;
(e) the name of the manager of the investment fund;
(f) the name of the portfolio adviser of the investment fund;
(g) the name and address of a person or company from whom a preliminary prospectus may be obtained and purchases of securities may be made;
and(h) how many securities will be made available; and
(i) whether the security is or will be a qualified investment for a registered retirement savings plan, registered retirement income fund, registered education savings plan or tax free savings account or qualifies or will qualify the holder for special tax treatment.
Part 14: Custodianship of Portfolio Assets of an Investment Fund
General
14.1 (1) This Part applies to an investment fund that prepares a prospectus in accordance with this Instrument, other than an investment fund subject to NI 81-102.
(2) Subject to sections 14.8 and 14.9, all portfolio assets of an investment fund must be held under the custodianship of one custodian that satisfies the requirements of section 14.2.
(3) No manager of an investment fund may act as a custodian or sub-custodian of the investment fund.
Who may act as custodian or sub-custodian
14.2 (1) If portfolio assets are held in Canada by a custodian or sub-custodian, the custodian or sub-custodian must be one of the following:
(a) a bank listed in Schedule I, II or III of the Bank Act (Canada);
(b) a trust company that
(i) is incorporated and licenced or registered under the laws of Canada or a jurisdiction, and
(ii) has equity, as reported in its most recent audited financial statement, of not less than $10,000,000;
(c) a company that is incorporated under the laws of Canada or a jurisdiction and is an affiliate of a bank or trust company referred to in paragraph (a) or (b), if
(i) the company has equity, as reported in its most recent audited financial statements that have been made public, of not less than $10,000,000, or
(ii) the bank or trust company has assumed responsibility for all of the custodial obligations of the company for that investment fund.
(2) If portfolio assets are held outside of Canada by a sub-custodian, the sub-custodian must be one of the following:
(a) an entity referred to in subsection (1);
(b) an entity that
(i) is incorporated or organized under the law of a country, or a political subdivision of a country, other than Canada,
(ii) is regulated as a banking institution or trust company by the government, or an agency of the government of the country or political subdivision of the country under whose laws it is incorporated or organized, and
(iii) has equity, as reported in its most recent audited financial statements of not less than the equivalent of $100,000,000;
(c) an affiliate of an entity referred to in paragraph (a) or (b) if
(i) the affiliate has equity, as reported in its most recent audited financial statements that have been made public, of not less than the equivalent of $100,000,000, or
(ii) the entity referred to in paragraphs (a) or (b) has assumed responsibility for all of the custodial obligations of the affiliate for that investment fund.
Standard of care
14.3 (1) The custodian and each sub-custodian of an investment fund, in carrying out their duties concerning the safekeeping of, and dealing with, the portfolio assets of the investment fund, must exercise
(a) the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances, or
(b) at least the same degree of care as they exercise with respect to their own property of a similar kind, if this is a higher degree of care than the degree of care referred to in paragraph (a).
(2) No investment fund may relieve the custodian or a sub-custodian of the investment fund from liability to the investment fund or to a securityholder of the investment fund for loss that arises out of the failure of the custodian or sub-custodian to exercise the standard of care imposed by subsection (1).
(3) An investment fund may indemnify a custodian or sub-custodian against legal fees, judgments and amounts paid in settlement, actually and reasonably incurred by that entity in connection with custodial or sub-custodial services provided by that entity to the investment fund, if those fees, judgments and amounts were not incurred as a result of a breach of the standard of care described in subsection (1).
(4) No investment fund may incur the cost of any portion of liability insurance that insures a custodian or sub-custodian for a liability, except to the extent that the custodian or sub-custodian may be indemnified for that liability under this section.
Appointment of sub-custodian
14.4 (1) The custodian or a sub-custodian of an investment fund may appoint one or more sub-custodians to hold portfolio assets of the investment fund if,
(a) in the case where the appointment is by the custodian, the investment fund gives written consent to each appointment,
(b) in the case where the appointment is by a sub-custodian, the investment fund and the custodian of the investment fund give written consent to each appointment,
(c) the sub-custodian is an entity described in subsection 14.2(1) or (2), as applicable,
(d) the arrangements under which a sub-custodian is appointed are such that the investment fund may enforce rights directly, or require the custodian or a sub-custodian to enforce rights on behalf of the investment fund, to the portfolio assets held by the appointed sub-custodian, and
(e) the appointment is otherwise in compliance with this Instrument.
(2) Despite paragraphs (1)(a) and (b), a general consent to the appointment of persons or companies that are part of an international network of sub-custodians within the organization of the custodian appointed by the investment fund or the sub-custodian appointed by the custodian is sufficient if that general consent is part of an agreement governing the relationship between the investment fund and the appointed custodian or the custodian and the appointed sub-custodian.
(3) A custodian or sub-custodian must provide to the investment fund a list of each person or company that is appointed sub-custodian under a general consent referred to in subsection (2).
Content of agreements
14.5 (1) All custodian agreements
between the investment fund and the custodian or the custodian and theand sub-custodian agreements of an investment fund must provide for(a) the location of portfolio assets,
(b) the appointment of a sub-custodian, if any,
(c) the provision of lists of sub-custodians,
(d) the method of holding portfolio assets,
(e) the standard of care and responsibility for loss,
(f) review and compliance reports, and
(g) the safekeeping of portfolio assets on terms consistent with the agreement between the investment fund and the custodian, for an agreement between a custodian and a sub-custodian
,.(2) The provisions of an agreement referred to under subsection (1) must comply with the requirements of this Part.
(3)
An agreement between an investment fund and aA custodianagreement ora custodian and asub-custodianrespectingagreement concerning the portfolio assets of an investment fund must not(a) provide for the creation of any security interest on the portfolio assets except for a good faith claim for payment of the fees and expenses of the custodian or sub-custodian for acting in that capacity or to secure the obligations of the investment fund to repay borrowings by the investment fund from a custodian or sub-custodian for the purpose of settling portfolio transactions, or
(b) contain a provision that would require the payment of a fee to the custodian or sub-custodian for the transfer of the beneficial ownership of portfolio assets, other than for safekeeping and administrative services in connection with acting as custodian or sub-custodian.
Review and compliance reports
14.6 (1) The custodian of an investment fund must, on a periodic basis and at least annually,
(a) review the agreements referred to in section 14.5 to determine if those agreements are in compliance with this Part,
(b) make reasonable enquiries to ensure that each sub-custodian is an entity referred to in subsection 14.2(1) or (2), as applicable, and
(c) make or cause to be made any changes that may be necessary to ensure that
(i) the agreements are in compliance with this Part, and
(ii) each sub-custodian is an entity referred to in subsection 14.2(1) or (2), as applicable.
(2) The custodian of an investment fund must, within 60 days after the end of each financial year of the investment fund, advise the investment fund in writing
(a) of the names and addresses of all sub-custodians of the investment fund,
(b) if the agreements are in compliance with this Part, and
(c) if, to the best of the knowledge and belief of the custodian, each sub-custodian is an entity that satisfies the requirements of subsection 14.2(1) or (2), as applicable.
(3) A copy of the report referred to in subsection (2) must be delivered by or on behalf of the investment fund to the securities regulatory authority within 30 days after the filing of the annual financial statements of the investment fund.
Holding of portfolio assets and payment of fees
14.7 (1) Except as provided in subsections (2) and (3) and sections 14.8 and 14.9, portfolio assets not registered in the name of the investment fund must be registered in the name of the custodian or a sub-custodian of the investment fund or any of their respective nominees with an account number or other designation in the records of the custodian sufficient to show that the beneficial ownership of the portfolio assets is vested in the investment fund.
(2) The custodian or a sub-custodian of the investment fund or the applicable nominee must segregate portfolio assets issued in bearer form to show that the beneficial ownership of the property is vested in the investment fund.
(3) A custodian or sub-custodian of an investment fund may deposit portfolio assets with a depository or a clearing agency that operates a book-based system.
(4) The custodian or sub-custodian of an investment fund arranging for the deposit of portfolio assets with, and their delivery to, a depository, or clearing agency, that operates a book-based system must ensure that the records of any of the applicable participants in that book-based system or the custodian contain an account number or other designation sufficient to show that the beneficial ownership of the portfolio assets is vested in the investment fund.
(5) No investment fund may pay a fee to a custodian or sub-custodian for the transfer of beneficial ownership of portfolio assets other than for safekeeping and administrative services in connection with acting as custodian or sub-custodian.
Custodial provisions relating to derivatives and securities lending, repurchases and reverse repurchase agreements
14.8(1) For the purposes of subsection (4), "specified derivative" has the same meaning as in NI 81-102.
(2) An investment fund may deposit portfolio assets as margin for transactions in Canada involving clearing corporation options, options on futures or standardized futures with a dealer that is a member of an SRO that is a participating member of CIPF if the amount of margin deposited does not, when aggregated with the amount of margin already held by the dealer on behalf of the investment fund, exceed 10% of the net assets of the investment fund, taken at market value as at the time of deposit.
(3) An investment fund may deposit portfolio assets with a dealer as margin for transactions outside Canada involving clearing corporation options, options on futures or standardized futures if
(a) in the case of standardized futures and options on futures, the dealer is a member of a futures exchange or, in the case of clearing corporation options, is a member of a stock exchange, and, as a result in either case, is subject to a regulatory audit,
(b) the dealer has a net worth, determined from its most recent audited financial statements that have been made public, in excess of the equivalent of $50 million, and
(c) the amount of margin deposited does not, when aggregated with the amount of margin already held by the dealer on behalf of the investment fund, exceed 10% of the net assets of the investment fund, taken at market value as at the time of deposit.
(4) An investment fund may deposit with its counterparty portfolio assets over which it has granted a security interest in connection with a particular specified derivatives transaction.
(5) The agreement by which portfolio assets are deposited in accordance with subsection (2), (3) or (4) must require the person or company holding the portfolio assets to ensure that its records show that the investment fund is the beneficial owner of the portfolio assets.
(6) An investment fund may deliver portfolio assets to a person or company in satisfaction of its obligations under a securities lending, repurchase or reverse purchase agreement if the collateral, cash proceeds or purchased securities that are delivered to the investment fund in connection with the transaction are held under the custodianship of the custodian or a sub-custodian of the investment fund in compliance with this Part.
Separate account for paying expenses
14.9 An investment fund may deposit cash in Canada with an entity referred to in paragraph (a) or (b) of subsection 14.2(1) to facilitate the payment of regular operating expenses of the investment fund.
PART 15: Documents Incorporated by Reference by Investment Funds
Application
15.1 This Part applies only to an investment fund in continuous distribution, other than scholarship plans.
Incorporation by reference
15.2(1) An investment fund must incorporate by reference into its long form prospectus, by means of a statement to that effect, the filed documents listed in section 37.1 of Form 41-101F2.
(2) If an investment fund does not incorporate by reference into its long form prospectus a document referred to in subsection (1), the document is deemed, for the purposes of securities legislation, to be incorporated by reference in the investment fund's long form prospectus as of the date of the long form prospectus.
(3) An investment fund must incorporate by reference in its long form prospectus, by means of a statement to that effect, the subsequently filed documents referred to in section 37.2 of Form 41-101F2.
(4) If an investment fund does not incorporate by reference into its long form prospectus a document referred to in subsection (3), the document is deemed, for the purposes of securities legislation, to be incorporated by reference in the investment fund's long form prospectus as of the date the investment fund filed the document.
PART 16: Distribution of Preliminary Prospectus and Distribution List
Distribution of preliminary prospectus and distribution list
16.1 Except in Ontario, any dealer distributing a security during the waiting period must
(a) send a copy of the preliminary prospectus to each prospective purchaser who indicates an interest in purchasing the security and requests a copy of such preliminary prospectus, and
(b) maintain a record of the names and addresses of all persons and companies to whom the preliminary prospectus has been forwarded.
[Note: In Ontario, sections 66 and 67 of the Securities Act (Ontario) impose similar requirements regarding the distribution of a preliminary prospectus and maintaining a distribution list.]
PART 17: Lapse Date
Pro forma prospectus
17.1(1) In this Part, "pro forma prospectus" means a long form prospectus that complies with the requirements described in subsection (2).
(2) A pro forma prospectus must be prepared in the form of a long form prospectus in accordance with Form 41-101F1 or Form 41-101F2, as applicable, and other securities legislation, except that a pro forma prospectus is not required to contain prospectus certificates or to comply with sections 4.2, 4.3 and 4.4 of this Instrument.
(3) This Part does not apply to a prospectus filed in accordance with NI 44-101, NI 44-102 or NI 44-103.
Refiling of prospectus
17.2(1) This section does not apply in Ontario.
(2) In this section, "lapse date" means, with reference to the distribution of a security that has been qualified under a prospectus, the date that is 12 months after the date of the most recent final prospectus relating to the security.
(3) An issuer must not continue the distribution of a security to which the prospectus requirement applies after the lapse date unless the issuer files a new prospectus that complies with securities legislation and a receipt for that new prospectus is issued by the regulator.
(4) Despite subsection (3), a distribution may be continued for a further 12 months after a lapse date if,
(a) the issuer delivers a pro forma prospectus not less than 30 days before the lapse date of the previous prospectus;
(b) the issuer files a new final prospectus not later than 10 days after the lapse date of the previous prospectus; and
(c) a receipt for the new final prospectus is issued by the regulator within 20 days after the lapse date of the previous prospectus.
(5) The continued distribution of securities after the lapse date does not contravene subsection (3) unless and until any of the conditions of subsection (4) are not complied with.
(6) Subject to any extension granted under subsection (7), if a condition in subsection (4) is not complied with, a purchaser may cancel a purchase made in a distribution after the lapse date in reliance on subsection (4) within 90 days after the purchaser first became aware of the failure to comply with the condition.
(7) The regulator may, on an application of a reporting issuer, extend, subject to such terms and conditions as it may impose, the times provided by subsection (4) where in its opinion it would not be prejudicial to the public interest to do so.
[Note: In Ontario, section 62 of the Securities Act (Ontario) imposes similar requirements and procedures regarding refiling of prospectuses.]
PART 18: Statement of Rights
Statement of rights
18.1 Except in Ontario, a prospectus must contain a statement of the rights given to a purchaser under securities legislation in case of a failure to deliver the prospectus or in case of a misrepresentation in a prospectus.
[Note: In Ontario, section 60 of the Securities Act (Ontario) imposes a similar requirement for the inclusion of a statement of rights in a prospectus.]
PART 19: Exemption
Exemption
19.1(1) The regulator or the securities regulatory authority may grant an exemption from the provisions of this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.
(2) Despite subsection (1), in Ontario, only the regulator may grant such an exemption.
(3) Except in Ontario, an exemption referred to in subsection (1) is granted under the statute referred to in Appendix B of NI 14-101 opposite the name of the local jurisdiction.
Application for exemption
19.2 An application made to the securities regulatory authority or regulator for an exemption from the provisions of this Instrument must include a letter or memorandum describing the matters relating to the exemption, and indicating why consideration should be given to the granting of the exemption.
Evidence of exemption
19.3(1) Subject to subsection (2) and without limiting the manner in which an exemption under this Part may be evidenced, the granting under this Part of an exemption, other than an exemption from subsection 2.2(2), may be evidenced by the issuance of a receipt for a final prospectus or an amendment to a final prospectus.
(2) The issuance of a receipt for a final prospectus or an amendment to a final prospectus is not evidence that the exemption has been granted unless
(a) the person or company that sought the exemption sent to the regulator
(i) the letter or memorandum referred to in section 19.2 on or before the date of the filing of thepro forma or preliminary prospectus, or
(ii) the letter or memorandum referred to in section 19.2 after the date of the filing of thepro forma or preliminary prospectus and received a written acknowledgement from the regulator that the exemption may be evidenced in the manner set out in subsection (1), and
(b) the regulator has not before, or concurrently with, the issuance of the receipt sent notice to the person or company that sought the exemption, that the exemption sought may not be evidenced in the manner set out in subsection (1).
PART 20: Transition, Effective Date, and Repeal
Transition
20.1(1) [Repealed]
(2) [Repealed]
Effective Date
20.2 This Instrument comes into force on March 17, 2008.
Repeal
20.3 National Instrument 41-101 Prospectus Disclosure Requirements, which came into force on December 31, 2000, is repealed.
{1} In Ontario, a number of prospectus related requirements in this Instrument are either set out in the Securities Act (Ontario) or Ontario does not have a similar requirement. We have identified carve-outs from the Instrument where a similar requirement is set out in the Securities Act (Ontario). Where no corresponding statutory provision has been identified for an Ontario carve-out, Ontario has generally not adopted a similar requirement. Notes included in this Instrument have been inserted for convenience of reference only and do not form part of this Instrument or have any force or effect as a rule or policy.
APPENDIX A TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
PERSONAL INFORMATION FORM AND
AUTHORIZATION OF INDIRECT COLLECTION,
USE AND DISCLOSURE OF PERSONAL INFORMATION
In connection with an issuer's (the "Issuer") filing of a prospectus, the attached Schedule 1 contains information (the "Information") concerning every individual for whom the Issuer is required to provide the Information under Part 9 of this Instrument or Part 4 of NI 44-101. The Issuer is required by provincial and territorial securities legislation to deliver the Information to the regulators listed in Schedule 3.
The Issuer confirms that each individual who has completed a Schedule 1:
(a) has been notified by the Issuer
(i) of the Issuer's delivery to the regulator of the Information in Schedule 1 pertaining to that individual,
(ii) that the Information is being collected indirectly by the regulator under the authority granted to it by provincial and territorial securities legislation or provincial legislation relating to documents held by public bodies and the protection of personal information,
(iii) that the Information collected from each director and executive officer of the investment fund manager may be used in connection with the prospectus filing of the Issuer and the prospectus filing of any other issuer managed by the investment fund manager,
(iv) that the Information is being collected and used for the purpose of enabling the regulator to administer and enforce provincial and territorial securities legislation, including those obligations that require or permit the regulator to refuse to issue a receipt for a prospectus if it appears to the regulator that the past conduct of management, an investment fund manager or promoter of the Issuer affords reasonable grounds for belief that the business of the Issuer will not be conducted with integrity and in the best interests of its securityholders, and
(v) of the contact, business address and business telephone number of the regulator in the local jurisdiction as set out in the attached Schedule 3, who can answer questions about the regulator's indirect collection of the Information;
(b) has read and understands the Personal Information Collection Policy attached hereto as Schedule 2; and
(c) has, by signing the certificate and consent in Schedule 1, authorized the indirect collection, use and disclosure of the Information by the regulator as described in Schedule 2.
Date: ____________________
(Please print the name of the person signing on behalf of the issuer)
APPENDIX A TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
PERSONAL INFORMATION FORM
AND AUTHORIZATION OF INDIRECT COLLECTION,
USE AND DISCLOSURE OF PERSONAL INFORMATION
Schedule 1
Part A
Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information
This Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information (the "Form") is to be completed by every individual who, in connection with an issuer filing a prospectus (the "Issuer"), is required to do so under Part 9 of National Instrument 41-101 General Prospectus Requirements or, Part 4 of National Instrument 44-101 Short Form Prospectus Distributions. Where an individual has submitted a personal information form (an "Exchange Form") to the Toronto Stock Exchange or the TSX Venture Exchange and the information has not changed, the Exchange Form may be delivered in lieu of this Form; provided that the certificate and consent of this Form is completed and attached to the Exchange Form.or Part 2 of National Instrument 81-101 Mutual Fund Prospectus Disclosure.
The securities regulatory authorities do not make any of the information provided in this Form public.
General Instructions:
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All Questions
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All questions must have a response. The response of "N/A" or "Not Applicable" will not be accepted for any questions, except Questions 1(B), 2
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For the purposes of answering the questions in this Form, the term "issuer" includes an investment fund manager.
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Questions 6 to
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Please
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Delivery
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The issuer should deliver completed Forms electronically via the System for Electronic Document Analysis and Retrieval (SEDAR) under the document type "Personal Information Form and Authorization". Access to this document type is not available to the public.
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CAUTION
An individual who makes a false statement commits an offence under securities legislation. Steps may be taken to verify the answers you have given in this Form, including verification of information relating to any previous criminal record.
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DEFINITIONS
"Offence" An offence includes:
(a) a summary conviction or indictable offence under the Criminal Code (Canada);
(b) a quasi-criminal offence (for example under the Income Tax Act (Canada), theImmigration Act (Canada) or the tax, immigration, drugs, firearms, money laundering or securities legislation of anyCanadian or foreign jurisdiction);
(c) a misdemeanour or felony under the criminal legislation of the United States of America, or any state or territory therein; or
(d) an offence under the criminal legislation of anyother foreign jurisdiction;
NOTE: If you have received a pardon under the Criminal Records Act (Canada)
and it has not been revokedfor an Offence that relates to fraud (including any type of fraudulent activity), misappropriation of money or other property, theft, forgery, falsification of books or documents or similar Offences, you must disclose the pardonedoffenceOffence in this Form. In such circumstances:(a) the appropriate written response would be "Yes, pardon granted on (date)"; and
(b) you must provide complete details in an attachment to this Form.
"Proceedings" means:
(a) a civil or criminal proceeding or inquirywhich is currently before a court;
(b) a proceeding before an arbitrator or umpire or a person or group of persons authorized by law to make an inquiry and take evidence under oath in the matter;
(c) a proceeding before a tribunal in the exercise of a statutory power of decision making where the tribunal is required by law to hold or afford the parties to the proceeding an opportunity for a hearing before making a decision; or
(d) a proceeding before a self-regulatory
organizationentity authorized by law to regulate the operations and the standards of practice and business conduct of its membersand their representatives(including where applicable, issuers listed on a stock exchange) and individuals associated with those members and issuers, in which the self-regulatoryorganizationentity is required under its by-lawsor, rules or policies to hold or afford the parties the opportunityfor a hearingto be heard before making a decision, but does not apply to a proceeding in which one or more persons are required to make an investigation and to make a report, with or without recommendations, if the report is for the information or advice of the person to whom it is made and does not in any way bind or limit that person in any decision the person may have the power to make;"securities regulatory authority"
(or "SRA")means a body created by statute in anyjurisdictionCanadian orin anyforeign jurisdiction to administer securities law, regulation and policy (e.g. securities commission), but does not include an exchange or other self regulatoryor professional organizationentity;"self regulatory
or professional organizationentity" or "SRE" means:(a) a stock, derivatives, commodities, futures or options exchange;
(b) an association of investment, securities, mutual fund, commodities, or future dealers;
(c) an association of investment counsel or portfolio managers;
(d) an association of other professionals (e.g. legal, accounting, engineering); and
(e) any other group, institution or self-regulatory
entityorganization, recognized by a securities regulatory authority, that is responsible for the enforcement of rules, policies, disciplines or codes under any applicable legislation, or considereda self regulatory or professional organizationan SRE in another country.
1.A.
IDENTIFICATION OF INDIVIDUAL COMPLETING FORM
LAST NAME(S)
FIRST NAME(S)
FULL MIDDLE NAME(S) (No initials. If none, please state)
NAME(S) MOST COMMONLY KNOWN BY:
NAME OF ISSUER
PRESENT or PROPOSED POSITION(S) WITH THE ISSUER - check ([check]) all positions below that are applicable.
IF DIRECTOR / OFFICER DISCLOSE THE DATE ELECTED / APPOINTED
IF OFFICER - PROVIDE TITLE IF OTHER - PROVIDE DETAILS
([check])
Month
Day
Year
Director
_____
____________________
____________________
Officer
_____
____________________
____________________
Other
_____
____________________
____________________
B.
Other than the name given in Question 1A above, provide any legal names, assumed names or nicknames under which you have carried on business or have otherwise been known, including information regarding any name change(s) resulting from marriage, divorce, court order or any other process. Use an attachment if necessary.
FROM
TO
MM
YY
MM
YY
_____
__________
___
___
___
___
_____
__________
___
___
___
___
D.
MARITAL STATUS
FULL NAME OF SPOUSE - include common-law
OCCUPATION OF SPOUSE
_____
____________________
____________________
____________________
E.
TELEPHONE AND FACSIMILE NUMBERS AND E-MAIL ADDRESS
RESIDENTIAL
( )
FACSIMILE
( )
BUSINESS
( )
E-MAIL{•}
{•}Please provide an email address that the regulator may use to contact you regarding this PIF. This email address may be used to exchange personal information relating to you.
F.
RESIDENTIAL HISTORY - Provide all residential addresses for the past 10 YEARS starting with your current principal residential address. If you are unable to
correctly identifyrecall the complete residential address for a period,which is beyond five years from the date of completion of this Form, the municipality and province or state and country must be identified. The regulator reserves the right to require the full address.
STREET ADDRESS, CITY, PROVINCE/STATE, COUNTRY & POSTAL/ZIP CODE
FROM
TO
MM
YY
MM
YY
______
____________________
_____
_____
_____
_____
______
____________________
_____
_____
_____
_____
______
____________________
_____
_____
_____
_____
______
____________________
_____
_____
_____
_____
2.
CITIZENSHIP
YES
NO
A.
CANADIAN CITIZENSHIP_____
_____
(i)
Are you a Canadian
Citizencitizen?_____
_____
(ii)
Are you a person lawfully in Canada as an immigrant but are not yet a Canadian citizen?
_____
_____
(iii)
If "Yes" to Question 2A(ii), the number of years of continuous residence in Canada:
_____
_____
(iv)
Do you hold citizenship in any country other than Canada?
_____
_____
(v)
If "Yes" to Question 2(iv), the name of the country(ies):
_____
_____
B.
OTHER CITIZENSHIP
(i)
Do you hold citizenship in any country other than Canada?_____
_____
(ii)
If "Yes" to Question 2B(i), the name of the country(s):_____
_____
(iii)
Please provide U.S. Social Security number, where you have such a number_____
_____
3.
EMPLOYMENT HISTORY
Provide your complete employment history for the
105YEARS immediately prior to the date of this Form starting with your current employment. Use an attachment if necessary.If you were unemployed during this period of time, please state this and identify the period of unemployment.
EMPLOYER NAME
EMPLOYER ADDRESS
POSITION HELD
FROM
TO
__________
__________
__________
MM
YY
MM
YY
__________
__________
__________
__________
__________
__________
__________
__________
__________
__________
__________
__________
__________
__________
__________
4.
POSITIONSINVOLVEMENT WITH OTHER ISSUERS
YES
NO
A.
While you were a director, officer or insider of an issuer, did any exchange or self-regulatory organization ever refuse approval for listing or quotation of that issuer (including a listing resulting from a qualifying transaction, reverse takeover, backdoor listing or change of business)? If yes, attach full particulars._____
_____
B.
Has your employment in a sales, investment or advisory capacity with any firm or company engaged in the sale of real estate, insurance or mutual funds ever been terminated for ause?_____
_____
C.
Has a firm or company registered under the securities laws of any jurisdiction or of any foreign jurisdiction as a securities dealer, broker, investment advisor or underwriter, suspended or terminated your employment for cause?_____
_____
DA.
Are you or have you during the last 10 years ever been a director, officer, promoter, insider or control person for any reporting issuer?_____
_____
EB.
If "YES" to 4DA above, provide the names of each reporting issuer. State the position(s) held and the period(s) during which you held the position(s). Use an attachment if necessary._____
_____
NAME OF REPORTING ISSUER
POSITION(S) HELD
MARKET TRADED ON
FROM
TO
MM
YY
MM
YY
__________
__________
__________
_____
_____
_____
_____
__________
__________
__________
_____
_____
_____
_____
__________
__________
__________
_____
_____
_____
_____
__________
__________
__________
_____
_____
_____
_____
__________
__________
__________
_____
_____
_____
_____
C.
While you were a director, officer or insider of an issuer, did any exchange or other self-regulatory entity ever refuse approval for listing or quotation of the issuer, including (i) a listing resulting from a business combination, reverse take-over or similar transaction involving the issuer that is regulated by an SRE or SRA, (ii) a backdoor listing or qualifying acquisition involving the issuer (as those terms are defined in the TSX Company Manual as amended) or (iii) a Qualifying Transaction, Reverse Take Over or Change of Business involving the issuer (as those terms are defined in the TSX Venture Corporate Finance Manual as amended)? If yes, attach full particulars.
5.
EDUCATIONAL HISTORY
A.
PROFESSIONAL DESIGNATION(S) -
ProvideIdentify any professional designation held and professional associations to which you belong.For, for example, Barrister & Solicitor, C.A., C.M.A., C.G.A., P.Eng., P.Geol.,andCFA, etc. and indicate which organization and the date the designations were granted.
PROFESSIONAL DESIGNATION And MEMBERSHIP NUMBER
GRANTOR OF DESIGNATION And
JURISDICTIONCANADIAN OR FOREIGN JURISDICTIONDATE GRANTED
MM
DDYY
__________
__________
____
____
____
__________
__________
____
____
____
__________
__________
____
____
____
Describe the current status of any designation and/or association (e.g. active, retired, non-practicing, suspended)
B.
Provide your post-secondary educational history starting with the most recent.
SCHOOL
LOCATION
DEGREE OR DIPLOMA
DATE OBTAINED
MM
DD
YY
__________
__________
__________
_____
_____
_____
__________
__________
__________
_____
_____
_____
6.
OFFENCES - If you answer "YES" to any item in Question 6, you must provide complete details in an attachment.If you have received a pardon under the Criminal Records Act (Canada) for an Offence that relates to fraud (including any type of fraudulent activity), misappropriation of money or other property, theft, forgery, falsification of books or documents or similar Offences, you must disclose the pardoned Offence in this Form.
YES
NO
A.
Have you ever
pleaded, in any Canadian or foreign jurisdiction, pled guilty to or been found guilty of anoffenceOffence?_____
_____
B.
Are you the subject of any current charge, indictment or proceeding for an
offenceOffence, in any Canadian or foreign jurisdiction?_____
_____
C.
To the best of your knowledge, are youcurrently or have you ever been a director, officer, promoter, insider, or control person of an issuer, in any
jurisdictionCanadian or inanyforeign jurisdiction, at the time of events, where the issuer:_____
_____
(i)
has ever pleadedpled guilty to orbeenwas found guilty of anoffenceOffence?_____
_____
(ii)
isnow the subject of any
currentcharge, indictment or proceeding for anoffenceOffence?_____
_____
7.
BANKRUPTCY - If you answer "YES" to any item in Question 7, you must provide complete details in an attachment and attach a copy of any discharge, release or other applicable document. You must answer "YES" or "NO" for EACH of (A), (B) and (C), below.
YES
NO
A.
Have you, in any
jurisdictionCanadian orin anyforeign jurisdiction, within the past 10 years had a petition in bankruptcy issued against you, made a voluntary assignment in bankruptcy, made a proposal under any bankruptcy or insolvency legislation, been subject to any proceeding, arrangement or compromise with creditors, or had a receiver, receiver-manager or trustee appointed to manage your assets?_____
_____
B.
Are you now an undischarged bankrupt?
_____
_____
C.
To the best of your knowledge, are youcurrently or have you ever been a director, officer, promoter, insider, or control person of an issuer, in any
jurisdictionCanadian or inanyforeign jurisdiction, at the time of events, or for a period of 12 months preceding the time of events, where the issuer:_____
_____
(i)
has made a petition in bankruptcy, a voluntary assignment in bankruptcy, a proposal under any bankruptcy or insolvency legislation, been subject to any proceeding, arrangement or compromise with creditors or had a receiver, receiver-manager or trustee appointed to manage the issuer's assets?
_____
_____
(ii)
is now an undischarged bankrupt?
_____
_____
8.
PROCEEDINGS - If you answer "YES" to any item in Question 8, you must provide complete details in an attachment.
YES
NO
A.
CURRENT PROCEEDINGS BY SECURITIES REGULATORY AUTHORITY OR SELF REGULATORY
OR PROFESSIONAL ORGANIZATIONENTITY. Are you now, in anyjurisdictionCanadian orin anyforeign jurisdiction, the subject of:
(i)
a notice of hearing or similar notice issued by
aan SRAor SRE?_____
_____
(ii)
a proceeding or to your knowledge, under investigation, by an
exchange or other self regulatory or professional organizationSRA or SRE?_____
_____
(iii)
settlement discussions or negotiations for settlement of any nature or kind whatsoever with
aan SRA orany self regulatory or professional organizationSRE?_____
_____
B.
PRIOR PROCEEDINGS BY SECURITIES REGULATORY AUTHORITY OR SELF REGULATORY
OR PROFESSIONAL ORGANIZATIONENTITY. Have you ever:
(i)
been reprimanded, suspended, fined, been the subject of an administrative penalty, or
otherwisebeen the subject of anydisciplinaryproceedings of any kind whatsoever, in anyjurisdictionCanadian orin anyforeign jurisdiction, byaan SRA orself regulatory or professional organizationSRE?_____
_____
(ii)
had a registration or licence for the trading of securities, exchange or commodity futures contracts, real estate, insurance or mutual fund products cancelled, refused, restricted or suspended, by an SRA or SRE?
_____
_____
(iii)
been prohibited or disqualified by an SRA or SRE under securities, corporate or any other legislation from acting as a director or officer of a reporting issueror been prohibited or restricted by an SRA or SRE from acting as a director, officer or employee of, or an agent or consultant to, a reporting issuer?
_____
_____
(iv)
had a cease trading or similar order issued against you or an order issued against you by an SRA or SRE that denied you the right to use any statutory prospectus or registration exemption?
_____
_____
(v)
had any other proceeding of any nature or kind taken against youby an SRA or SRE?
_____
_____
C.
SETTLEMENT AGREEMENT(S)
Have you ever entered into a settlement agreement with
aan SRA,self regulatory or professional organizationSRE, attorney general or comparable official or body, in any jurisdictionCanadian or in any foreign jurisdiction, in a matter that involved actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading in securities or exchange or commodity futures contracts, illegal distributions, failure to disclose material facts or changes or similar conduct, or any other settlement agreement with respect to any other violation of securities legislation in ajurisdictionCanadian orin aforeign jurisdiction or the rules, by-laws or policies of anyself regulatory or professional organizationSRE?_____
_____
D.
To the best of your knowledge, are you now or have you ever been a director, officer, promoter, insider, or control person of an issuer at the time of such event, in any
jurisdictionCanadian or in any foreign jurisdiction, for which a securities regulatory authority orself regulatory or professional organizationentity has:
(i)
refused, restricted, suspended or cancelled the registration or licensing of an issuer to trade securities, exchange or commodity futures contracts, or to sell or trade real estate, insurance or mutual fund products?
_____
_____
(ii)
issued a cease trade or similar order or imposed an administrative penalty of any nature or kind whatsoever against the issuer, other than an order for failure to file financial statements that was revoked within 30 days of its issuance?
_____
_____
(iii)
refused a receipt for a prospectus or other offering document, denied any application for listing or quotation or any other similar application, or issued an order that denied the issuer the right to use any statutory prospectus or registration exemptions?
_____
_____
(iv)
issued a notice of hearing, notice as to a proceeding or similar notice against the issuer?
_____
_____
(v)
takencommenced any other proceeding of any nature or kind against the issuer, including a trading halt, suspension or delisting of the issuer (other than, in connection with an alleged or actual contravention of an SRA's or SRE's rules, regulations, policies or other requirements, but excluding halts imposed (i) in the normal course for proper dissemination of information, or (ii) pursuant to a business combination, reverse takeover, backdoor listing or similar transactiontake-over or similar transaction involving the issuer that is regulated by an SRE or SRA, including a Qualifying Transaction, Reverse Takeover or Change of Business involving the issuer (as those terms are defined in the TSX Venture Corporate Finance Manual as amended)?_____
_____
(vi)
entered into a settlement agreement with the issuer in a matter that involved actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading in securities or exchange or commodity futures contracts, illegal distributions, failure to disclose material facts or changes or similar conduct by the issuer, or involved in any other violation of securities legislation in a jurisdiction or in a foreign jurisdiction or a self regulatory or professional organization's rulesor the rules, by-laws or policies of an SRE?
_____
_____
9.
CIVIL PROCEEDINGS - If you answer "YES" to any item in Question 9, you must provide complete details in an attachment.
YES
NO
A.
JUDGMENT, GARNISHMENT AND INJUNCTIONS
Has a court in any jurisdictionCanadian or in any foreign jurisdiction:
(i)
rendered a judgment, ordered garnishment or issued an injunction or similar ban (whether by consent or otherwise) against you in a claim based in whole or in part on fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
_____
_____
(ii)
rendered a judgment, ordered garnishment or issued an injunction or similar ban (whether by consent or otherwise) against an issuer, forof which you are currently or have ever been a director, officer, promoter, insider or control person, in a claim based in whole or in part on fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
_____
_____
B.
CURRENT CLAIMS
(i)
Are you now subject, in any jurisdictionCanadian or in any foreign jurisdiction, ofto a claim that is based in whole or in part on actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
_____
_____
(ii)
To the best of your knowledge, are you currently or have you ever been a director, officer, promoter, insider or control person of an issuer that is now subject, in any jurisdictionCanadian or in any foreign jurisdiction, ofto a claim that is based in whole or in part on actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
_____
_____
C.
SETTLEMENT AGREEMENT
(i)
Have you ever entered into a settlement agreement, in any jurisdictionCanadian or in any foreign jurisdiction, in a civil action that involved actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
_____
_____
(ii)
To the best of your knowledge, are you currently or have you ever been a director, officer, promoter, insider or control person of an issuer that has entered into a settlement agreement, in any jurisdictionCanadian or in any foreign jurisdiction, in a civil action that involved actual or alleged fraud, theft, deceit, misrepresentation, conspiracy, breach of trust, breach of fiduciary duty, insider trading, unregistered trading, illegal distributions, failure to disclose material facts or changes, or allegations of similar conduct?
_____
_____
10.
INVOLVEMENT WITH OTHER ENTITIES
YES
NO
A.
Has your employment in a sales, investment or advisory capacity with any employer engaged in the sale of real estate, insurance or mutual funds ever been suspended or terminated for cause? If yes, attach full particulars.
_____
_____
B.
Has your employment with a firm or company registered under the securities laws of any Canadian or foreign jurisdiction as a securities dealer, broker, investment advisor or underwriter, ever been suspended or terminated for cause? If yes, attach full particulars.
_____
_____
C.
Has your employment as an officer of an issuer ever been suspended or terminated for cause? If yes, attach full particulars.
_____
_____
CERTIFICATE AND CONSENT
I, ____________________ (Please Print - Name of Individual) hereby certify that:
(a) I have read and understood the questions, cautions, acknowledgement and consent in this Form, and the answers I have given to the questions in this Form and in any attachments to it are true and correct, except where stated to be to the best of my knowledge, in which case I believe the answers to be true;
(b) I have read and understand the Personal Information Collection Policy attached hereto as Schedule 2 (the "Personal Information Collection Policy");
(c) I consent to the collection, use and disclosure of the information in this Form and to the collection, use and disclosure of further personal information in accordance with the Personal Information Collection Policy; and
(d) I understand that I am providing this Form to a regulator listed in Schedule 3 attached hereto and I am under the jurisdiction of the regulator to which I submit this Form, and it is a breach of securities legislation to provide false or misleading information to the regulator.
____________________
Date [within 30 days of the date of the preliminary prospectus]
____________________
Signature of Person Completing this Form
APPENDIX A TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
Schedule 1
Part B
PERSONAL INFORMATION FORM
AND AUTHORIZATION OF INDIRECT COLLECTION,
USE AND DISCLOSURE OF PERSONAL INFORMATION
- - - - - - - - - - - - - - - - - - - -
CERTIFICATE AND CONSENT
- - - - - - - - - - - - - - - - - - - -
I, ____________________ (Please Print - Name of Individual) hereby certify that:
(a) I have read and understood the questions, cautions, acknowledgement and consent in the personal information form to which this certificate and consent is attached or of which this certificate and consent forms part (the "Form"), and the answers I have given to the questions in the Form and in any attachments to it are correct, except where stated to be to the best of my knowledge, in which case I believe the answers to be correct;
(b) I have been provided with and have read and understand the Personal Information Collection Policy (the "Personal Information Collection Policy") in Schedule 2 of Appendix A to National Instrument 41-101 General Prospectus Requirements ("NI 41-101");
(c) I consent to the collection, use and disclosure by a regulator or a securities regulatory authority listed in Schedule 3 of Appendix A to NI 41-101 (collectively the "regulators") of the information in the Form and to the collection, use and disclosure by the regulators of further personal information in accordance with the Personal Information Collection Policy including the collection, use and disclosure by the regulators of the information in the Form in respect of the prospectus filings of the Issuer and the prospectus filings of any other issuer in a situation where I am or will be:
(i) a director, executive officer or promoter of such issuer,
(ii) a director or executive officer of a promoter of such issuer, if the promoter is not an individual, or
(iii) where the issuer is an investment fund, a director or executive officer of the investment fund manager; and
(d) I understand that I am providing the Form to the regulators and I am under the jurisdiction of the regulators to which I submit the Form, and it is a breach of securities legislation to provide false or misleading information to the regulators, whenever the Form is provided in respect of the prospectus filings of the Issuer or the prospectus filings of any other issuer of which I am or will be a director, executive officer or promoter.
____________________
Date [within 30 days of the date of the preliminary prospectus]
____________________
Signature of Person Completing this Form
APPENDIX A TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
Schedule 2
Personal Information Collection Policy
The regulators and securities regulatory authorities (the "regulators") listed in Schedule 3 Regulatorsof Appendix A to National Instrument 41-101 General Prospectus Requirements ("NI 41-101") collect the personal information in Schedule 1 the personal information form as this term is defined in NI 41-101 (the "Personal Information Form"), under the authority granted to them under provincial and territorial securities legislation. Under securities legislation, the regulators do not make any of the information provided in Schedule 1the Personal Information Form public.
The regulators collect the personal information in Schedule 1the Personal Information Form for the purpose of enabling the regulators to administer and enforce provincial and territorial securities legislation, including those provisions that require or permit the regulators to refuse to issue a receipt for a prospectus if it appears to the regulators that the past conduct of management or promoters of the Issuer affords reasonable grounds for belief that the business of the Issuer will not be conducted with integrity and in the best interests of its securityholders.
You understand that by signing the certificate and consent in Schedule 1,the Personal Information Form, you are consenting to the Issuer submitting your personal information in Schedule 1the Personal Information Form (the "Information") to the regulators and to the collection and use by the regulators of the Information, as well as any other information that may be necessary to administer and enforce provincial and territorial securities legislation. This may include the collection of information from law enforcement agencies, other government or non-governmental regulatory authorities, self-regulatory organizations, exchanges, and quotation and trade reporting systems in order to conduct background checks, verify the Information and perform investigations and conduct enforcement proceedings as required to ensure compliance with provincial and territorial securities legislation. Your consent would also extend to the collection, use and disclosure of the Information as described above in respect of other prospectus filings of the Issuer and the prospectus filings of any other issuer in a situation where you are or will be a:
(a) a director, executive officer or promoter of such issuer,
(b) a director or executive officer of a promoter of such issuer, if the promoter is not an individual, or
(c) where the issuer is an investment fund, a director or executive officer of the investment fund manager.
You understand that the Issuer is required to deliver the Information to the regulators because the Issuer has filed a prospectus under provincial and territorial securities legislation. You also understand that you have a right to be informed of the existence of personal information about you that is kept by regulators, that you have the right to request access to that information, and that you have the right to request that such information be corrected, subject to the applicable provisions of the freedom of information and protection of privacy legislation adopted by each province and territory.
You also understand and agree that the Information the regulators collect about you may also be disclosed, as permitted by law, where its use and disclosure is for the purposes described above. The regulators may also use a third party to process the Information, but when this happens, the third party will be carefully selected and obligated to comply with the limited use restrictions described above and with provincial and federal privacy legislation.
Warning: It is an offence to submit information that, in a material respect and at the time and in the light of the circumstances in which it is submitted, is misleading or untrue.
Questions
If you have any questions about the collection, use, and disclosure of the information you provide to the regulators, you may contact the regulator in the jurisdiction in which the required information is filed, at the address or telephone number listed in Schedule 3.
APPENDIX A TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
PERSONAL INFORMATION FORM
AND AUTHORIZATION OF INDIRECT COLLECTION,
USE AND DISCLOSURE OF PERSONAL INFORMATION
Schedule 3
Regulatorsand Securities Regulatory Authorities
|
Local Jurisdiction
|
Regulator
|
|
|
|
|
Alberta
|
Securities Review Officer
|
|
|
Alberta Securities Commission
|
|
|
Suite 400600
|
|
|
|
|
|
Calgary, Alberta T2P
|
|
|
Telephone: (403) 297-6454
|
|
|
E-mail: [email protected]
|
|
|
www.albertasecurities.com
|
|
|
|
|
British Columbia
|
Review Officer
|
|
|
British Columbia Securities Commission
|
|
|
P.O. Box 10142 Pacific Centre
|
|
|
701 West Georgia Street
|
|
|
Vancouver, British Columbia V7Y 1L2
|
|
|
Telephone: (604) 899-6854
|
|
|
Toll Free within British Columbia and Alberta: (800) 373-6393
|
|
|
E-mail: [email protected]
|
|
|
www.bcsc.bc.ca
|
|
|
|
|
Manitoba
|
Director, Corporate Finance
|
|
|
The Manitoba Securities Commission
|
|
|
500-400 St. Mary Avenue
|
|
|
Winnipeg, Manitoba R3C 4K5
|
|
|
Telephone: (204) 945-2548
|
|
|
E-mail: [email protected]
|
|
|
www.msc.gov.mb.ca
|
|
|
|
|
New Brunswick
|
Director Corporate Finance and Chief Financial Officer
|
|
|
New Brunswick Securities Commission
|
|
|
85 Charlotte Street, Suite 300
|
|
|
Saint John, New Brunswick E2L 2J2
|
|
|
Telephone: (506) 658-3060
|
|
|
Fax: (506) 658-3059
|
|
|
E-mail: [email protected]
|
|
|
|
|
Newfoundland and Labrador
|
Director of Securities
|
|
|
Department of Government Services and Lands
|
|
|
P.O. Box 8700
|
|
|
West Block, 2nd Floor, Confederation Building
|
|
|
St. John's, Newfoundland A1B 4J6
|
|
|
Telephone: (709) 729-4189
|
|
|
www.gov.nf.ca/gsl/cca/s
|
|
|
|
|
Northwest Territories
|
Superintendent of Securities
|
|
|
Department of Justice
|
|
|
Government of the Northwest Territories
|
|
|
P.O. Box 1320,
|
|
|
Yellowknife, Northwest Territories X1A 2L9
|
|
|
Telephone: (867) 873- 7490
|
|
|
www.justice.gov.nt.ca/SecuritiesRegistry
|
|
|
|
|
Nova Scotia
|
Deputy Director, Compliance and Enforcement
|
|
|
Nova Scotia Securities Commission
|
|
|
P.O. Box 458
|
|
|
Halifax, Nova Scotia B3J 2P8
|
|
|
Telephone: (902) 424-5354
|
|
|
www.gov.ns.ca/nssc
|
|
|
|
|
Nunavut
|
Superintendent of Securities
|
|
|
Government of Nunavut
|
|
|
Legal Registries Division
|
|
|
P.O. Box 1000 - Station 570
|
|
|
Iqaluit, Nunavut X0A 0H0
|
|
|
Telephone: (867) 975-6590
|
|
|
|
|
Ontario
|
Administrative Assistant to the Director of Corporate Finance
|
|
|
Ontario Securities Commission
|
|
|
19th Floor, 20 Queen Street West
|
|
|
Toronto, Ontario M5H 2S8
|
|
|
Telephone: (416) 597-0681
|
|
|
E-mail: [email protected]
|
|
|
www.osc.gov.on.ca
|
|
|
|
|
Prince Edward Island
|
Deputy Registrar, Securities Division
|
|
|
Shaw Building
|
|
|
95 Rochford Street, P.O. Box 2000, 4th Floor
|
|
|
Charlottetown, Prince Edward Island C1A 7N8
|
|
|
Telephone: (902) 368-4550
|
|
|
www.gov.pe.ca/securities
|
|
|
|
|
Québec
|
Autorité des marchés financiers
|
|
|
Stock Exchange Tower
|
|
|
P.O. Box 246, 22nd Floor
|
|
|
800 Victoria Square
|
|
|
Montréal, Québec H4Z 1G3
|
|
|
Attention: Responsable de l'accès à l'information
|
|
|
Telephone: (514) 395-0337
|
|
|
Toll Free in Québec: (877) 525-0337
|
|
|
www.lautorite.qc.ca
|
|
|
|
|
Saskatchewan
|
Director
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Saskatchewan Financial Services Commission
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Suite 601, 1919 Saskatchewan Drive
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Regina, Saskatchewan S4P 4H2
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Telephone: (306) 787-5842
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www.sfsc.gov.sk.ca
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Yukon
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Superintendent of Securities
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Department of Justice
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Andrew A. Philipsen Law Centre
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2130 -- 2nd Avenue, 3rd Floor
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Whitehorse, Yukon Territory Y1A 5H6
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Telephone: (867) 667-5005
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APPENDIX A TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
Schedule 4
PREVIOUSLY FILED PERSONAL INFORMATION FORMS
CERTIFICATE
In connection with the issuer's (the "Issuer") filing of a prospectus, the personal information forms of the individuals named in the table below (the "Individuals") were previously delivered to one or more regulators or securities regulatory authorities (the "Regulators") listed in Schedule 3 of Appendix "A" to NI 41-101 (the "Personal Information Forms"). The Personal Information Forms contain information concerning the Individuals for whom an issuer was previously required to provide the information under Part 9 of NI 41-101, Part 4 of NI 44-101 or Part 2 of NI 81-101.
The Issuer confirms that
(a) a true copy of the Personal Information Form of each of the Individuals
(i) is attached to this certificate, as noted in the table below, or
(ii) was filed under the issuer name and associated SEDAR project number referenced in the table below{•};
Name of Individual
Issuer Name and Associated SEDAR project number (if known)
Personal Information Form (check the box if attached)
_______________
____________________
__________
_______________
____________________
__________
_______________
____________________
__________
_______________
____________________
__________
_______________
____________________
__________
(b) each of the Individuals has advised the Issuer that the individual's responses to the following questions in his/her Personal Information Form remain correct as at the date noted below:
(i) questions 4(B) and (C) and questions 6 through 9 if the Personal Information Form was delivered to the Regulator before [insert effective date of amendments]; and
(ii) all of questions 6 through 10 if the Personal Information Form was delivered to the Regulator after [insert effective date of amendments]; and
(c) each Individual has advised the Issuer of the Individual's understanding that his or her statement as to the correctness of the above-noted responses in the Individual's Personal Information Form under paragraph (b) is provided to a Regulator listed in Schedule 3 of Appendix "A" to NI 41-101 and that it is a breach of securities legislation to provide false or misleading information to such Regulator.
Date: ____________________ [within 30 days of the date of the preliminary prospectus]
(Please print the name of the person signing on behalf of the issuer)
{•}If the Personal Information Form for an Individual was not previously filed with the principal regulator of the Issuer (as the term "principal regulator" is defined in National Instrument 11-102 Passport System), the Issuer must attach a true copy of the Personal Information Form to this Certificate in accordance with subparagraph (a)(i) above, and may not rely on the option available under subparagraph (a)(ii) above. If such form was not previously filed with a non-principal regulator and the Issuer wishes to file its prospectus with the non-principal regulator, the non-principal regulator may request a copy of the Personal Information Form as contemplated in subparagraph (a)(i) above.
APPENDIX B TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
ISSUER FORM OF SUBMISSION TO
JURISDICTION AND APPOINTMENT OF
AGENT FOR SERVICE OF PROCESS
1. Name of issuer (the "Issuer"):
____________________
2. Jurisdiction of incorporation, or equivalent, of Issuer:
____________________
3. Address of principal place of business of Issuer:
____________________
4. Description of securities (the "Securities"):
____________________
5. Date of the prospectus (the "Prospectus") under which the Securities are offered:
____________________
6. Name of agent for service of process (the "Agent"):
____________________
7. Address for service of process of Agent in Canada (the address may be anywhere in Canada):
____________________
8. The Issuer designates and appoints the Agent at the address of the Agent stated above as its agent upon whom may be served any notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal, penal or other proceeding (the "Proceeding") arising out of, relating to or concerning the distribution of the Securities made or purported to be made under the Prospectus or the obligations of the Issuer as a reporting issuer, and irrevocably waives any right to raise as a defence in any such Proceeding any alleged lack of jurisdiction to bring such Proceeding.
9. The Issuer irrevocably and unconditionally submits to the non-exclusive jurisdiction of
(a) the judicial, quasi-judicial and administrative tribunals of each of the provinces [and territories] of Canada in which the securities are distributed under the Prospectus; and
(b) any administrative proceeding in any such province [or territory],
in any Proceeding arising out of or related to or concerning the distribution of the Securities made or purported to be made under the Prospectus or the obligations of the issuer as a reporting issuer.
10. Until six years after it has ceased to be a reporting issuer in any Canadian province or territory, the Issuer shall file a new submission to jurisdiction and appointment of agent for service of process in this form at least 30 days before termination of this submission to jurisdiction and appointment of agent for service of process.
11. Until six years after it has ceased to be a reporting issuer in any Canadian province or territory, the Issuer shall file an amended submission to jurisdiction and appointment of agent for service of process at least 30 days before any change in the name or above address of the Agent.
12. This submission to jurisdiction and appointment of agent for service of process shall be governed by and construed in accordance with the laws of [insert province or territory of above address of Agent].
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Dated: ____________________ |
____________________ |
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Signature of Issuer
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____________________ |
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Print name and title of signing officer of Issuer
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AGENT
The undersigned accepts the appointment as agent for service of process of [insert name of Issuer] under the terms and conditions of the appointment of agent for service of process stated above.
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Dated: ____________________ |
____________________ |
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Signature of Issuer
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____________________ |
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Print name of person signing and, if Agent is not an individual, the title of the person
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APPENDIX C TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
NON-ISSUER FORM OF SUBMISSION TO
JURISDICTION AND APPOINTMENT OF
AGENT FOR SERVICE OF PROCESS
1. Name of issuer (the "Issuer"):
____________________
2. Jurisdiction of incorporation, or equivalent, of Issuer:
____________________
3. Address of principal place of business of Issuer:
____________________
4. Description of securities (the "Securities"):
____________________
5. Date of the prospectus (the "Prospectus") under which the Securities are offered:
____________________
6. Name of person filing this form (the "Filing Person"):
____________________
7. Filing Person's relationship to Issuer:
____________________
8. Jurisdiction of incorporation, or equivalent, of Filing Person, if applicable, or jurisdiction of residence of Filing Person:
____________________
9. Address of principal place of business of Filing Person:
____________________
10. Name of agent for service of process (the "Agent"):
____________________
11. Address for service of process of Agent in Canada (the address may be anywhere in Canada):
____________________
12. The Filing Person designates and appoints the Agent at the address of the Agent stated above as its agent upon whom may be served any notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal, penal or other proceeding (the "Proceeding") arising out of, relating to or concerning the distribution of the Securities made or purported to be made under the Prospectus, and irrevocably waives any right to raise as a defence in any such Proceeding any alleged lack of jurisdiction to bring the Proceeding.
13. The Filing Person irrevocably and unconditionally submits to the non-exclusive jurisdiction of
(a) the judicial, quasi-judicial and administrative tribunals of each of the provinces [and territories] of Canada in which the securities are distributed under the Prospectus; and
(b) any administrative proceeding in any such province [or territory],
in any Proceeding arising out of or related to or concerning the distribution of the Securities made or purported to be made under the Prospectus.
14. Until six years after completion of the distribution of the Securities made under the Prospectus, the Filing Person shall file a new submission to jurisdiction and appointment of agent for service of process in this form at least 30 days before termination of this submission to jurisdiction and appointment of agent for service of process.
15. Until six years after completion of the distribution of the Securities under the Prospectus, the Filing Person shall file an amended submission to jurisdiction and appointment of agent for service of process at least 30 days before a change in the name or above address of the Agent.
16. This submission to jurisdiction and appointment of agent for service of process shall be governed by and construed in accordance with the laws of [insert province or territory of above address of Agent].
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Dated: ____________________ |
____________________ |
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Signature of Filing Person
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____________________ |
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Print name of person signing and, if the Filing Person is not an individual, the title of the person
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AGENT
The undersigned accepts the appointment as agent for service of process of [insert name of IssuerFiling Person] under the terms and conditions of the appointment of agent for service of process stated above.
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Dated: ____________________ |
____________________ |
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Signature of Agent
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____________________ |
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Print name and title of signing and, if Agent is not an individual, the title of the person
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Schedule B-2 -- Blackline Showing Proposed Changes to Form 41-101F1 Information Required in a Prospectus
APPENDIX B
SCHEDULE B-2
FORM 41-101F1
INFORMATION REQUIRED IN A PROSPECTUS
GENERAL INSTRUCTIONS
(1) The objective of the prospectus is to provide information concerning the issuer that an investor needs in order to make an informed investment decision. This Form sets out specific disclosure requirements that are in addition to the general requirement under securities legislation to provide full, true and plain disclosure of all material facts relating to the securities to be distributed. Certain rules of specific application impose prospectus disclosure obligations in addition to those described in this Form.
(2) Terms used and not defined in this Form that are defined or interpreted in the Instrument bear that definition or interpretation. Other definitions are set out in NI 14-101.
(3) In determining the degree of detail required, a standard of materiality must be applied. Materiality is a matter of judgment in the particular circumstance, and is determined in relation to an item's significance to investors, analysts and other users of the information. An item of information, or an aggregate of items, is considered material if it is probable that its omission or misstatement would influence or change an investment decision with respect to the issuer's securities. In determining whether information is material, take into account both quantitative and qualitative factors. The potential significance of items must be considered individually rather than on a net basis, if the items have an offsetting effect.
(4) Unless an item specifically requires disclosure only in the preliminary prospectus, the disclosure requirements set out in this Form apply to both the preliminary prospectus and the prospectus. Details concerning the price and other matters dependent upon or relating to price, such as the number of securities being distributed, may be left out of the preliminary prospectus, along with specifics concerning the plan of distribution, to the extent that these matters have not been decided.
(5) The disclosure must be understandable to readers and presented in an easy-to-read format. The presentation of information should comply with the plain language principles listed in section 4.1 of Companion Policy 41-101CP General Prospectus Requirements. If technical terms are required, clear and concise explanations should be included.
(6) No reference need be made to inapplicable items and, unless otherwise required in this Form, negative answers to items may be omitted.
(7) Where the term "issuer" is used, it may be necessary, in order to meet the requirement for full, true and plain disclosure of all material facts, to also include disclosure with respect to persons or companies that the issuer is required, under the issuer's GAAP, to consolidate, proportionately consolidate or account for using the equity method (for example, including "subsidiaries" as that term is used in Canadian GAAP applicable to publicly accountable enterprises). If it is more likely than not that a person or company will become an entity that the issuer will be required, under the issuer's GAAP, to consolidate, proportionately consolidate or account for using the equity method, it may be necessary to also include disclosure with respect to the person or company.
(8) An issuer that is a special purpose entity may have to modify the disclosure items to reflect the special purpose nature of its business.
(9) If disclosure is required as of a specific date and there has been a material change or change that is otherwise significant in the required information subsequent to that date, present the information as of the date of the change or a date subsequent to the change instead.
(10) If an issuer discloses financial information in a preliminary prospectus or prospectus in a currency other than the Canadian dollar, prominently display the presentation currency.
(11) Except as otherwise required or permitted, include information in a narrative form. The issuer may include graphs, photographs, maps, artwork or other forms of illustration, if relevant to the business of the issuer or the distribution and not misleading. Include descriptive headings. Except for information that appears in a summary, information required under more than one Item need not be repeated.
(12) Certain requirements in this Form make reference to requirements in another instrument or form. Unless this Form states otherwise, issuers must also follow the instruction or requirement in the other instrument or form. These references include references to Form 51-102F2. Venture issuers must include such disclosure in a preliminary prospectus or prospectus even if they are not otherwise required to file an annual information form under NI 51-102
(13) Wherever this Form uses the word "subsidiary", the term includes companies and other types of business organizations such as partnerships, trusts and other unincorporated business entities.
(14) Where requirements in this Form make reference to, or are substantially similar to, requirements in Form 51-102F2, issuers may apply the general provision in subpart 1(d) of Form 51-102F2. However, issuers must supplement this disclosure if the supplemented disclosure is necessary to ensure that the prospectus provides full, true and plain disclosure of all material facts related to the securities to be distributed as required under Item 29 of this Form.
(15) Forward-looking information, as defined in NI 51-102, included in a prospectus must comply with section 4A.2 of NI 51-102 and must include the disclosure described in section 4A.3 of NI 51-102. In addition to the foregoing, FOFI or a financial outlook, each as defined in NI 51-102, included in a prospectus must comply with Part 4B of NI 51-102. If the forward-looking information relates to an issuer or other entity that is not a reporting issuer in any jurisdiction, section 4A.2, section 4A.3 and Part 4B of NI 51-102 apply as if the issuer or other entity were a reporting issuer in at least one jurisdiction.
ITEM 1: Cover Page Disclosure
Required statement
1.1 State in italics at the top of the cover page the following:
"No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise."
Preliminary prospectus disclosure
1.2 Every preliminary prospectus must have printed in red ink and in italics at the top of the cover page immediately above the disclosure required under section 1.1 the following, with the bracketed information completed:
"A copy of this preliminary prospectus has been filed with the securities regulatory authority(ies) in [each of/certain of the provinces/provinces and territories of Canada] but has not yet become final for the purpose of the sale of securities. Information contained in this preliminary prospectus may not be complete and may have to be amended. The securities may not be sold until a receipt for the prospectus is obtained from the securities regulatory authority(ies)."
INSTRUCTION
Issuers must complete the bracketed information by
(a) inserting the names of each jurisdiction in which the issuer intends to offer securities under the prospectus,
(b) stating that the filing has been made in each of the provinces of Canada or each of the provinces and territories of Canada, or
(c) identifying the filing jurisdictions by exception (i.e., every province of Canada or every province and territory of Canada, except [excluded jurisdictions]).
Basic disclosure about the distribution
1.3 State the following immediately below the disclosure required under sections 1.1 and 1.2 with the bracketed information completed:
"[PRELIMINARY] PROSPECTUS
[INITIAL PUBLIC OFFERING OR NEW ISSUE AND/OR SECONDARY OFFERING]
[(Date)]
[Name of Issuer]
[number and type of securities qualified for distribution under the prospectus, including any
options or warrants, and the price per security]"
Distribution
1.4(1) If the securities are being distributed for cash, provide the information called for below, in substantially the following tabular form or in a note to the table:
Price to public
Underwriting discounts or commission
Proceeds to issuer or selling securityholders
(a)
(b)
(c)
Per Security
__________
__________
__________
Total
__________
__________
__________
(2) If there may be an over allocation position,
(a)
disclose that adescribe the terms of the option, and(b) provide the following disclosure:
"A purchaser who acquires [insert type of securitiesqualified for distribution under the prospectus] forming part of the underwriters' over-allocation position acquires those securities under this prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the
over-allotment option or secondary market purchases, and(b) describe the terms of anyover-allotment option oran option to increase the size of the distribution before closing.secondary market purchases."(3) If the distribution of the securities is to be on a best efforts basis
, provide totals for both the minimum and maximum offering amount, if applicable.and a minimum offering amount(a) is required for the issuer to achieve one or more of the purposes of the offering, provide totals for both the minimum and maximum offering amount, or
(b) is not required for the issuer to achieve any of the purposes of the offering, state the following in boldface type:
"There is no minimum amount of funds that must be raised under this offering. This means that the issuer could complete this offering after raising only a small proportion of the offering amount set out above."
(4) If a minimum subscription amount is required from each subscriber, provide details of the minimum subscription requirements in the table required under subsection (1).
(5) If debt securities are being distributed at a premium or a discount, state in boldface type the effective yield if held to maturity.
(6) Disclose separately those securities that are underwritten, those under option and those to be sold on a best efforts basis, and, in the case of a best efforts distribution, the latest date that the distribution is to remain open.
(7) In column (b) of the table, disclose only commissions paid or payable in cash by the issuer or selling securityholder and discounts granted. Set out in a note to the table
(a) commissions or other consideration paid or payable by persons or companies other than the issuer or selling securityholder,
(b) consideration other than discounts granted and cash paid or payable by the issuer or selling securityholder, including warrants and options, and
(c) any finder's fees or similar required payment.
(8) If a security is being distributed for the account of a selling securityholder, state the name of the securityholder and a cross-reference to the applicable section in the prospectus where further information about the selling securityholder is provided. State the portion of the expenses of the distribution to be borne by the selling securityholder and, if none of the expenses of the distribution are being borne by the selling securityholder, include a statement to that effect and discuss the reason why this is the case.
INSTRUCTIONS
(1) Estimate amounts, if necessary. For non-fixed price distributions that are being made on a best efforts basis, disclosure of the information called for by the table may be set forth as a percentage or a range of percentages and need not be set forth in tabular form.
(2) If debt securities are being distributed, also express the information in the table as a percentage.
Offering price in currency other than Canadian dollar
1.5 If the offering price of the securities being distributed is disclosed in a currency other than the Canadian dollar, disclose in boldface type the currency.
Non-fixed price distributions
1.6 If the securities are being distributed at non-fixed prices, disclose
(a) the discount allowed or commission payable to the underwriter,
(b) any other compensation payable to the underwriter and, if applicable, that the underwriter's compensation will be increased or decreased by the amount by which the aggregate price paid for the securities by the purchasers exceeds or is less than the gross proceeds paid by the underwriter to the issuer or selling securityholder,
(c) that the securities to be distributed under the prospectus will be distributed, as applicable, at
(i) prices determined by reference to the prevailing price of a specified security in a specified market,
(ii) market prices prevailing at the time of sale, or
(iii) prices to be negotiated with purchasers,
(d) that prices may vary from purchaser to purchaser and during the period of distribution,
(e) if the price of the securities is to be determined by reference to the prevailing price of a specified security in a specified market, the price of the specified security in the specified market at the latest practicable date,
(f) if the price of the securities will be the market price prevailing at the time of the sale, the market price at the latest practicable date, and
(g) the net proceeds or, if the distribution is to be made on a best efforts basis, the minimum amount of net proceeds, if any, to be received by the issuer or selling securityholder.
Pricing disclosure
1.7 If the offering price or the number of securities being distributed, or an estimate of the range of the offering price or of the number of securities being distributed, has been publicly disclosed in a jurisdiction or a foreign jurisdiction as of the date of the preliminary prospectus, include this information in the preliminary prospectus.
Reduced price distributions
1.8 If an underwriter wishes to be able to decrease the price at which securities are distributed for cash from the initial offering price fixed in the prospectus, include in boldface type a cross-reference to the section in the prospectus where disclosure concerning the possible price decrease is provided.
Market for securities
1.9(1) Identify the exchange(s) and quotation system(s), if any, on which securities of the issuer of the same class or series as the securities being distributed are traded or quoted and the market price of those securities as of the latest practicable date.
(2) Disclose any intention to stabilize the market. Provide a cross-reference to the section in the prospectus where further information about market stabilization is provided.
(3) If no market for the securities being distributed under the prospectus exists or is expected to exist upon completion of the distribution, state the following in boldface type:
"There is no market through which these securities may be sold and purchasers may not be able to resell securities purchased under this prospectus. This may affect the pricing of the securities in the secondary market, the transparency and availability of trading prices, the liquidity of the securities, and the extent of issuer regulation. See 'Risk Factors'."
(4) If the issuer has complied with the requirements of the Instrument as an IPO venture issuer, include a statement, in substantially the following form, with bracketed information completed:
"As at the date of this prospectus, [name of issuer] does not have any of its securities listed or quoted, has not applied to list or quote any of its securities, and does not intend to apply to list or quote any of its securities, on the Toronto Stock Exchange, a U.S. marketplace, or a marketplace outside Canada and the United States of America other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc."
Risk factors
1.10 Include a cross-reference to sections in the prospectus where information about the risks of an investment in the securities being distributed is provided.
Underwriter(s)
1.11(1) State the name of each underwriter.
(2) If applicable, comply with the requirements of NI 33-105 for front page prospectus disclosure.
(3) If an underwriter has agreed to purchase all of the securities being distributed at a specified price and the underwriter's obligations are subject to conditions, state the following, with bracketed information completed:
"We, as principals, conditionally offer these securities, subject to prior sale, if, as and when issued by [name of issuer] and accepted by us in accordance with the conditions contained in the underwriting agreement referred to under Plan of Distribution".
(4) If an underwriter has agreed to purchase a specified number or principal amount of the securities at a specified price, state that the securities are to be taken up by the underwriter, if at all, on or before a date not later than 42 days after the date of the receipt for the final prospectus.
(5) If there is no underwriter involved in the distribution, provide a statement in boldface type to the effect that no underwriter has been involved in the preparation of the prospectus or performed any review or independent due diligence of the contents of the prospectus.
(6) Provide the following tabular information
INSTRUCTION
If the underwriter has been granted compensation securities, state, in a footnote, whether the prospectus qualifies the grant of all or part of the compensation securities and provide a cross-reference to the applicable section in the prospectus where further information about the compensation securities is provided.
International issuersEnforcement of judgments against foreign persons or companies
1.12 If the issuer, a director of the issuer, a selling securityholder, or any other person or company
required to providethat is signing or providing a certificate under Part 5 of the Instrument or other securities legislation, is incorporated, continued, or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, state the following on the cover page or under a separate heading elsewhere in the prospectus, with the bracketed information completed:"The [issuer, director of the issuer, selling securityholder, or any other person or company signing or providing a certificate under Part 5 of the Instrument or other securities legislation] is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada. Although [the person or company described above] has appointed [name(s) and address[es] of agent(s) for service] as its agent(s) for service of process in [list jurisdictions] it may not be possible for investors to enforce judgements obtained in Canada against [the person or company described above]."
Restricted securities
1.13(1) Describe the number and class or classes of restricted securities being distributed using the appropriate restricted security terms in the same type face and type size as the rest of the description.
(2) If the securities being distributed are restricted securities and the holders of the securities do not have the right to participate in a takeover bid made for other equity securities of the issuer, disclose that fact.
Earnings coverage
1.14 If any of the earnings coverage ratios required to be disclosed under Item 9 is less than one-to-one, disclose this fact in boldface type.
ITEM 2: Table of Contents
Table of contents
2.1 Include a table of contents.
ITEM 3: Summary of Prospectus
General
3.1(1) Briefly summarize, near the beginning of the prospectus, information appearing elsewhere in the prospectus that, in the opinion of the issuer or selling securityholder, would be most likely to influence the investor's decision to purchase the securities being distributed, including a description of
(a) the principal business of the issuer and its subsidiaries,
(b) the securities to be distributed, including the offering price and expected net proceeds,
(c) use of proceeds,
(d) risk factors,
(e) financial information, and
(f) if restricted securities, subject securities or securities that are directly or indirectly convertible into or exercisable or exchangeable for restricted securities or subject securities, are to be distributed under the prospectus
(i) include a summary of the information required by section 10.6, and
(ii) include, in boldface type, a statement of the rights the holders of restricted securities do not have, if the holders do not have all of the rights referred to in section 10.6.
(2) For the financial information provided under paragraph (1)(e),
(a) describe the type of information appearing elsewhere in the prospectus on which the financial information is based,
(b) disclose whether the information appearing elsewhere in the prospectus on which the financial information is based has been audited,
(c) disclose whether the financial information has been audited, and
(d) if neither the information appearing elsewhere in the prospectus on which the financial information is based nor the financial information has been audited, prominently disclose that fact.
(3) For each item summarized under subsection (1), provide a cross-reference to the information in the prospectus.
Cautionary language
3.2 At the beginning of the summary, include a statement in italics in substantially the following form:
"The following is a summary of the principal features of this distribution and should be read together with the more detailed information and financial data and statements contained elsewhere in this prospectus."
ITEM 4: Corporate Structure
Name, address and incorporation
4.1(1) State the issuer's full corporate name or, if the issuer is an unincorporated entity, the full name under which it exists and carries on business, and the address(es) of the issuer's head and registered office.
(2) State the statute under which the issuer is incorporated, continued or organized or, if the issuer is an unincorporated entity, the laws of the jurisdiction or foreign jurisdiction under which it is established and exists.
(3) Describe the substance of any material amendments to the articles or other constating or establishing documents of the issuer.
Intercorporate relationships
4.2(1) Describe, by way of a diagram or otherwise, the intercorporate relationships among the issuer and its subsidiaries.
(2) For each subsidiary described in subsection (1), state
(a) the percentage of votes attaching to all voting securities of the subsidiary beneficially owned, or controlled or directed, directly or indirectly, by the issuer,
(b) the percentage of each class of restricted securities of the subsidiary beneficially owned, or controlled or directed, directly or indirectly, by the issuer, and
(c) where the subsidiary was incorporated, continued, formed or organized.
(3) If the securities distributed under the prospectus are being issued in connection with a restructuring transaction, describe by way of a diagram or otherwise these intercorporate relationships both before and after the completion of the proposed transaction.
(4) A particular subsidiary may be omitted from the disclosure required by this section if, at the most recent financial year end of the issuer
(a) the total assets of the subsidiary do not exceed 10% of the consolidated assets of the issuer,
(b) the revenue of the subsidiary does not exceed 10% of the consolidated revenue of the issuer, and
(c) the conditions in paragraphs (a) and (b) would be satisfied if
(i) the subsidiaries that may be omitted under paragraphs (a) and (b) were considered in the aggregate, and
(ii) the reference to 10% in those paragraphs was changed to 20%.
ITEM 5: Describe the Business
Describe the business
5.1(1) Describe the business of the issuer and its operating segments that are reportable segments as those terms are described in the issuer's GAAP. Disclose information for each reportable segment of the issuer in accordance with subsection 5.1(1) of Form 51-102F2.
(2) Disclose the nature and results of any bankruptcy, receivership or similar proceedings against the issuer or any of its subsidiaries, or any voluntary bankruptcy, receivership or similar proceedings by the issuer or any of its subsidiaries, within the three most recently completed financial years or completed during or proposed for the current financial year.
(3) Disclose the nature and results of any material restructuring transaction of the issuer or any of its subsidiaries within the three most recently completed financial years or completed during or proposed for the current financial year.
(4) If the issuer has implemented social or environmental policies that are fundamental to the issuer's operations, such as policies regarding the issuer's relationship with the environment or with the communities in which the issuer does business, or human rights policies, describe them and the steps the issuer has taken to implement them.
Three-year history
5.2(1) Describe how the issuer's business has developed over the last three completed financial years and any subsequent period to the date of the prospectus, including only events, such as acquisitions or dispositions, or conditions that have influenced the general development of the business.
(2) If the issuer produces or distributes more than one product or provides more than one kind of service, describe the products or services.
(3) Discuss changes in the issuer's business that the issuer expects will occur during the current financial year.
Issuers with asset-backed securities outstanding
5.3 If the issuer has asset-backed securities outstanding that were distributed under a prospectus, disclose information in accordance with section 5.3 of Form 51-102F2.
Issuers with mineral projects
5.4 If the issuer has a mineral project, disclose information for the issuer in accordance with section 5.4 of Form 51-102F2.For the purposes of this section, the alternative disclosure permitted in Instruction (ii) to section 5.4 of Form 51-102F2 does not apply.
Issuers with oil and gas operations
5.5(1) If the issuer is engaged in oil and gas activities as defined in NI 51-101 and any of the oil and gas information is material as contemplated under NI 51-101 in respect of the issuer, disclose that information in accordance with Form 51-101F1
(a) as at the end of, and for, the most recent financial year for which the prospectus includes an audited statement of financial position of the issuer,
(b) in the absence of a completed financial year referred to in paragraph (a), as at the most recent date for which the prospectus includes an audited statement of financial position of the issuer, and for the most recent financial period for which the prospectus includes an audited statement of comprehensive income of the issuer, or
(c) if the issuer was not engaged in oil and gas activities at the date set out in paragraphs (a) or (b), as of a date subsequent to the date the issuer first engaged in oil and gas activities as defined in NI 51-101 and prior to the date of the preliminary prospectus.
(2) Include with the disclosure under subsection (1) a report in the form of Form 51-101F2, on the reserves data included in the disclosure required under subsection (1).
(3) Include with the disclosure under subsection (1) a report in the form of Form 51-101F3 that refers to the information disclosed under subsection (1).
(4) To the extent not reflected in the information disclosed in response to subsection (1), disclose the information contemplated by Part 6 of NI 51-101 in respect of material changes that occurred after the applicable statement of financial position referred to in subsection (1).
INSTRUCTION
Disclosure in a prospectus must be consistent with NI 51-101 if the issuer is engaged in oil and gas activities as defined in NI 51-101.
ITEM 6: Use of Proceeds
Proceeds
6.1(1) State the estimated net proceeds to be received by the issuer or selling securityholder or, in the case of a non-fixed price distribution or a distribution to be made on a best efforts basis, the minimum amount, if any, of net proceeds to be received by the issuer or selling securityholder from the sale of the securities distributed.
(2) State the particulars of any provisions or arrangements made for holding any part of the net proceeds of the distribution in trust or escrow subject to the fulfillment of conditions.
(3) If the prospectus is used for a special warrant or similar transaction, state the amount that has been received by the issuer of the special warrants or similar securities on the sale of the special warrants or similar securities.
Junior issuers
6.2 A junior issuer must disclose
(a) the total funds available, and
(b) the following breakdown of those funds:
(i) the estimated net proceeds from the sale of the securities offered under the prospectus;
(ii) the estimated consolidated working capital (deficiency) as at the most recent month end before filing the prospectus;
(iii) the total other funds available to be used to achieve the principal purposes identified by the junior issuer pursuant to this Item.
Principal purposes -- generally
6.3(1) Describe in reasonable detail and, if appropriate, using tabular form, each of the principal purposes, with approximate amounts, for which
(a) the net proceeds will be used by the issuer, or
(b) the funds available as required under section 6.2 will be used by a junior issuer.
(2) If the closing of the distribution is subject to a minimum
subscriptionoffering amount, provide disclosure of the use of proceeds for the minimum and maximumsubscriptionsoffering amounts.(3) If all of the following apply, disclose how the proceeds will be used by the issuer, with reference to various potential thresholds of proceeds raised, in the event that the issuer raises less than the maximum offering amount:
(a) the closing of the distribution is not subject to a minimum offering amount;
(b) the distribution of the securities is to be on a best efforts basis; and
(c) the issuer has significant short-term non-discretionary expenditures including those for general corporate purposes, or significant short-term capital or contractual commitments, and may not have other readily accessible resources to satisfy those expenditures or commitments.
(4) If the issuer is required to provide disclosure under subsection (3), the issuer must discuss, in respect of each threshold, the impact (if any) of raising this amount on its liquidity, operations, capital resources and solvency.
INSTRUCTIONS
If the issuer is required to disclose the use of proceeds at various thresholds under subsections 6.3(3) and (4), include as an example a threshold that reflects the receipt of a small portion of the offering.
Principal purposes -- indebtedness
6.4(1) If more than 10% of the net proceeds will be used to reduce or retire indebtedness and the indebtedness was incurred within the two preceding years, describe the principal purposes for which the proceeds of the indebtedness were used.
(2) If the creditor is an insider, associate or affiliate of the issuer, identify the creditor and the nature of the relationship to the issuer, and disclose the outstanding amount owed.
Principal purposes -- asset acquisition
6.5(1) If more than 10% of the net proceeds are to be used to acquire assets, describe the assets.
(2) If known, disclose the particulars of the purchase price being paid for or being allocated to the assets or categories of assets, including intangible assets.
(3) If the vendor of the assets is an insider, associate or affiliate of the issuer, identify the vendor and the nature of the relationship to the issuer, and disclose the method used in determining the purchase price.
(4) Describe the nature of the title to or interest in the assets to be acquired by the issuer.
(5) If part of the consideration for the acquisition of the assets consists of securities of the issuer, give brief particulars of the class, number or amount, voting rights, if any, and other appropriate information relating to the securities, including particulars of the issuance of securities of the same class within the two preceding years.
Principal purposes -- insiders, etc.
6.6 If an insider, associate or affiliate of the issuer will receive more than 10% of the net proceeds, identify the insider, associate or affiliate and the nature of the relationship to the issuer, and disclose the amount of net proceeds to be received.
Principal purposes -- research and development
6.7 If more than 10% of the net proceeds from the distribution will be used for research and development of products or services, describe
(a) the timing and stage of research and development programs that management anticipates will be reached using such proceeds,
(b) the major components of the proposed programs that will be funded using the proceeds from the distribution, including an estimate of anticipated costs,
(c) if the issuer is conducting its own research and development, is subcontracting out the research and development or is using a combination of those methods, and
(d) the additional steps required to reach commercial production and an estimate of costs and timing.
Business objectives and milestones
6.8(1) State the business objectives that the issuer expects to accomplish using the net proceeds of the distribution under section 6.1, or in the case of a junior issuer, using the funds available described under section 6.2.
(2) Describe each significant event that must occur for the business objectives described under subsection (1) to be accomplished and state the specific time period in which each event is expected to occur and the costs related to each event.
Unallocated funds in trust or escrow
6.9(1) Disclose that unallocated funds will be placed in a trust or escrow account, invested or added to the working capital of the issuer.
(2) Give details of the arrangements made for, and the persons or companies responsible for,
(a) the supervision of the trust or escrow account or the investment of unallocated funds, and
(b) the investment policy to be followed.
Other sources of funding
6.10 If any material amounts of other funds are to be used in conjunction with the proceeds, state the amounts and sources of the other funds.
Financing by special warrants, etc.
6.11(1) If the prospectus is used to qualify the distribution of securities issued upon the exercise of special warrants or the exercise of other securities acquired on a prospectus-exempt basis, describe the principal purposes for which the proceeds of the prospectus-exempt financing were used or are to be used.
(2) If all or a portion of the funds have been spent, explain how the funds were spent.
ITEM 7: Dividends or Distributions
Dividends or distributions
7.1(1) Disclose the amount of cash dividends or distributions declared per security for each class of the issuer's securities for each of the three most recently completed financial years and its current financial year.
(2) Describe any restrictions that could prevent the issuer from paying dividends or distributions.
(3) Disclose the issuer's dividend or distribution policy and any intended change in dividend or distribution policy.
ITEM 8: Management's Discussion and Analysis
Interpretation
8.1(1) For the purposes of this Item, MD&A means a completed Form 51-102F1 or, in the case of an SEC issuer, a completed Form 51-102F1 or management's discussion and analysis prepared in accordance with Item 303 of Regulation S-K under the 1934 Act.
(2) For MD&A in the form of Form 51-102F1, the issuer
(a) must read the references to a "venture issuer" in Form 51-102F1 to include an IPO venture issuer,
(b) must disregard
(i) the Instruction to section 1.11 of Form 51-102F1, and
(ii) section 1.15 of Form 51-102F1, and
(c) must include the disclosure required by section 1.10 of Form 51-102F1 in the prospectus.
INSTRUCTION
For the purposes of paragraph (2)(c), an issuer cannot satisfy the requirement in section 1.10 of Form 51-102F1 by incorporating by reference its fourth quarter MD&A into the prospectus.
MD&A
8.2(1) Provide MD&A for
(a) the most recent annual financial statements of the issuer included in the prospectus under Item 32, and
(b) the most recent interim financial report of the issuer included in the prospectus under Item 32.
(2) If the prospectus includes the issuer's annual statements of comprehensive income, statements of changes in equity, and statements of cash flow for three financial years under Item 32, provide MD&A for the second most recent annual financial statements of the issuer included in the prospectus under Item 32.
(3) Despite subsection (2), MD&A for the second most recent annual financial statements of the issuer included in the prospectus under Item 32 may omit disclosure regarding statement of financial position items.
[Repealed]
8.3(1) [Repealed]
(2) [Repealed]
Disclosure of outstanding security data
8.4(1) Disclose the designation and number or principal amount of
(a) each class and series of voting or equity securities of the issuer for which there are securities outstanding,
(b) each class and series of securities of the issuer for which there are securities outstanding if the securities are convertible into, or exercisable or exchangeable for, voting or equity securities of the issuer, and
(c) subject to subsection (2), each class and series of voting or equity securities of the issuer that are issuable on the conversion, exercise or exchange of outstanding securities of the issuer.
(2) If the exact number or principal amount of voting or equity securities of the issuer that are issuable on the conversion, exercise or exchange of outstanding securities of the issuer is not determinable, the issuer must disclose the maximum number or principal amount of each class and series of voting or equity securities that are issuable on the conversion, exercise or exchange of outstanding securities of the issuer and, if that maximum number or principal amount is not determinable, the issuer must describe the exchange or conversion features and the manner in which the number or principal amount of voting or equity securities will be determined.
(3) The disclosure under subsections (1) and (2) must be prepared as of the latest practicable date.
More recent financial information
8.5 If the issuer is required to include more recent historical financial information in the prospectus under subsection 32.6(
12), the issuer is not required to update the MD&A already included in the prospectus under this Item.Additional disclosure for venture issuers or IPO venture issuers without significant revenue
8.6(1) If the issuer is a venture issuer or an IPO venture issuer that has not had significant revenue from operations in either of its last two financial years, disclose a breakdown of material components of
(a) exploration and evaluation assets or expenditures,
(b) expensed research and development costs,
(c) intangible assets arising from development,
(d) general and administrative expenses, and
(e) any material costs, whether expensed or recognized as assets, not referred to in paragraphs (a) through (d).
(2) Present the analysis of exploration and evaluation assets or expenditures required by subsection (1) on a property-by-property basis, if the issuer's business primarily involves mining exploration and development.
(3) Provide the disclosure in subsection (1) for the following periods:
(a) the two most recently completed financial years; and
(b) the most recent year-to-date interim period and the comparative year-to-date period presented in the interim financial report included in the prospectus, if any.
(4) Subsection (1) does not apply if the information required under that subsection has been disclosed in the financial statements included in the prospectus.
Additional disclosure for junior issuers
8.7 For a junior issuer that had negative cash flow from operating activities in its most recently completed financial year for which financial statements have been included in the prospectus, disclose
(a) the period of time the proceeds raised under the prospectus are expected to fund operations,
(b) the estimated total operating costs necessary for the issuer to achieve its stated business objectives during that period of time, and
(c) the estimated amount of other material capital expenditures during that period of time.
In determining cash flow from operating activities, the issuer must include cash payments related to dividends and borrowing costs.
Additional disclosure for issuers with significant equity investees
8.8(1) An issuer that has a significant equity investee must disclose
(a) summarized financial information of the equity investee, including the aggregated amounts of assets, liabilities, revenue and profit or loss, and
(b) the issuer's proportionate interest in the equity investee and any contingent issuance of securities by the equity investee that might significantly affect the issuer's share of profit or loss.
(2) Provide the disclosure in subsection (1) for the following periods:
(a) the two most recently completed financial years;
(b) the most recent year-to-date interim period and the comparative year-to-date period presented in the interim financial report included in the prospectus, if any.
(3) Subsection (1) does not apply if
(a) the information required under that subsection has been disclosed in the financial statements included in the prospectus, or
(b) the issuer includes in the prospectus separate financial statements of the equity investee for the periods referred to in subsection (2).
ITEM 9: Earnings Coverage Ratios
Earnings coverage ratios
9.1(1) If the securities being distributed are debt securities having a term to maturity in excess of one year or are preferred shares, disclose the following earnings coverage ratios adjusted in accordance with subsection (2):
(a) the earnings coverage ratio based on the most recent 12-month period included in the issuer's annual financial statements included in the prospectus,
(b) if there has been a change in year end and the issuer's most recent financial year is less than nine months in length, the earnings coverage calculation for its old financial year, and
(c) the earnings coverage ratio based on the 12-month period ended on the last day of the most recently completed period for which an interim financial report of the issuer has been included in the prospectus.
(2) Adjust the ratios referred to in subsection (1) to reflect
(a) the issuance of the securities being distributed under the prospectus, based on the price at which these securities are expected to be distributed,
(b) in the case of a distribution of preferred shares,
(i) the issuance of all preferred shares since the date of the annual financial statements or interim financial report, and
(ii) the repurchase, redemption or other retirement of all preferred shares repurchased, redeemed, or otherwise retired since the date of the annual financial statements or interim financial report and of all preferred shares to be repurchased, redeemed, or otherwise retired from the proceeds to be realized from the sale of securities under the prospectus,
(c) the issuance of all financial liabilities, as defined in accordance with the issuer's GAAP, since the date of the annual financial statements or interim financial report, and
(d) the repayment, redemption or other retirement of all financial liabilities, as defined in accordance with the issuer's GAAP, since the date of the annual financial statements or interim financial report and all financial liabilities to be repaid or redeemed from the proceeds to be realized from the sale of securities distributed under the prospectus.
(e) [Repealed]
(3) [Repealed]
(4) If the earnings coverage ratio is less than one-to-one, disclose in the prospectus the dollar amount of the numerator required to achieve a ratio of one-to-one.
(5) If the prospectus includes a pro forma income statement, calculate the pro forma earnings coverage ratios for the periods of the pro forma income statement, and disclose them in the prospectus.
INSTRUCTIONS
(1) Cash flow coverage may be disclosed but only as a supplement to earnings coverage and only if the method of calculation is fully disclosed.
(2) Earnings coverage is calculated by dividing an entity's profit or loss attributable to owners of the parent (the numerator) by its borrowing costs and dividend obligations (the denominator).
(3) For the earnings coverage calculation
(a) the numerator should be calculated using consolidated profit or loss attributable to owners of the parent before borrowing costs and income taxes;
(b) imputed interest income from the proceeds of a distribution should not be added to the numerator;
(c) [Repealed]
(d) for distributions of debt securities, the appropriate denominator is borrowing costs, after giving effect to the new debt securities issue and any retirement of obligations, plus the borrowing costs that have been capitalized during the period;
(e) for distributions of preferred shares
(i) the appropriate denominator is dividends declared during the period, together with undeclared dividends on cumulative preferred shares, after giving effect to the new preferred share issue, plus the issuer's annual borrowing cost requirements, including the borrowing costs that have been capitalized during the period, less any retirement of obligations, and
(ii) dividends should be grossed-up to a before-tax equivalent using the issuer's effective income tax rate; and
(f) for distributions of both debt securities and preferred shares, the appropriate denominator is the same as for a preferred share issue, except that the denominator should also reflect the effect of the debt securities being offered pursuant to the prospectus.
(4) The denominator represents a pro forma calculation of the aggregate of an issuer's borrowing cost obligations on all financial liabilities and dividend obligations (including both dividends declared and undeclared dividends on cumulative preferred shares) with respect to all outstanding preferred shares, as adjusted to reflect
(a) the issuance of all financial liabilities and, in addition in the case of an issuance of preferred shares, all preferred shares issued, since the date of the annual financial statements or interim financial report;
(b) the issuance of the securities that are to be distributed under the prospectus, based on a reasonable estimate of the price at which these securities will be distributed; and
(c) the repayment or redemption of all financial liabilities since the date of the annual financial statements or interim financial report, all financial liabilities to be repaid or redeemed from the proceeds to be realized from the sale of securities under the prospectus and, in addition, in the case of an issuance of preferred shares, all preferred shares repaid or redeemed since the date of the annual financial statements or interim financial report and all preferred shares to be repaid or redeemed from the proceeds to be realized from the sale of securities under the prospectus.
(d) [Repealed]
(5) [Repealed]
(6) For debt securities, disclosure of earnings coverage shall include language similar to the following, with the bracketed and bulleted information completed:
"[Name of the issuer]'s borrowing cost requirements, after giving effect to the issue of [the debt securities to be distributed under the prospectus], amounted to $• for the 12 months ended •. [Name of the issuer]'s profit or loss attributable to owners of the parent before borrowing costs and income tax for the 12 months then ended was $•, which is • times [name of the issuer]'s borrowing cost requirements for this period."
(7) For preferred share issues, disclosure of earnings coverage shall include language similar to the following, with the bracketed and bulleted information completed:
"[Name of the issuer]'s dividend requirements on all of its preferred shares, after giving effect to the issue of [the preferred shares to be distributed under the prospectus], and adjusted to a before-tax equivalent using an effective income tax rate of •%, amounted to $• for the 12 months ended •. [Name of the issuer]'s borrowing cost requirements for the 12 months then ended amounted to $•. [Name of the issuer]'s profit or loss attributable to owners of the parent before borrowing costs and income tax for the 12 months ended • was $•, which is • times [name of the issuer]'s aggregate dividend and borrowing cost requirements for this period."
(8) Other earnings coverage calculations may be included as supplementary disclosure to the required earnings coverage calculations outlined above as long as their derivation is disclosed and they are not given greater prominence than the required earnings coverage calculations.
ITEM 10: Description of the Securities Distributed
Equity securities
10.1 If equity securities are being distributed, state the description or the designation of the class of the equity securities and describe all material attributes and characteristics, including
(a) dividend rights,
(b) voting rights,
(c) rights upon dissolution or winding-up,
(d) pre-emptive rights,
(e) conversion or exchange rights,
(f) redemption, retraction, purchase for cancellation or surrender provisions,
(g) sinking or purchase fund provisions,
(h) provisions permitting or restricting the issuance of additional securities and any other material restrictions, and
(i) provisions requiring a securityholder to contribute additional capital.
Debt securities
10.2 If debt securities are being distributed, describe all material attributes and characteristics of the indebtedness and the security, if any, for the debt, including
(a) provisions for interest rate, maturity and premium, if any,
(b) conversion or exchange rights,
(c) redemption, retraction, purchase for cancellation or surrender provisions,
(d) sinking or purchase fund provisions,
(e) the nature and priority of any security for the debt securities, briefly identifying the principal properties subject to lien or charge,
(f) provisions permitting or restricting the issuance of additional securities, the incurring of additional indebtedness and other material negative covenants, including restrictions against payment of dividends and restrictions against giving security on the assets of the issuer or its subsidiaries, and provisions as to the release or substitution of assets securing the debt securities,
(g) the name of the trustee under any indenture relating to the debt securities and the nature of any material relationship between the trustee or any of its affiliates and the issuer or any of its affiliates, and
(h) any financial arrangements between the issuer and any of its affiliates or among its affiliates that could affect the security for the indebtedness.
Asset-backed securities
10.3(1) This section applies only if any asset-backed securities are being distributed under the prospectus.
(2) Describe the material attributes and characteristics of the asset-backed securities, including
(a) the rate of interest or stipulated yield and any premium,
(b) the date for repayment of principal or return of capital and any circumstances in which payments of principal or capital may be made before such date, including any redemption or pre-payment obligations or privileges of the issuer and any events that may trigger early liquidation or amortization of the underlying pool of financial assets,
(c) provisions for the accumulation of cash flows to provide for the repayment of principal or return of capital,
(d) provisions permitting or restricting the issuance of additional securities and any other material negative covenants applicable to the issuer,
(e) the nature, order and priority of the entitlements of holders of asset-backed securities and any other entitled persons or companies to receive cash flows generated from the underlying pool of financial assets, and
(f) any events, covenants, standards or preconditions that may reasonably be expected to affect the timing or amount of payments or distributions to be made under the asset-backed securities, including those that are dependent or based on the economic performance of the underlying pool of financial assets.
(3) Provide financial disclosure that describes the underlying pool of financial assets for
(a) the three most recently completed financial years ended more than
(i) 90 days before the date of the prospectus, or
(ii) 120 days before the date of the prospectus, if the issuer is a venture issuer,
(b) if the issuer has not had asset-backed securities outstanding for three financial years, each completed financial year ended more than
(i) 90 days before the date of the prospectus, or
(ii) 120 days before the date of the prospectus, if the issuer is a venture issuer,
(c) a period from the date the issuer had asset-backed securities outstanding to a date not more than 90 days before the date of the prospectus if the issuer has not had asset-backed securities outstanding for at least one financial year.
(4) For the purposes of the financial disclosure required by subsection (3), if an issuer changed its financial year end during any of the financial years referred to in subsection (3) and the transition year is less than nine months, the transition year is not a financial year.
(5) Despite subsection (4), all financial disclosure that describes the underlying pool of financial assets of the issuer for a transition year must be included in the prospectus for the most recent interim period, if any, ended
(a) subsequent to the most recent financial year refer to in paragraphs (3)(a) and (3)(b) in respect of which financial disclosure on the underlying pool of financial assets is included in the prospectus, and
(b) more than
(i) 45 days before the date of the prospectus, or
(ii) 60 days before the date of the prospectus if the issuer is a venture issuer.
(6) If the issuer files financial disclosure that describes the underlying pool of financial assets for a more recent period than required under subsection (3) or (5) before the prospectus is filed, the issuer must include that more recent financial disclosure that describes the underlying pool of financial assets in the prospectus.
(7) If financial disclosure that describes the underlying pool of financial assets of the issuer is publicly disseminated by, or on behalf of, the issuer through news release or otherwise for a more recent period than required under subsection (3) or (5), the issuer must include the content of the news release or public communication in the prospectus.
(8) The disclosure in subsections (3) and (5) must include a discussion and analysis of
(a) the composition of the pool as at the end of the period,
(b) profit and losses from the pool for the period presented on at least an annual basis or such shorter period as is reasonable given the nature of the underlying pool of assets,
(c) the payment, prepayment and collection experience of the pool for the period on at least an annual basis or such shorter period as is reasonable given the nature of the underlying pool of assets,
(d) servicing and other administrative fees, and
(e) any significant variances experienced in the matters referred to in paragraphs (a) through (d).
(9) Describe the type of financial assets, the manner in which the financial assets originated or will originate and, if applicable, the mechanism and terms of the agreement governing the transfer of the financial assets comprising the underlying pool to or through the issuer, including the consideration paid for the financial assets.
(10) Describe any person or company who
(a) originated, sold or deposited a material portion of the financial assets comprising the pool, or has agreed to do so,
(b) acts, or has agreed to act, as a trustee, custodian, bailee or agent of the issuer or any holder of the asset-backed securities, or in a similar capacity,
(c) administers or services a material portion of the financial assets comprising the pool or provides administrative or managerial services to the issuer, or has agreed to do so, on a conditional basis or otherwise, if
(i) finding a replacement provider of the services at a cost comparable to the cost of the current provider is not reasonably likely,
(ii) a replacement provider of the services is likely to achieve materially worse results than the current provider,
(iii) the current provider of the services is likely to default in its service obligations because of its current financial condition, or
(iv) the disclosure is otherwise material,
(d) provides a guarantee, alternative credit support or other credit enhancement to support the obligations of the issuer under the asset-backed securities or the performance of some or all of the financial assets in the pool, or has agreed to do so, or
(e) lends to the issuer in order to facilitate the timely payment or repayment of amounts payable under the asset-backed securities, or has agreed to do so.
(11) Describe the general business activities and material responsibilities under the asset-backed securities of a person or company referred to in subsection (10).
(12) Describe the terms of any material relationships between
(a) any of the persons or companies referred to in subsection (10) or any of their respective affiliates, and
(b) the issuer.
(13) Describe any provisions relating to termination of services or responsibilities of any of the persons or companies referred to in subsection (10) and the terms on which a replacement may be appointed.
(14) Describe any risk factors associated with the asset-backed securities, including disclosure of material risks associated with changes in interest rates or prepayment levels, and any circumstances where payments on the asset-backed securities could be impaired or disrupted as a result of any reasonably foreseeable event that may delay, divert or disrupt the cash flows dedicated to service the asset-backed securities.
INSTRUCTIONS
(1) Present the information required under subsections (3) through (8) in a manner that will enable a reader to easily determine whether, and the extent to which, the events, covenants, standards and preconditions referred to in paragraph (2)(f) have occurred, are being satisfied or may be satisfied.
(2) If the information required under subsections (3) through (8) is not compiled specifically from the underlying pool of financial assets, but is compiled from a larger pool of the same assets from which the securitized assets are randomly selected so that the performance of the larger pool is representative of the performance of the pool of securitized assets, then an issuer may comply with subsections (3) through (8) by providing the financial disclosure required based on the larger pool and disclosing that it has done so.
(3) Issuers are required to summarize contractual arrangements in plain language and may not merely restate the text of the contracts referred to. The use of diagrams to illustrate the roles of, and the relationship among, the persons and companies referred to in subsection (10), and the contractual arrangements underlying the asset-backed securities is encouraged.
Derivatives
10.4 If derivatives are being distributed, describe fully the material attributes and characteristics of the derivatives, including
(a) the calculation of the value or payment obligations under the derivatives,
(b) the exercise of the derivatives,
(c) settlements that are the result of the exercise of the derivatives,
(d) the underlying interest of the derivatives,
(e) the role of a calculation expert in connection with the derivatives,
(f) the role of any credit supporter of the derivatives, and
(g) the risk factors associated with the derivatives.
Special warrants, etc.
10.5 If the prospectus is used to qualify the distribution of securities issued upon the exercise of special warrants or other securities acquired on a prospectus-exempt basis,
discloseprovide the following disclosure in the prospectus to indicate that holders of such securities have been provided with a contractual right of rescissionand provide the following disclosure in the prospectus, with the bracketed information completed:"The issuer has granted to each holder of a special warrant a contractual right of rescission of the prospectus-exempt transaction under which the special warrant was initially acquired. The contractual right of rescission provides that if a holder of a special warrant who acquires another security of the issuer on exercise of the special warrant as provided for in the prospectus is, or becomes, entitled under the securities legislation of a jurisdiction to the remedy of rescission because of the prospectus or an amendment to the prospectus containing a misrepresentation,
(a) the holder is entitled to rescission of both the holder's exercise of its special warrant and the private placement transaction under which the special warrant was initially acquired,
(b) the holder is entitled in connection with the rescission to a full refund of all consideration paid to the underwriter or issuer, as the case may be, on the acquisition of the special warrant, and
(c) if the holder is a permitted assignee of the interest of the original special warrant subscriber, the holder is entitled to exercise the rights of rescission and refund as if the holder was the original subscriber."
INSTRUCTION
If the prospectus is qualifying the distribution of securities issued upon the exercise of securities other than special warrants, replace the term "special warrant" with the type of the security being distributed.
Restricted securities
10.6(1) If the issuer has outstanding, or proposes to distribute under a prospectus restricted securities, subject securities or securities that are, directly or indirectly, convertible into or exercisable or exchangeable for restricted securities or subject securities, provide a detailed description of
(a) the voting rights attached to the restricted securities that are the subject of the distribution or that will result from the distribution, either directly or following a conversion, exchange or exercise, and the voting rights, if any, attached to the securities of any other class of securities of the issuer that are the same as or greater than, on a per security basis, those attached to the restricted securities,
(b) any significant provisions under applicable corporate and securities law that do not apply to the holders of the restricted securities that are the subject of the distribution or that will result from the distribution, either directly or following a conversion, exchange or exercise, but do apply to the holders of another class of equity securities, and the extent of any rights provided in the constating documents or otherwise for the protection of holders of the restricted securities,
(c) any rights under applicable corporate law, in the constating documents or otherwise, of holders of restricted securities that are the subject of the distribution or that will result from the distribution, either directly or following a conversion, exchange or exercise, to attend, in person or by proxy, meetings of holders of equity securities of the issuer and to speak at the meetings to the same extent that holders of equity securities are entitled, and
(d) how the issuer complied with, or the basis upon which it was exempt from, the requirements of Part 12 of the Instrument.
(2) If holders of restricted securities do not have all of the rights referred to in subsection (1) the detailed description referred to in that subsection must include, in boldface type, a statement of the rights the holders do not have.
(3) If the issuer is required to include the disclosure referred to in subsection (1), state the percentage of the aggregate voting rights attached to the issuer's securities that will be represented by restricted securities after effect has been given to the issuance of the securities being offered.
Other securities
10.7 If securities other than equity securities, debt securities, asset-backed securities or derivatives are being distributed, describe fully the material attributes and characteristics of those securities.
Modification of terms
10.8(1) Describe provisions about the modification, amendment or variation of any rights attached to the securities being distributed.
(2) If the rights of holders of securities may be modified otherwise than in accordance with the provisions attached to the securities or the provisions of the governing statute relating to the securities, explain briefly.
Ratings
10.9 If the issuer has asked for and received a stability rating, or if the issuer is aware that it has received any other kind of rating, including a provisional rating, from one or more approved rating organizations for the securities being distributed and the rating or ratings continue in effect, disclose
(a) each security rating, including a provisional rating or stability rating, received from an approved rating organization,
(b) the name of each approved rating organization that has assigned a rating for the securities to be distributed,
(c) a definition or description of the category in which each approved rating organization rated the securities to be distributed and the relative rank of each rating within the organization's overall classification system,
(d) an explanation of what the rating addresses and what attributes, if any, of the securities to be distributed are not addressed by the rating,
(e) any factors or considerations identified by the approved rating organization as giving rise to unusual risks associated with the securities to be distributed,
(f) a statement that a security rating or a stability rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the rating organization, and
(g) any announcement made by, or any proposed announcement known to the issuer that is to be made by, an approved rating organization to the effect that the organization is reviewing or intends to revise or withdraw a rating previously assigned and required to be disclosed under this section.
INSTRUCTION
There may be factors relating to a security that are not addressed by a ratings agency when they give a rating. For example, in the case of cash settled derivative instruments, factors in addition to the creditworthiness of the issuer, such as the continued subsistence of the underlying interest or the volatility of the price, value or level of the underlying interest may be reflected in the rating analysis. Rather than being addressed in the rating itself, these factors may be described by an approved rating organization by way of a superscript or other notation to a rating. Any such attributes must be discussed in the disclosure under this section.
Other attributes
10.10(1) If the rights attaching to the securities being distributed are materially limited or qualified by the rights of any other class of securities, or if any other class of securities ranks ahead of or equally with the securities being distributed, include information about the other securities that will enable investors to understand the rights attaching to the securities being distributed.
(2) If securities of the class being distributed may be partially redeemed or repurchased, state the manner of selecting the securities to be redeemed or repurchased.
INSTRUCTION
This section requires only a brief summary of the provisions that are material from an investment standpoint. The provisions attaching to the securities being distributed or any other class of securities do not need to be set out in full. They may, in the issuer's discretion, be attached as a schedule to the prospectus.
ITEM 11: Consolidated Capitalization
Consolidated capitalization
11.1 Describe any material change in, and the effect of the material change on, the share and loan capital of the issuer, on a consolidated basis, since the date of the issuer's financial statements for its most recently completed financial period included in the prospectus, including any material change that will result from the issuance of the securities being distributed under the prospectus.
ITEM 12: Options to Purchase Securities
Options to purchase securities
12.1(1) For an issuer that is not a reporting issuer in any jurisdiction immediately before filing the prospectus, state, in tabular form, as at a specified date within 30 days before the date of the prospectus, information about options to purchase securities of the issuer, or a subsidiary of the issuer, that are held or will be held upon completion of the distribution by
(a) all executive officers and past executive officers of the issuer, as a group, and all directors and past directors of the issuer who are not also executive officers, as a group, indicating the aggregate number of executive officers and the aggregate number of directors to whom the information applies,
(b) all executive officers and past executive officers of all subsidiaries of the issuer, as a group, and all directors and past directors of those subsidiaries who are not also executive officers of the subsidiary, as a group, excluding, in each case, individuals referred to in paragraph (a), indicating the aggregate number of executive officers and the aggregate number of directors to whom the information applies,
(c) all other employees and past employees of the issuer as a group,
(d) all other employees and past employees of subsidiaries of the issuer as a group,
(e) all consultants of the issuer as a group, and
(f) any other person or company, other than the underwriter(s), naming each person or company.
(2) Describe any material change to the information required to be included in the prospectus under subsection (1) to the date of the prospectus.
INSTRUCTIONS
(1) Describe the options, warrants, or other similar securities stating the material provisions of each class or type of option, including:
(a) the designation and number of the securities under option;
(b) the purchase price of the securities under option or the formula by which the purchase price will be determined, and the expiration dates of the options;
(c) if reasonably ascertainable, the market value of the securities under option on the date of grant;
(d) if reasonably ascertainable, the market value of the securities under option on the specified date; and
(e) with respect to options referred to in paragraph (1)(f), the particulars of the grant including the consideration for the grant.
(2) For the purposes of paragraph (1)(f), provide the information required for all options except warrants and special warrants.
ITEM 13: Prior Sales
Prior sales
13.1 For each class or series of securities of the issuer distributed under the prospectus and for securities that are convertible or exchangeable into those classes or series of securities, state, for the 12-month period before the date of the prospectus,
(a)
(a)the price at which the securities have been issued or are to be issued by the issuer or sold by the selling securityholder,(b)
(b)the number of securities issued or sold at that price, and(c)
(c)the date on which the securities were issued or sold.Trading price and volume
13.2(1) For
each class ofthe following securities of the issuer thatisare traded or quoted on a Canadian marketplace, identify the marketplace and the price ranges and volume traded or quoted on the Canadian marketplace on which the greatest volume of trading or quotation for the securities generally occurs:(a) each class or series of securities of the issuer distributed under the prospectus;
(b) securities of the issuer into which those classes or series of securities are convertible or exchangeable.
(2)
If a class ofFor the following securities of the issueristhat are not traded or quoted on a Canadian marketplace, butisare traded or quoted on a foreign marketplace, identify the foreign marketplace and the price ranges and volume traded or quoted on the foreign marketplace on which the greatest volume or quotation for the securities generally occurs.:(a) each class or series of securities of the issuer distributed under the prospectus;
(b) securities of the issuer into which those classes or series of securities are convertible or exchangeable.
(3)
(3)Provide the information required under subsections (1) and (2) on a monthly basis for each month or, if applicable, partial months of the 12-month period before the date of the prospectus.
ITEM 14: Escrowed Securities and Securities Subject to Contractual Restriction on Transfer
Escrowed securities and securities subject to contractual restriction on transfer
14.1(1) State as of a specified date within 30 days before the date of the prospectus, in substantially the following tabular form, the number of securities of each class of securities of the issuer held, to the knowledge of the issuer, in escrow or that are subject to a contractual restriction on transfer and the percentage that number represents of the outstanding securities of that class.
ESCROWED SECURITIES AND SECURITIES
SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER
Designation of class
Number of securities held in escrow or that are subject to a contractual restriction on transfer
Percentage of class
__________
__________
__________
(2) In a note to the table disclose the name of the depository, if any, and the date of and conditions governing the release of the securities from escrow or the date the contractual restriction on transfer ends, as applicable.
(3) Describe any material change to the information required to be included in the prospectus under subsection (1) to the date of the prospectus.
INSTRUCTIONS
(1) For purposes of this section, escrow includes securities subject to a pooling agreement.
(2) For the purposes of this section, securities subject to contractual restrictions on transfer as a result of pledges made to lenders are not required to be disclosed.
ITEM 15: Principal Securityholders and Selling Securityholders
Principal securityholders and selling securityholders
15.1(1) Provide the following information for each principal securityholder of the issuer and, if any securities are being distributed for the account of a securityholder, for each selling securityholder:
(a) the name;
(b) the number or amount of securities owned, controlled or directed of the class being distributed;
(c) the number or amount of securities of the class being distributed for the account of the securityholder;
(d) the number or amount of securities of the issuer of any class to be owned, controlled or directed after the distribution, and the percentage that number or amount represents of the total outstanding;
(e) whether the securities referred to in paragraph (b), (c) or (d) are owned both of record and beneficially, of record only, or beneficially only.
(2) If securities are being distributed in connection with a restructuring transaction, indicate, to the extent known, the holdings of each person or company described in paragraph (1)(a) that will exist after effect has been given to the transaction.
(3) If any of the securities being distributed are being distributed for the account of a securityholder and those securities were purchased by the selling securityholder within the two years preceding the date of the prospectus, state the date the selling securityholder acquired the securities and, if the securities were acquired in the 12 months preceding the date of the prospectus, the cost to the securityholder in the aggregate and on an average cost-per-security basis.
(4) If, to the knowledge of the issuer or the underwriter of the securities being distributed, more than 10% of any class of voting securities of the issuer is held, or is to be held, subject to any voting trust or other similar agreement, disclose, to the extent known, the designation of the securities, the number or amount of the securities held or to be held subject to the agreement and the duration of the agreement. State the names and addresses of the voting trustees and outline briefly their voting rights and other powers under the agreement.
(5) If, to the knowledge of the issuer or the underwriter of the securities being distributed, any principal securityholder or selling securityholder is an associate or affiliate of another person or company named as a principal securityholder, disclose, to the extent known, the material facts of the relationship, including any basis for influence over the issuer held by the person or company other than the holding of voting securities of the issuer.
(6) In addition to the above, include in a footnote to the table the required calculation(s) on a fully-diluted basis.
(7) Describe any material change to the information required to be included in the prospectus under subsection (1) to the date of the prospectus.
INSTRUCTION
If a company, partnership, trust or other unincorporated entity is a principal securityholder of an issuer, disclose, to the extent known, the name of each individual who, through ownership of or control or direction over the securities of that company, trust or other unincorporated entity, or membership in the partnership, as the case may be, is a principal securityholder of that entity.
ITEM 16: Directors and Executive Officers
Name, occupation and security holding
16.1(1) Provide information for directors and executive officers of the issuer in accordance with section 10.1 of Form 51-102F2 as at the date of the prospectus.
(2) If information similar to the information required under subsection (1) is provided for any director or executive officer, who is not serving in such capacity as at the date of the prospectus, clearly indicate this fact and explain whether the issuer believes that this director or executive officer is liable under the prospectus.
Cease trade orders, bankruptcies, penalties or sanctions
16.2 Provide information for directors and executive officers of the issuer in accordance with section 10.2 of Form 51-102F2 as if the references in that section to "date of the AIF" read "date of the prospectus".
Conflicts of interest
16.3 Disclose particulars of existing or potential material conflicts of interest between the issuer or a subsidiary of the issuer and a director or officer of the issuer or of a subsidiary of the issuer.
Management of junior issuers
16.4 A junior issuer must provide the following information for each member of management:
(a) state the individual's name, age, position and responsibilities with the issuer and relevant educational background;
(b) state whether the individual works full time for the issuer or what proportion of the individual's time will be devoted to the issuer;
(c) state whether the individual is an employee or independent contractor of the issuer;
(d) state the individual's principal occupations or employment during the five years before the date of the prospectus, disclosing with respect to each organization as of the time such occupation or employment was carried on:
(i) its name and principal business;
(ii) if applicable, that the organization was an affiliate of the issuer;
(iii) positions held by the individual; and
(iv) whether it is still carrying on business, if known to the individual;
(e) describe the individual's experience in the issuer's industry;
(f) state whether the individual has entered into a non-competition or non-disclosure agreement with the issuer.
INSTRUCTION
For purposes of this section, "management" means all directors, officers, employees and contractors whose expertise is critical to the issuer, its subsidiaries and proposed subsidiaries in providing the issuer with a reasonable opportunity to achieve its stated business objectives.
ITEM 17: Executive Compensation
Disclosure
17.1 Include in the prospectus a Statement of Executive Compensation prepared in accordance with Form 51-102F6 and describe any intention to make any material changes to that compensation.
ITEM 18: Indebtedness of Directors and Executive Officers
Aggregate indebtedness
18.1 Provide information for the issuer in accordance with section 10.1 of Form 51-102F5 as if the reference in that section to "date of the information circular" read "date of the prospectus ".
Indebtedness of directors and executive officers under securities purchase and other programs
18.2(1) Provide information for the issuer in accordance with section 10.2 of Form 51-102F5 as if the reference in this section to "date of the information circular" read "date of the prospectus".
(2) Do not disclose the information required under subsection (1) for
(a) any indebtedness that has been entirely repaid on or before the date of the prospectus, or
(b) routine indebtedness (as defined in paragraph 10.3(c) of Form 51-102F5 as if reference in this paragraph to "the company" read "the issuer").
ITEM 19: Audit Committees and Corporate Governance
Audit committees
19.1(1) Include in the prospectus the disclosure for the issuer in accordance with Form 52-110F1, as applicable, if the issuer is neither a venture issuer nor an IPO venture issuer.
(2) Include in the prospectus the disclosure for the issuer in accordance with Form 52-110F2, as applicable, if the issuer is a venture issuer or an IPO venture issuer.
Corporate governance
19.2(1) Include in the prospectus the disclosure in accordance with Form 58-101F1, as applicable, if the issuer is neither a venture issuer nor an IPO venture issuer.
(2) Include in the prospectus the disclosure in accordance with Form 58-101F2, as applicable, if the issuer is a venture issuer or an IPO venture issuer.
ITEM 20: Plan of Distribution
Name of underwriters
20.1(1) If the securities are being distributed by an underwriter, state the name of the underwriter and describe briefly the nature of the underwriter's obligation to take up and pay for the securities.
(2) Disclose the date by which the underwriter is obligated to purchase the securities.
Disclosure of conditions to underwriters' obligations
20.2 If securities are distributed by an underwriter that has agreed to purchase all of the securities at a specified price and the underwriter's obligations are subject to conditions,
(a) include a statement in substantially the following form, with the bracketed information completed and with modifications necessary to reflect the terms of the distribution:
"Under an agreement dated [insert date of agreement] between [insert name of issuer or selling securityholder] and [insert name(s) of underwriter(s)], as underwriter[s], [insert name of issuer or selling security shareholder] has agreed to sell and the underwriter[s] [has/have] agreed to purchase on [insert closing date] the securities at a price of [insert offering price], payable in cash to [insert name of issuer or selling securityholder] against delivery. The obligations of the underwriter[s] under the agreement may be terminated at [its/their] discretion on the basis of [its/their] assessment of the state of the financial markets and may also be terminated upon the occurrence of certain stated events. The underwriter[s] [is/are], however, obligated to take up and pay for all of the securities if any of the securities are purchased under the agreement.", and
(b) describe any other conditions and indicate any information known that is relevant to whether such conditions will be satisfied.
Best efforts offering
20.3 Outline briefly the plan of distribution of any securities being distributed other than on the basis described in section 20.2.
Minimum distribution
20.4 If securities are being distributed on a best efforts basis and minimum funds are to be raised, state
(a) the minimum funds to be raised,
(b) that the issuer must appoint a registered dealer authorized to make the distribution, a Canadian financial institution, or a lawyer who is a practicing member in good standing with a law society of a jurisdiction in which the securities are being distributed, or a notary in Québec, to hold in trust all funds received from subscriptions until the minimum amount of funds stipulated in paragraph (a) has been raised, and
(c) that if the minimum amount of funds is not raised within the distribution period, the trustee must return the funds to the subscribers without any deductions.
Determination of price
20.5 Disclose the method by which the distribution price has been or will be determined and, if estimates have been provided, explain the process of determining the estimates.
Stabilization
20.6 If the issuer, a selling securityholder or an underwriter knows or has reason to believe that there is an intention to over-allot or that the price of any security may be stabilized to facilitate the distribution of the securities, describe the nature of these transactions, including the anticipated size of any over-allocation position, and explain how the transactions are expected to affect the price of the securities.
Approvals
20.7 If the proceeds of the distribution will be used to substantially fund a material undertaking that would constitute a material departure from the business or operations of the issuer and the issuer has not obtained all material licences, registrations and approvals necessary for the stated principal use of proceeds, include a statement that
(a) the issuer will appoint a registered dealer authorized to make the distribution, a Canadian financial institution, or a lawyer who is a practicing member in good standing with a law society of a jurisdiction in which the securities are being distributed, or a notary in Québec, to hold in trust all funds received from subscriptions until all material licences, registrations and approvals necessary for the stated principal use of proceeds have been obtained, and
(b) if all material licences, registrations and approvals necessary for the operation of the material undertaking have not been obtained within 90 days from the date of receipt of the final prospectus, the trustee will return the funds to subscribers.
Reduced price distributions
20.8 If the underwriter may decrease the offering price after the underwriter has made a reasonable effort to sell all of the securities at the initial offering price disclosed in the prospectus in accordance with the procedures permitted by the Instrument, disclose this fact and that the compensation realised by the underwriter will be decreased by the amount that the aggregate price paid by purchasers for the securities is less than the gross proceeds paid by the underwriter to the issuer or selling securityholder.
Listing application
20.9 If application has been made to list or quote the securities being distributed, include a statement, in substantially the following form, with bracketed information completed:
"The issuer has applied to [list/quote] the securities distributed under this prospectus on [name of exchange or other market]. [Listing/Quotation] will be subject to the issuer fulfilling all the listing requirements of [name of exchange or other market]."
Conditional listing approval
20.10 If application has been made to list or quote the securities being distributed on an exchange or marketplace and conditional listing approval has been received, include a statement, in substantially the following form, with the bracketed information completed:
"[name of exchange or marketplace] has conditionally approved the [listing/quotation] of these securities. [Listing/Quotation] is subject to the [name of issuer]'s fulfilling all of the requirements of the [name of exchange or marketplace] on or before [date], [including distribution of these securities to a minimum number of public securityholders]."
IPO venture issuers
20.11 If the issuer has complied with the requirements of the Instrument as an IPO venture issuer, include a statement, in substantially the following form, with bracketed information completed:
"As at the date of the prospectus, [name of issuer] does not have any of its securities listed or quoted, has not applied to list or quote any of its securities, and does not intend to apply to list or quote any of its securities, on the Toronto Stock Exchange, a U.S. marketplace, or a marketplace outside of Canada and the United States of America other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc."
Constraints
20.12 If there are constraints imposed on the ownership of securities of the issuer to ensure that the issuer has a required level of Canadian ownership, describe the mechanism, if any, by which the level of Canadian ownership of the securities of the issuer will be monitored and maintained.
Special warrants acquired by underwriters or agents
20.13 Disclose the number and dollar value of any special warrants acquired by any underwriter or agent and the percentage of the distribution represented by those special warrants.
ITEM 21: Risk Factors
Risk factors
21.1(1) Disclose risk factors relating to the issuer and its business, such as cash flow and liquidity problems, if any, experience of management, the general risks inherent in the business carried on by the issuer, environmental and health risks, reliance on key personnel, regulatory constraints, economic or political conditions and financial history and any other matter that would be likely to influence an investor's decision to purchase securities of the issuer.
(2) If there is a risk that securityholders of the issuer may become liable to make an additional contribution beyond the price of the security, disclose that risk.
(3) Describe any risk factors material to the issuer that a reasonable investor would consider relevant to an investment in the securities being distributed and that are not otherwise described under subsection (1) or (2).
INSTRUCTIONS
(1) Disclose risks in the order of seriousness from the most serious to the least serious.
(2) A risk factor must not be de-emphasized by including excessive caveats or conditions.
ITEM 22: Promoters
Promoters
22.1(1) For a person or company that is, or has been within the two years immediately preceding the date of the prospectus, a promoter of the issuer or subsidiary of the issuer, state
(a) the person or company's name,
(b) the number and percentage of each class of voting securities and equity securities of the issuer or any of its subsidiaries beneficially owned, or controlled or directed, directly or indirectly, by the person or company,
(c) the nature and amount of anything of value, including money, property, contracts, options or rights of any kind received or to be received by the promoter directly or indirectly from the issuer or from a subsidiary of the issuer, and the nature and amount of any assets, services or other consideration received or to be received by the issuer or a subsidiary of the issuer in return, and
(d) for an asset acquired within the two years before the date of the preliminary prospectus, or to be acquired, by the issuer or by a subsidiary of the issuer from a promoter,
(i) the consideration paid or to be paid for the asset and the method by which the consideration has been or will be determined,
(ii) the person or company making the determination referred to in subparagraph (i) and the person or company's relationship with the issuer or the promoter, or an affiliate of the issuer or the promoter, and
(iii) the date that the asset was acquired by the promoter and the cost of the asset to the promoter.
(2) If a promoter referred to in subsection (1) is, as at the date of the preliminary prospectus, or was within 10 years before the date of the preliminary prospectus, a director, chief executive officer, or chief financial officer of any person or company, that
(a) was subject to an order that was issued while the promoter was acting in the capacity as director, chief executive officer or chief financial officer, or
(b) was subject to an order that was issued after the promoter ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while the promoter was acting in the capacity as director, chief executive officer or chief financial officer,
state the fact and describe the basis on which the order was made and whether the order is still in effect.
(3) For the purposes of subsection (2), "order" means:
(a) a cease trade order,
(b) an order similar to a cease trade order, or
(c) an order that denied the relevant person or company access to any exemption under securities legislation,
that was in effect for a period of more than 30 consecutive days.
(4) If a promoter referred to in subsection (1)
(a) is, as at the date of the preliminary prospectus, or has been within the 10 years before the date of the preliminary prospectus, a director or executive officer of any person or company that, while the promoter was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, state the fact, or
(b) has, within the 10 years before the date of the preliminary prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the promoter, state the fact.
(5) Describe the penalties or sanctions imposed and the grounds on which they were imposed or the terms of the settlement agreement and the circumstances that gave rise to the settlement agreement, if a promoter referred to in subsection (1) has been subject to
(a) any penalties or sanctions imposed by a court relating to provincial and territorial securities legislation or by a provincial and territorial securities regulatory authority or has entered into a settlement agreement with a provincial and territorial securities regulatory authority, or
(b) any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor in making an investment decision.
(6) Despite subsection (5), no disclosure is required of a settlement agreement entered into before December 31, 2000 unless the disclosure would likely be considered important to a reasonable investor in making an investment decision.
INSTRUCTIONS
(1) The disclosure required by subsections (2), (4) and (5) also applies to any personal holding companies of any of the persons referred to in subsections (2), (4), and (5).
(2) A management cease trade order which applies to a promoter referred to in subsection (1) is an "order" for the purposes of paragraph (2)(a) and must be disclosed, whether or not the director, chief executive officer or chief financial officer was named in the order.
(3) For the purposes of this section, a late filing fee, such as a filing fee that applies to the late filing of an insider report, is not a "penalty or sanction".
(4) The disclosure in paragraph (2)(a) only applies if the promoter was a director, chief executive officer or chief financial officer when the order was issued against the person or company. The issuer does not have to provide disclosure if the promoter became a director, chief executive officer or chief financial officer after the order was issued.
ITEM 23: Legal Proceedings and Regulatory Actions
Legal proceedings
23.1(1) Describe any legal proceedings the issuer is or was a party to, or that any of its property is or was the subject of, since the beginning of the most recently completed financial year for which financial statements of the issuer are included in the prospectus.
(2) Describe any such legal proceedings the issuer knows to be contemplated.
(3) For each proceeding described in subsections (1) and (2), include the name of the court or agency, the date instituted, the principal parties to the proceeding, the nature of the claim, the amount claimed, if any, whether the proceeding is being contested, and the present status of the proceeding.
INSTRUCTION
Information with respect to any proceeding that involves a claim for damages if the amount involved, exclusive of interest and costs, does not exceed 10% of the current assets of the issuer may be omitted. However, if any proceeding presents in large degree the same legal and factual issues as other proceedings pending or known to be contemplated, include the amount involved in the other proceedings in computing the percentage.
Regulatory actions
23.2 Describe any
(a) penalties or sanctions imposed against the issuer by a court relating to provincial and territorial securities legislation or by a securities regulatory authority within the three years immediately preceding the date of the prospectus,
(b) any other penalties or sanctions imposed by a court or regulatory body against the issuer necessary for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities being distributed, and
(c) settlement agreements the issuer entered into before a court relating to provincial and territorial securities legislation or with a securities regulatory authority within the three years immediately preceding the date of the prospectus.
ITEM 24: Interests of Management and Others in Material Transactions
Interests of management and others in material transactions
24.1 Provide information for the issuer for this section in accordance with section 13.1 of Form 51-102F2 as if the reference in that section to "within the three most recently completed financial years or during the current financial year that has materially affected or is reasonably expected to materially affect your company" read "within the three years before the date of the prospectus that has materially affected or is reasonably expected to materially affect the issuer or a subsidiary of the issuer".
Underwriting discounts
24.2 Disclose any material underwriting discounts or commissions upon the sale of securities by the issuer if any of the persons or companies listed in section 13.1 of Form 51-102F2 were or are to be an underwriter or are associates, affiliates or partners of a person or company that was or is to be an underwriter.
ITEM 25: Relationship Between Issuer or Selling Securityholder and Underwriter
Relationship between issuer or selling securityholder and underwriter
25.1(1) If the issuer or selling securityholder is a connected issuer or related issuer of an underwriter of the distribution, or if the issuer or selling securityholder is also an underwriter of the distribution, comply with the requirements of NI 33-105.
(2) For the purposes of subsection (1), "connected issuer" and "related issuer" have the same meanings as in NI 33-105.
ITEM 26: Auditors, Transfer Agents and Registrars
Auditors
26.1 State the name and address of the auditor of the issuer.
Transfer agents, registrars, trustees or other agents
26.2 For each class of securities, state the name of any transfer agent, registrar, trustee, or other agent appointed by the issuer to maintain the securities register and the register of transfers for such securities and indicate the location (by municipality) of each of the offices of the issuer or transfer agent, registrar, trustee or other agent where the securities register and register of transfers are maintained or transfers of securities are recorded.
ITEM 27: Material Contracts
Material contracts
27.1 Give particulars of any material contract
(a) required to be filed under section 9.3 of the Instrument, or
(b) that would be required to be filed under section 9.3 of the Instrument but for the fact that it was previously filed.
INSTRUCTIONS
(1) Set out a complete list of all contracts for which particulars must be given under this section, indicating those that are disclosed elsewhere in the prospectus. Particulars need only be provided for those contracts that do not have the particulars given elsewhere in the prospectus.
(2) Particulars of contracts must include the dates of, parties to, consideration provided for in, and general nature and key terms of, the contracts.
ITEM 28: Experts
Names of experts
28.1 Name each person or company
(a) who is named as having prepared or certified a report, valuation, statement or opinion in the prospectus or an amendment to the prospectus, and
(b) whose profession or business gives authority to the report, valuation, statement or opinion made by the person or company.
Interest of experts
28.2 For each person or company referred to in section 28.1, provide the disclosure in accordance with section 16.2 of Form 51-102F2, as of the date of the prospectus, as if that person or company were a person or company referred to in section 16.1 of Form 51-102F2.
ITEM 29: Other Material Facts
Other material facts
29.1 Give particulars of any material facts about the securities being distributed that are not disclosed under any other Items and are necessary in order for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities to be distributed.
ITEM 30: Rights of Withdrawal and Rescission
General
30.1 Include a statement in substantially the following form, with the bracketed information completed:
"Securities legislation in [certain of the provinces [and territories] of Canada/the Province of [insert name of local jurisdiction, if applicable]] provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. [In several of the provinces/provinces and territories,] [T/t]he securities legislation further provides a purchaser with remedies for rescission [or[, in some jurisdictions,] revisions of the price or damages] if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission[, revisions of the price or damages] are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province [or territory]. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province [or territory] for the particulars of these rights or consult with a legal adviser."
Non-fixed price offerings
30.2 In the case of a non-fixed price offering, replace, if applicable in the jurisdiction in which the prospectus is filed, the second sentence in the legend in section 30.1 with a statement in substantially the following form:
"This right may only be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment, irrespective of the determination at a later date of the purchase price of the securities distributed."
Convertible, exchangeable or exercisable securities
30.3 In the case of an offering of convertible, exchangeable or exercisable securities, provide a statement in the following form:
"In an offering of [state name of convertible, exchangeable or exercisable securities], investors are cautioned that the statutory right of action for damages for a misrepresentation contained in the prospectus is limited, in certain provincial [or territorial] securities legislation, to the price at which the [state name of convertible, exchangeable or exercisable securities] is offered to the public under the prospectus offering. This means that, under the securities legislation of certain provinces [or territories], if the purchaser pays additional amounts upon [conversion, exchange or exercise] of the security, those amounts may not be recoverable under the statutory right of action for damages that applies in such provinces [or territories]. The purchaser should refer to the applicable provisions of the purchaser's province [or territory] for the particulars of this right of action for damages or consult with a legal adviser."
ITEM 31: List of Exemptions from Instrument
List of exemptions from Instrument
31.1 List all exemptions from the provisions of the Instrument, including this Form, granted to the issuer applicable to the distribution or the prospectus, including all exemptions to be evidenced by the issuance of a receipt for the prospectus pursuant to section 19.3 of the Instrument.
ITEM 32: Financial Statement Disclosure for Issuers
Interpretation of "issuer"
32.1
The(1) Subject to subsection (2), the financial statements of an issuer required under this Item to be included in a prospectus must include(a) the financial statements of any predecessor entity that formed, or will form, the basis of the business of the issuer, even though the predecessor entity is, or may have been, a different legal entity, if the issuer has not existed for three years,
(b) the financial statements of a business or businesses acquired by the issuer within three years before the date of the prospectus or proposed to be acquired, if a reasonable investor reading the prospectus would regard the primary business of the issuer to be the business or businesses acquired, or proposed to be acquired, by the issuer, and
(c)
(c)the restated combined financial statements of the issuer and any other entity with which the issuer completed a transaction within three years before the date of the prospectus or proposes to complete a transaction, if the issuer accounted for or will account for the transaction as a combination in which all of the combining entities or businesses ultimately are controlled by the same party or parties both before and after the combination, and that control is not temporary.(2) A reporting issuer is not required to include the financial statements for an acquisition to which paragraph (1)(a) or (b) applies if
(a) the issuer was a reporting issuer in any jurisdiction of Canada
(i) on the date of the acquisition, in the case of a completed acquisition; or
(ii) immediately before the filing of the prospectus, in the case of a proposed acquisition;
(b) the issuer's principal asset is not cash, cash equivalents, or its exchange listing; and
(c) the issuer provides disclosure in respect of the proposed or completed acquisition in accordance with Item 35.
Annual financial statements
32.2(1) Subject to section 32.4, include annual financial statements of the issuer consisting of
(a) a statement of comprehensive income, a statement of changes in equity, and a statement of cash flows for each of the three most recently completed financial years ended more than
(i) 90 days before the date of the prospectus, or
(ii) 120 days before the date of the prospectus, if the issuer is a venture issuer,
(b) a statement of financial position as at the end of the two most recently completed financial years described in paragraph (a),
(c) a statement of financial position as at the beginning of the earliest comparative period for which financial statements that are included in the prospectus comply with IFRS in the case of an issuer that
(i) discloses in its annual financial statements an unreserved statement of compliance with IFRS, and
(ii) does any of the following
(A) applies an accounting policy retrospectively in its annual financial statements,
(B) makes a retrospective restatement of items in its annual financial statements, or
(C) reclassifies items in its annual financial statements,
(d) in the case of an issuer's first IFRS financial statements, the opening IFRS statement of financial position at the date of transition to IFRS, and
(e) notes to the annual financial statements.
(1.1) If an issuer presents the components of profit or loss in a separate income statement, the separate income statement must be displayed immediately before the statement of comprehensive income filed under subsection (1).
(2) If the issuer has not completed three financial years, include the financial statements described under subsection (1) for each completed financial year ended more than
(a) 90 days before the date of the prospectus, or
(b) 120 days before the date of the prospectus, if the issuer is a venture issuer.
(3) If the issuer has not included in the prospectus financial statements for a completed financial year, include the financial statements described under subsection (1) or (2) for a period from the date the issuer was formed to a date not more than 90 days before the date of the prospectus.
(4) If an issuer changed its financial year end during any of the financial years referred to in this section and the transition year is less than nine months, the transition year is deemed not to be a financial year for the purposes of the requirement to provide financial statements for a specified number of financial years in this section.
(5) Despite subsection (4), all financial statements of the issuer for a transition year referred to in subsection (4) must be included in the prospectus.
(6) Subject to section 32.4, if financial statements of any predecessor entity, business or businesses acquired by the issuer, or of any other entity are required under this section, then include
(a) statements of comprehensive income, statements of changes in equity, and statements of cash flow for the entities or businesses for as many periods before the acquisition as may be necessary so that when these periods are added to the periods for which the issuer's statements of comprehensive income, statements of changes in equity, and statements of cash flow are included in the prospectus, the results of the entities or businesses, either separately or on a consolidated basis, total three years,
(b) statements of financial position for the entities or businesses for as many periods before the acquisition as may be necessary so that when these periods are added to the periods for which the issuer's statements of financial position are included in the prospectus, the financial position of the entities or businesses, either separately or on a consolidated basis, total two years,
(c) if the entities or businesses have not completed three financial years, the financial statements described under paragraphs (a) and (b) for each completed financial year of the entities or businesses for which the issuer's financial statements in the prospectus do not include the financial statements of the entities or businesses, either separately or on a consolidated basis, and ended more than
(i) 90 days before the date of the prospectus, or
(ii) 120 days before the date of the prospectus, if the issuer is a venture issuer,
(d) if an entity's or business's first IFRS financial statements are included under paragraphs (a), (b) or (c), the opening IFRS statement of financial position at the date of transition to IFRS, and
(e) a statement of financial position as at the beginning of the earliest comparative period for which financial statements that are included in the prospectus comply with IFRS in the case of an issuer that
(i) discloses in its annual financial statements an unreserved statement of compliance with IFRS, and
(ii) does any of the following
(A) applies an accounting policy retrospectively in its financial statements,
(B) makes a retrospective restatement of items in its financial statements, or
(C) reclassifies items in its financial statements.
Interim financial report
32.3(1) Include a comparative interim financial report of the issuer for the most recent interim period, if any, ended
(a) subsequent to the most recent financial year in respect of which annual financial statements of the issuer are included in the prospectus, and
(b) more than
(i) 45 days before the date of the prospectus, or
(ii) 60 days before the date of the prospectus if the issuer is a venture issuer.
(2) The interim financial report referred to in subsection (1) must include
(a) a statement of financial position as at the end of the interim period and a statement of financial position as at the end of the immediately preceding financial year, if any,
(b) a statement of comprehensive income, a statement of changes in equity, and a statement of cash flows, all for the year-to-date interim period, and comparative financial information for the corresponding interim period in the immediately preceding financial year, if any,
(c) for interim periods other than the first interim period in an issuer's financial year, a statement of comprehensive income for the three month period ending on the last day of the interim period and comparative financial information for the corresponding period in the immediately preceding financial year, if any,
(d) a statement of financial position as at the beginning of the earliest comparative period for which financial statements that are included in the prospectus comply with IFRS in the case of an issuer that
(i) discloses in its interim financial report an unreserved statement of compliance with International Accounting Standard 34 Interim Financial Reporting, and
(ii) does any of the following
(A) applies an accounting policy retrospectively in its interim financial report,
(B) makes a retrospective restatement of items in its interim financial report, or
(C) reclassifies items in its interim financial report,
(e) in the case of the first interim financial report required to be filed in the year of adopting IFRS, the opening IFRS statement of financial position at the date of transition to IFRS, and
(f) notes to the interim financial report.
(3) If an issuer presents the components of profit or loss in a separate income statement, the separate income statement must be displayed immediately before the statement of comprehensive income filed under subsection (2).
(4) If the issuer is required to include under subsection 32.3(1), a comparative interim financial report of the issuer for the second or third interim period in the year of adopting IFRS, include
(a) the issuer's first interim financial report in the year of adopting IFRS, or
(b) both
(i) the opening IFRS statement of financial position at the date of transition to IFRS, and
(ii) the annual and date of transition to IFRS reconciliations required by IFRS 1First-time Adoption of International Financial Reporting Standards to explain how the transition from previous GAAP to IFRS affected the issuer's reported financial position, financial performance and cash flows.
(5) Subsection (4) does not apply to an issuer that was a reporting issuer in at least one jurisdiction immediately before filing the prospectus.
Exceptions to financial statement requirements
32.4(1) Despite section 32.2, an issuer is not required to include the following financial statements in a prospectus
(a) the statement of comprehensive income, the statement of changes in equity, and the statement of cash flows for the third most recently completed financial year, if the issuer is a reporting issuer in at least one jurisdiction immediately before filing the prospectus,
(b) the statement of comprehensive income, the statement of changes in equity, and the statement of cash flows for the third most recently completed financial year, and the financial statements for the second most recently completed financial year, if
(i) the issuer is a reporting issuer in at least one jurisdiction immediately before filing the prospectus, and
(ii) the issuer includes financial statements for a financial year ended less than
(A) 90 days before the date of the prospectus, or
(B) 120 days before the date of the prospectus, if the issuer is a venture issuer,
(c) the statement of comprehensive income, the statement of changes in equity, and the statement of cash flows for the third most recently completed financial year, and the statement of financial position for the second most recently completed financial year, if the issuer includes financial statements for a financial year ended less than 90 days before the date of the prospectus,
(d) the statement of comprehensive income, the statement of changes in equity, and the statement of cash flows for the third most recently completed financial year, and the financial statements for the second most recently completed financial year, if
(i) the issuer is a reporting issuer in at least one jurisdiction immediately before filing the prospectus,
(ii) the issuer includes audited financial statements for a period of at least nine months commencing the day after the most recently completed financial year for which financial statements are required under section 32.2,
(iii) the business of the issuer is not seasonal, and
(iv) none of the financial statements required under section 32.2 are for a financial year that is less than nine months,
(e) the statement of comprehensive income, the statement of changes in equity, and the statement of cash flows for the third most recently completed financial year, and the statement of financial position for the second most recently completed financial year, if
(i) the issuer includes audited financial statements for a period of at least nine months commencing the day after the most recently completed financial year for which financial statements are required under section 32.2,
(ii) the business of the issuer is not seasonal, and
(iii) none of the financial statements required under section 32.2 are for a financial year that is less than nine months, or
(f) the separate financial statements of the issuer and the other entity for periods prior to the date of the transaction, if the restated combined financial statements of the issuer and the other entity are included in the prospectus under paragraph 32.1(c).
(2) Paragraphs (1)(a), (b) and (d) do not apply to an issuer
(a) whose principal asset is cash, cash equivalents or its exchange listing; or
(b) in respect of financial statements of a reverse takeover acquirer for a completed or proposed transaction by the issuer that was or will be accounted for as a reverse takeover.
Exceptions to audit requirement
32.5 The audit requirement in section 4.2 of the Instrument does not apply to the following financial statements
(a) any financial statements for the second and third most recently completed financial years required under section 32.2, if
(i) those financial statements were previously included in a final prospectus without an auditor's report pursuant to an exemption under applicable securities legislation, and
(ii) an auditor has not issued an auditor's report on those financial statements,
(b) any financial statements for the second and third most recently completed financial years required under section 32.2, if
(i) the issuer is a junior issuer,
(i.1) an auditor has not issued an auditor's report on those financial statements, and
(ii) the financial statements for the most recently completed financial year required under section 32.2 is not less than 12 months in length, or
(c) any interim financial report required under section 32.3.
Additional financial statements or financial information filed or released
32.6(1) If the issuer files financial statements for a more recent period than required under section 32.2 or 32.3 before the prospectus is filed, the issuer must include in the prospectus those more recent financial statements.
(2) If historical financial information about the issuer is publicly disseminated by, or on behalf of, the issuer through news release or otherwise for a more recent period than required under section 32.2, the issuer must include the content of the news release or public communication in the prospectus.
Pro forma financial statements for an acquisition
32.7(1) Include the pro forma financial statements prescribed in subsection (2) in respect of a completed or proposed acquisition for which financial statement disclosure is required under section 32.1 if
(a) less than nine months of the acquired business operations have been reflected in the issuer's most recent audited financial statements included in the prospectus; and
(b) the inclusion of the pro forma financial statements is necessary for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities to be distributed.
(2) For the purposes of subsection (1), include the following:
(a) a pro forma statement of financial position of the issuer, as at the date of the issuer's most recent statement of financial position included in the prospectus, that gives effect, as if it had taken place as at the date of the pro forma statement of financial position, to the acquisition that has been completed, or that will be completed, but is not reflected in the issuer's most recent statement of financial position for an annual or interim period;
(b) a pro forma income statement of the issuer that gives effect to the acquisition completed, or that will be completed, since the beginning of the issuer's most recently completed financial year for which it has included financial statements in its prospectus, as if it had taken place at the beginning of that financial year, for each of the following periods:
(i) the most recently completed financial year for which the issuer has included financial statements in its prospectus; and
(ii) the interim period for which the issuer has included an interim financial report in its prospectus, that started after the financial year referred to in subparagraph (i) and ended
(A) in the case of a completed acquisition, immediately before the acquisition date or, in the issuer's discretion, after the acquisition date; and
(B) in the case of a proposed acquisition, immediately before the date of the filing of the prospectus, as if the acquisition had been completed before the filing of the prospectus and the acquisition date were the date of the prospectus; and
(c) pro forma earnings per share based on the pro forma financial statements referred to in paragraph (b).
(3) If an issuer is required to include pro forma financial statements in its prospectus under subsections (1) and (2),
(a) the issuer must identify in the pro forma financial statements each acquisition, if the pro forma financial statements give effect to more than one acquisition,
(b) the issuer must include in the pro forma financial statements
(i) adjustments attributable to the acquisition for which there are firm commitments and for which the complete financial effects are objectively determinable;
(ii) adjustments to conform amounts for the business to the issuer's accounting policies; and
(iii) a description of the underlying assumptions on which the pro forma financial statements are prepared, cross-referenced to each related pro forma adjustment;
(c) if the financial year-end of the business differs from the issuer's year-end by more than 93 days, for the purpose of preparing the pro forma income statement of the issuer's most recently completed financial year, the issuer must construct an income statement of the business for a period of 12 consecutive months ending no more than 93 days before or after the issuer's year-end, by adding the results for a subsequent interim period to a completed financial year of the business and deducting the comparable interim results for the immediately preceding year;
(d) if a constructed income statement is required under paragraph (c), the pro forma financial statements must disclose the period covered by the constructed income statement on the face of the pro forma financial statements and must include a note stating that the financial statements of the business used to prepare the pro forma financial statements were prepared for the purpose of the pro forma financial statements and do not conform with the financial statements for the business included elsewhere in the prospectus;
(e) if an issuer is required to prepare a pro forma income statement for an interim period required by paragraph (2)(b), and the pro forma income statement for the most recently completed financial year includes results of the business which are also included in the pro forma income statement for the interim period, the issuer must disclose in a note to the pro forma financial statements the revenue, expenses, and profit or loss from continuing operations included in each pro forma income statement for the overlapping period; and
(f) a constructed period referred to in paragraph (c) does not have to be audited.
Pro forma financial statements for multiple acquisitions
32.8 Despite subsection 32.7(1), an issuer is not required to include in its prospectus the pro forma financial statements otherwise required for each acquisition, if the issuer includes in its prospectus one set of pro forma financial statements that
(a) reflects the results of each acquisition since the beginning of the issuer's most recently completed financial year for which financial statements of the issuer are included in the prospectus, and
(b) is prepared as if each acquisition had occurred at the beginning of the most recently completed financial year of the issuer for which financial statements of the issuer are included in the prospectus.
Exemption from financial statement disclosure for oil & gas acquisitions
32.9(1) The issuer is exempt from sections 32.2, 32.3 and 32.7 that apply to a completed or proposed acquisition by operation of section 32.1 if
(a) the acquisition is an acquisition of a business which is an interest in an oil and gas property;
(b) the acquisition is an acquisition to which section 32.1 applies;
(c) the acquisition is not an acquisition of securities of another issuer, unless the vendor transferred the business referenced in paragraph (1)(a) to such other issuer which
(i) was created for the sole purpose of facilitating the acquisition; and
(ii) other than assets or operations relating to the transferred business, has no
(A) substantial assets; or
(B) operating history;
(d) the issuer is unable to provide the financial statements in respect of the acquisition otherwise required under sections 32.2 and 32.3 because those financial statements do not exist or because the issuer does not have access to those financial statements;
(e) the acquisition does not constitute a reverse takeover;
(f) subject to subsections (2) and (3), in respect of the business for each of the financial periods for which financial statements would, but for this section, be required under sections 32.2 and 32.3, the prospectus includes
(i) an operating statement for the business prepared in accordance with section 3.17 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;
(ii) a pro forma operating statement of the issuer that gives effect to the acquisition completed or to be completed since the beginning of the issuer's most recently completed financial year for which financial statements are required to have been filed, as if the acquisition had taken place at the beginning of that financial year, for each of the financial periods referred to in paragraph 32.7(2)(b), unless
(A) more than nine months of the acquired business operations have been reflected in the issuer's most recent audited financial statements included in the prospectus; or
(B) the inclusion of the pro forma financial statements is not necessary for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities to be distributed;
(iii) a description of the property or properties and the interest acquired by the issuer; and
(iv) disclosure of the annual oil and gas production volumes from the business;
(g) the operating statement for the three most recently completed financial years has been audited;
(h) the prospectus discloses
(i) the estimated reserves and related future net revenue attributable to the business, the material assumptions used in preparing the estimates and the identity and relationship to the issuer or to the vendor of the person who prepared the estimates; and
(ii) the estimated oil and gas production volumes from the business for the first year reflected in the estimated disclosure under subparagraph (i).
(2) An issuer is exempted from subparagraphs (1)(f)(i), (ii) and (iv) if
(a) production, gross revenue, royalty expenses, production costs and operating income were nil, or are reasonably expected to be nil for the business for each financial period; and
(b) the prospectus discloses the applicable facts referred to in paragraph (a).
(3) An issuer is exempted from paragraphs 32.9(1)(f) and (g) in respect of the third most recently completed financial year if the issuer has completed the acquisition and has included in the prospectus the following:
(a) information in accordance with Form 51-101F1 as of a date commencing on or after the acquisition date and within 6 months of the date of the preliminary prospectus;
(b) a report in the form of Form 51-101F2 on the reserves data included in the disclosure required under paragraph (a);
(c) a report in the form of Form 51-101F3 that refers to the information disclosed under paragraph (a).
ITEM 33: Credit Supporter Disclosure, Including Financial Statements
Credit supporter disclosure, including financial statements
33.1 If a credit supporter has provided a guarantee or alternative credit support for all or substantially all of the payments to be made under the securities being distributed, include statements by the credit supporter providing disclosure about the credit supporter that would be required under Items 4, 5, 8, 9, 16, 21, 23, 25, 26, and 32 if the credit supporter were the issuer of the securities to be distributed and such other information about the credit supporter as is necessary to provide full, true and plain disclosure of all material facts relating to the securities to be distributed.
ITEM 34: Exemptions for Certain Issues of Guaranteed Securities
Definitions and interpretation
34.1(1) In this Item
(a) the impact of subsidiaries, on a combined basis, on the financial statements of the parent entity is "minor" if each item of the summary financial information of the subsidiaries, on a combined basis, represents less than three percent of the total consolidated amounts,
(b) a parent entity has "limited independent operations" if each item of its summary financial information represents less than three percent of the total consolidated amounts,
(c) a subsidiary is a "finance subsidiary" if it has minimal assets, operations, revenue or cash flows other than those related to the issuance, administration and repayment of the security being distributed and any other securities guaranteed by its parent entity,
(d) "parent credit supporter" means a credit supporter of which the issuer is a subsidiary,
(e) "parent entity" means a parent credit supporter for the purposes of sections 34.2 and 34.3 and an issuer for the purpose of section 34.4,
(f) "subsidiary credit supporter" means a credit supporter that is a subsidiary of the parent credit supporter, and
(g) "summary financial information" includes the following line items:
(i) revenue;
(ii) profit or loss from continuing operations attributable to owners of the parent;
(iii) profit or loss attributable to owners of the parent; and
(iv) unless the accounting principles used to prepare the financial statements of the entity permits the preparation of the entity's statement of financial position without classifying assets and liabilities between current and non-current and the entity provides alternative meaningful financial information which is more appropriate to the industry,
(A) current assets;
(B) non-current assets;
(C) current liabilities; and
(D) non-current liabilities.
INSTRUCTION
See section 1.1 of the Instrument for the definitions of "profit or loss attributable to owners of the parent" and "profit or loss from continuing operations attributable to owners of the parent".
(2) For the purposes of this Item, consolidating summary financial information must be prepared on the following basis
(a) an entity's annual or interim summary financial information must be derived from the entity's financial information underlying the corresponding consolidated financial statements of the parent entity included in the prospectus,
(b) the parent entity column must account for investments in all subsidiaries under the equity method, and
(c) all subsidiary entity columns must account for investments in non-credit supporter subsidiaries under the equity method.
Issuer is wholly-owned subsidiary of parent credit supporter
34.2 An issuer is not required to include the issuer disclosure required by Items 4, 5, 8, 9, 21, 23, 25, 26, and 32, if
(a) a parent credit supporter has provided full and unconditional credit support for the securities being distributed,
(b) the securities being distributed are non-convertible debt securities, non-convertible preferred shares, or convertible debt securities or convertible preferred shares that are convertible, in each case, into non-convertible securities of the parent credit supporter,
(c) the parent credit supporter is the beneficial owner of all the issued and outstanding voting securities of the issuer,
(d) no other subsidiary of the parent credit supporter has provided a guarantee or alternative credit support for all or substantially all of the payments to be made under the securities being distributed, and
(e) the issuer includes in the prospectus
(i) a statement that the financial results of the issuer are included in the consolidated financial results of the parent credit supporter, if
(A) the issuer is a finance subsidiary, and
(B) the impact of any subsidiaries of the parent credit supporter on a combined basis, excluding the issuer, on the consolidated financial statements of the parent credit supporter is minor, or
(ii) for the periods covered by the parent credit supporter's consolidated interim financial report and consolidated annual financial statements included in the prospectus under Item 33, consolidating summary financial information for the parent credit supporter presented with a separate column for each of the following:
(A) the parent credit supporter;
(B) the issuer;
(C) any other subsidiaries of the parent credit supporter on a combined basis;
(D) consolidating adjustments;
(E) the total consolidated amounts.
Issuer is wholly-owned subsidiary of, and one or more subsidiary credit supporters controlled by, parent credit supporter
34.3(1) An issuer is not required to include the issuer disclosure required by Items 4, 5, 8, 9, 21, 23, 25, 26, and 32, or the credit supporter disclosure of one or more subsidiary credit supporters required by Item 33, if
(a) a parent credit supporter and one or more subsidiary credit supporters have each provided full and unconditional credit support for the securities being distributed,
(b) the guarantees or alternative credit supports are joint and several,
(c) the securities being distributed are non-convertible debt securities, non-convertible preferred shares, or convertible debt securities or convertible preferred shares that are convertible, in each case, into non-convertible securities of the parent credit supporter,
(d) the parent credit supporter is the beneficial owner of all the issued and outstanding voting securities of the issuer,
(e) the parent credit supporter controls each subsidiary credit supporter and the parent credit support has consolidated the financial statements of each subsidiary credit supporter into the parent credit supporter's financial statements that are included in the prospectus, and
(f) the issuer includes in the prospectus, for the periods covered by the parent credit supporter's financial statements included in the prospectus under Item 33, consolidating summary financial information for the parent credit supporter presented with a separate column for each of the following:
(i) the parent credit supporter;
(ii) the issuer;
(iii) each subsidiary credit supporter on a combined basis;
(iv) any other subsidiaries of the parent credit supporter on a combined basis;
(v) consolidating adjustments;
(vi) the total consolidated amounts.
(2) Despite paragraph (1)(f), the information set out in a column in accordance with
(a) subparagraph (1)(f)(iv) may be combined with the information set out in accordance with any of the other columns in paragraph (1)(f) if the impact of any subsidiaries of the parent credit supporter on a combined basis, excluding the issuer and all subsidiary credit supporters, on the consolidated financial statements of the parent credit supporter is minor, and
(b) subparagraph (1)(f)(ii), may be combined with the information set out in accordance with any of the other columns in paragraph (1)(f) if the issuer is a finance subsidiary.
One or more credit supporters controlled by issuer
34.4 An issuer is not required to include the credit supporter disclosure for one or more credit supporters required by Item 33, if
(a) one or more credit supporters have each provided full and unconditional credit support for the securities being distributed,
(b) there is more than one credit supporter, the guarantee or alternative credit supports are joint and several,
(c) the securities being distributed are non-convertible debt securities, non-convertible preferred shares, or convertible debt securities or convertible preferred shares that are convertible, in each case, into non-convertible securities of the issuer,
(d) the issuer controls each credit supporter and the issuer has consolidated the financial statements of each credit supporter into the issuer's financial statements that are included in the prospectus, and
(e) the issuer includes in the prospectus
(i) a statement that the financial results of the credit supporter(s) are included in the consolidated financial results of the issuer, if
(A) the issuer has limited independent operations, and
(B) the impact of any subsidiaries of the issuer on a combined basis, excluding the credit supporter(s) but including any subsidiaries of the credit supporter(s) that are not themselves credit supporters, on the consolidated financial statements of the issuer is minor, or
(ii) for the periods covered by the issuer's financial statements included in the prospectus under Item 32, consolidating summary financial information for the issuer, presented with a separate column for each of the following:
(A) the issuer;
(B) the credit supporters on a combined basis;
(C) any other subsidiaries of the issuer on a combined basis;
(D) consolidating adjustments;
(E) the total consolidated amounts.
ITEM 35: Significant Acquisitions
Application and definitions
35.1(1) This Item does not apply to
(a) a completed or proposed transaction by the issuer that was or will be a reverse takeover or a transaction that is a proposed reverse takeover that has progressed to a state where a reasonable person would believe that the likelihood of the reverse takeover being completed is high
.; or(b) a completed or proposed acquisition
(i) by the issuer if
(A) the issuer's principal asset is cash, cash equivalents or its exchange listing; or
(B) the issuer was not a reporting issuer in any jurisdiction
(I)on the acquisition date, in the case of a completed acquisition; and
(II) immediately before filing the prospectus, in the case of a proposed acquisition; and
(ii) to which Item 32 applies by operation of section 32.1.
(2)
The requirements in sections 35.5 and 35.6 are not applicable to an initial distribution by prospectus by a Capital Pool Company, as that term is defined in TSX Venture Exchange Policy 2.4 entitled Capital Pool Companies, as amended from time to time.Repealed.(3) The audit requirement in section 4.2 of the Instrument does not apply to any financial statements or other information included in the prospectus under this Item, other than the financial statements or other information for the most recently completed financial year of a business or related businesses acquired, or proposed to be acquired, by the issuer.
(4) In this Item, "significant acquisition" means an acquisition of a business or related businesses that,
(a) if the issuer was a reporting issuer in at least one jurisdiction on the acquisition date, is determined to be a significant acquisition under section 8.3 of NI 51-102, or
(b) if the issuer was not a reporting issuer in any jurisdiction on the acquisition date, would be determined to be a significant acquisition under section 8.3 of NI 51-102, as if
(i) the issuer was a reporting issuer on the acquisition date,
(ii) the references to a "venture issuer" were read as an "IPO venture issuer" if the issuer is an IPO venture issuer,
(iii) for the purposes of the optional tests, the issuer used its financial statements for the most recently completed interim period or financial year that is included in the prospectus,
(iv) for the purposes of the optional profit or loss test, the most recently completed financial year of the business or related businesses were the financial year of the business ended before the date of the prospectus, and the 12 months ended on the last day of the most recently completed interim period of the business or related businesses were the 12 months ended on the last day of the most recently completed interim period before the date of the prospectus,
(v) subsection 8.3(11.1) of NI 51-102 did not apply,
(vi) references to "audited annual statements filed" meant "audited annual financial statements included in the long form prospectus", and
(vii) in subsection 8.3(15) of NI 51-102, the reference to "been required to file, and has not filed," meant "been required to include, and has not included, in the long form prospectus".
Completed acquisitions for which issuer has filed business acquisition report
35.2 If an issuer completed an acquisition of a business or related businesses since the beginning of its most recently completed financial year for which financial statements are included in the prospectus, and it has filed a business acquisition report under Part 8 of NI 51-102 for the acquisition, include all of the disclosure included in, or incorporated by reference into, that business acquisition report.
Completed acquisitions for which issuer has not filed business acquisition report because issuer was not reporting issuer on acquisition date
35.3(1) An issuer must include the disclosure required under subsection (2), if
(a) the issuer completed an acquisition of a business or related businesses since the beginning of the issuer's most recently completed financial year for which financial statements of the issuer are included in the prospectus,
(b) the issuer was not a reporting issuer in any jurisdiction on the acquisition date,
(c) the acquisition is a significant acquisition, and
(d) the acquisition date was
completedmore than(i) 90 days before the date of the prospectus, if the financial year of the acquired business ended 45 days or less before the acquisition, or
(ii) 75 days before the date of the prospectus.
(2) For an acquisition to which subsection (1) applies, include all the disclosure that would be required to be included in, or incorporated by reference into, a business acquisition report filed under Part 8 of NI 51-102, as if
(a) the issuer was a reporting issuer in at least one jurisdiction on the acquisition date,
(b) the business acquisition report was filed as at the date of the prospectus,
(c) the issuer was a venture issuer at the acquisition date, if the issuer is an IPO venture issuer,
(d) subsections 8.4(4) and 8.4(6) of NI 51-102 did not apply, and
(e) references to financial statements filed or required to be filed meant financial statements included in the prospectus.
Financial performance consolidated in financial statements of issuer
35.4 Despite section 35.2 and subsection 35.3(1), an issuer may omit the financial statements or other information of a business required to be included in the prospectus, if at least nine months of the acquired business or related businesses financial performance have been reflected in the issuer's most recent audited financial statements included in the prospectus.
Recently completed acquisitions
35.5(1) Include the information required under subsection (2) for any significant acquisition completed by the issuer
(a) since the beginning of the issuer's most recently completed financial year for which financial statements of the issuer are included in the prospectus, and
(b) for which the issuer has not included any disclosure under section 35.2 or subsection 35.3(2).
(2) For a significant acquisition to which subsection (1) applies, include the following
(a) the information required by sections 2.1 through 2.6 of Form 51-102F4, and
(b) the financial statements of or other information about the acquisition under subsection (3) for the acquired business or related businesses, if
(i) the issuer was not a reporting issuer in any jurisdiction immediately before filing the prospectus, or
(ii) the issuer was a reporting issuer in at least one jurisdiction immediately before filing the prospectus, and the inclusion of the financial statements or other information is necessary for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities to be distributed.
(3) The requirement to include financial statements or other information under paragraph (2)(b) must be satisfied by including
(a) if the issuer was a reporting issuer in at least one jurisdiction on the acquisition date, the financial statements or other information that will be required to be included in, or incorporated by reference into, a business acquisition report filed under Part 8 of NI 51-102,
(b) if the issuer was not a reporting issuer in any jurisdiction on the acquisition date, the financial statements or other information that would be required by subsection 35.3(2), or
(c) satisfactory alternative financial statements or other information.
Probable acquisitions
35.6(1) Include the information required under subsection (2) for any proposed acquisition of a business or related businesses by an issuer that has progressed to a state where a reasonable person would believe that the likelihood of the issuer completing the acquisition is high, and that, if completed by the issuer at the date of the prospectus, would be a significant acquisition.
(2) For a proposed acquisition of a business or related businesses by the issuer that has progressed to a state where a reasonable person would believe that the likelihood of the issuer completing the acquisition is high and to which subsection (1) applies, include
(a) the information required by sections 2.1 through 2.6 of Form 51-102F4, modified as necessary to convey that the acquisition has not been completed, and
(b) the financial statements or other information of the probable acquisition under subsection (3) for the acquired business or related businesses, if
(i) the issuer was not a reporting issuer in any jurisdiction immediately before filing the prospectus, or
(ii) the issuer was a reporting issuer in at least one jurisdiction immediately before filing the prospectus, and the inclusion of the financial statements or other information is necessary for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities to be distributed.
(3) For a proposed acquisition of a business or related businesses by the issuer that has progressed to a state where a reasonable person would believe that the likelihood of the issuer completing the acquisition is high and to which subsection (2) applies, the requirement to include financial statements or other information under subsection (2)(b) must be satisfied by including
(a) if the issuer was a reporting issuer in at least one jurisdiction immediately before filing the prospectus, the financial statements or other information that would be required to be included in, or incorporated by reference into, a business acquisition report filed under Part 8 of NI 51-102, as if the acquisition date were the date of the prospectus,
(b) if the issuer was not a reporting issuer in any jurisdiction immediately before filing the prospectus, the financial statements or other information that would be required to be included by subsection 35.3(2), as if the acquisition had been completed before the filing of the prospectus and the acquisition date were the date of the prospectus, or
(c)
(c)satisfactory alternative financial statements or other information.Pro forma financial statements for multiple acquisitions
35.7 Despite sections 35.2, 35.3, 35.5 and 35.6, an issuer is not required to include in its prospectus the pro forma financial statements otherwise required for each acquisition, if the issuer includes in its prospectus one set of pro forma financial statements that
(a) reflects the results of each acquisition since the beginning of the issuer's most recently completed financial year for which financial statements of the issuer are included in the prospectus,
(b) is prepared as if each acquisition had occurred at the beginning of the most recently completed financial year of the issuer for which financial statements of the issuer are included in the prospectus, and
(c) is prepared in accordance with
(i) if no disclosure is otherwise required for a probable acquisition under section 35.6, the section in this Item that applies to the most recently completed acquisition, or
(ii) section 35.6.
Additional financial statements or financial information of business filed or released
35.8(1) An issuer must include in its prospectus annual financial statements and an interim financial report of a business or related businesses for a financial period that ended before the acquisition date and is more recent than the periods for which financial statements are required under section 35.5 or 35.6 if, before the prospectus is filed, the financial statements of the business for the more recent period have been filed.
(2) If, before the prospectus is filed, historical financial information of a business or related businesses for a period more recent than the period for which financial statements are required under section 35.5 or 35.6, is publicly disseminated by news release or otherwise by or on behalf of the issuer, the issuer shall include in the prospectus the content of the news release or public communication.
ITEM 36: Probable Reverse Takeovers
Probable reverse takeovers
36.1 If the issuer is involved in a proposed reverse takeover that has progressed to a state where a reasonable person would believe that the likelihood of the reverse takeover being completed is high, include statements by the reverse takeover acquirer providing disclosure about the reverse takeover acquirer that would be required under this Form, as applicable, if the reverse takeover acquirer were the issuer of the securities to be distributed, and such other information about the reverse takeover acquirer as is necessary to provide full, true and plain disclosure of all material facts relating to the securities to be distributed, including the disclosure required by Items 4, 5,7, 8, 9, 11, 12, 13, 14, 15, 16, 17, 18, 19, 21, 22, 23, 24, 25, 27, 28, and 32.
ITEM 37: Certificates
Certificates
37.1 Include the certificates required by Part 5 of the Instrument or by securities legislation.
Issuer certificate form
37.2 An issuer certificate form must state:
"This prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of [insert the jurisdictions in which qualified]."
Underwriter certificate form
37.3 An underwriter certificate form must state:
"To the best of our knowledge, information and belief, this prospectus constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of [insert the jurisdictions in which qualified]."
Amendments
37.4(1) For an amendment to a prospectus that does not restate the prospectus, change "prospectus" to "prospectus dated [insert date] as amended by this amendment" wherever it appears in the statements in sections 37.2 and 37.3.
(2) For an amended and restated prospectus, change "prospectus" to "amended and restated prospectus" wherever it appears in the statements in sections 37.2 and 37.3.
Non-offering prospectuses
37.5 For a non-offering prospectus, change "securities offered by this prospectus" to "securities previously issued by the issuer" wherever it appears in the statements in sections 37.2 and 37.3.
ITEM 38: Transition
Interim financial report
38.1(1) Despite subsection 32.3(1), an issuer may include a comparative interim financial report of the issuer for the most recent interim period, if any, ended
(a) subsequent to the most recent financial year in respect of which annual financial statements of the issuer are included in the prospectus, and
(b) more than
(i) 75 days before the date of the prospectus, or
(ii) 90 days before the date of the prospectus if the issuer is a venture issuer.
(2) Subsection (1) does not apply unless
(a) the comparative interim financial report is the first interim financial report required to be filed in the year of adopting IFRS in respect of an interim period beginning on or after January 1, 2011,
(b) the issuer
(i) is disclosing, for the first time, a statement of compliance with International Accounting Standard 34 Interim Financial Reporting, and
(ii) did not previously file financial statements that disclosed compliance with IFRS,
(c) the issuer is a reporting issuer in any jurisdiction immediately before the date of the final long form prospectus, and
(d) the final long form prospectus is filed before July 5, 2012.
Asset-backed securities
38.2(1) Despite subsection 10.3(5), all financial disclosure that describes the underlying pool of financial assets of the issuer for a transition year must be included in the prospectus for the most recent interim period, if any, ended
(a) subsequent to the most recent financial year referred to in paragraphs 10.3(3)(a) and 10.3(3)(b) in respect of which financial disclosure on the underlying pool of financial assets is included in the prospectus, and
(b) more than
(i) 75 days before the date of the prospectus, or
(ii) 90 days before the date of the prospectus if the issuer is a venture issuer.
(2) Subsection (1) does not apply unless
(a) the financial disclosure in respect of the interim period is the first interim financial report required to be filed in the year of adopting IFRS in respect of an interim period beginning on or after January 1, 2011,
(b) the issuer
(i) is disclosing, for the first time, a statement of compliance with International Accounting Standard 34 Interim Financial Reporting, and
(ii) did not previously file financial statements that disclosed compliance with IFRS,
(c) the issuer is a reporting issuer in any jurisdiction immediately before the date of the final long form prospectus, and
(d) the final long form prospectus is filed before July 5, 2012.
Schedule B-3 -- Blackline Showing Proposed Changes to Form 41-101F2 Information Required in an Investment Fund Prospectus
APPENDIX B
SCHEDULE B-3
FORM 41-101F2
INFORMATION REQUIRED IN AN INVESTMENT FUND PROSPECTUS
General Instructions
(1) The objective of the prospectus is to provide information concerning the investment fund that an investor needs in order to make an informed investment decision. This Form sets out specific disclosure requirements that are in addition to the general requirement under securities legislation to provide full, true and plain disclosure of all material facts relating to the securities to be distributed. This Form does not prohibit including information beyond what the Form requires. Further, certain rules of specific application impose prospectus disclosure obligations in addition to those described in this Form.
(2) Terms used and not defined in this Form that are defined or interpreted in the Instrument must bear that definition or interpretation. Other definitions are set out in NI 14-101 Definitions.
(3) In determining the degree of detail required, a standard of materiality must be applied. Materiality is a matter of judgment in the particular circumstance, and is determined in relation to an item's significance to investors, analysts and other users of the information. An item of information, or an aggregate of items, is considered material if it is probable that its omission or misstatement would influence or change an investment decision with respect to the investment fund's securities. In determining whether information is material, take into account both quantitative and qualitative factors. The potential significance of items must be considered individually rather than on a net basis, if the items have an offsetting effect. This concept of materiality is consistent with the financial reporting notion of materiality contained in the Handbook.
(4) Unless an item specifically requires disclosure only in the preliminary prospectus, the disclosure requirements set out in this Form apply to both the preliminary prospectus and the prospectus. Details concerning the price and other matters dependent upon or relating to price, such as the number of securities being distributed, may be left out of the preliminary prospectus, along with specifics concerning the plan of distribution, to the extent that these matters have not been decided.
(5) The disclosure must be understandable to readers and presented in an easy-to-read format. The presentation of information should comply with the plain language principles listed in section 4.1 of Companion Policy 41-101CP General Prospectus Requirements. If technical terms are required, clear and concise explanations should be included.
(6) No reference need be made to inapplicable items and, unless otherwise required in this Form, negative answers to items may be omitted.
(7) The disclosure required in this Form must be presented in the order and using the headings specified in the Form.
However, scholarship plans may make modifications to the disclosure items in order to reflect the special nature of their investment structure and distribution mechanismIf no sub-heading for an Item is stipulated in this Form, an investment fund may include sub-headings, under the required headings, at its option.(8) Where the term "investment fund" is used, it may be necessary, in order to meet the requirement for full, true and plain disclosure of all material facts, to also include disclosure with respect to the investment fund's subsidiaries and investees. If it is more likely than not that a person or company will become a subsidiary or investee, it may be necessary to also include disclosure with respect to the person or company. For this purpose, subsidiaries and investees include entities that are consolidated, proportionately consolidated, or accounted for using the equity method.
(9) If disclosure is required as of a specific date and there has been a material change or change that is otherwise significant in the required information subsequent to that date, present the information as of the date of the change or a date subsequent to the change instead.
(10) If the term "class" is used in any item to describe securities, the term includes a series.
(11) Where performance data is presented in the prospectus, annual compound returns must be presented for standard applicable performance periods of 1, 3, 5 and 10 year periods and the period since inception unless otherwise specified by the requirements of this Form. Performance data for periods of less than one year must not be presented. Hypothetical or back-tested performance data must not be presented.
(12) An investment fund that has more than one class or series that are referable to the same portfolio may treat each class or series as a separate investment fund for the purposes of this Form, or may combine disclosure of one or more of the classes or series in one prospectus. If disclosure pertaining to more than one class or series is combined in one prospectus, separate disclosure in response to each item in this Form must be provided for each class or series unless the responses would be identical for each class or series.
(13) A section, part, class or series of a class of securities of an investment fund that is referable to a separate portfolio is considered to be a separate investment fund for the purposes of this Form. An investment fund that has more than one class or series of securities referable to separate portfolios may combine disclosure of one or more of the classes or series in one prospectus if each class or series is managed by the same manager. If disclosure pertaining to more than one class or series is combined in one prospectus, separate disclosure in response to each item in this Form must be provided for each class or series unless the responses would be identical for each class or series.
PROSPECTUS FORM
Item 1: -- Cover Page Disclosure
1.1 -- Preliminary Prospectus Disclosure
Every preliminary prospectus must have printed in red ink and in italics at the top of the cover page immediately above the disclosure required in section 1.2 the following, with the bracketed information completed:
A copy of this preliminary prospectus has been filed with the securities regulatory authority(ies) in [each of/certain of the provinces/provinces and territories of Canada] but has not yet become final for the purpose of the sale of securities. Information contained in this preliminary prospectus may not be complete and may have to be amended. The securities may not be sold until a receipt for the prospectus is obtained from the securities regulatory authority(ies).
INSTRUCTION
Investment funds must complete the bracketed information by
(a) inserting the names of each jurisdiction in which the investment fund intends to offer securities under the prospectus;
(b) stating that the filing has been made in each of the provinces of Canada or each of the provinces and territories of Canada; or
(c) identifying the filing jurisdictions by exception (i.e., every province of Canada or every province and territory of Canada, except [excluded jurisdictions].
1.2 -- Required Statement
State in italics at the top of the cover page the following:
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise.
1.3 -- Basic Disclosure about the Distribution
(1) State the following immediately below the disclosure required under sections 1.1 and 1.2 with the bracketed information completed:
[PRELIMINARY OR PRO FORMA] PROSPECTUS
--
[INITIAL PUBLIC OFFERING OR NEW ISSUE AND/OR
--
SECONDARY OFFERING OR CONTINUOUS OFFERING]
--
[Date]
--
[Name of investment fund]
--
[number and type of securities qualified for distribution under the prospectus, including any options or warrants, and the price per security]
--
[type of fund -- state the following: "This investment fund is a [labour sponsored or venture capital fund, commodity pool, non-redeemable investment fund, scholarship plan or exchange-traded mutual fund, or, if the issuer is another type of investment fund, state the type of fund]."
--
If securities of the investment fund are intended to be listed or quoted on an exchange or marketplace and conditional listing approval has been received, state the following: "[Name of exchange or marketplace] has conditionally approved the [listing/quotation] of the [type of securities qualified for distribution under the prospectus and to be listed/quoted], subject to the [name of investment fund] fulfilling all of the requirements of the [name of exchange or marketplace] on or before [date]."]
(2) Briefly describe the investment objectives of the investment fund and provide a cross-reference to sections in the prospectus where information about the investment objectives is provided.
(3) State the name of the manager and portfolio adviser of the investment fund and provide a cross-reference to sections in the prospectus where information about the manager and portfolio adviser is provided.
1.4 -- Distribution
(1) Subsections (2)-(8) do not apply to an investment fund in continuous distribution.
(2) If the securities are being distributed for cash, provide the information called for below, in substantially the following tabular form or in a note to the table:
Price to public (a)
Underwriting discounts or commission (b)
Proceeds to issuer or selling securityholders (c)
--
Per Security
__________
__________
__________
--
Total
__________
__________
__________
(3) If there is an over-allotment option or an option to increase the size of the distribution before closing,
(a)
disclose that adescribe the terms of the option, and(b) provide the following disclosure:
"A purchaser who acquires [ insert type of securities qualified for distribution under the prospectus] forming part of the underwriters
'' over-allocation position acquires those securities under this prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the over-allotment option or secondary market purchases, and(b) describe the terms of the option. "(4) If the distribution of the securities is to be on a best efforts basis
, provide totals for both the minimum and maximum offering amount, if applicable.and a minimum offering amount(a) is required for the issuer to achieve one or more of the purposes of the offering, provide totals for both the minimum and maximum offering amount, or
(b) is not required for the issuer to achieve any of the purposes of the offering, state the following in boldface type:
"There is no minimum amount of funds that must be raised under this offering. This means that the issuer could complete this offering after raising only a small proportion of the offering amount set out above."
(5) If debt securities are being distributed at a premium or a discount, state in boldface type the effective yield if held to maturity.
(6) Disclose separately those securities that are underwritten, those under option and those to be sold on a best efforts basis, and, in the case of a best efforts distribution, the latest date that the distribution is to remain open.
(7) In column (b) of the table, disclose only commissions paid or payable in cash by the investment fund or selling securityholder and discounts granted. Set out in a note to the table
(a) commissions or other consideration paid or payable by persons or companies other than the investment fund or selling securityholder,
(b) consideration other than discounts granted and cash paid or payable by the investment fund or selling securityholder, including warrants and options, and
(c) any finder's fees or similar required payment.
(8) If a security is being distributed for the account of a selling securityholder, state the name of the securityholder and a cross-reference to the applicable section in the prospectus where further information about the selling securityholder is provided. State the portion of the expenses of the distribution to be borne by the selling securityholder and, if none of the expenses of the distribution are being borne by the selling securityholder, include a statement to that effect and discuss the reason why this is the case.
(9) If a minimum subscription amount is required from each subscriber, provide details of the minimum subscription requirements.
INSTRUCTIONS
(1) Estimate amounts, if necessary. For non-fixed price distributions that are being made on a best efforts basis, disclosure of the information called for by the table may be set forth as a percentage or a range of percentages and need not be set forth in tabular form.
(2) If debt securities are being distributed, also express the information in the table as a percentage.
1.5 -- Offering Price in Currency Other than Canadian Dollar
If the offering price of the securities being distributed is disclosed in a currency other than the Canadian dollar, disclose in boldface type the currency.
1.6 -- Non-fixed Price Distributions
If the securities are being distributed at non-fixed prices, disclose
(a) the discount allowed or commission payable to the underwriter,
(b) any other compensation payable to the underwriter and, if applicable, that the underwriter's compensation will be increased or decreased by the amount by which the aggregate price paid for the securities by the purchasers exceeds or is less than the gross proceeds paid by the underwriter to the investment fund or selling securityholder,
(c) that the securities to be distributed under the prospectus will be distributed, as applicable, at
(i) prices determined by reference to the prevailing price of a specified security in a specified market,
(ii) market prices prevailing at the time of sale,
(iii) prices to be negotiated with purchasers, or
(iv) the net asset value of a security,
(d) that prices may vary from purchaser to purchaser and during the period of distribution,
(e) if the price of the securities is to be determined by reference to the prevailing price of a specified security in a specified market, the price of the specified security in the specified market at the latest practicable date,
(f) if the price of the securities will be the market price prevailing at the time of the sale, the market price at the latest practicable date, and
(g) the net proceeds or, if the distribution is to be made on a best efforts basis, the minimum amount of net proceeds, if any, to be received by the investment fund or selling securityholder.
1.7 -- Pricing Disclosure
If the offering price or the number of securities being distributed, or an estimate of the range of the offering price or the number of securities being distributed, has been publicly disclosed in a jurisdiction or a foreign jurisdiction as of the date of the preliminary prospectus, include this information in the preliminary prospectus.
1.8 -- Reduced Price Distributions
If an underwriter wishes to be able to decrease the price at which securities are distributed for cash from the initial offering price fixed in the prospectus, include in boldface type a cross-reference to the section in the prospectus where disclosure concerning the possible price decrease is provided.
1.9 -- Market for Securities
(1) Identify the exchange(s) and quotation system(s), if any, on which securities of the investment fund of the same class as the securities being distributed are traded or quoted and the market price of those securities as of the latest practicable date.
(2) Disclose any intention to stabilize the market. Provide a cross-reference to the section in the prospectus where further information about market stabilization is provided.
(3) If no market for the securities being distributed under the prospectus exists or is expected to exist upon completion of the distribution, state the following in boldface type:
There is no market through which these securities may be sold and purchasers may not be able to resell securities purchased under this prospectus. This may affect the pricing of the securities in the secondary market, the transparency and availability of trading prices, the liquidity of the securities, and the extent of issuer regulation. See 'Risk Factors'.
(4) Subsection (3) does not apply to an investment fund in continuous distribution.
1.10 -- Risk Factors
Include a cross-reference to sections in the prospectus where information about the risks of an investment in the securities being distributed is provided. State any significant risks including leverage.
1.11 -- Underwriter(s)
(1) State the name of each underwriter.
(2) If applicable, comply with the requirements of NI 33-105
Underwriting Conflictsfor front page prospectus disclosure.(3) Other than a labour sponsored or venture capital fund, commodity pool or scholarship plan, if there is no underwriter involved in the distribution, provide a statement in boldface type to the effect that no underwriter has been involved in the preparation of the prospectus or performed any review or independent due diligence of the contents of the prospectus.
1.12 -- Commodity Pool
(1) For a commodity pool, state in substantially the following words:
You should carefully consider whether your financial condition permits you to participate in this investment. The securities of this commodity pool are highly speculative and involve a high degree of risk. You may lose a substantial portion or even all of the money you place in the commodity pool.
The risk of loss in trading [nature of instruments to be traded by the commodity pool] can be substantial. In considering whether to participate in the [commodity pool], you should be aware that trading [nature of instruments] can quickly lead to large losses as well as gains. Such trading losses can sharply reduce the net asset value of the [commodity pool] and consequently the value of your interest in the [commodity pool]. Also, market conditions may make it difficult or impossible for the [commodity pool] to liquidate a position.
The [commodity pool] is subject to certain conflicts of interest. The [commodity pool] will be subject to the charges payable by it as described in this prospectus that must be offset by revenues and trading gains before an investor is entitled to a return on his or her investment. It may be necessary for the [commodity pool] to make substantial trading profits to avoid depletion or exhaustion of its assets before an investor is entitled to a return on his or her investment.
(2) For the initial prospectus, state in substantially the following words:
The [commodity pool] is newly organized. The success of the [commodity pool] will depend upon a number of conditions that are beyond the control of the [commodity pool]. There is substantial risk that the goals of the [commodity pool] will not be met.
(3) If the promoter, manager, or a portfolio adviser of the commodity pool has not had a similar involvement with any other publicly offered commodity pool, state in substantially the following words:
The [promoter], [manager] [and/or] [portfolio adviser] of the [commodity pool] has not previously operated any other publicly offered commodity pools [or traded other accounts].
(4) If the commodity pool will execute trades outside Canada, state in substantially the following words:
Participation in transactions in [nature of instrument to be traded by the commodity pool] involves the execution and clearing of trades on or subject to the rules of a foreign market.
None of the Canadian securities regulatory authorities or Canadian exchanges regulates activities of any foreign markets, including the execution, delivery and clearing of transactions, or has the power to compel enforcement of the rule of a foreign market or any applicable foreign law. Generally, any foreign transaction will be governed by applicable foreign laws. This is true even if the foreign market is formally linked to a Canadian market so that a position taken on a market may be liquidated by a transaction on another market. Moreover, such laws or regulations will vary depending on the foreign country in which the transaction occurs.
For these reasons, entities such as the commodity pool that trade [nature of instrument to be traded by the commodity pool] may not be afforded certain of the protective measures provided by Canadian legislation and the rules of Canadian exchanges. In particular, funds received from customers for transactions may not be provided the same protection as funds received in respect of transactions on Canadian exchanges.
(5) State that the commodity pool is a mutual fund but that certain provisions of securities legislation designed to protect investors who purchase securities of mutual funds do not apply.
(6) Immediately after the statements required by subsections (1)-(5), state in substantially the following words:
These brief statements do not disclose all the risks and other significant aspects of investing in the [commodity pool]. You should therefore carefully study this prospectus, including a description of the principal risk factors at page [page number], before you decide to invest in the [commodity pool].
1.13 -- Restricted Securities
Describe the number and class or classes of restricted securities being distributed using the appropriate restricted security terms in the same type face and type size as the rest of the description.
1.14 -- Non-Canadian
ManagerInvestment FundIf the investment fund
manager, investment fund manager or any other person or company required to provide a certificate under Part 5 of the Instrument or other securities legislation, is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, state the following on the cover page or under a separate heading elsewhere in the prospectus, with the bracketed information completed:"The
manager[investment fund, investment fund manager or any other person or company required to provide a certificate under Part 5 of the Instrument or other securities legislation] is incorporated, continued or otherwise governed under the laws of a foreign jurisdiction or resides outside Canada. Although themanager[person or company described above] has appointed [name (s) and address (es) of agent (s) for service] as its agent for service of process inCanada[list jurisdictions], it may not be possible for investors to realize onjudgementsjudgments obtained in Canada against themanager.[person or company described above]."1.15 -- Documents Incorporated by Reference
For an investment fund in continuous distribution, other than a scholarship plan, state in substantially the following words:
Additional information about the Fund is available in the following documents:
• the most recently filed annual financial statements;
• any interim financial statements filed after those annual financial statements;
• the most recently filed annual management report of fund performance;
• any interim management report of fund performance filed after that annual management report of fund performance.
These documents are incorporated by reference into this prospectus which means that they legally form part of this prospectus. Please see the "Documents Incorporated by Reference" section for further details.
Item 2: -- Table of Contents
2.1 -- Table of Contents
Include a table of contents.
Item 3: -- Summary of Prospectus
3.1 -- Prospectus Summary
Under the heading "Prospectus Summary" include the information listed in sections 3.2 to 3.6.
3.2 -- Cautionary Language
At the beginning of the summary, include a statement in italics in substantially the following form:
The following is a summary of the principal features of this distribution and should be read together with the more detailed information and financial data and statements contained elsewhere in this prospectus [[if applicable] or incorporated by reference in the prospectus].
3.3 -- General
(1) Briefly summarize information appearing elsewhere in the prospectus that, in the opinion of the investment fund or selling securityholder, would be most likely to influence the investor's decision to purchase the securities being distributed. Include a description of
(a) how the investment fund has been organized (corporation, trust, etc.),
(b) the securities to be distributed, including the offering price and expected net proceeds,
(c) the investment objectives,
(d) the investment strategies,
(e) the use of leverage, including the following:
(i) if leverage is created through borrowing or the issuance of preferred securities, disclose any restrictions
andon the leverage used or to be used and whether the investment fund will borrow a minimum amount. Disclose the maximum amount of leverage the investment fundcouldmay useexpressed as a ratio as follows: (total long positions including leveraged positions plus total short positions) divided by the net assets ofas a ratio calculated by dividing the maximum total assets of the investment fund by the net asset value of the investment fund, and(ii) if leverage is created through the use of specified derivatives or by other means not disclosed in subparagraph (i), disclose any restrictions on the leverage used or to be used by the investment fund and whether the investment fund will use a minimum amount of leverage. Disclose the maximum amount of leverage the fund may use as a multiple of net assets. Provide a brief explanation of how the investment fund uses the term "leverage" and the significance of the maximum and minimum amounts of leverage to the investment fund,
(f) the use of proceeds,
(g) risk factors,
(h) income tax considerations,
(i) all available purchase options and state, if applicable, that the choice of different purchase options requires the investor to pay different fees and expenses and if applicable, that the choice of different purchase options affects the amount of compensation paid to a dealer,
(j) the redemption features,
(k) the distribution policy,
(l) the termination provisions,
(m) if restricted securities, subject securities or securities directly or indirectly convertible into or exercisable or exchangeable for restricted securities or subject securities are to be distributed under the prospectus,
(i) include a summary of the information required by section 21.6, and
(ii) include, in boldface type, a statement of the rights the holders of restricted securities do not have if the holders do not have all of the rights referred to in section 21.6, and
(n) whether the investment fund is eligible as an investment for registered retirement savings plans, registered retirement income plans, registered education savings plans or deferred profit sharing plans.
(2) For each item summarized under subsection (1), provide a cross-reference to the information in the prospectus.
INSTRUCTIONS
(1) For the purposes of Item 3.3(1)(e)(i), a fund must calculate its maximum total assets by aggregating the maximum value of its long positions, short positions and the maximum amount that may be borrowed.
(2) For the purposes of the disclosure required by Item 3.3(1)(e)(ii), the term "specified derivative" has the same meaning as in NI 81-102. The description of an investment fund's use of leverage under Item 3.3(1)(e)(ii) must provide investors with sufficient information to understand the magnitude of the market exposure of the investment fund as compared to the amount of money raised by the investment fund from investors.
3.4 -- Organization and Management of the Investment Fund
(1) Provide, under the sub-heading "Organization and Management of the [name of investment fund]", information about the manager, trustee, portfolio adviser, promoter, custodian, registrar and transfer agent
and, auditor and principal distributor of the investment fund in the form of a diagram or table.(2) For each entity listed in the diagram or table, briefly describe the services provided by that entity and the relationship of that entity to the manager.
(3) For each entity listed in the diagram or table, other than the manager of the investment fund, provide the municipality and the province or country where it principally provides its services to the investment fund. Provide the complete municipal address for the manager of the investment fund.
INSTRUCTIONS:
(1) The information required to be disclosed in this section must be presented prominently, using enough space so that it is easy to read.
(2) Briefly describe the services provided by the listed entities. For instance, the manager may be described as "manages the overall business and operations of the fund", and a portfolio adviser may be described as "provides investment advice to the manager about the investment portfolio of the fund" or "manages the investment portfolio of the fund".
3.5 -- Underwriter(s)
(1) Under the sub-heading "Underwriters" or "Agents", as applicable, state the name of each underwriter or agent.
(2) If an underwriter has agreed to purchase all of the securities being distributed at a specified price and the underwriter's obligations are subject to conditions, state the following, with the bracketed information completed:
We, as principals, conditionally offer these securities, subject to prior sale, if, as and when issued by [name of investment fund] and accepted by us in accordance with the conditions contained in the underwriting agreement referred to under "Plan of Distribution".
(3) If an underwriter has agreed to purchase a specified number or principal amount of the securities at a specified price, state that the securities are to be taken up by the underwriter, if at all, on or before a date not later than 42 days after the date of the receipt for the final prospectus.
(4) Provide the following tabular information:
INSTRUCTION
If the underwriter has been granted compensation securities, state, in a footnote, whether the prospectus qualifies the grant of all or part of the compensation securities and provide a cross-reference to the applicable section in the prospectus where further information about the compensation securities is provided.
3.6 -- Fees, Expenses and Returns
(1) Set out information about the fees and expenses payable by the investment fund and by investors in the investment fund under the sub-heading "Summary of Fees and Expenses".
(2) The information required by this section must be a summary of the fees, charges and expenses of the investment fund and investors presented in the form of the following table, appropriately completed, and introduced using substantially the following words:
This table lists the fees and expenses that you may have to pay if you invest in the [insert the name of the investment fund]. You may have to pay some of these fees and expenses directly. The Fund may have to pay some of these fees and expenses, which will therefore reduce the value of your investment in the Fund.
Fees and Expenses Payable by the Fund [for scholarship plans, Fees and Expenses payable by Subscribers' Deposits]
(3) Describe the following fees and expenses in the table referred to in subsection (2):
Fees and Expenses Payable by the Fund or by Subscribers' Deposits (for scholarship plans)
(a) Fees payable to the Underwriters for Selling the Securities
(b) Expenses of the Issue
(c) Management Fees [See Instruction (1)]
(d) Incentive or Performance Fees
(e) Portfolio Adviser Fees
(f) Counterparty Fees (if any)
(g) Operating Expenses [See Instructions (2) and (3)]
(h) Other Fees and Expenses [specify type] [specify amount]
Fees and Expenses Payable Directly by You
(i) Sales Charges [specify percentage, as a percentage of __________]
(j) Service Fees [specify percentage, as a percentage of __________]
(k) Redemption Fees [specify percentage, as a percentage of __________, or specify amount]
(l) Registered Tax Plan Fees [include this disclosure and specify the type of fees if the registered tax plan is sponsored by the investment fund and is described in the prospectus][specify amount]
(m) Other Fees and Expenses [specify type] [specify amount].
(4) Under the sub-heading
""Annual Returnsand, Management Expense Ratio"and Trading Expense Ratio", provide, in the following table, returns for each of the past five yearsand, the management expense ratio for each of the past five years and the trading expense ratio for each of the past five years as disclosed in the most recently filed annual management report of fund performance of the investment fund:
Notes: ""MER"" means management expense ratio and is based on total expenses (excluding commissions and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net asset value."TER" means trading expense ratio and represents total commissions and portfolio transaction costs expressed as an annualized percentage of daily average net asset value.
INSTRUCTIONS:
(1) List the amount of the management fee, including any performance or incentive fee, for each investment fund separately.
(2) Under "Operating Expenses", state whether the investment fund pays all of its operating expenses and list the main components of those expenses. If the investment fund pays only certain operating expenses and is not responsible for payment of all such expenses, adjust the statement in the table to reflect the proper contractual responsibility of the investment fund and indicate who is responsible for the payment of these expenses.
(3) Show all fees or expenses payable by the investment fund (e.g. brokerage) and investors in the investment fund. The description of fees must also include sales and trailing commissions paid either by the investment fund or the investor.
Item 4: -- Overview of the Structure of the Investment Fund
4.1 -- Legal Structure
(1) Under the heading "Overview of the Legal Structure of the Fund", state the full corporate name of the investment fund or, if the investment fund is an unincorporated entity, the full name under which it exists and carries on business and the address(es) of the investment fund's head and registered office.
(2) State the statute under which the investment fund is incorporated or continued or organized or, if the investment fund is an unincorporated entity, the laws of the jurisdiction or foreign jurisdiction under which the investment fund is established and exists. Describe the substance of any material amendments to the articles or other constating or establishing documents of the investment fund.
(3) State whether the investment fund would be considered a mutual fund under securities legislation.
Item 5: -- Investment Objectives
5.1 -- Investment Objectives
(1) Set out under the heading "Investment Objectives" the fundamental investment objectives of the investment fund, including information that describes the fundamental nature of the investment fund, or the fundamental features of the investment fund, that distinguish it from other investment funds.
(2) If the investment fund purports to arrange a guarantee or insurance in order to protect all or some of the principal amount of an investment in the investment fund, include this fact as a fundamental investment objective of the investment fund and
(a) identify the person or company providing the guarantee or insurance,
(b) provide the material terms of the guarantee or insurance, including the maturity date of the guarantee or insurance,
(c) if applicable, state that the guarantee or insurance does not apply to the amount of any redemptions before the maturity date of the guarantee or before the death of the securityholder and that redemptions before that date would be based on the net asset value of the investment fund at the time, and
(d) modify any other disclosure required by this section appropriately.
INSTRUCTIONS:
(1) State the type or types of securities, such as money market instruments, bonds or equity securities, in which the investment fund will primarily invest under normal market conditions.
(2) If the investment fund primarily invests, or intends to primarily invest, or if its name implies that it will primarily invest
(a) in a particular type of issuer, such as foreign issuers, small capitalization issuers or issuers located in emerging market countries,
(b) in a particular geographic location or industry segment, or
(c) in portfolio assets other than securities, the investment fund's fundamental investment objectives must so indicate.
(3) If a particular investment strategy is an essential aspect of the investment fund, as evidenced by the name of the investment fund or the manner in which the investment fund is marketed, disclose this strategy as an investment objective. This instruction would be applicable, for example, to an investment fund that described itself as an "investment fund that invests primarily through the use of derivatives".
Item 6: -- Investment Strategies
6.1 -- Investment Strategies
(1) Describe under the heading "Investment Strategies"
(a) the principal investment strategies that the investment fund intends to use in achieving its investment objectives,
(b) the use of leverage, including
any restrictions and the maximum amount of leverage the fund can use, expressed as a ratio as follows: (total long positions including leveraged positions plus total short positions) divided by the net assets of the investment fund, and thefollowing:(i) if leverage is created through borrowing or the issuance of preferred securities, disclose any restrictions on the leverage used or to be used and whether the investment fund will borrow a minimum amount. Disclose the maximum amount of leverage the investment fund may use as a ratio calculated by dividing the maximum total assets of the investment fund by the net asset value of the investment fund, and
(ii) if leverage is created through the use of specified derivatives or by other means not disclosed in subparagraph (i), disclose any restrictions on the leverage used or to be used by the investment fund and whether the investment fund will use a minimum amount of leverage. Disclose the maximum amount of leverage the fund may use as a multiple of net assets. Provide a brief explanation of how the investment fund uses the term "leverage" and the significance of the maximum and minimum amounts of leverage to the investment fund, and
(c) the process by which the investment fund's portfolio adviser selects securities for the fund's portfolio, including any investment approach, philosophy, practices or techniques used by the portfolio adviser or any particular style of portfolio management that the portfolio adviser intends to follow.
(2) Indicate what types of securities, other than those held by the investment fund in accordance with its fundamental investment objectives, may form part of the investment fund's portfolio assets under normal market conditions.
(3) If the investment fund intends to use derivatives
(a) for hedging purposes only, state that the investment fund may use derivatives for hedging purposes only, or
(b) for non-hedging purposes, or for hedging and non-hedging purposes, briefly describe
(i) how derivatives are or will be used in conjunction with other securities to achieve the investment fund's investment objectives,
(ii) the types of derivatives expected to be used and give a brief description of the nature of each type, and
(iii) the limits of the investment fund's use of derivatives.
(4) If the investment fund may depart temporarily from its fundamental investment objectives as a result of adverse market, economic, political or other considerations, disclose any temporary defensive tactics the investment fund's portfolio adviser may use or intends to use in response to such conditions.
(5) If the investment fund intends to enter into securities lending, repurchase or reverse repurchase transactions, briefly describe
(a) how those transactions are or will be entered into in conjunction with other strategies and investments of the investment fund to achieve the investment fund's investment objectives,
(b) the types of those transactions to be entered into and give a brief description of the nature of each type, and
(c) the limits of the investment fund's entering into those transactions.
INSTRUCTIONS:
(1) For the purposes of Item 6.1(1)(b)(i), a fund must calculate its maximum total assets by aggregating the maximum value of its long positions, short positions and the maximum amount that may be borrowed.
(2) For the purposes of the disclosure required by Item 6.1(1)(b)(ii), the term "specified derivative" has the same meaning as in NI 81-102. The description of an investment fund's use of leverage under Item 6.1(1)(b)(ii) must provide investors with sufficient information to understand the magnitude of the market exposure of the investment fund as compared to the amount of money raised by the investment fund from investors.
6.2 -- Overview of the Investment Structure
(1) Under the sub-heading, "Overview of the Investment Structure", describe, including a diagram for complex structures, the overall structure of the underlying investment or investments made or to be made by the investment fund, including any direct or indirect investment exposure. Include in the description and the diagram any counterparties under a forward or swap agreement entered into with the investment fund or its manager, the nature of the portfolio of securities being purchased by the investment fund, any indirect investment exposure that is related to the return of the investment fund and any collateral or guarantees given as part of the overall structure of the underlying investment or investments made by the investment fund.
(2) If the securities distributed under the prospectus are being issued in connection with a restructuring transaction, describe by way of a diagram or otherwise the intercorporate relationships both before and after the completion of the proposed transaction.
Item 7: -- Overview of the Sector(s) that the Fund Invests in
7.1 -- Sector(s) that the Fund Invests in
(1) Under the heading "Overview of the Sector[(s)] that the Fund Invests in", if the investment fund invests or intends to invest in a specific sector(s), briefly describe the sector(s) that the investment fund has been or will be investing in.
(2) Include in the description known material trends, events or uncertainties in the sector(s) that the investment fund invests or intends to invests in that might reasonably be expected to affect the investment fund.
7.2 -- Significant Holdings in Other Entities
For a labour sponsored or venture capital fund, include in substantially the tabular form below, the following information as at a date within 30 days of the date of the prospectus with respect to each entity, 5 percent or more of whose securities of any class are beneficially owned directly or indirectly by the fund.
Significant Holdings of the [name of the labour sponsored or venture capital fund]
Item 8: -- Investment Restrictions
8.1 -- Investment Restrictions
(1) Under the heading "Investment Restrictions", describe any restrictions on investments adopted by the investment fund, beyond what is required under securities legislation.
(2) If the investment fund has received the approval of the securities regulatory authorities to vary any of the investment restrictions and practices contained in securities legislation, provide details of the permitted variations.
(3) Describe the nature of any securityholder or other approval that may be required in order to change the fundamental investment objectives and any of the material investment strategies to be used to achieve the investment objectives.
Item 9: -- Management Discussion of Fund Performance
9.1 -- Management Discussion of Fund Performance
Unless the investment fund's most recently filed management report of fund performance is incorporated by reference under Item 37 or attached to the prospectus under Item 38, provide, under the heading "Management Discussion of Fund Performance", management's discussion of fund performance in accordance with sections 2.3, 2.4, 2.5, 3, 4, 5 and 6 of Part B of Form 81-106F1 for the period covered by the financial statements required under Item 38.
Item 10: -- Fees and Expenses
10.1 -- Fees and Expenses
Under the heading "Fees and Expenses", set out information about all of the fees and expenses payable by the investment fund and by investors in the investment fund.
INSTRUCTION:
Describe each fee paid by the investment fund and by the investor in this section separately. The description of fees must also include sales and trailing commissions paid either by the investment fund or the investor.
Item 11: -- Annual Returns and Management Expense Ratio
11.1 -- Annual Returns and Management Expense Ratio and Trading Expense Ratio
Under the heading
""Annual Returnsand, Management Expense Ratio"and Trading Expense Ratio", provide, in the following table, returns for each of the past five yearsand, the management expense ratio for each of the past five years and the trading expense ratio for each of the past five years as disclosed in the most recently filed annual management report of fund performance of the investment fund:
""MER"" means management expense ratio and is based on total expenses (excluding commissions and other portfolio transaction costs) and is expressed as an annualized percentage of daily average net asset value."TER" means trading expense ratio and represents total commissions and portfolio transaction costs expressed as an annualized percentage of daily average net asset value.
Item 12: -- Risk Factors
12.1 -- Risk Factors
(1) Under the heading "Risk Factors", describe the risk factors material to the investment fund that a reasonable investor would consider relevant to an investment in the securities being distributed, such as the risks associated with any particular aspect of the fundamental investment objectives and investment strategies.
(2) Include a discussion of general market, political, market sector, liquidity, interest rate, foreign currency, diversification, leverage, credit, legal and operational risks, as appropriate.
(3) Include a brief discussion of general investment risks applicable to the investment fund, such as specific company developments, stock market conditions and general economic and financial conditions in those countries where the investments of the investment fund are listed for trading.
(4) If derivatives are to be used by the investment fund for non-hedging purposes, describe the risks associated with any use or intended use by the investment fund of derivatives.
(5) If there is a risk that purchasers of the securities distributed may become liable to make an additional contribution beyond the price of the security, disclose the risk.
INSTRUCTIONS:
(1) Describe risks in the order of seriousness from the most serious to the least serious.
(2) A risk factor must not be de-emphasized by including excessive caveats or conditions.
Item 13: -- Distribution Policy
13.1 -- Distribution Policy
Under the heading "Distribution Policy", describe the distribution policy, including
(a) whether distributions are made by the investment fund in cash or reinvested in securities of the investment fund,
(b) the targeted amount of any distributions,
(c) whether the distributions are guaranteed or not, and
(d) when the distributions are made.
Item 14: -- Purchases of Securities
14.1 -- Purchases of Securities
(1) Under the heading "Purchases of Securities", describe the procedure followed or to be followed by investors who desire to purchase securities of the investment fund or switch them for securities of other investment funds.
(2) If applicable, state that the issue price of securities is based on the net asset value of a security of that class, or series of a class, next determined after the receipt by the investment fund of the purchase order.
(3) Describe how the securities of the investment fund are distributed. If sales are effected through a principal distributor, give brief details of any arrangements with the principal distributor.
(4) Describe all available purchase options and state, if applicable, that the choice of different purchase options requires the investor to pay different fees and expenses and if applicable, that the choice of different purchase options affects the amount of compensation paid to a dealer.
(5) If applicable, disclose that a dealer may make provision in arrangements that it has with an investor that will require the investor to compensate the dealer for any losses suffered by the dealer in connection with a failed settlement of a purchase of securities of the investment fund caused by the investor.
(6) If applicable, for an investment fund that is being sold on a best efforts basis, state whether the issue price will be fixed during the initial distribution period, and state when the investment fund will begin issuing securities at the net asset value of a security of the investment fund.
Item 15: -- Redemption of Securities
15.1 -- Redemption of Securities
Under the heading "Redemption of Securities", describe how investors may redeem securities of the investment fund, including
(a) the procedures followed, or to be followed, by an investor who desires to redeem securities of the investment fund and specifying the procedures to be followed and the documents to be delivered before a redemption order pertaining to securities of the investment fund will be accepted by the investment fund for processing and before payment of the proceeds of redemption will be made by the investment fund,
(b) how the redemption price of the securities is determined and, if applicable, state that the redemption price of the securities is based on the net asset value of a security of that class, or series of a class, next determined after the receipt by the investment fund of the redemption order, and
(c) the circumstances under which the investment fund may suspend redemptions of the securities of the investment fund.
15.2 -- Short-term Trading
For an investment fund in continuous distribution, under the sub-heading "Short-Term Trading",
(a) describe the adverse effects, if any, that short-term trades in securities of the investment fund by an investor may have on other investors in the investment fund,
(b) describe the restrictions, if any, that may be imposed by the investment fund to deter short-term trades, including the circumstances, if any, under which such restrictions may not apply,
(c) where the investment fund does not impose restrictions on short-term trades, state the specific basis for the view of the manager that it is appropriate for the investment fund not to do so, and
(d) describe any arrangements, whether formal or informal, with any person or company, to permit short-term trades in securities of the investment fund, including the name of such person or company and the terms of such arrangements, including any restrictions imposed on the short-term trades and any compensation or other consideration received by the manager, the investment fund or any other party pursuant to such arrangements.
INSTRUCTION
For the disclosure required by section 15.2, include a brief description of the short-term trading activities in the investment fund that are considered by the manager to be inappropriate or excessive. If the manager imposes a short-term trading fee, include a cross-reference to the disclosure provided under Item 10 of this Form.
Item 16: -- Consolidated Capitalization
16.1 -- Consolidated Capitalization
(1) This section does not apply to an investment fund in continuous distribution.
(2) Under the heading "Consolidated Capitalization", describe any material change in, and the effect of the material change on, the share and loan capital of the investment fund, on a consolidated basis, since the date of the investment fund's financial statements for its most recently completed financial period included in the prospectus, including any material change that will result from the issuance of the securities being distributed under the prospectus.
Item 17: -- Prior Sales
17.1 -- Prior Sales
(1) Subsection (2) does not apply to an investment fund in continuous distribution.
(2) Under the heading "Prior Sales", for each class of securities of the investment fund distributed under the prospectus and for securities that are convertible into those classes of securities, state, for the 12-month period before the date of the prospectus,
(a) the price at which the securities have been issued or are to be issued by the investment fund or sold by the selling securityholder,
(b) the number of securities issued or sold at that price, and
(c) the date on which the securities were issued or sold.
17.2 -- Trading Price and Volume
(1) For each class of securities of the investment fund that is traded or quoted on a Canadian marketplace, identify the marketplace and the price ranges and volume traded or quoted on the Canadian marketplace on which the greatest volume of trading or quotation generally occurs.
(2) If a class of securities of the investment fund is not traded or quoted on a Canadian marketplace but is traded or quoted on a foreign marketplace, identify the foreign marketplace and the price ranges and volume traded or quoted on the foreign marketplace on which the greatest volume or quotation generally occurs.
(3) Provide the information required under subsections (1) and (2) on a monthly basis for each month or, if applicable, partial months of the 12-month period before the date of the prospectus.
Item 18: -- Income Tax Considerations
18.1 -- Status of the Investment Fund
Under the heading "Income Tax Considerations" and under the sub-heading "Status of the Investment Fund", briefly describe the status of the investment fund for income tax purposes. Also disclose whether the investment fund is eligible as an investment for registered retirement savings plans, registered retirement income plans, registered education savings plans or deferred profit sharing plans.
18.2 -- Taxation of the Investment Fund
Under the sub-heading "Taxation of the Investment Fund", state in general terms the bases upon which the income and capital receipts of the investment fund are taxed.
18.3 -- Taxation of Securityholders
Under the sub-heading "Taxation of Securityholders", state in general terms the income tax consequences to the holders of the securities offered of
(a) any distribution to the securityholders in the form of income, capital, dividends or otherwise, including amounts reinvested in securities of the investment fund,
(b) the redemption of securities, and
(c) the issue of securities.
18.4 -- Taxation of Registered Plans
Under the sub-heading "Taxation of Registered Plans", explain the tax treatment applicable to securities of the investment fund held in a registered tax plan.
18.5 -- Tax Implications of the Investment Fund's Distribution Policy
Under the sub-heading "Tax Implications of the Investment Fund's Distribution Policy", describe the impact of the investment fund's distribution policy on a taxable investor who acquires securities of the investment fund late in a calendar year.
Item 19: -- Organization and Management Details of the Investment Fund
19.1 -- Management of the Investment Fund
(1) Under the heading "Organization and Management Details of the Investment Fund" and under the sub-heading "Officers and Directors of the Investment Fund",
(a) list the name and municipality of residence of each director and executive officer of the investment fund and indicate their respective positions and offices held with the investment fund and their respective principal occupations during the five preceding years,
(b) state the period or periods during which each director has served as a director and when his or her term of office will expire,
(c)
state the number and percentage of securities of each class of voting securities of the investment fund or any of its subsidiaries beneficially owned, or controlled or directed, directly or indirectly, by all directors and executive officers of the investment fund as a group,[Repealed](d) disclose the board committees of the investment fund and identify the members of each committee,
(e) if the principal occupation of a director or executive officer of the investment fund is acting as an executive officer of a person or company other than the investment fund, disclose that fact and state the principal business of the person or company, and
(f) for an investment fund that is a limited partnership, provide the information required by this subsection for the general partner of the investment fund, modified as appropriate.
(2) Under the sub-heading "Cease Trade Orders and Bankruptcies", if a director or executive officer of the investment fund is, as at the date of the prospectus or pro forma prospectus, as applicable, or was within 10 years before the date of the prospectus or pro forma prospectus, as applicable, a director, chief executive officer or chief financial officer of any other
investment fundissuer, that:(a) was subject to an order that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer, or
(b) was subject to an order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer,
state the fact and describe the basis on which the order was made and whether the order is still in effect.
(3) For the purposes of subsection (2), "order" means
(a) a cease trade order,
(b) an order similar to a cease trade order, or
(c) an order that denied the relevant investment fund access to any exemption under securities legislation,
that was in effect for a period of more than 30 consecutive days.
(4) If a director or executive officer of the investment fund
(a) is, as at the date of the prospectus or pro forma prospectus, as applicable, or has been within the 10 years before the date of the prospectus or pro forma prospectus, as applicable, a director or executive officer of any
investment fundissuer that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, state the fact, or(b) has, within the 10 years before the date of the prospectus or pro forma prospectus, as applicable, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director or executive officer, state the fact.
(5) Under the heading "Organization and Management Details of the Investment Fund" and under the sub-heading "Manager of the Investment Fund", provide the complete municipal address of the manager and details of the manager of the investment fund, including the history and background of the manager and any overall investment strategy or approach used by the manager in connection with the investment fund.
(6) Under the sub-heading "Duties and Services to be Provided by the Manager", provide a description of the duties and services that the manager will be providing to the investment fund.
(7) Under the sub-heading "Details of the Management Agreement", provide a brief description of the essential details of any management agreement that the manager has entered into or will be entering into with the investment fund, including any termination rights.
(8) Under the sub-heading "Officers and Directors of the Manager of the Investment Fund",
(a) list the name and municipality of residence of each partner, director and executive officer of the manager of the investment fund and indicate their respective positions and offices held with the manager and their respective principal occupations within the five preceding years,
(b) if a partner, director or executive officer of the manager has held more than one office with the manager within the past five years, state only the current office held, and
(c) if the principal occupation of a partner, director or executive officer of the manager is with an organization other than the manager of the investment fund, state the principal business in which the organization is engaged.
(9) Under the sub-heading "Cease Trade Orders and Bankruptcies of the Manager", provide the information required under subsections (2) and (4) for the directors and executive officers of the manager of the investment fund, modified as appropriate.
(10) Under the heading "Ownership of Securities of the Investment Fund and of the Manager" disclose
(a) the percentage of securities of each class or series of voting or equity securities beneficially owned, directly or indirectly, in aggregate, by all the directors and executive officers of the investment fund
(i) in the investment fund if the aggregate level of ownership exceeds 10 percent,
(ii) in the manager, or
(iii) in any person or company that provides services to the investment fund or the manager; and
(b) the percentage of securities of each class or series of voting or equity securities beneficially owned, directly or indirectly, in aggregate, by all the directors and executive officers of the manager of the investment fund
(i) in the investment fund if the aggregate level of ownership exceeds 10 percent,
(ii) in the manager, or
(iii) in any person or company that provides services to the investment fund or the manager; and
(c) the percentage of securities of each class or series of voting or equity securities beneficially owned, directly or indirectly, in aggregate, by all the independent review committee members of the investment fund
(i) in the investment fund if the aggregate level of ownership exceeds 10 percent,
(ii) in the manager, or
(iii) in any person or company that provides services to the investment fund or the manager.
(11) If the management functions of the investment fund are carried out by employees of the investment fund, provide for those employees the disclosure concerning executive compensation that is required to be provided for executive officers of an issuer under securities legislation.
(12) Describe any arrangements under which compensation was paid or payable by the investment fund during the most recently completed financial year of the investment fund, for the services of directors of the investment fund, members of an independent board of governors or advisory board of the investment fund and members of the independent review committee of the investment fund, including the amounts paid, the name of the individual and any expenses reimbursed by the investment fund to the individual
(a) in that capacity, including any additional amounts payable for committee participation or special assignments; and
(b) as consultant or expert.
(13) For an investment fund that is a trust, describe the arrangements, including the amounts paid and expenses reimbursed, under which compensation was paid or payable by the investment fund during the most recently completed financial year of the investment fund for the services of the trustee or trustees of the investment fund.
INSTRUCTIONS
(1) The disclosure required by subsections (2) and (4) also applies to any personal holding companies of any of the persons referred to in subsections (2) and (4).
(2) A management cease trade order which applies to directors and executive officers of the investment fund is an "order" for the purposes of paragraph (2)(a) and must be disclosed, whether or not the director, chief executive officer or chief financial officer was named in the order.
(3) For the purposes of this section, a late filing fee, such as a filing fee that applies to the late filing of an insider report, is not a "penalty or sanction".
(4) The disclosure in paragraph (2)(a) only applies if the director or executive officer of the investment fund was a director, chief executive officer or chief financial officer when the order was issued against the relevant investment fund. The investment fund does not have to provide disclosure if the director or executive officer became a director, chief executive officer or chief financial officer after the order was issued.
(5) The disclosure required under Item 19.1(10) regarding executive compensation for management functions carried out by employees of an investment fund must be made in accordance with the disclosure requirements of Form 51-102F6.
19.2 -- Portfolio Adviser
(1) Under the sub-heading "Portfolio Adviser"
(a) state the municipality and the province or country where the portfolio adviser principally provides its services to the investment fund and give details of the portfolio adviser of the investment fund, including the history and background of the portfolio adviser,
(b) state the extent to which investment decisions are made by certain individuals employed by the portfolio adviser and whether those decisions are subject to the oversight, approval or ratification of a committee, and
(c) state the name, title, and length of time of service of the person or persons employed by or associated with the portfolio adviser of the investment fund who is or are principally responsible for the day-to-day management of a material portion of the portfolio of the investment fund, implementing a particular material strategy or managing a particular segment of the portfolio of the investment fund, and each person's business experience in the last five years.
(2) Under the sub-heading "Details of the Portfolio Advisory Agreement", provide a brief description of the essential details of any portfolio advisory agreement that the portfolio adviser has entered into or will be entering into with the investment fund or the manager of the investment fund, including any termination rights.
19.2.1 -- Brokerage Arrangements
Under the sub-heading "Brokerage Arrangements",
(a) If any brokerage transactions involving the client brokerage commissions of the investment fund have been or might be directed to a dealer in return for the provision of any good or service, by the dealer or a third party, other than order execution, state
(i) the process for, and factors considered in, selecting a dealer to effect securities transactions for the investment fund, including whether receiving goods or services in addition to order execution is a factor, and whether and how the process may differ for a dealer that is an affiliated entity;
(ii) the nature of the arrangements under which order execution goods and services or research goods and services might be provided;
(iii) each type of good or service, other than order execution, that might be provided; and
(iv) the method by which the portfolio adviser makes a good faith determination that the investment fund, on whose behalf the portfolio adviser directs any brokerage transactions involving client brokerage commissions to a dealer in return for the provision of any order execution goods and services or research goods and services, by the dealer or a third party, receives reasonable benefit considering both the use of the goods or services and the amount of client brokerage commissions paid;
(b) If any brokerage transactions involving the client brokerage commissions of the investment fund have been or might be directed to a dealer in return for the provision of any good or service, by the dealer or a third party, other than order execution, since the date of the investment fund's last prospectus or last annual information form, whichever one is the most recent, state
(i) each type of good or service, other than order execution, that has been provided to the manager or the portfolio adviser of the investment fund; and
(ii) the name of any affiliated entity that provided any good or service referred to in subparagraph (i), separately identifying each affiliated entity and each type of good or service provided by each affiliated entity; and
(c) If any brokerage transactions involving the client brokerage commissions of the investment fund have been or might be directed to a dealer in return for the provision of any good or service, by the dealer or a third party, other than order execution, state that the name of any other dealer or third party that provided a good or service referred to in paragraph (b)(i), that was not disclosed under paragraph (b)(ii), will be provided upon request by contacting the investment fund or investment fund family at [insert telephone number] or at [insert investment fund or investment fund family e-mail address].
INSTRUCTIONS:
Terms defined in NI 23-102 -- Use of Client Brokerage Commissions have the same meaning where used in this Item.
19.3 -- Conflicts of Interest
Under the sub-heading "Conflicts of Interest", disclose particulars of existing or potential material conflicts of interest between
(1) the investment fund and a director or executive officer of the investment fund,
(2) the investment fund and the manager or any director or executive officer of the manager of the investment fund, and
(3) the investment fund and the portfolio adviser or any director or executive officer of the portfolio adviser of the investment fund.
19.4 -- Independent Review Committee
Under the sub-heading "Independent Review Committee", provide a description of the independent review committee of the investment fund, including
(a) the mandate and responsibilities of the independent review committee,
(b) the composition of the independent review committee (including the names of its members), and the reasons for any change in its composition since the date of the most recently filed annual information form or prospectus of the investment fund, as applicable,
(c) that the independent review committee prepares a report at least annually of its activities for securityholders which is available on the [investment fund's/investment fund family's] Internet site at [insert investment fund's Internet site address], or at the securityholder's request at no cost, by contacting the [investment fund/investment fund family] at [investment fund's/investment fund family's email address], and
(d) the amount of fees and expenses payable in connection with the independent review committee by the investment fund, including any amounts payable for committee participation or special assignments, and state whether the investment fund pays all of the fees payable to the independent review committee.
19.5 -- Trustee
Under the sub-heading "Trustee", provide details of the trustee of the investment fund, including the municipality and the province or country where the trustee principally provides its services to the investment fund.
19.6 -- Custodian
(1) Under the sub-heading "Custodian", state the name, municipality of the principal or head office, and nature of business of the custodian and any principal sub-custodian of the investment fund.
(2) Describe generally the sub-custodial arrangements of the investment fund.
INSTRUCTION:
A "principal sub-custodian" is a sub-custodian to whom custodial authority has been delegated in respect of a material portion or segment of the portfolio assets of the investment fund.
19.7 -- Auditor
Under the sub-heading "Auditor", state the name and address of the auditor of the investment fund.
19.8 -- Transfer Agent and Registrar
Under the sub-heading, "Transfer Agent and Registrar", for each class of securities, state the name of the investment fund's transfer agent(s), registrar(s), trustee, or other agent appointed by the investment fund to maintain the securities register and the register of transfers for such securities and indicate the location (by municipalities) of each of the offices of the investment fund or transfer agent, registrar, trustee or other agent where the securities, register and register of transfers are maintained or transfers of securities are recorded.
19.9 -- Promoters
(1) For a person or company that is, or has been within the two years immediately preceding the date of the prospectus or pro forma prospectus, a promoter of the investment fund or of a subsidiary of the investment fund, state under the sub-heading "Promoter"
(a) the person or company's name and municipality and the province or country of residence,
(b) the number and percentage of each class of voting securities and equity securities of the investment fund or any of its subsidiaries beneficially owned, or controlled or directed, directly or indirectly, by the person or company,
(c) the nature and amount of anything of value, including money, property, contracts, options or rights of any kind received or to be received by the promoter directly or indirectly from the investment fund or from a subsidiary of the investment fund, and the nature and amount of any assets, services or other consideration received or to be received by the investment fund or a subsidiary of the investment fund in return, and
(d) for an asset acquired within the two years before the date of the preliminary prospectus or pro forma prospectus, or to be acquired, by the investment fund or by a subsidiary of the investment fund from a promoter,
(i) the consideration paid or to be paid for the asset and the method by which the consideration has been or will be determined,
(ii) the person or company making the determination referred to in subparagraph (i) and the person or company's relationship with the investment fund, the promoter, or an affiliate of the investment fund or of the promoter, and
(iii) the date that the asset was acquired by the promoter and the cost of the asset to the promoter.
(2) If a promoter referred to in subsection (1) is, as at the date of the prospectus or pro forma prospectus, as applicable, or was within 10 years before the date of the prospectus or pro forma prospectus, as applicable, a director, chief executive officer or chief financial officer of any person or company, that
(a) was subject to an order that was issued while the promoter was acting in the capacity as director, chief executive officer or chief financial officer, or
(b) was subject to an order that was issued after the promoter ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while the promoter was acting in the capacity as director, chief executive officer or chief financial officer,
state the fact and describe the basis on which the order was made and whether the order is still in effect.
(3) For the purposes of subsection (2), "order" means:
(a) a cease trade order,
(b) an order similar to a cease trade order, or
(c) an order that denied the relevant person or company access to any exemption under securities legislation
that was in effect for a period of more than 30 consecutive days.
(4) If a promoter referred to in subsection (1)
(a) is, as at the date of the prospectus or pro forma prospectus, as applicable, or has been within the 10 years before the date of the prospectus or pro forma prospectus, as applicable, a director or executive officer of any person or company that, while the promoter was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, state the fact, or
(b) has, within the 10 years before the date of the prospectus or pro forma prospectus, as applicable, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the promoter, state the fact.
(5) Describe the penalties or sanctions imposed and the grounds on which they were imposed or the terms of the settlement agreement and the circumstances that gave rise to the settlement agreement, if a promoter referred to in subsection (1) has been subject to
(a) any penalties or sanctions imposed by a court relating to provincial and territorial securities legislation or by a provincial and territorial securities regulatory authority or has entered into a settlement agreement with a provincial and territorial securities regulatory authority, or
(b) any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor in making an investment decision.
(6) Despite subsection (5), no disclosure is required of a settlement agreement entered into before December 31, 2000 unless the disclosure would likely be considered to be important to a reasonable investor in making an investment decision.
INSTRUCTIONS
(1) The disclosure required by subsections (2), (4) and (5) also applies to any personal holding companies of any of the persons referred to in subsections (2), (4), and (5).
(2) A management cease trade order which applies to a promoter referred to in subsection (1) is an "order" for the purposes of paragraph (2)(a) and must be disclosed, whether or not the director, chief executive officer or chief financial officer was named in the order.
(3) For the purposes of this section, a late filing fee, such as a filing fee that applies to the late filing of an insider report, is not a "penalty or sanction".
(4) The disclosure in paragraph (2)(a) only applies if the promoter was a director, chief executive officer or chief financial officer when the order was issued against the person or company. The investment fund does not have to provide disclosure if the promoter became a director, chief executive officer or chief financial officer after the order was issued.
19.10 -- Principal Distributor
(1) If applicable, state the name and address of the principal distributor of the investment fund.
(2) Describe the circumstances under which any agreement with the principal distributor of the investment fund may be terminated and include a brief description of the essential terms of this agreement.
Item 20: -- Calculation of Net Asset Value
20.1 -- Calculation of Net Asset Value
Under the heading "Calculation of Net Asset Value",
(a) describe how the net asset value of the investment fund is calculated, and
(b) state the frequency at which the net asset value is calculated and the date and time of day at which it is calculated.
20.2 -- Valuation Policies and Procedures
Under the sub-heading "Valuation Policies and Procedures of the Investment Fund",
(a) describe the methods used to value the various types or classes of assets of the investment fund and its liabilities for the purpose of calculating net asset value,
(a.1) If the valuation principles and practices established by the manager differ from Canadian GAAP, describe the differences, and
(b) if the manager has discretion to deviate from the investment fund's valuation practices described in paragraph (a), disclose when and to what extent that discretion may be exercised and, if it has been exercised in the past three years, provide an example of how it has been exercised or, if it has not been exercised in the past three years, so state.
20.3 -- Reporting of Net Asset Value
Under the sub-heading "Reporting of Net Asset Value", describe
(a) how the net asset value of the investment fund will be made available at no cost (e.g. website, toll-free telephone line, etc.), and
(b) the frequency at which the net asset value is disclosed.
Item 21: -- Description of the Securities Distributed
21.1 -- Equity Securities
If equity securities of the investment fund are being distributed, under the heading "Attributes of the Securities" and under the sub-heading "Description of the Securities Distributed" state the description or the designation of the class of equity securities distributed and describe all material attributes and characteristics, including
(a) dividend or distribution rights,
(b) voting rights,
(c) rights upon dissolution, termination or winding-up,
(d) pre-emptive rights,
(e) conversion or exchange rights,
(f) redemption, retraction, purchase for cancellation or surrender provisions,
(g) sinking or purchase fund provisions,
(h) provisions permitting or restricting the issuance of additional securities and any other material restrictions, and
(i) provisions requiring a securityholder to contribute additional capital.
21.2 -- Debt Securities
If debt securities are being distributed, under the heading "Attributes of the Securities" and under the sub-heading "Description of the Securities Distributed", describe all material attributes and characteristics of the indebtedness and the security, if any, for the debt, including
(a) provisions for interest rate, maturity and premium, if any,
(b) conversion or exchange rights,
(c) redemption, retraction, purchase for cancellation or surrender provisions,
(d) sinking or purchase fund provisions,
(e) the nature and priority of any security for the debt securities, briefly identifying the principal properties subject to lien or charge,
(f) provisions permitting or restricting the issuance of additional securities, the incurring of additional indebtedness and other material negative covenants, including restrictions against payment of
dividendsdistributions and restrictions against giving security on the assets of the investment fund or its subsidiaries, and provisions as to the release or substitution of assets securing the debt securities,(g) the name of the trustee under any indenture relating to the debt securities and the nature of any material relationship between the trustee or any of its affiliates and the investment fund or any of its affiliates, and
(h) any financial arrangements between the investment fund and any of its affiliates or among its affiliates that could affect the security for the indebtedness.
21.3 -- Derivatives
If derivatives are being distributed, under the heading "Attributes of the Securities" and under the sub-heading "Description of the Securities Distributed", describe fully the material attributes and characteristics of the derivatives, including
(a) the calculation of the value or payment obligations under the derivatives,
(b) the exercise of the derivatives,
(c) settlements that are the result of the exercise of the derivatives,
(d) the underlying interest of the derivatives,
(e) the role of a calculation expert in connection with the derivatives,
(f) the role of any credit supporter of the derivatives, and
(g) the risk factors associated with the derivatives.
21.4 -- Other Securities
If securities other than the securities mentioned above are being distributed, under the heading "Attributes of the Securities" and under the sub-heading "Description of the Securities Distributed", describe fully the material attributes and characteristics of those securities.
21.5 -- Special Warrants
If the prospectus is used to qualify the distribution of securities issued upon the exercise of special warrants or other securities acquired on a prospectus-exempt basis, disclose that holders of such securities have been provided with a contractual right of rescission and provide the following disclosure in the prospectus, with the bracketed information completed:
The issuer has granted to each holder of a special warrant a contractual right of rescission of the prospectus-exempt transaction under which the special warrant was initially acquired. The contractual right of rescission provides that if a holder of a special warrant who acquires another security of the issuer on exercise of the special warrant as provided for in the prospectus is, or becomes, entitled under the securities legislation of a jurisdiction to the remedy of rescission because of the prospectus or an amendment to the prospectus containing a misrepresentation,
(a) the holder is entitled to rescission of both the holder's exercise of its special warrant and the private placement transaction under which the special warrant was initially acquired,
(b) the holder is entitled in connection with the rescission to a full refund of all consideration paid to the underwriter or issuer, as the case may be, on the acquisition of the special warrant, and
(c) if the holder is a permitted assignee of the interest of the original special warrant subscriber, the holder is entitled to exercise the rights of rescission and refund as if the holder was the original subscriber.
INSTRUCTION
If the prospectus is qualifying the distribution of securities issued upon the exercise of securities other than special warrants, replace the term "special warrant" with the type of the security being distributed.
21.6 -- Restricted Securities
(1) If the investment fund has outstanding, or proposes to distribute under
thea prospectus, restricted securities, subject securities or securities that are, directly or indirectly, convertible into or exercisable or exchangeable for restricted securities or subject securities, provide a detailed description of(a) the voting rights attached to the restricted securities that are the subject of the distribution or that will result from the distribution, either directly or following a conversion, exchange or exercise, and the voting rights, if any, attached to the securities of any other class of securities of the investment fund that are the same as or greater than, on a per security basis, those attached to the restricted securities,
(b) any significant provisions under applicable corporate and securities law that do not apply to the holders of the restricted securities that are the subject of the distribution or that will result from the distribution, either directly or following a conversion, exchange or exercise, but do apply to the holders of another class of equity securities, and the extent of any rights provided in the constating documents or otherwise for the protection of holders of the restricted securities,
(c) any rights under applicable corporate law, in the constating documents or otherwise, of holders of restricted securities that are the subject of the distribution or that will result from the distribution, either directly or following a conversion, exchange or exercise, to attend, in person or by proxy, meetings of holders of equity securities of the investment fund and to speak at the meetings to the same extent that holders of equity securities are entitled, and
(d) how the investment fund complied with, or the basis upon which it was exempt from, the requirements of Part 12 of the Instrument.
(2) If holders of restricted securities do not have all of the rights referred to in subsection (1), the detailed description referred to in that subsection must include, in boldface type, a statement of the rights the holders do not have.
(3) If the investment fund is required to include the disclosure referred to in subsection (1), state the percentage of the aggregate voting rights attached to the investment fund's securities that will be represented by restricted securities after effect has been given to the issuance of the securities being offered.
21.7 -- Modification of Terms
(1) Describe provisions about the modification, amendment or variation of any rights attached to the securities being distributed.
(2) If the rights of holders of securities may be modified otherwise than in accordance with the provisions attached to the securities or the provisions of the governing statute relating to the securities, explain briefly.
21.8 -- Ratings
If the investment fund has asked for and received a stability rating, or if the investment fund is aware that it has received any other kind of rating, including a provisional rating, from one or more approved rating organizations for the securities being distributed and the rating or ratings continue in effect, disclose
(a) each security rating, including a provisional rating or stability rating, received from an approved rating organization,
(b) the name of each approved rating organization that has assigned a rating for the securities to be distributed,
(c) a definition or description of the category in which each approved rating organization rated the securities to be distributed and the relative rank of each rating within the organization's overall classification system,
(d) an explanation of what the rating addresses and what attributes, if any, of the securities to be distributed are not addressed by the rating,
(e) any factors or considerations identified by the approved rating organization as giving rise to unusual risks associated with the securities to be distributed,
(f) a statement that a security rating or a stability rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the rating organization, and
(g) any announcement made by, or any proposed announcement known to the investment fund that is to be made by, an approved rating organization to the effect that the organization is reviewing or intends to revise or withdraw a rating previously assigned and required to be disclosed under this section.
21.9 -- Other Attributes
(1) If the rights attaching to the securities being distributed are materially limited or qualified by the rights of any other class of securities, or if any other class of securities ranks ahead of or equally with the securities being distributed, include information about the other securities that will enable investors to understand the rights attaching to the securities being distributed.
(2) If securities of the class being distributed may be partially redeemed or repurchased, state the manner of selecting the securities to be redeemed or repurchased.
INSTRUCTION
This section requires only a brief summary of the provisions that are material from an investment standpoint. The provisions attaching to the securities being distributed or any other class of securities do not need to be set out in full. They may, in the investment fund's discretion, be attached as a schedule to the prospectus.
Item 22: -- Securityholder Matters
22.1 -- Meetings of Securityholders
Under the heading "Securityholder Matters" and under the sub-heading "Meetings of Securityholders", describe the circumstances, processes and procedures for holding any securityholder meeting and for any extraordinary resolution.
22.2 -- Matters Requiring Securityholder Approval
Under the sub-heading "Matters Requiring Securityholder Approval", describe the matters that require securityholder approval.
22.3 -- Amendments to Declaration of Trust
For an investment fund established pursuant to a declaration of trust, under the sub-heading "Amendments to the Declaration of Trust", describe the circumstances, processes and procedures required to amend the declaration of trust.
22.4 -- Reporting to Securityholders
Under the sub-heading "Reporting to Securityholders" describe the information or reports that will be delivered or made available to securityholders and the frequency with which such information or reports will be delivered or made available to securityholders, including any requirements under securities legislation.
Item 23: -- Termination of the Fund
23.1 -- Termination of the Fund
Under the heading "Termination of the Fund", describe the circumstances in which the investment fund will be terminated, including:
(a) the date of termination,
(b) how the value of the securities of the investment fund at termination will be determined,
(c) whether securityholders will receive cash or any other type of payment upon termination,
(d) the details of any rollover transaction, if securityholders will receive securities of another investment fund as part of a rollover transaction upon termination,
(e) how the assets of the investment fund will be distributed upon termination, and
(f) if the investment fund is a commodity pool, disclose whether the investment fund will be wound up without the approval of securityholders if the net asset value per security falls below a certain predetermined level, and, if so, the net asset value per security at which this will occur.
Item 24: -- Use of Proceeds
24.1 -- Application
This Item does not apply to an investment fund in continuous distribution.
24.2 -- Proceeds
(1) Under the heading "Use of Proceeds", state the estimated net proceeds to be received by the investment fund or selling securityholder or, in the case of a non-fixed price distribution or a distribution to be made on a best efforts basis, the minimum amount, if any, of net proceeds to be received by the investment fund or selling securityholder from the sale of the securities distributed.
(2) Describe in reasonable detail and, if appropriate, using tabular form, each of the principal purposes, with approximate amounts, for which the net proceeds will be used by the investment fund.
(3) If the prospectus is used for a special warrant or similar transaction, state the amount that has been received by the issuer of the special warrants or similar securities on the sale of the special warrants or similar securities.
24.3 -- Other Sources of Funding
If any material amounts of other funds are to be used in conjunction with the proceeds, state the amounts and sources of the other funds.
24.4 -- Financing by Special Warrants, etc.
(1) If the prospectus is used to qualify the distribution of securities issued upon the exercise of special warrants or the exercise of other securities acquired on a prospectus-exempt basis, describe the principal purposes for which the proceeds of the prospectus-exempt financing were used or are to be used.
(2) If all or a portion of the funds have been spent, explain how the funds were spent.
Item 25: -- Plan of Distribution
25.1 -- Plan of Distribution
Under the heading "Plan of Distribution", briefly describe the plan of distribution.
25.2 -- Name of Underwriters
(1) If the securities are being distributed by an underwriter, state the name of the underwriter and describe briefly the nature of the underwriter's obligation to take up and pay for the securities.
(2) Disclose the date by which the underwriter is obligated to purchase the securities.
25.3 -- Disclosure of Conditions to Underwriters' Obligations
If securities are distributed by an underwriter that has agreed to purchase all of the securities at a specified price and the underwriter's obligations are subject to conditions,
(a) include a statement in substantially the following form, with the bracketed information completed and with modifications necessary to reflect the terms of the distribution:
Under an agreement dated [insert date of agreement] between [insert name of investment fund or selling securityholder] and [insert name(s) of underwriter(s)], as underwriter[s], [insert name of investment fund or selling securityholder] has agreed to sell and the underwriter[s] [has/have] agreed to purchase on [insert closing date] the securities at a price of [insert offering price], payable in cash to [insert name of investment fund or selling securityholder] against delivery. The obligations of the underwriter[s] under the agreement may be terminated at [its/their] discretion on the basis of [its/their] assessment of the state of the financial markets and may also be terminated upon the occurrence of certain stated events. The underwriter[s] [is/are], however, obligated to take up and pay for all of the securities if any of the securities are purchased under the agreement.
, and
(b) describe any other conditions and indicate any information known that is relevant to whether such conditions will be satisfied.
25.4 -- Best Efforts Offering
Outline briefly the plan of distribution of any securities being distributed other than on the basis described in section 25.3.
25.5 -- Minimum Distribution
If securities are being distributed on a best efforts basis and minimum funds are to be raised, state
(a) the minimum funds to be raised,
(b) that the investment fund must appoint a registered dealer authorized to make the distribution, a Canadian financial institution, or a lawyer who is a practising member in good standing with a law society of a jurisdiction in which the securities are being distributed, or a notary in Québec, to hold in trust all funds received from subscriptions until the minimum amount of funds stipulated in paragraph (a) has been raised, and
(c) that if the minimum amount of funds is not raised within the distribution period, the trustee must return the funds to the subscribers without any deductions.
25.6 -- Determination of Price
Disclose the method by which the distribution price has been or will be determined and, if estimates have been provided, explain the process of determining the estimates.
25.7 -- Stabilization
If the investment fund, a selling securityholder or an underwriter knows or has reason to believe that there is an intention to over-allot or that the price of any security may be stabilized to facilitate the distribution of the securities, describe the nature of these transactions, including the anticipated size of any over-allocation position, and explain how the transactions are expected to affect the price of the securities.
25.8 -- Reduced Price Distributions
If the underwriter may decrease the offering price after the underwriter has made a reasonable effort to sell all of the securities at the initial offering price disclosed in the prospectus in accordance with the procedures permitted by the Instrument, disclose this fact and that the compensation realised by the underwriter will be decreased by the amount that the aggregate price paid by purchasers for the securities is less than the gross proceeds paid by the underwriter to the investment fund or selling securityholder.
25.9 -- Listing Application
If application has been made to list or quote the securities being distributed, include a statement, in substantially the following form, with the bracketed information completed:
The investment fund has applied to [list/quote] the securities distributed under this prospectus on [name of exchange or other market]. [Listing/Quotation] will be subject to the investment fund fulfilling all the listing requirements of [name of exchange or other market].
25.10 -- Conditional Listing Approval
If application has been made to list or quote the securities being distributed on an exchange or marketplace and conditional listing approval has been received, include a statement, in substantially the following form, with the bracketed information completed:
[name of exchange or marketplace] has conditionally approved the [listing/quotation] of these securities. [Listing/Quotation] is subject to the [name of investment fund]'s fulfilling all of the requirements of the [name of exchange or marketplace] on or before [date], [including distribution of these securities to a minimum number of public securityholders].
25.11 -- Constraints
If there are constraints imposed on the ownership of securities of the investment fund to ensure that the investment fund has a required level of Canadian ownership, describe the mechanism, if any, by which the level of Canadian ownership of the securities of the investment fund will be monitored and maintained.
25.12 -- Special Warrants Acquired by Underwriters or Agents
Disclose the number and dollar value of any special warrants acquired by any underwriter or agent and the percentage of the distribution represented by those special warrants.
Item 26: -- Relationship Between Investment Fund or Selling Securityholder and Underwriter
26.1 -- Relationship Between Investment Fund or Selling Securityholder and Underwriter
(1) Under the heading "Relationship between Investment Fund [or Selling Securityholder] and Underwriter", if the investment fund or selling securityholder is a connected issuer or related issuer of an underwriter of the distribution, or if the selling securityholder is also an underwriter, comply with the requirements of NI 33-105.
(2) For the purposes of subsection (1), "connected issuer" and "related issuer" have the same meanings as in NI 33-105.
Item 27: -- Options to Purchase Securities
27.1 -- Options to Purchase Securities
(1) Under the heading "Options to Purchase Securities", state, in tabular form, as at a specified date within 30 days before the date of the prospectus or pro forma prospectus, information about options to purchase securities of the investment fund, or a subsidiary of the investment fund, that are held or will be held upon completion of the distribution by
(a) all executive officers and past executive officers of the investment fund, as a group, and all directors and past directors of the investment fund who are not also executive officers, as a group, indicating the aggregate number of executive officers and the aggregate number of directors to whom the information applies,
(b) all executive officers and past executive officers of all subsidiaries of the investment fund, as a group, and all directors and past directors of those subsidiaries who are not also executive officers of the subsidiary, as a group, excluding, in each case, individuals referred to in paragraph (a), indicating the aggregate number of executive officers and the aggregate number of directors to whom the information applies,
(c) all other employees and past employees of the investment fund as a group,
(d) all other employees and past employees of subsidiaries of the investment fund as a group,
(e) all consultants of the investment fund as a group, and
(f) any other person or company, other than the underwriter(s), naming each person or company.
(2) Describe any material change to the information required to be included in the prospectus under subsection (1) to the date of the prospectus.
INSTRUCTIONS
(1) Describe the options, warrants, or other similar securities stating the material provisions of each class or type of option, including:
(a) the designation and number of the securities under option;
(b) the purchase price of the securities under option or the formula by which the purchase price will be determined, and the expiration dates of the options;
(c) if reasonably ascertainable, the market value of the securities under option on the date of grant;
(d) if reasonably ascertainable, the market value of the securities under option on the specified date; and
(e) with respect to options referred to in paragraph (1)(f), the particulars of the grant including the consideration for the grant.
(2) For the purposes of paragraph (1)(f), provide the information required for all options except warrants and special warrants.
Item 28: -- Principal Holders of Securities of the Investment Fund and Selling Securityholders
28.1 -- Principal Holders of Securities of the Investment Fund and Selling Securityholders
(1) Under the heading "Principal Holders of Securities of the Investment Fund [and Selling Securityholders]", provide the following information for each principal securityholder of the investment fund , if known or ought to be known by the investment fund or the manager and, if any securities are being distributed for the account of a securityholder, for each selling securityholder, as of a specified date not more than 30 days before the date of the prospectus or pro forma prospectus, as applicable:
(a) the name,
(b) the number or amount of securities owned, controlled or directed of the class being distributed,
(c) the number or amount of securities of the class being distributed for the account of the securityholder,
(d) the number or amount of securities of the investment fund of any class to be owned, controlled or directed after the distribution, and the percentage that number or amount represents of the total outstanding, and
(e) whether the securities referred to in paragraphs (b), (c) or (d) are owned both of record and beneficially, of record only, or beneficially only.
(2) If securities are being distributed in connection with a restructuring transaction, indicate, to the extent known, the holdings of each person or company described in paragraph (1)(a) that will exist after effect has been given to the transaction.
(3) If any of the securities being distributed are being distributed for the account of a securityholder and those securities were purchased by the selling securityholder within the two years preceding the date of the prospectus or pro forma prospectus, as applicable, state the date the selling securityholder acquired the securities and, if the securities were acquired in the 12 months preceding the date of the prospectus or pro forma prospectus, as applicable, the cost to the securityholder in the aggregate and on an average cost-per-security basis.
(4) If, to the knowledge of the investment fund or the underwriter of the securities being distributed, more than 10 percent of any class of voting securities of the investment fund is held, or is to be held, subject to any voting trust or other similar agreement, disclose, to the extent known, the designation of the securities, the number or amount of the securities held or to be held subject to the agreement and the duration of the agreement. State the names and addresses of the voting trustees and outline briefly their voting rights and other powers under the agreement.
(5) If, to the knowledge of the investment fund or the underwriter of the securities being distributed, any principal securityholder or selling securityholder is an associate or affiliate of another person or company named as a principal securityholder, disclose, to the extent known, the material facts of the relationship, including any basis for influence over the investment fund held by the person or company other than the holding of voting securities of the investment fund.
(6) In addition to the above, include in a footnote to the table the required calculation(s) on a fully-diluted basis.
(7) Describe any material change to the information required to be included in the prospectus under subsection (1) to the date of the prospectus.
INSTRUCTION
If a company, partnership, trust or other unincorporated entity is a principal securityholder of an investment fund, disclose, to the extent known, the name of each individual who, through ownership of or control or direction over the securities of the company, trust or other unincorporated entity, or membership in the partnership, as the case may be, is a principal securityholder of that entity.
Item 29: -- Interests of Management and Others in Material Transactions
29.1 -- Interests of Management and Others in Material Transactions
Under the heading "Interests of Management and Others in Material Transactions", describe, and state the approximate amount of, any material interest, direct or indirect, of any of the following persons or companies in any transaction within the three years before the date of the prospectus or pro forma prospectus that has materially affected or is reasonably expected to materially affect the investment fund:
(a) a director or executive officer of the investment fund or the investment fund manager,
(b) a person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10 percent of any class or series of the outstanding voting securities of the investment fund or the investment fund manager, and
(c) an associate or affiliate of any of the persons or companies referred to in paragraphs (a) or (b).
29.2 -- Underwriting Discounts
Disclose any material underwriting discounts or commissions upon the sale of securities by the investment fund if any of the persons or companies listed under section 29.1 were or are to be an underwriter or are associates, affiliates or partners of a person or company that was or is to be an underwriter.
INSTRUCTIONS
(1) The materiality of an interest is to be determined on the basis of the significance of the information to investors in light of all the circumstances of the particular case. The importance of the interest to the person having the interest, the relationship of the parties to the transaction with each other and the amount involved are among the factors to be considered in determining the significance of the information to investors.
(2) Give a brief description of the material transaction. Include the name of each person or company whose interest in any transaction is described and the nature of the relationship to the investment fund.
(3) For any transaction involving the purchase of assets by or sale of assets to the investment fund, state the cost of the assets to the purchaser, and the cost of the assets to the seller if acquired by the seller within three years before the transaction.
(4) This Item does not apply to any interest arising from the ownership of securities of the investment fund if the securityholder receives no extra or special benefit or advantage not shared on an equal basis by all other holders of the same class of securities or all other holders of the same class of securities who are resident in Canada.
(5) No information need be given under this Item for a transaction if
(a) the rates or charges involved in the transaction are fixed by law or determined by competitive bids,
(b) the interest of a specified person or company in the transaction is solely that of a director of another company that is a party to the transaction,
(c) the transaction involves services as a bank or other depository of funds, a transfer agent, registrar, trustee under a trust indenture or other similar services, or
(d) the transaction does not involve remuneration for services and the interest of the specified person or company arose from the beneficial ownership, direct or indirect, of less than ten percent of any class of equity securities of another company that is party to the transaction and the transaction is in the ordinary course of business of the investment fund or its subsidiaries.
(6) Describe all transactions not excluded above that involve remuneration (including an issuance of securities), directly or indirectly, to any of the specified persons or companies for services in any capacity unless the interest of the person or company arises solely from the beneficial ownership, direct or indirect, of less than ten percent of any class of equity securities of another company furnishing the services to the investment fund.
Item 30: -- Proxy Voting Disclosure
30.1 -- Proxy Voting Disclosure for Portfolio Securities Held
Under the heading "Proxy Voting Disclosure for Portfolio Securities Held", include the disclosure required by subsection 10.2(3) of NI 81-106.
Item 31: -- Material Contracts
31.1 -- Material Contracts
Under the heading "Material Contracts", list and provide particulars of
(a) the articles of incorporation, the declaration of trust or trust agreement of the investment fund or any other constating document, if any,
(b) any agreement of the investment fund or trustee with the manager of the investment fund,
(c) any agreement of the investment fund, the manager or trustee with the portfolio adviser of the investment fund,
(d) any agreement of the investment fund, the manager or trustee with the custodian of the investment fund,
(e) any agreement of the investment fund, the manager or trustee with the underwriters or agents of the investment fund,
(f) any swap or forward agreement of the investment fund, the manager or trustee with a counterparty that is material to the investment fund fulfilling its investment objectives,
(g) any agreement of the investment fund, the manager or trustee with the principal distributor of the investment fund, and
(h) any other contract or agreement that can reasonably be regarded as material to an investor in the securities of the investment fund.
INSTRUCTIONS
(1) Set out a complete list of all contracts for which particulars must be given under this section, indicating those that are disclosed elsewhere in the prospectus. Particulars need only be provided for those contracts that do not have the particulars given elsewhere in the prospectus.
(2) Particulars of contracts must include the dates of, parties to, consideration provided for in, termination provisions, general nature and key terms of, the contracts.
Item 32: -- Legal and Administrative Proceedings
32.1 -- Legal and Administrative Proceedings
Under the heading "Legal and Administrative Proceedings", describe briefly any ongoing legal and administrative proceedings material to the investment fund, to which the investment fund, its manager or principal distributor is a party.
32.2 -- Particulars of the Proceedings
(1) For all matters disclosed under section 32.1, disclose
(a) the name of the court or agency having jurisdiction,
(b) the date on which the proceeding was instituted,
(c) the principal parties to the proceeding,
(d) the nature of the proceeding and, if applicable, the amount claimed, and
(e) whether the proceeding is being contested and the present status of the proceeding.
(2) Provide similar disclosure about any proceedings known to be contemplated.
32.3 -- Penalties and Sanctions
Describe the penalties or sanctions imposed and the grounds on which they were imposed or the terms of any settlement agreement and the circumstances that gave rise to the settlement agreement, if, within the 10 years before the date of the prospectus or pro forma prospectus, the manager of the investment fund, a director or executive officer of the investment fund or a partner, director or executive officer of the manager of the investment fund has
(a) been subject to any penalties or sanctions imposed by a court or a securities regulatory authority relating to Canadian securities legislation, promotion or management of an investment fund, theft or fraud or has entered into a settlement agreement before a court or with a regulatory body in relation to any of these matters, or
(b) been subject to any other penalties or sanctions imposed by a court or regulatory body or has entered into any other settlement agreement before a court or with a regulatory body that would likely be considered important to a reasonable investor in determining whether to purchase securities of the investment fund.
Item 33: -- Experts
33.1 -- Names of Experts
Under the heading "Experts", name each person or company
(a) who is named as having prepared or certified a report, valuation, statement or opinion in the prospectus or an amendment to the prospectus, and
(b) whose profession or business gives authority to the report, valuation, statement or opinion made by the person or company.
33.2 -- Interests of Experts
(1) Disclose all registered or beneficial interests, direct or indirect, in any securities or other property of the investment fund or of an associate or affiliate of the investment fund received or to be received by a person or company whose profession or business gives authority to a statement made by the person or company and who is named as having prepared or certified a part of the prospectus or prepared or certified a report or valuation described or included in the prospectus.
(2) For the purpose of subsection (1), if the ownership is less than one percent, a general statement to that effect is sufficient.
(3) If a person, or a director, officer or employee of a person or company referred to in subsection (1) is or is expected to be elected, appointed or employed as a director, officer or employee of the investment fund or of any associate or affiliate of the investment fund, disclose the fact or expectation.
(4) Despite subsection (1), an auditor who is independent in accordance with the auditor's rules of professional conduct in a jurisdiction of Canada or has performed an audit in accordance with US GAAS is not required to provide the disclosure in subsection (1) if there is disclosure that the auditor is independent in accordance with the auditor's rules of professional conduct in a jurisdiction of Canada or that the auditor has complied with the SEC's rules on auditor independence.
INSTRUCTIONS
(1) Section 33.2 does not apply to the investment fund's predecessor auditors, if any, for those periods when they were not the investment fund's auditor.
(2) Section 33.2 does not apply to registered or beneficial interests, direct or indirect, held through mutual funds.
Item 34: -- Exemptions and Approvals
34.1 -- Exemptions and Approvals
Under the heading "Exemptions and Approvals", describe all exemptions from or approvals under securities legislation obtained by the investment fund or the manager of the investment fund that continue to be relied upon by the investment fund or the manager, including all exemptions to be evidenced by the issuance of a receipt for the prospectus pursuant to section 19.3 of the Instrument.
Item 35: -- Other Material Facts
35.1 -- Other Material Facts
Under the heading "Other Material Facts", using sub-headings as appropriate, give particulars of any material facts about the securities being distributed that are not disclosed under any other section and are necessary in order for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities to be distributed.
Item 36: -- Purchasers' Statutory Rights of Withdrawal and Rescission
36.1 -- General
For investment funds other than mutual funds, under the heading "Purchasers' Statutory Rights of Withdrawal and Rescission" include a statement in substantially the following form, with bracketed information completed:
Securities legislation in [certain of the provinces [and territories] of Canada/the Province of [insert name of local jurisdiction, if applicable]] provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. [In several of the provinces/provinces and territories], [T/t]he securities legislation further provides a purchaser with remedies for rescission [or [, in some jurisdictions,] revisions of the price or damages] if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission [, revisions of the price or damages] are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province [or territory]. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province [or territory] for the particulars of these rights or consult with a legal adviser.
36.2 -- Mutual Funds
If the investment fund is a mutual fund, under the heading "Purchasers' Statutory Rights of Withdrawal and Rescission" include a statement in substantially the following form:
Securities legislation in [certain of the provinces [and territories] of Canada/the Province of [insert name of local jurisdiction, if applicable]] provides purchasers with the right to withdraw from an agreement to purchase mutual fund securities within two business days after receipt of a prospectus and any amendment or within 48 hours after the receipt of a confirmation of a purchase of such securities. If the agreement is to purchase such securities under a contractual plan, the time period during which withdrawal may be made may be longer. [In several of the provinces/provinces and territories], [T/t]he securities legislation further provides a purchaser with remedies for rescission [or [, in some jurisdictions,] revisions of the price or damages] if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission [, revisions of the price or damages] are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province [or territory]. The purchaser should refer to the applicable provisions of the securities legislation of the province [or territory] for the particulars of these rights or should consult with a legal adviser.
36.3 -- Non-fixed Price Offerings
In the case of a non-fixed price offering, if applicable in the jurisdiction in which the prospectus is filed, replace the second sentence in the disclosure in section 36.1 with a statement in substantially the following form:
This right may only be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment, irrespective of the determination at a later date of the purchase price of the securities distributed.
Item 37: -- Documents Incorporated by Reference
37.1 -- Mandatory Incorporation by Reference
If the investment fund is in continuous distribution, other than a scholarship plan, incorporate by reference the following documents in the prospectus, by means of the following statement in substantially the following words under the heading "Documents Incorporated by Reference":
Additional information about the Fund is available in the following documents:
1. The most recently filed comparative annual financial statements of the investment fund, together with the accompanying report of the auditor.
2. Any interim financial statements of the investment fund filed after those annual financial statements.
3. The most recently filed annual management report of fund performance of the investment fund.
4. Any interim management report of fund performance of the investment fund filed after that annual management report of fund performance.
These documents are incorporated by reference into the prospectus, which means that they legally form part of this document just as if they were printed as part of this document. You can get a copy of these documents, at your request, and at no cost, by calling [toll-free/collect] [insert the toll-free telephone number or telephone number where collect calls are accepted] or from your dealer.
[If applicable] These documents are available on the [investment fund's/investment fund family's] Internet site at [insert investment fund's Internet site address], or by contacting the [investment fund/investment fund family] at [insert investment fund's /investment fund family's email address].
These documents and other information about the Fund are available on the Internet at www.sedar.com.
37.2 -- Mandatory Incorporation by Reference of Future Documents
If the investment fund is in continuous distribution, other than a scholarship plan, state that any documents, of the type described in section 37.1, if filed by the investment fund after the date of the prospectus and before the termination of the distribution, are deemed to be incorporated by reference in the prospectus.
Item 38: -- Financial Disclosure
38.1 -- Financial Statements
(1) Unless incorporated by reference under Item 37, include in the prospectus the comparative annual financial statements and the auditor's report prepared in accordance with NI 81-106 for the investment fund's most recently completed financial year.
(2) If an investment fund's most recent financial year ended within 90 days of the date of the prospectus referred to in subsection (1), the investment fund may treat the previous year as the most recently completed financial year under subsection (1).
(3) If the investment fund has not completed its first financial year, the fund must include in the prospectus audited financial statements and the auditor's report prepared in accordance with NI 81-106 for the period from the date of the fund's formation to a date not more than 90 days before the date of the prospectus and as at a date not more than 90 days before the date of the prospectus, as applicable.
(4) Despite subsections (1) and (3), if the investment fund is a newly established fund, include in the prospectus the opening balance sheet of the investment fund, accompanied by the auditor's report prepared in accordance with NI 81-106.
38.2 -- Interim Financial Statements
Unless incorporated by reference under Item 37, include in the prospectus financial statements for the investment fund prepared in accordance with NI 81-106 for the interim period that began immediately after the financial year to which the annual financial statements required to be included in the prospectus under section 38.1 relate, if the prospectus is filed 60 days or more after the end of that interim period.
38.3 -- Management Reports of Fund Performance
Unless incorporated by reference under Item 37, include in the prospectus the most recently filed interim management report of fund performance, if filed after the most recently filed annual management report of fund performance and include the most recently filed annual management report of fund performance.
Item 39: -- Certificates
39.1 -- Certificate of the Investment Fund
Include a certificate of the investment fund in the following form:
This prospectus [, together with the documents incorporated herein by reference,] constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of [insert the jurisdictions in which qualified].
39.2 -- Certificate of the Manager
Include a certificate of the manager of the investment fund in the same form as the certificate of the investment fund.
39.3 -- Certificate of the Underwriter
Where a person or company is required to provide a certificate in the underwriter certificate form, the certificate must state:
To the best of our knowledge, information and belief, this prospectus [,together with the documents incorporated herein by reference,] constitutes full, true and plain disclosure of all material facts relating to the securities offered by this prospectus as required by the securities legislation of [insert the jurisdictions in which qualified].
39.4 -- Certificate of the Promoter
If there is a promoter of the investment fund or a subsidiary of the investment fund, include a certificate in the same form as the certificate of the investment fund.
39.4.1 -- Certificate of the Principal Distributor
If there is a principal distributor of the investment fund, include a certificate in the same form as the certificate of the investment fund.
39.5 -- Amendments
(1) For an amendment to a prospectus that does not restate the prospectus, change "prospectus" to "prospectus dated [insert date] as amended by this amendment" wherever it appears in the statements in sections 39.1 to 39.4.
(2) For an amended and restated prospectus, change "prospectus" to "amended and restated prospectus" wherever it appears in the statements in sections 39.1 to 39.4.
39.6 -- Non-offering Prospectus
For a non-offering prospectus, change "securities offered by this prospectus" to "securities previously issued by the investment fund" wherever it appears in the statements in sections 39.1 to 39.4.
Schedule B-4 -- Blackline Showing Proposed Changes to Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements
APPENDIX B
SCHEDULE B-4
COMPANION POLICY
TO NATIONAL INSTRUMENT 41-101
GENERAL PROSPECTUS REQUIREMENTS
PART 1: Introduction, Interrelationship with Securities Legislation, and Definitions
Introduction and purpose
1.1 This Policy describes how the provincial and territorial securities regulatory authorities (or "we") intend to interpret or apply the provisions of the Instrument. Some terms used in this Policy are defined or interpreted in the Instrument, NI 14-101, or a definition instrument in force in the jurisdiction.
Interrelationship with other securities legislation
This Policy
1.2(1) The Instrument applies to any prospectus filed under securities legislation and any distribution of securities subject to the prospectus requirement, other than a prospectus filed under NI 81-101 or a distribution of securities under such a prospectus, or unless otherwise stated. Parts of this Policy may not apply to all issuers.
Local securities legislation
(2) The Instrument, while being the primary instrument regulating prospectus distributions, is not exhaustive. Issuers should refer to the implementing law of the jurisdictions and other securities legislation of the local jurisdiction for additional requirements that may apply to the issuer's prospectus distribution.
Continuous disclosure (NI 51-102 and NI 81-106)
(3) NI 51-102, NI 81-106 and other securities legislation imposes ongoing disclosure and filing obligations on reporting issuers. The regulator may consider issues raised in the context of a continuous disclosure review when determining whether it is in the public interest to refuse to issue a receipt for a prospectus. Consequently, unresolved issues may delay or prevent the issuance of a receipt.
Reporting issuers are generally required to file periodic and timely disclosure documents under applicable securities legislation. Reporting issuers may also be required to file periodic and timely disclosure documents pursuant to an order issued by the securities regulatory authority or an undertaking to the securities regulatory authority. Failure to comply with any requirement to file periodic and timely disclosure documents could cause the regulator to refuse a receipt for the prospectus.
Short form prospectus distributions (NI 44-101)
(4) As set out in section 2.1 of NI 44-101, an issuer must not file a prospectus in the form of Form 44-101F1 unless the issuer is qualified under any of sections 2.2 through 2.6 of NI 44-101 to file a short form prospectus. An issuer that is qualified to file a short form prospectus must satisfy the requirements of NI 44-101, including the filing requirements of Part 4 of NI 44-101, as well as any applicable requirements of the Instrument. Therefore, issuers qualified to file a short form prospectus and selling securityholders of those issuers that wish to distribute securities under the short form system should refer to the Instrument, this Policy, and NI 44-101 and its companion policy.
Shelf distributions (NI 44-102)
(5) Issuers qualified under NI 44-101 to file a prospectus in the form of a short form prospectus and their securityholders can distribute securities under a short form prospectus using the shelf distribution procedures under NI 44-102. The
Companion Policycompanion policy to NI 44-102 explains that the distribution of securities under the shelf system is governed by the requirements and procedures of NI 44-101 and securities legislation, except as supplemented or varied by NI 44-102. Therefore, issuers qualified to file a short form prospectus and selling securityholders of those issuers that wish to distribute securities under the shelf system should refer to the Instrument, this Policy, NI 44-101 and its companion policy, and NI 44-102 and its companion policy.PREP procedures (NI 44-103)
(6) NI 44-103 contains the post-receipt pricing (PREP) procedures. All issuers and selling securityholders can use the PREP procedures of NI 44-103 to distribute securities, other than rights under a rights offering. Issuers and selling securityholders that wish to distribute securities using the PREP procedures as provided for in NI 44-103 should refer to the Instrument, this Policy, and NI 44-103 and its companion policy. Issuers and selling securityholders that wish to distribute securities under a short form prospectus using the PREP procedures should also refer to NI 44-101 and its companion policy for any additional requirements.
Process for prospectus reviews in multiple jurisdictions (NP 11-202)
(7) National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions ("NP 11-202") describes the process for filing and review of prospectuses, including investment fund and shelf prospectuses, amendments to prospectuses and related materials in multiple jurisdictions. NP 11-202 represents the means by which an issuer can enjoy the benefits of co-ordinated review by the securities regulatory authorities in the various jurisdictions in which the issuer has filed a prospectus. Under NP 11-202, one securities regulatory authority acts as the principal regulator for all materials relating to a filer.
Definitions
Asset-backed security
1.3(1) The definition of "asset-backed security" is the same definition used in NI 51-102.
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" assets that 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 time period. These would include, among other things, notes, leases, instalment contracts and interest rate swaps, as well as other financial assets, such as loans, credit card receivables, accounts receivable and franchise or servicing arrangements. The reference to "and any rights or other assets..." in the definition is sufficiently broad to include "ancillary" or "incidental" assets, such as guarantees, letters of credit, financial insurance or other instruments provided as a credit enhancement for 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 be reinvested in short-term debt obligations.
The term, a "discrete pool" of assets, can refer to a single group of assets as a "pool" or to multiple groups of assets as a "pool". For example, a group or pool of credit card receivables and a pool of mortgage receivables can, together, constitute a "discrete pool" of assets. 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 the percentage 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 to as an "asset concentration test").
Business day
(2) Section 1.1 of the Instrument defines business day as any day other than a Saturday, Sunday or a statutory holiday. In some cases, a statutory holiday may only be a statutory holiday in one jurisdiction. The definition of business day should be applied in each local jurisdiction in which a prospectus is being filed. For example, subsection 2.3(2) of the Instrument states that an issuer must not file a prospectus more than three business days after the date of the prospectus. A prospectus is dated Day 1. Day 2 is a statutory holiday in Québec but not in Alberta. If the prospectus is filed in both Alberta and Québec, it must be filed no later than Day 4, despite the fact that Day 2 was not a business day in Québec. If the prospectus is filed only in Québec, it could be filed on Day 5.
Accounting terms
(3) The Instrument uses accounting terms that are defined or used in Canadian GAAP applicable to publicly accountable enterprises. In certain cases, some of those terms are defined differently in securities legislation. In deciding which meaning applies, you should consider that NI 14-101 provides that a term used in the Instrument and defined in the securities statute of a local jurisdiction has the meaning given to it in the statute unless: (a) the definition in that statute is restricted to a specific portion of the statute that does not govern prospectuses; or (b) the context otherwise requires.
Acceptable accounting principles other than Canadian GAAP applicable to publicly accountable enterprises
(4) If an issuer is permitted under NI 52-107 to file financial statements in accordance with acceptable accounting principles other than Canadian GAAP applicable to publicly accountable enterprises, then the issuer may interpret any reference in the Instrument to a term or provision defined or used in Canadian GAAP applicable to publicly accountable enterprises as a reference to the corresponding term or provision in the other acceptable accounting principles.
Financial statements prepared in accordance with different accounting principles
(5) Issuers intending to include financial statements that are prepared in accordance with different accounting principles should consider the guidance in section 2.8 of Companion Policy 52-107CP Acceptable Accounting Principles and Auditing Standards,
Rate-regulated activities
(6) If a qualifying entity is relying on the exemption in paragraph 5.4(1)(a) of NI 52-107, then the qualifying entity may interpret any reference in the Instrument to a term or provision defined or used in Canadian GAAP applicable to publicly accountable enterprises as a reference to the corresponding term or provision in Part V of the Handbook.
PART 2: General Requirements
Experience of officers and directors
2.1 Securities legislation requires that a securities regulatory authority or regulator refuse to issue a receipt for a prospectus if it appears that the proceeds received from the sale of securities to be paid to the treasury of the issuer, together with other resources of the issuer, will be insufficient to accomplish the purposes stated in the prospectus. In addition to financial resources, resources include people. If a sufficient number of the directors and officers of the issuer do not have relevant knowledge and experience, the securities regulatory authority or regulator may conclude that the human and other resources are insufficient to accomplish these purposes. If the requisite knowledge and experience are not possessed by the directors and officers, a securities regulatory authority or regulator may be satisfied that the human and other resources are sufficient if it is shown that the issuer has contracted to obtain the knowledge and experience from others.
Role of underwriter
2.2 The due diligence investigation undertaken by an underwriter in relation to the business of the issuer often results in enhanced quality of disclosure in the prospectus. In addition, an underwriter typically provides valuable advice regarding the pricing and marketing of securities. For these reasons, we strongly encourage underwriter participation in prospectus offerings, particularly where the offering is an initial public offering.
Minimum offering amount
2.2.1 If the distribution of securities is being done on a best efforts basis, an issuer will need to determine if a minimum offering is required for the issuer to achieve one or more of the stated purposes of the offering, as expressed in the "Use of Proceeds" section of the prospectus. If this is the case, the issuer will need to provide a minimum and maximum offering amount. Otherwise, the issuer is required to provide the cautionary statement prescribed in paragraph 1.4(3)(b) of Form 41-101F1.
Although an issuer may determine that a minimum offering amount is not necessary for the prospectus offering, a regulator may reasonably infer that a minimum offering amount is appropriate in certain circumstances. This could occur, for example, if we have concerns that a minimum amount of proceeds must be raised in order for the issuer to achieve its stated objectives. Also, if we have concerns about an issuer continuing as a going concern, we may take the view that the issuer cannot achieve its stated objectives unless a minimum offering amount is raised. The imposition of a minimum offering amount by a regulator derives from the general responsibility of a regulator under securities laws to refuse a receipt for a prospectus if it appears that the aggregate of the proceeds from the sale of the securities under the prospectus and other resources of the issuer are insufficient to accomplish the purposes stated in the prospectus, or if it would not be in the public interest to issue a receipt. A benefit of the imposition of a minimum offering amount is that if the issuer fails to raise the minimum amount, investors benefit from an investor protection mechanism that facilitates the return of their subscription funds to them, if previously deposited.
Indirect distributions
2.3 Securities legislation prohibits a person from distributing a security unless a prospectus is filed and receipted or the distribution is exempt from the prospectus requirement. Securities legislation also prohibits a person from trading in a security where the trade would be a distribution of such security, unless a prospectus is filed and receipted or the distribution is exempt from the prospectus requirement. Securities legislation defines distribution as including a trade in a security that has not been previously issued, a trade out of a control block and any transaction or series of transactions involving a purchase and sale of or a repurchase and resale in the course of or incidental to a distribution. In Québec, the definition of "distribution" is broad enough to include these transactions.
Occasionally, a prospectus is filed to qualify securities for sale to one purchaser or to a small group of related purchasers where it appears that the purchaser does not have a bona fide intention to invest in the securities but rather is acquiring the securities with a view to immediately reselling them in the secondary market. This can be the case where the purchaser is a lender to the issuer or where the securities are issued as consideration for the acquisition of assets.
Where the offering and subsequent resale are in substance a single distribution, in order to comply with securities legislation, the distribution to the public purchasers should be made by way of prospectus in order that the subsequent purchasers have the benefit of prospectus disclosure and all the rights and remedies provided to prospectus purchasers under securities legislation.
Considerations relevant to determining whether a distribution under a prospectus is only one transaction in a series of transactions in the course of or incidental to the ultimate distribution include:
• the number of persons or companies who are likely to purchase securities in each transaction;
• whether the purchasers' traditional business is that of financing as opposed to investing;
• whether a purchaser is likely to acquire more of a specified class of securities of the issuer than it is legally entitled to, or practically wishes to, hold (e.g., more than 10% of a class of equity securities where the purchaser wishes to avoid becoming an insider or 20% of a class of equity securities where the purchaser wishes to avoid becoming a control person);
• the type of security distributed (e.g., loan repayment rights) and whether or not the security is convertible into publicly traded securities of the issuer;
• whether the purchase price of the securities is set at a substantial discount to their market price; and
• whether the purchaser is committed to hold the securities it acquires for any specified time period.
Over-allocation
2.4 Underwriters of a distribution may over-allocate a distribution in order to hold a short position in the securities following closing. This over-allocation position allows the underwriters to engage in limited market stabilization to compensate for the increased liquidity in the market following the distribution. If the market price of the securities decreases following the closing of the distribution, the short position created by the over-allocation position may be filled through purchases in the market. This creates upward pressure on the price of the securities. If the market price of the securities increases following the closing of the distribution, the over-allocation position may be filled through the exercise of an over-allotment option (at the issue offering price). Underwriters would not generally engage in market stabilization activities without the protection provided by an over-allotment option.
Over-allotment options are permitted solely to facilitate the over-allocation of the distribution and consequent market stabilization. Accordingly, an over-allotment option may only be exercised for the purpose of filling the underwriters' over-allocation position. The exercise of an over-allotment option for any other purpose would raise public policy concerns.
To form part of the over-allocation position, securities must be sold to bona fide purchasers as of the closing of the offering. Securities held by an underwriter or in proprietary accounts of an underwriter for sale at a future date do not form part of the over-allocation position. Further, as discussed below, section 11.2 of the Instrument restricts the distribution of securities under a prospectus to an underwriter. Since section 11.1 of the Instrument requires that all securities that are sold to create the over-allocation position be distributed under the prospectus, securities cannot be sold to an underwriter to increase the size of the over-allocation position.
Distribution of securities under a prospectus to an underwriter
2.5 Section 11.2 of the Instrument restricts the distribution of securities under a prospectus to a person acting as an underwriter. Issuers should determine the 10% limit in that section as if all convertible or exchangeable securities offered under the prospectus were exercised for the underlying securities.
Certificates
Public interest
2.6(1) Securities legislation provides the regulator with discretion to refuse a receipt for a prospectus where it is not in the public interest to issue the receipt. Securities legislation imposes statutory liability in connection with prospectus disclosure to provide investors with a remedy if a prospectus does not contain full, true and plain disclosure of all material facts relating to the securities being distributed and to protect the integrity of the Canadian public markets. Where an offering is structured in a manner that circumvents the objects and purposes of securities legislation and results in a person or company accessing the Canadian public markets, who is not clearly accountable for the information in the prospectus, the regulator may have significant public interest concerns. Such public interest concerns will be addressed on a case by case basis as part of the analysis of whether a receipt should be issued for a final prospectus. There may be circumstances in which it will be appropriate for the regulator to request a person or company, that is not otherwise required to do so, to certify a prospectus as a means of resolving such public interest concerns. For example, where it appears that a person or company is organizing its business and affairs to avoid a requirement to sign a prospectus certificate or to avoid prospectus liability, a regulator may conclude that there is sufficient public interest concerns that the regulator should require that person or company to certify a prospectus.
Discretion of the regulator to request certificates
(2) Subsection 5.15(1) of the Instrument provides the regulator in each jurisdiction except Ontario with the discretion to require additional certificates. The exercise of this discretion will generally be informed by pubic interest concerns, including those discussed in subsection (1) above.
Signatories
(3) Part 5 of the Instrument contains requirements regarding who must sign prospectus certificates. Certificates signed on behalf of the identified signatories by an agent or attorney will generally not be acceptable. For example, an income trust issuer with an active board of trustees would be required to arrange for the signature of two trustees on behalf of the board, rather than the signature of an attorney or agent.
Trustee certificates
(4) Subsection 5.5(4) of the Instrument provides an exception to the trust certificate requirement where the trustees of the issuer do not perform functions similar to those of corporate directors. In this type of situation, a prospectus certificate is instead required from two individuals who do perform those functions for the issuer on behalf of all such individuals. In a situation where a regulated trust company is a trustee but does not perform functions similar to those of corporate directors, the regulated trust company and its officers and directors will not be required to sign a prospectus certificate if two other individuals who perform those functions do provide a certificate.
Chief executive officer and chief financial officer
(5) The Instrument and other securities legislation require that prospectus certificates of certain persons or companies are to be signed by the chief executive officer and chief financial officer of such persons or companies. The terms chief executive officer and chief financial officer should be read to include the individuals who have the responsibilities normally associated with these positions or act in a similar capacity. This determination should be made irrespective of an individual's corporate title or whether that individual is employed directly or acts pursuant to an agreement or understanding.
Selling securityholder certificates
(6) Subsection 5.13(1) of the Instrument provides the regulator in each jurisdiction except Ontario with the discretion to require selling securityholders to sign a prospectus certificate. Under securities legislation, selling securityholders are liable for misrepresentations in a prospectus whether or not they sign a prospectus certificate. There are circumstances, however, where the regulator may determine that it is in the public interest to require the selling securityholder to affirmatively certify the prospectus. Generally, the regulator would only exercise this discretion where the securities being distributed by the selling securityholder represent a substantial portion of the securities being distributed under the prospectus.
Promoters of issuers of asset-backed securities
2.7 Securities legislation in some jurisdictions in Canada define "promoter" and require, in certain circumstances, a promoter of an issuer to assume statutory liability for prospectus disclosure. Asset-backed securities are commonly issued by a "special purpose" entity, established for the sole purpose of facilitating one or more asset-backed offerings. The securities regulatory authorities are of the opinion that special purpose issuers of asset-backed securities will have a promoter because someone will typically have taken the initiative in founding, organizing or substantially reorganizing the business of the issuer. We interpret the business of such issuers to include the business of issuing asset-backed securities and entering into the supporting contractual 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"), we will usually consider an entity transferring or originating a significant portion of such assets, an entity initially agreeing to provide on-going collection, administrative or similar services to the issuer, and the entity for whose primary economic benefit the asset-backed program is established, to be a promoter of the issuer if it took the initiative in founding, organizing or substantially reorganizing the business of the issuer. Persons or companies contracting with the issuer to provide credit enhancements, liquidity facilities or hedging arrangements or to be a replacement servicer of assets, and investors who acquire subordinated investments issued by the issuer, will not typically be promoters of the issuer solely 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"), we will usually consider 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, to be a promoter of the issuer if it took the initiative in founding, organizing or substantially reorganizing the business of the issuer. Individual sellers 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 persons or companies from utilizing the program. As with single-seller programs, other persons or companies contracting with the issuer to provide services or other benefits to the issuer of the asset-backed securities will not typically be promoters of the issuer solely by virtue of such involvement.
Where an entity is determined to be a promoter of an issuer at the time of the issuer's initial public offering, the entity continues to be a promoter of the issuer, in the case of subsequent offerings by the issuer, if the entity's relationship to the issuer and involvement in the offerings remains substantially the same. Accordingly, where an entity establishes a special purpose issuer to act as a dedicated securitization vehicle, and the prospectus filed in connection with a subsequent offering continues to include disclosure relating to the entity's securitization program, we will expect the entity to certify the prospectus as a promoter.
While we have included this discussion of promoters as guidance to issuers of asset-backed securities, the question of whether a particular person or company is a "promoter" of an issuer is ultimately a question of fact to be determined in light of the particular circumstances.
Special warrants
Distributions to resale market
2.8(1) In certain special warrant transactions, the dealer involved in the private placement may itself have purchased special warrants from the issuer on an exempt basis, despite not disclosing any commitment to do so.
Securities legislation generally requires that a dealer not acting as agent of the purchaser who receives an order or subscription for a security offered in a distribution to which a prospectus requirement applies to deliver to the purchaser the latest prospectus. Where a dealer acquires special warrants, with a view to exercising them and reselling the underlying securities, such a resale would be a distribution that must be made by way of a prospectus or pursuant to an exemption from the prospectus requirements.
It is a requirement, therefore, that any dealer who has acquired special warrants with a view to their distribution or the distribution of the underlying securities deliver a prospectus during the period of distribution to its purchasers (where the sale to such purchasers is made otherwise than pursuant to a prospectus exemption) in order that such purchasers have the benefit of all rights and remedies provided to prospectus purchasers under securities legislation. In Québec, prospectus purchasers are notably conferred with a contractual right of rescission under s.1443 of the Québec Civil Code.
In connection with its prospectus review procedure, the regulator may request information from the issuer of all beneficial purchasers of special warrants. The regulator will generally keep this information confidential.
Underwriters' certificate and due diligence
(2) While the special warrant transaction is, in form, two separate distributions, the first an exempt private placement distribution and the second a conversion of the warrants under a prospectus, such a transaction is, in substance, a single distribution under a prospectus of the underlying securities to the warrant investors.
The registrants involved in placing the special warrants are, therefore, also involved in the prospectus distribution and such registrants in a contractual relationship with the issuer must include their certificate in the prospectus under subsection 5.9(1) of the Instrument or other securities legislation. We note that the resulting incentive to such registrants to participate in the due diligence investigation of the issuer is also beneficial to the secondary market.
The obligation to deliver an underwriter's certificate as described in this Policy does not extend the scope of distributions any registrant is authorized to make under applicable securities legislation.
Contractual right of rescission
(3) Under section 2.4 of the Instrument, an issuer must not file a prospectus or an amendment to a prospectus to qualify the distribution of securities issued on the exercise of special warrants or other securities acquired on a prospectus-exempt basis, unless the issuer has provided holders of the special warrants or other securities with a contractual right of rescission. We would not generally consider the disclosure of the contractual right of rescission in the prospectus as satisfying this condition unless there is a prior contract between the issuer and the holder of the special warrant or other security under which the issuer granted this right to the holder.
Offerings of convertible
or, exchangeableor exercisable securities2.9 Investor protection concerns may arise where the distribution of a convertible
or, exchangeableor exercisable security is qualified under a prospectus and the subsequent conversion, exchange or exercise ofthe convertible or exchangeablethis security is made on a prospectus-exempt basis.Examples of such offerings include issuing instalment receipts, subscription receipts and stand-alone warrants or long-term warrants. Reference to stand-alone warrants or long-term warrants is intended to refer to warrants and other forms of exchangeable or convertible securities that are offered under a prospectus as a separate and independent form of investment. This would not apply to an offering of warrants where the warrants may reasonably be regarded as incidental to the offering as a whole.Specifically, this concern arises when the subsequent conversion, exchange or exercise occurs within a short period of time -- generally 180 days or less -- following the purchase of the original security.The concerns arise because the conversion, exchange or exercise feature of the security may operate to limit or "strip away" the remedies available to an investor for a misrepresentation in a prospectus.
The investor protection concern arises because the conversion or exchange feature of the security may operate to limit the remedies available to an investor for incomplete or inaccurate disclosure in a prospectus. For example, an investor may pay part of the purchase price at the time of the purchase of the convertible security and part of the purchase price at the time of the conversion. To the extent that an investor makes a further "investment decision" at the time of conversion, the investor should continue to enjoy the benefits of statutory rights or comparable contractual rights in relation to this further investment. In such circumstances, issuers should ensure that:
(a) the distribution of both the convertible or exchangeable securities and the underlying securities will be qualified by the prospectus; orIn particular, we are concerned about offerings of subscription receipts, or other types of securities which may be convertible, exchangeable or exercisable within a short period of time following the purchase of the original security (generally 180 days or less), where the investor, when purchasing the subscription receipt, or other similar type of security, is in effect also making an investment decision in respect of the underlying security.
Public interest concerns arise if the subsequent distribution of the underlying security is not part of the initial distribution and is not qualified by the prospectus. These concerns arise because when the security is converted, exchanged or exercised prior to the end of the statutory period for a right of action for rescission under securities legislation (which in many jurisdictions is 180 days from the date of purchase of the original security), the purchaser of a convertible, exchangeable or exercisable security does not retain the same rights to rescission because the convertible, exchangeable or exercisable security that was issued under the prospectus has been replaced by the underlying security. In these circumstances, the original purchaser should retain the benefit of any remaining statutory right of rescission that would otherwise apply in respect of the convertible, exchangeable or exercisable security. As such, the issuer should provide the original purchaser of the convertible, exchangeable or exercisable security with a contractual right of rescission in respect of the conversion, exchange or exercise transaction.
In some cases, the subsequent distribution of the underlying security may be part of the initial distribution as it is part of a series of transactions involving further purchases and sales in the course of or incidental to a distribution. If this is the case the issuer should consider whether its prospectus should qualify the distribution of both the subscription receipt, or other similar type of security, as well as the underlying security.
(b) the statutory rights that an investor would have if he or she purchased the underlying security offered under a prospectus are otherwise provided to the investor by way of a contractual right of action.The guidance above would not apply to an offering of warrants where the warrants may reasonably be regarded as incidental to the offering as a whole. For example, in the case of a typical special warrant offering, the special warrant converts into i) a common share, and ii) a common share purchase warrant (or a fraction thereof). In such cases, we have generally accepted that the common share purchase warrant component merely represents a "sweetener", and that the primary investment decision relates to the common share underlying the special warrant. This would also generally be the case with a unit offering where the unit consists of a common share, and a common share purchase warrant. Therefore, the regulator would not generally request that the issuer provide the original purchaser with a contractual right of rescission in respect of the sweetener warrants.
Lapse date
2.10 An amendment to a prospectus, even if it amends and restates the prospectus, does not change the lapse date under section 17.2 of the Instrument or other securities legislation.
PART 3: Filing and Receipting Requirements
Extension of 90-day period for issuance of final receipt
3.1 The effect of subsection 2.3(1) of the Instrument is to ensure that issues are not being marketed by means of preliminary prospectuses containing outdated information.
Confidential material change reports
3.2 An issuer cannot meet the standard of "full, true and plain" disclosure, while a material change report has been filed but remains undisclosed publicly. Accordingly, an issuer who has filed a confidential material change report may not file a prospectus until the material change that is the subject of the report is generally disclosed or the decision to implement the change has been rejected and the issuer so notified the regulator of each jurisdiction where the confidential material change report was filed, and an issuer may not file a confidential material change report during a distribution and continue with the distribution. If circumstances arise that cause an issuer to file a confidential material change report during the distribution period of securities under a prospectus, the issuer should cease all activities related to the distribution until
(a) the material change is generally disclosed and an amendment to the prospectus 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 material change report was filed.
Supporting documents
3.3 Material that is filed in a jurisdiction will be made available for public inspection in that jurisdiction, subject to the provisions of securities legislation in the local jurisdiction regarding confidentiality of filed material. Material that is delivered to a regulator, but not filed, is not generally required under securities legislation to be made available for public inspection.
Consents of lawyers
3.4 The names of lawyers or law firms frequently appear in prospectuses in two ways. First, the underwriters, the issuer and selling securityholders may name the lawyers upon whose advice they are relying. Second, the opinions of counsel that the securities may be eligible for investment under certain statutes may be expressed or opinions on the tax consequences of the investment may be given.
In the first case, we are of the view that the lawyer is not, in the words of subsection 10.1(
11.1) of the Instrument, named as having prepared or certified a part of the prospectus and is not named as having prepared or certified a report, valuation, statement or opinion referred to in the prospectus. Accordingly, this subsection does not require the written consent of the lawyer. In the second case, because the opinions or similar reports are prepared for the purpose of inclusion in the prospectus, we are of the view that this subsection applies and requires the consent.Documents affecting the rights of securityholders
3.5(1) Subclause 9.1(a)(ii)(A) of the Instrument requires issuers to file copies of their articles of incorporation, amalgamation, continuation or any other constating or establishing documents, unless the document is a statutory or regulatory instrument. This carve out for a statutory or regulatory instrument is very narrow. For example, the carve out would apply to Schedule I or Schedule II banks under the Bank Act, whose charter is the Bank Act. It would not apply when only the form of the constating document is prescribed under statute or regulation, such as articles under the Canada Business Corporations Act.
(2) Subclause 9.1(a)(ii)(E) of the Instrument requires issuers to file copies of contracts that can reasonably be regarded as materially affecting the rights of their securityholders generally. A warrant indenture is one example of this type of contract. We would expect that contracts entered into in the ordinary course of business would not usually affect the rights of securityholders generally, and so would not be required to be filed under this subclause.
Material contracts
Definition
3.6(1) Under section 1.1 of the Instrument, a material contract is defined as a contract that an issuer or any of its subsidiaries is a party to, that is material to the issuer. A material contract generally includes a schedule, side letter or exhibit referred to in the material contract and any amendment to the material contract. The redaction and omission provisions in subsections 9.3(3) and (4) of the Instrument apply to these schedules, side letters, exhibits or amendments.
Filing requirements
(2) Subject to the exceptions in paragraphs 9.3(2)(a) through (f) of the Instrument, subsection 9.3(2) of the Instrument provides an exemption from the filing requirement for a material contract entered into in the ordinary course of business. Whether an issuer entered into a material contract in the ordinary course of business is a question of fact that the issuer should consider in the context of its business and industry.
Paragraphs 9.3(2)(a) through (f) of the Instrument describe specific types of material contracts that are not eligible for the ordinary course of business exemption. Accordingly, if subsection 9.3(1) of the Instrument requires an issuer to file a material contract of a type described in these paragraphs, the issuer must file that material contract even if the issuer entered into it in the ordinary course of business.
Contract of employment
(3) Paragraph 9.3(2)(a) of the Instrument provides that a material contract with certain individuals is not eligible for the ordinary course of business exemption, unless it is a "contract of employment". One way for issuers to determine whether a contract is a contract of employment is to consider whether the contract contains payment or other provisions that are required disclosure under Form 51-102F6 as if the individual were a named executive officer or director of the issuer.
External management and external administration agreements
(4) Under paragraph 9.3(2)(e) of the Instrument, external management and external administration agreements are not eligible for the ordinary course of business exemption. External management and external administration agreements include agreements between the issuer and a third party, the issuer's parent entity, or an affiliate of the issuer, under which the latter provides management or other administrative services to the issuer.
Material contracts on which the issuer's business is substantially dependent
(5) Paragraph 9.3(2)(f) of the Instrument provides that a material contract on which the "issuer's business is substantially dependent" is not eligible for the ordinary course of business exemption. Generally, a contract on which the issuer's business is substantially dependent is a contract so significant that the issuer's business depends on the continuance of the contract. Some examples of this type of contract include
(a) a financing or credit agreement providing a majority of the issuer's capital requirements for which alternative financing is not readily available at comparable terms,
(b) a contract calling for the acquisition or sale of substantially all of the issuer's property, plant and equipment, long-lived assets, or total assets, and
(c) an option, joint venture, purchase or other agreement relating to a mining or oil and gas property that represents a majority of the issuer's business.
Confidentiality provisions
(6) Under subsection 9.3(3) of the Instrument, an issuer may omit or redact a provision of a material contract that is required to be filed if an executive officer of the issuer reasonably believes that disclosure of the omitted or redacted provision would violate a confidentiality provision. A provision of the type described in paragraphs 9.3(4)(a), (b) or (c) of the Instrument may not be omitted or redacted even if disclosure would violate a confidentiality provision, including a blanket confidentiality provision covering the entire material contract.
When negotiating material contracts with third parties, reporting issuers should consider their disclosure obligations under securities legislation. A regulator or securities regulatory authority may consider granting an exemption to permit a provision of the type listed in subsection 9.3(4) of the Instrument to be redacted if
(a) the disclosure of that provision would violate a confidentiality provision, and
(b) the material contract was negotiated before the effective date of the Instrument.
The regulator may consider the following factors, among others, in deciding whether to grant an exemption:
(c) whether an executive officer of the issuer reasonably believes that the disclosure of the provision would be prejudicial to the interests of the issuer;
(d) whether the issuer is unable to obtain a waiver of the confidentiality provision from the other party.
Disclosure seriously prejudicial to interests of issuer
(7) Under subsection 9.3(3) of the Instrument, an issuer may omit or redact certain provisions of a material contract that is required to be filed if an executive officer of the issuer reasonably believes that disclosure of the omitted or redacted provision would be seriously prejudicial to the interests of the issuer. One example of disclosure that may be seriously prejudicial to the interests of the issuer is disclosure of information in violation of applicable Canadian privacy legislation. However, in situations where securities legislation requires disclosure of the particular type of information, applicable privacy legislation generally provides an exemption for the disclosure. Generally, disclosure of information that an issuer or other party has already publicly disclosed is not seriously prejudicial to the interests of the issuer.
Terms necessary for understanding impact on business of issuer
(8) An issuer may not omit or redact a provision of a type described in paragraph 9.3(4)(a), (b), or (c) of the Instrument. Paragraph 9.3(4)(c) of the Instrument provides that an issuer may not omit or redact "terms necessary for understanding the impact of the material contract on the business of the issuer". Terms that may be necessary for understanding the impact of the material contract on the business of the issuer include the following:
(a) the duration and nature of a patent, trademark, license, franchise, concession, or similar agreement;
(b) disclosure about related party transactions;
(c) contingency, indemnification, anti-assignability, take-or-pay clauses, or change-of-control clauses.
Summary of omitted or redacted provisions
(9) Under subsection 9.3(5) of the Instrument, an issuer must include a description of the type of information that has been omitted or redacted in the copy of the material contract filed by the issuer. A brief one-sentence description immediately following the omitted or redacted information is generally sufficient.
Response letters and marked up copies
3.7 In response to a comment letter for a preliminary prospectus, an issuer should include draft wording for the changes it proposes to make to a prospectus to address staff's comments. When the comments of the various securities regulators have been resolved, an issuer should clearly mark a draft of the prospectus with all proposed changes from the preliminary prospectus and submit it as far as possible in advance of the filing of final material. These procedures may prevent delay in the issuing of a receipt for the prospectus, particularly if the number or extent of changes are substantial.
Undertaking in respect of credit supporter disclosure, including financial statements
3.8 Under subparagraph 9.2(a)(x) of the Instrument, an issuer must file an undertaking to file the periodic and timely disclosure of a credit supporter. For credit supporters that are reporting issuers with a current AIF (as defined in NI 44-101), the undertaking will likely be to continue to file the documents it is required to file under NI 51-102. For credit supporters registered under the 1934 Act, the undertaking will likely be to file the types of documents that would be required to be incorporated by reference into a Form S-3 or Form F-3 registration statement. For other credit supporters, the types of documents to be filed pursuant to the undertaking will be determined through discussions with the regulators on a case-by-case basis.
If an issuer, a parent credit supporter, and a subsidiary credit supporter satisfy the conditions of the exemption in section 34.3 of Form 41-101F1, an undertaking may provide that the subsidiary credit supporter will file periodic and timely disclosure if the issuer and the credit supporters no longer satisfy the conditions of the exemption in that section.
If an issuer and a credit supporter satisfy the conditions the exemption in section 34.4 of Form 41-101F1, an undertaking may provide that the credit supporter will file periodic and timely disclosure if the issuer and the credit supporter no longer satisfy the conditions of the exemption in that section.
For the purposes of such an undertaking, references to disclosure included in the prospectus should be replaced with references to the issuer or parent credit supporter's continuous disclosure filings. For example, if an issuer and subsidiary credit supporter(s) plan to continue to satisfy the conditions of the exemption in section 34.4 of Form 41-101F1 for continuous disclosure filings, the undertaking should provide that the issuer will file with its consolidated financial statements,
(a) a statement that the financial results of the credit supporter(s) are included in the consolidated financial results of the issuer if
(i) the issuer continues to have limited independent operations, and
(ii) the impact of any subsidiaries of the issuer on a combined basis, excluding the credit supporter(s) but including any subsidiaries of the credit supporter(s) that are not themselves credit supporters, on the consolidated financial statements of the issuer continues to be minor, or
(b) for any periods covered by issuer's consolidated financial statements, consolidating summary financial information for the issuer presented in the format set out in subparagraph 34.4(e)(ii) of Form 41-101F1.
Disclosure of investigations or proceedings
3.9 Securities legislation provides that, subject to certain conditions, the securities regulatory authorities or the regulator must issue a receipt for a prospectus unless it appears that it would not be in the public interest to do so. The securities regulatory authority or the regulator will consider whether there are ongoing or recently concluded investigations or proceedings relating to
• an issuer,
• a promoter,
• a principal securityholder, director or officer of the issuer, or
• an underwriter or other person or company involved in a proposed distribution
when it determines if it should refuse to issue a receipt for the prospectus. That decision will be made on a case-by-case basis and will depend upon the facts known at the time.
If the facts and circumstances do not warrant the denial of a receipt for a prospectus, securities legislation nonetheless imposes an obligation to provide full, true and plain disclosure of all material facts relating to the securities offered by the prospectus. Disclosure of an ongoing or recently concluded investigation or proceeding relating to a person or company involved in a proposed distribution may be necessary to meet this standard. The circumstances in which disclosure will be required and the nature and extent of the disclosure will also be determined on a case-by-case basis. In making this determination, all relevant facts, including the allegations that gave rise to the investigation or proceeding, the status of the investigation or proceeding, the seriousness of the alleged breaches that are the subject of the investigation or proceeding and the degree of involvement in the proposed distribution by the person or company under investigation will be considered.
Amendments
3.10(1) Subsection 6.5(1) of the Instrument and other securities legislation provides that if a material adverse change occurs after a receipt for a preliminary prospectus is obtained, an amendment to the preliminary prospectus must be filed as soon as practicable, but in any event within 10 days after the change occurs. If a preliminary prospectus indicates the number or value of the securities to be distributed under the prospectus, an increase in the number or value is, absent unusual circumstances, unlikely to constitute a material adverse change requiring an amendment to the preliminary prospectus.
(2) If, after filing a preliminary prospectus, an issuer decides to attach or add to the securities offered under a prospectus a right to convert into, or a warrant to acquire, the security of the issuer being offered under the preliminary prospectus, the attachment or addition of the conversion feature or warrant is, absent unusual circumstances, unlikely to constitute a material adverse change requiring an amendment to the preliminary prospectus.
(3) Securities legislation provides that no person or company shall distribute securities, unless a preliminary prospectus and a prospectus have been filed and receipts have been issued by the securities regulatory authority or regulator. If an issuer intends to add a new class of securities to the distribution under the prospectus after the preliminary prospectus has been filed and receipted, we interpret this requirement to mean an issuer must file an amended and restated preliminary prospectus.
Similarly, if an issuer wishes to add a new class of securities to a prospectus before the distribution under that prospectus is completed the issuer must file a preliminary prospectus for that class of securities and an amended and restated prospectus and obtain receipts for both the preliminary prospectus and the amended prospectus. Alternatively the issuer may file a separate preliminary prospectus and prospectus for the new class of securities. We interpret this requirement to also apply to mutual funds. If a mutual fund adds a new class or series of securities to a prospectus that is referable to a new separate portfolio of assets, a preliminary prospectus must be filed. However, if the new class or series of securities is referable to an existing portfolio of assets, the new class or series may be added by way of amendment.
(4) Any changes to the terms or conditions of the security being distributed, such as the deletion of a conversion feature, may constitute a material adverse change requiring an amendment to the preliminary prospectus.
(5) Under securities legislation, a regulator must not issue a receipt for a prospectus in certain circumstances, including if the regulator considers it prejudicial to the public interest to do so. The purpose of subsection 6.6(3) of the Instrument is to clarify that these receipt refusal grounds apply to an amendment to a final prospectus or a final short form prospectus in certain jurisdictions.
Reduced price distributions
3.11 Subsection 7.2(3) of the Instrument permits an issuer to reduce the offering price of the securities being distributed without filing an amendment to the prospectus if certain conditions are satisfied. Satisfying the conditions in this subsection means the underwriter's compensation should decrease by the amount that the aggregate price paid by purchasers for the securities is less than the gross proceeds paid by the underwriter to the issuer or selling securityholder. Section 20.8 of Form 41-101F1 requires disclosure of this fact.
Licences, registrations and approvals
3.12 For the purposes of section 10.2 of the Instrument, we would generally conclude that an issuer has all material licences, registrations and approvals necessary for the stated principal use of proceeds if the issuer could use a material portion of the proceeds of the distribution in the manner described in the prospectus without obtaining the licence, registration or approval.
Registration requirements
3.13 Issuers filing a prospectus and other market participants are reminded to ensure that members of underwriting syndicates are in compliance with registration requirements under securities legislation in each jurisdiction in which syndicate members are participating in the distribution of securities under the prospectus. Failure to comply with the registration requirements could cause the regulator to refuse to issue a receipt for the prospectus.
PART 4: General Content of Long Form Prospectus
Style of long form prospectus
4.1 Securities legislation requires that a long form prospectus contain "full, true and plain" disclosure. Issuers should apply plain language principles when they prepare a long form prospectus including:
• using short sentences;
• using definite everyday language;
• using the active voice;
• avoiding superfluous words;
• organizing the document into clear, concise sections, paragraphs and sentences;
• avoiding jargon;
• using personal pronouns to speak directly to the reader;
• avoiding reliance on glossaries and defined terms unless it facilitates understanding of the disclosure;
• avoiding vague boilerplate wording;
• avoiding abstract terms by using more concrete terms or examples;
• avoiding multiple negatives;
• using technical terms only when necessary and explaining those terms;
• using charts, tables and examples where it makes disclosure easier to understand.
Question and answer and bullet point formats are consistent with the disclosure requirements of the Instrument.
Pricing disclosure
4.2(1) If the offering price or the number of securities being distributed, or an estimate of the range of the offering price or the number of securities being distributed, has been publicly disclosed in a jurisdiction or a foreign jurisdiction as of the date of the preliminary long form prospectus, section 1.7 of Form 41-101F1 requires the issuer to disclose that information in the preliminary long form prospectus. For example, if an issuer has previously disclosed this information in a public filing or a press release, in a foreign jurisdiction, the information must also be disclosed in the preliminary long form prospectus. If the issuer discloses this information in the preliminary long form prospectus, we will not consider a difference between this information and the actual offering price or number of securities being distributed to be, in itself, a material adverse change for which the issuer must file an amended preliminary long form prospectus.
(2) No disclosure is required under section 1.7 of Form 41-101F1 if the offering price or size of the offering has not been disclosed as of the date of the preliminary long form prospectus. However, given the materiality of pricing or offering size information, subsequent disclosure of this information on a selective basis could constitute conduct that is prejudicial to the public interest.
(3) If a minimum offering amount is not provided and the issuer faces significant short-term expenditures or commitments, the issuer must provide additional disclosure as required under subsections 6.3(3) and (4) of Form 41-101F1 or subsections 4.2(3) and (4) of Form 44-101F1. The issuer must provide disclosure of how it will use the proceeds at different thresholds, describing what business objectives will be accomplished at each threshold as well as the priority of how the proceeds will be used. In describing the use of proceeds under each threshold, the disclosure must also include an assessment of the impact of raising this amount on the issuer's liquidity, operations, capital resources and solvency.
Disclosures that may be necessary to understand this impact may include the following examples:
(a) for issuers without significant revenue and available working capital, disclose the anticipated length of time that the proceeds at each threshold will suffice to meet expected cash requirements;
(b) for issuers that have or anticipate having within the next 12 months any cash flow or liquidity problems, disclose how the proceeds at each threshold may impact the issuer's ability to continue in operation for the foreseeable future and realize assets and discharge liabilities in the normal course of operations;
(c) for issuers that have significant projects that have not yet commenced operations and the projects have therefore not yet generated revenue, describe how the proceeds at each threshold may impact the anticipated timing and costs of the project and other critical milestones;
(d) for issuers that have exploration and development expenditures or research and development expenditures required to maintain properties or agreements in good standing, describe how the proceeds at each threshold may impact these properties or agreements.
If the issuer anticipates additional funds from other sources are to be used in conjunction with the proceeds and the available working capital, the issuer will need to sufficiently describe the amounts of those funds, the source of those funds and whether those funds are firm or contingent. If the funds are contingent, the issuer should describe the nature of the contingency.
Depending on the particular circumstances of the issuer, one or more of the above examples may require the provision of a minimum offering amount in the prospectus. Refer to section 2.2.1 of this Policy for additional guidance.
Principal purposes -- generally
4.3(1) Subsection 6.3(1) of Form 41-101F1 requires disclosure of each of the principal purposes for which the issuer will use the net proceeds. If an issuer has negative cash flow from operating activities in its most recently completed financial year for which financial statements have been included in the long form prospectus, the issuer should prominently disclose that fact in the use of proceeds section of the long form prospectus. The issuer should also disclose whether, and if so, to what extent, the issuer will use the proceeds of the distribution to fund any anticipated negative cash flow from operating activities in future periods. An issuer should disclose negative cash flow from operating activities as a risk factor under subsection 21.1(1) of Form 41-101F1. For the purposes of this section, in determining cash flow from operating activities, the issuer must include cash payments related to dividends and borrowing costs.
(2) For the purposes of the disclosure required under section 6.3 of Form 41-101F1, the phrase "for general corporate purposes" is not generally sufficient.
MD&A
Additional information for venture issuers without significant revenue
4.4(1) Section 8.6 of Form 41-101F1 requires certain venture issuers and IPO venture issuers to disclose a breakdown of material costs whether expensed or recognized as assets. A component of cost is generally considered to be a material component if it exceeds the greater of
(a) 20% of the total amount of the class, and
(b) $25,000.
Disclosure of outstanding security data
(2) Section 8.4 of Form 41-101F1 requires disclosure of information relating to the outstanding securities of the issuer as of the latest practicable date. The "latest practicable date" should be as close as possible to the date of the long form prospectus. Disclosing the number of securities outstanding at the most recently completed financial period is generally not sufficient to meet this requirement.
Additional disclosure for issuers with significant equity investees
(3) Section 8.8 of Form 41-101F1 requires issuers with significant equity investees to provide in their long form prospectuses summarized information about the equity investee. Generally, we will consider that an equity investee is significant if the equity investee would meet the thresholds for the significance tests in Item 35 of Form 41-101F1 using the financial statements of the equity investee and the issuer as at the issuer's financial year-end.
Distribution of asset-backed securities
4.5 Section 10.3 of Form 41-101F1 specifies additional disclosure that applies to distributions of asset-backed securities. Disclosure for a special purpose issuer of asset-backed securities will generally explain
• the nature, performance and servicing of the underlying pool of financial assets,
• the structure of the securities and dedicated cash flows, and
• any third party or internal support arrangements established to protect holders of the asset-backed securities from losses associated with non-performance of the financial assets or disruptions in payment.
The nature and extent of required disclosure may vary depending on the type and attributes of the underlying pool and the contractual arrangements through which holders of the asset-backed securities take their interest in such assets.
An issuer of asset-backed securities should consider the following factors when preparing its long form prospectus:
(a) The extent of disclosure respecting an issuer will depend on the extent of the issuer's on-going involvement in the conversion of the assets comprising the pool to cash and the distribution of cash to securityholders; this involvement may, in turn, vary dramatically depending on the type, quality and attributes of the assets comprising the pool and on the overall structure of the transaction.
(b) Disclosure about the business and affairs of the issuer should relate to the financial assets underlying the asset-backed securities.
(c) Disclosure about the originator or the seller of the underlying financial assets will often be relevant to investors in the asset-backed securities particularly where the originator or seller has an on-going involvement with the financial assets comprising the pool. For example, if asset-backed securities are serviced with the cash flows from a revolving pool of receivables, an evaluation of the nature and reliability of the future origination or the future sales of underlying assets by the seller to or through the issuer may be 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 assets should deal with whether there are current circumstances that indicate that the originator or seller will not generate adequate assets in the future to avoid an early liquidation of the pool and, correspondingly, an early payment of the asset-backed securities. Summary historical financial information respecting the originator or seller will ordinarily be adequate to satisfy the disclosure requirements applicable to the originator or seller in circumstances where the originator or seller has an ongoing relationship with the assets comprising the pool.
Subsection 10.3(10) of Form 41-101F1 requires issuers of asset-backed securities to describe any person or company who originated, sold or deposited a material portion of the financial assets comprising the pool, irrespective of whether the person or company has an on-going relationship with the assets comprising the pool. The securities regulatory authorities consider 33?% of the dollar value of the financial assets comprising the pool to be a material portion in this context.
Distribution of derivatives and underlying securities
4.6(1) Section 10.4 of Form 41-101F1 specifies additional disclosure applicable to distributions of derivatives. This prescribed disclosure is formulated in general terms for issuers to customize appropriately in particular circumstances.
(2) If the securities being distributed are convertible into or exchangeable for other securities, or are a derivative of, or otherwise linked to, other securities, a description of the material attributes of the underlying securities will generally be necessary to meet the requirements of securities legislation that a long form prospectus contain full, true and plain disclosure of all material facts concerning the securities being distributed.
Restricted securities
4.7 Section 10.6 of Form 41-101F1 specifies additional disclosure for restricted securities, including a detailed description of any significant provisions under applicable corporate and securities law that do not apply to the holders of the restricted securities but do apply to the holders of another class of equity securities. An example of such provisions would be rights under takeover bids.
Credit supporter disclosure
4.8 A long form prospectus must include, under Item 33 of Form 41-101F1, disclosure about any credit supporters that have provided a guarantee or alternative credit support for all or substantially all of the payments to be made under the securities being distributed. Disclosure about a credit supporter may be required even if the credit supporter has not provided full and unconditional credit support.
Exemptions for certain issues of guaranteed securities
4.9 Requiring disclosure about the issuer and any applicable credit supporters in a long form prospectus may result in unnecessary disclosure in some instances. Item 34 of Form 41-101F1 provides exemptions from the requirement to include both issuer and credit supporter disclosure where such disclosure is not necessary to ensure that the long form prospectus includes full, true and plain disclosure of all material facts concerning the securities to be distributed.
These exemptions are based on the principle that, in these instances, investors will generally require issuer disclosure or credit supporter disclosure to make an informed investment decision. These exemptions are not intended to be comprehensive and issuers may apply for exemptive relief from the requirement to provide both issuer and credit supporter disclosure, as appropriate.
Previously disclosed material forward-looking information
4.10 If an issuer, at the time it files a long form prospectus,
(a) has previously disclosed to the public material forward-looking information for a period that is not yet complete, and
(b) is aware of events and circumstances that are reasonably likely to cause actual results to differ materially from the material forward-looking information,
the issuer should discuss those events and circumstances, and the expected differences from the material forward-looking information, in the long form prospectus.
PART 5: Content of Long Form Prospectus (Financial Statements)
Exemptions from financial disclosure requirements
5.1 Request for exemptions from financial disclosure should be made in accordance with Part 19 of the Instrument, which requires the issuer to make submissions in writing along with the reasons for the request. Written submissions should be filed at the time the preliminary long form prospectus is filed, and include any proposed alternative disclosure. If the application involves a novel and substantive issue or raises a novel public policy concern, issuers should use the pre-filing procedures under NP 11-202. Issuers that are not filing their prospectuses under NP 11-202 should also follow the principles outlined and procedures set out in NP 11-202.
Presentation of Financial Results
5.1.1 Canadian GAAP applicable to publicly accountable enterprises provides an issuer two alternatives in presenting its income: (a) in one single statement of comprehensive income, or (b) in a statement of comprehensive income with a separate income statement. If an issuer presents its income using the second alternative, both statements must be filed to satisfy the requirements of this Instrument. (See subsections 32.2(1.1) and 32.3(3) of Form 41-101F1).
General financial statement requirements
5.2 If an issuer has filed annual financial statements or an interim financial report for periods that are more recent than those that the issuer must otherwise include in a long form prospectus before it files the prospectus, sections 32.6 and 35.8 of Form 41-101F1 require the issuer to include those financial statements in the long form prospectus. Issuers should update the disclosure in the prospectus accordingly in order to satisfy the requirement that the long form prospectus contain full, true and plain disclosure of all material facts relating to the securities being distributed. However, if historical financial information derived from more recent annual financial statements or interim financial report is released to the public by the issuer before the financial statements are filed, the prospectus should include the information included in the news release or public communication. There is no specific requirement in the Instrument to otherwise update the prospectus, or pro forma financial statements to reflect the more recent information.
We think the directors of an issuer should endeavor to consider and approve financial statements in a timely manner and should not delay the approval and filing of the financial statements for the purpose of avoiding their inclusion in a long form prospectus. Once the directors have approved an issuer's financial statements, the issuer should file them as soon as possible.
Interpretation of issuer -- primary business
5.3(1) An issuer is required to provide historical financial statements under Item 32 of Form 41-101F1 for a business or related businesses that a reasonable investor would regard as the primary business of the issuer. However, if the issuer is a reporting issuer whose principal assets are not cash, cash equivalents or an exchange listing, and the acquisition of the primary business represents a significant acquisition for the issuer, the reporting issuer is subject to the requirements of Item 35 in respect of the financial statement and other disclosure for the acquisition.
An acquisition does not include a reverse takeover, as defined in NI 41-101 which cross-references the meaning of acquisition as used in Part 8 of NI 51-102. Therefore a reporting issuer cannot rely on the exemption in subsection 32.1(2) if the applicable transaction is a reverse takeover.
Examples of when a reasonable investor would regard the primary business of the issuer to be the acquired business or related businesses, thereby triggering the application of Item 32, are when the acquisition(s) was
(a) a reverse takeover,
(b) a qualifying transaction for a Capital Pool Company, or
(c) an acquisition that is a significant acquisition at over the 100% level under subsection 35.1(4) of Form 41-101F1.
The issuer should consider the facts of each situation to determine whether a reasonable investor would regard the primary business of the issuer to be the acquired business or related businesses.
(2) The periods for which the issuer must provide financial statements under Item 32 of Form 41-101F1 for an acquired business or businesses that are regarded as the primary business of the issuer should be determined in reference to sections 32.2 and 32.3 of Form 41-101F1, and with the same exceptions, where applicable, set out in paragraphs 32.4(a) through (e) of Form 41-101F1. For example, for an issuer that is a reporting issuer in at least one jurisdiction immediately before filing a long form prospectus, the reference to three years in subparagraph 32.2(6)(a) of Form 41-101F1 should be read as two years under paragraphs 32.4(a), (b), (d) and (e) of Form 41-101F1.
The issuer must also consider the necessity of including pro forma financial statements pursuant to section 32.7 of Form 41-101F1 to illustrate the impact of the acquisition of the primary business on the issuer's financial position and results of operations. For additional guidance, an issuer should refer to section 5.10 of this Policy.
Interpretation of issuer -- predecessor entity
5.4(1) An issuer is required to provide historical financial statements under Item 32 of the Form 41-101F1 for any predecessor entity. This includes financial statements of acquired businesses that are unrelated and not otherwise individually significant, but together form the basis of the business of the issuer.
In these circumstances, the issuer shouldHowever, if the issuer is a reporting issuer whose principal assets are not cash, cash equivalents or an exchange listing, and the acquisition of the predecessor entity represents a significant acquisition for the issuer, the reporting issuer is subject to the requirements of Item 35 in respect of the financial statement and other disclosure for the acquisition.The issuer must also consider the necessity of including pro forma financial statements
in the prospectus giving effect to the recently completed or proposedpursuant to section 32.7 of Form 41-101F1 to illustrate the impact of the acquisition ofathe predecessor entity.on the issuer's financial position and results of operations. For additional guidance, an issuer should refer to section 5.10 of this Policy.(2) If an issuer determines the financial statements of certain acquired businesses referred to in subsection (1) are not relevant, the issuer should utilize the pre-filing procedures in NP 11-202 to determine whether it would require an exemption from the requirement to include these financial statements.
Sufficiency of financial history included in a long form prospectus
5.5(1) Item 32 of Form 41-101F1 prescribes the issuer financial statements that must be included in a long form prospectus. We recognize that an issuer, at the time of filing a long form prospectus, may have been in existence for less than one year. We expect that in many situations the limited historical financial statement information that is available for such an issuer may be adequately supplemented by other relevant information disclosed in the long form prospectus. However, if the issuer cannot provide financial statements for a period of at least 12 months and the long form prospectus does not otherwise contain information concerning the business conducted or to be conducted by the issuer that is sufficient to enable an investor to make an informed investment decision, a securities regulatory authority or regulator may consider this a key factor when deciding whether it should refuse to issue a receipt for the long form prospectus.
(2) A reference to a prospectus includes a preliminary prospectus. Consequently, the time references in sections 32.2, 32.3, 35.5 and 35.6 of Form 41-101F1 should be considered as at the date of the preliminary long form prospectus and again at the date of the final long form prospectus for both the issuer and any business acquired or to be acquired. Depending on the period of time between the dates of the preliminary and final long form prospectuses, an issuer may have to include more recent financial statements.
(3) An issuer is subject to certain additional disclosure requirements when it discloses an interim financial report for a period in the year of adopting IFRS, as set out in subparagraph 32.3(2)(e) and subsection 32.3(4) of Form 41-101F1. These requirements only apply to interim financial reports relating to periods in the year of adopting IFRS and therefore do not apply if the prospectus includes annual financial statements prepared in accordance with IFRS.
An issuer is required to provide an opening IFRS statement of financial position at the date of transition to IFRS. An issuer with, for example, a year-end of December 31, 2010 that files a prospectus for which it must include its first interim financial report in the year of adopting IFRS for the period ended March 31, 2011, must generally provide an opening IFRS statement of financial position at January 1, 2010.
An issuer must also include various reconciliations required by IFRS 1 to explain how the transition from previous GAAP to IFRS has affected its reported financial position, financial performance and cash flows. In the first interim period IFRS 1 requires certain additional reconciliations which relate to annual periods and the date of transition to IFRS. Where an issuer that was not a reporting issuer in at least one jurisdiction immediately before filing the prospectus includes an interim financial report in respect of the second or third interim period in the year of adopting IFRS, subsection 32.3(4) of Form 41-101F1 requires these additional reconciliations to be included in the prospectus. Alternatively, pursuant to subsection 32.3(4) of Form 41-101F1, the issuer may include the first interim financial report in the year of adopting IFRS as this report includes the required reconciliations.
These additional reconciliations may be summarized as follows:
• reconciliations of the issuer's equity presented in accordance with previous GAAP to its equity in accordance with IFRS for the date of transition to IFRS (January 1, 2010 in the above-noted example);
• reconciliations of the issuer's equity presented in accordance with previous GAAP to its equity in accordance with IFRS for the end of the latest period presented in the issuer's most recent annual financial statements in accordance with previous GAAP (December 31, 2010 in the above-noted example); and
• a reconciliation of the issuer's total comprehensive income (or total profit or loss) presented in accordance with previous GAAP to its total comprehensive income in accordance with IFRS for the latest period in the issuer's most recent annual financial statements presented in the prospectus in accordance with previous GAAP (year ended December 31, 2010 in the above-noted example).
The reconciliations summarized above must give sufficient detail to enable investors to understand the material adjustments to the statement of financial position, statement of comprehensive income and statement of cash flows.
Applications for exemption from requirement to include financial statements of the issuer
5.6(1) We believe investors should receive in a long form prospectus for an IPO no less than three years of audited historical financial statements and that relief from the financial statements requirements should be granted only in unusual circumstances and generally not related solely to the cost or the time involved in preparing and auditing the financial statements.
(2) In view of our reluctance to grant exemptions from the requirement to include audited historical financial statements, issuers seeking relief should consult with staff on a pre-filing basis.
(3) Considerations relevant to granting an exemption from the requirement to include financial statements, generally for the years immediately preceding the issuer's most recently completed financial year, may include the following:
The issuer's historical accounting records have been destroyed and cannot be reconstructed.
(a) In this case, as a condition of granting the exemption, the issuer may be requested by a securities regulatory authority or regulator to
(i) represent in writing to the securities regulatory authority or regulator, no later than the time the preliminary long form prospectus is filed, that the issuer made every reasonable effort to obtain copies of, or reconstruct, the historical accounting records necessary to prepare and audit the financial statements, but such efforts were unsuccessful, and
(ii) disclose in the long form prospectus the fact that the historical accounting records have been destroyed and cannot be reconstructed.
The issuer has emerged from bankruptcy and current management is denied access to the historical accounting records necessary to audit the financial statements.
(b) In this case, as a condition of granting the exemption, the issuer may be requested by a securities regulatory authority or regulator to
(i) represent in writing to the securities regulatory authority or regulator, no later than the time the preliminary long form prospectus is filed, that the issuer has made every reasonable effort to obtain access to, or copies of, the historical accounting records necessary to audit the financial statements but that such efforts were unsuccessful, and
(ii) disclose in the long form prospectus the fact that the issuer has emerged from bankruptcy and current management is denied access to the historical accounting records.
The issuer has undergone a fundamental change in the nature of its business or operations affecting a majority of its operations and all, or substantially all, of the executive officers and directors of the company have changed.
(c) The evolution of a business or progression along a development cycle will not be considered to be a fundamental change in an issuer's business or operations. Relief from the requirement to include financial statements of the issuer required by the Instrument for the year in which the change occurred, or for the most recently completed financial year if the change in operations occurred during the issuer's current financial year, generally will not be granted.
(4) If, in unusual circumstances, relief from Part 4 of the Instrument is granted, additional financial information will likely be requested to allow a reader to gain a similar understanding of the entity's financial position and prospects as one would gain from the information required in Part 4 of the Instrument.
Examples of acceptable additional information include an audited interim financial report, audited divisional statements of comprehensive income or cash flows, financial statements accompanied by an auditor's report that expresses a modified opinion, or audited statements of net operating income.
Additional information
5.7 An issuer may find it necessary, in order to meet the requirement for full, true and plain disclosure contained in securities legislation, to include certain additional information in its long form prospectus, such as separate financial statements of a subsidiary of the issuer in a long form prospectus, even if the financial statements of the subsidiary are included in the consolidated financial statements of the issuer. For example, separate financial statements of a subsidiary may be necessary to help explain the risk profile and nature of the operations of the subsidiary.
Audit and review of financial statements included or incorporated by reference into a long form prospectus
5.8(1) Part 4 of the Instrument requires that all financial statements included in a long form prospectus be audited, except financial statements specifically exempted in the Instrument. This requirement extends to financial statements of subsidiaries and other entities even if the financial statements are not required to be included in the long form prospectus but have been included at the discretion of the issuer.
(2) NI 52-107 requires that financial statements, other than acquisition statements, that are required to be audited by securities legislation, such as this Instrument, be accompanied by an auditor's report that expresses an unmodified opinion if they were audited in accordance with Canadian GAAS or International Standards on Auditing, or contain an unqualified opinion if they were audited in accordance with U.S. PCAOB GAAS. This requirement applies to all financial statements included in the long form prospectus under Item 32 of Form 41-101F1, including financial statements from entities acquired or to be acquired that are the primary business or the predecessor of the issuer. For greater clarity, subsections 3.12(3) and 4.12(6) of NI 52-107 only apply to financial statements included in the long form prospectus pursuant to Item 35 of Form 41-101F1. Relief may be granted to non-reporting issuers in appropriate circumstances to permit the auditor's report on financial statements to contain a qualified opinion relating to opening inventory if there is a subsequent audited period of at least six months on which the auditor's report expresses an unmodified opinion and the business is not seasonal. Issuers requesting this relief should be aware that NI 51-102 requires an issuer's comparative financial statements be accompanied by an auditors' report that expresses an unmodified opinion.
Financial statement disclosure for significant acquisitions
Applicable principles in NI 51-102
5.9(1) Generally, it is intended that the disclosure requirements set out in Item 35 of Form 41-101F1 for significant acquisitions follow the requirements in Part 8 of NI 51-102. The guidance in Part 8 of the companion policy to NI 51-102 ("51-102CP") apply to any disclosure of a significant business acquisition in a long form prospectus required by Item 35 of Form 41-101F1, except
(a) any headings in Part 8 of 51-102CP should be disregarded,
(b) subsections 8.1(1), 8.1(5), 8.7(8), and 8.10(2) of 51-102CP do not apply,
(c) other than in subsections 8.3(4) and 8.7(7) of 51-102CP, any references to a "reporting issuer" should be read as an "issuer",
(d) any references to the "Instrument" should be read as "NI 51-102",
(e) any references to a provision in NI 51-102 in 51-102CP should be read to include the following "as it applies to a long form prospectus pursuant to Item 35 of Form 41-101F1",
(f) any references to "business acquisition report" should be read as "long form prospectus",
(g) in subsection 8.1(2) of 51-102CP, the term "file a copy of the documents as its business acquisition report" should be read as "include that disclosure in its long form prospectus in lieu of the significant acquisition disclosure required under Item 35 of Form 41-101F1",
(h) in subsection 8.2(1) of 51-102CP,
(i) the term "The test" should be read as "For any completed acquisition, the test",
(ii) the sentence "For any proposed acquisition of a business or related businesses by an issuer that has progressed to a state where a reasonable person would believe that the likelihood of the issuer completing the acquisition is high, the test must be applied using the financial statements included in the long form prospectus." should be added after "the business.", and
(iii) the term "business acquisition report will be required to be filed" should be read as "disclosure regarding the significant acquisition is required to be included in the issuer's long form prospectus",
(i) in subsection 8.3(1) of 51-102CP, the term "filing a business acquisition report" should be read as "the financial statements used for the optional tests",
(j) in section 8.5, and subsection 8.7(4), of 51-102CP, the term "filed" wherever it occurs, should be read as "included in the long form prospectus",
(k) in subsection 8.7(1) of 51-102CP, the term "as already filed" should be read as "included in the long form prospectus",
(l) in subsection 8.7(2) of 51-102CP, the term "filed under the Instrument" should be read as "included in the long form prospectus",
(m) in subsection 8.7(4) of 51-102CP, the term "presented" should be read as "for which financial statements are included in the prospectus",
(n) in subsection 8.7(6) of 51-102CP, the term "for which financial statements are included in the long form prospectus" should be added after "financial year",
(o) in paragraph 8.8(a) of 51-102CP, the term "prior to the deadline for filing the business acquisition report" should be read as "using the pre-filing procedures referred to in section 5.1 of this Policy",
(p) in subsection 8.9(1) of 51-102CP, the term "before the filing deadline for the business acquisition report and before the closing date of the transaction, if applicable. Reporting issuers are reminded that many securities regulatory authorities and regulators do not have the power to grant retroactive relief" should be read as "using the pre-filing procedures referred to in section 5.1 of this Policy", and
(q) in subparagraphs 8.9(4)(a)(i) and 8.9(4)(b)(i) of 51-102CP, the term "no later than the time the business acquisition report is required to be filed" wherever it occurs should be read as "using the pre-filing procedures referred to in section 5.1 of this Policy".
(r) in subparagraph 8.10(1) of 51-102CP, the term "but must be reviewed" should be added after "may be unaudited".
Completed significant acquisitions and the obligation to provide business acquisition report level disclosure for a non-reporting issuer
(2) For an issuer that is not a reporting issuer in any jurisdiction immediately before filing the long form prospectus (a "non-reporting issuer"), the long form prospectus disclosure requirements for a significant acquisition are generally intended to mirror those for reporting issuers subject to Part 8 of NI 51-102. To determine whether an acquisition is significant, non-reporting issuers would first look to the guidance under section 8.3 of NI 51-102. The initial test for significance would be calculated based on the financial statements of the issuer and acquired business or related businesses for the most recently completed financial year of each that ended before the acquisition date.
To recognize the possible growth of a non-reporting issuer between the date of its most recently completed year end and the acquisition date and the corresponding potential decline in significance of the acquisition to the issuer, issuers should refer to the guidance in paragraph 35.1(4)(b) of Form 41-101F1 to perform the optional test. The applicable time period for this optional test for the issuer is the most recently completed interim period or financial year for which financial statements of the issuer are included in the prospectus and for the acquired business or related businesses is the most recently completed interim period or financial year ended before the date of the long form prospectus
The significance thresholds for IPO venture issuers are identical to the significance thresholds for venture issuers.
The timing of the disclosure requirements set out in subsection 35.3(1) of Form 41-101F1 are based on the principles under section 8.2 of NI 51-102. For reporting issuers, subsection 8.2(2) of NI 51-102 sets out the timing of disclosures for significant acquisitions where the acquisition occurs within 45 days after the year end of the acquired business. However, for IPO venture issuers, paragraph 35.3(1)(d) imposes a disclosure requirement for all significant acquisitions completed more than 90 days before the date of the long form prospectus, where the acquisition occurs within 45 days after the year end of the acquired business. This differs from the business acquisition report filing deadline for venture issuers under paragraph 8.2(2)(b) of NI 51-102 where the business acquisition report deadline for any significant acquisition where the acquisition occurs within 45 days after the year end of the acquired business is within 120 days after the acquisition date.
Probable acquisitions
(3) When interpreting the phrase "where a reasonable person would believe that the likelihood of the acquisition being completed is high", it is our view that the following factors may be relevant in determining whether the likelihood of an acquisition being completed is high:
(a) whether the acquisition has been publicly announced;
(b) whether the acquisition is the subject of an executed agreement;
(c) the nature of conditions to the completion of the acquisition including any material third party consents required.
The test of whether a proposed acquisition "has progressed to a state where a reasonable person would believe that the likelihood of the acquisition being completed is high" is an objective, rather than subjective, test in that the question turns on what a "reasonable person" would believe. It is not sufficient for an officer of an issuer to determine that he or she personally believes that the likelihood of the acquisition being completed is or is not high. The officer must form an opinion as to what a reasonable person would believe in the circumstances. In the event of a dispute, an objective test requires an adjudicator to decide whether a reasonable person would believe in the circumstances that the likelihood of an acquisition being completed was high. By contrast, if the disclosure requirement involved a subjective test, the adjudicator would assess an individual's credibility and decide whether the personal opinion of the individual as to whether the likelihood of the acquisition being completed was high was an honestly held opinion. Formulating the disclosure requirement using an objective test rather than a subjective test strengthens the basis upon which the regulator may object to an issuer's application of the test in particular circumstances.
We generally presume that the inclusion of financial statements or other information is required for all acquisitions that are, or would be, significant under Part 8 of NI 51-102. Reporting issuers can rebut this presumption if they can provide evidence that the financial statements or other information are not required for full, true and plain disclosure.
Satisfactory alternative financial statements or other information
(4) Issuers must satisfy the disclosure requirements in section 35.5 or section 35.6 of Form 41-101F1 by including either:
(i) the financial statements or other information that would be required by Part 8 of NI 51-102; or
(ii) satisfactory alternative financial statements or other information.
Satisfactory alternative financial statements or other information may be provided to satisfy the requirements of subsection 35.5(3) or subsection 35.6(3) of Form 41-101F1 when the financial statements or other information that would be required by Part 8 of NI 51-102 relate to a financial year ended within 90 days before the date of the long form prospectus or an interim period ended within 60 days before the date of the long form prospectus for issuers that are venture issuers, and 45 days for issuers that are not venture issuers. In these circumstances, we believe that satisfactory alternative financial statements or other information would not have to include any financial statements or other information for the acquisition or probable acquisition related to:
(a) a financial year ended within 90 days before the date of the long form prospectus; or
(b) an interim period ended within 60 days before the date of the long form prospectus for issuers that are venture issuers, and 45 days for issuers that are not venture issuers.
An example of satisfactory alternative financial statements or other information that we will generally find acceptable would be:
(c) comparative annual financial statements or other information for the acquisition or probable acquisition for at least the number of financial years as would be required under Part 8 of NI 51-102 that ended more than 90 days before the date of the long form prospectus, audited for the most recently completed financial period in accordance with section 4.2 of the Instrument, and reviewed for the comparative period in accordance with section 4.3 of the Instrument;
(d) a comparative interim financial report or other information for the acquisition or probable acquisition for any interim period ended subsequent to the latest annual financial statements included in the long form prospectus and more than 60 days before the date of the long form prospectus for issuers that are venture issuers, and 45 days for issuers that are not venture issuers reviewed in accordance with section 4.3 of the Instrument; and
(e) pro forma financial statements or other information required under Part 8 of NI 51-102.
If the issuer intends to include financial statements as set out in the example above as satisfactory alternative financial statements, we ask that this be highlighted in the cover letter to the long form prospectus. If the issuer does not intend to include financial statements or other information, or intends to file financial statements or other information that are different from those set out above, the issuer should use the pre-filing procedures in NP 11-202.
Acquired business has recently completed an acquisition
(5) When an issuer acquires a business or related businesses that has itself recently acquired another business or related businesses (an "indirect acquisition"), the issuer should consider whether long form prospectus disclosure about the indirect acquisition, including historical financial statements, is necessary to satisfy the requirement that the long form prospectus contain full, true and plain disclosure of all material facts relating to the securities being distributed. In making this determination, the issuer should consider the following factors:
• if the indirect acquisition would meet any of the significance tests in section 35.1(4) of Form 41-101F1 when the issuer applies each of those tests to its proportionate interest in the indirect acquisition of the business;
• if the amount of time between the separate acquisitions is such that the effect of the first acquisition is not adequately reflected in the results of the business or related businesses the issuer is acquiring.
Financial statements or other information
(6) Paragraphs 35.5(2)(b) and 35.6(2)(b) discuss financial statements or other information for the acquired business or related businesses. This "other information" is intended to capture the financial information disclosures required under Part 8 of NI 51-102 other than financial statements. An example of "other information" would include the operating statements, property descriptions, production volumes and reserves disclosures described under section 8.10 of NI 51-102.
(7) Section 3.11 of NI 52-107 permits acquisition statements included in a business acquisition report or prospectus to be prepared in accordance with Canadian GAAP applicable to private enterprises in certain circumstances. The ability to present acquisition statements using Canadian GAAP applicable to private enterprises would not extend to a situation where an entity acquired or to be acquired is considered the primary business or the predecessor of the issuer
.and the issuer must provide financial statements for this acquisition under Item 32.Financial statements for acquisitions of a predecessor entity, a business or businesses acquired by reporting and non-reporting issuers
Pro forma financial statements for acquisitions of a predecessor entity, a business or businesses acquired by the issuer, or other entity5.10(1) The financial statements for acquisitions of a predecessor entity, a business or businesses acquired by the issuer, or other entity must be
filedincluded in the prospectus under Item 32 of Form 41-101F1, if the entities or businesses satisfy the conditions of paragraph 32.1(1)(a), (b), or (c) of Form 41-101F1. Despite this requirement, acquisitions of a predecessor entity, a business or businesses acquired by the issuer, or other entity may also be subject to the requirements in Item 35 of Form 41-101F1. For example, the long form prospectus should include pro forma financial statements and a description of the entities or businesses.1 and(a) the issuer was not a reporting issuer in any jurisdiction on the acquisition date in the case of a completed acquisition or immediately prior to the prospectus filing in the case of a proposed acquisition, as set out in section 35.1 of Form 41-101F1; or
(b) the issuer was a reporting issuer with only cash, cash equivalents or an exchange listing as its principal asset.
If the issuer was a reporting issuer prior to the filing of the prospectus, but its principal asset was not cash, cash equivalents or its exchange listing, the issuer would be eligible to disclose the above-noted acquisitions in accordance with Item 35. The disclosure requirements applicable to a reporting issuer in Item 35 are intended to reflect the requirements that would be prescribed for such acquisitions in the reporting issuer's business acquisition report.
(2) An issuer that is subject to Item 32 must also consider the necessity of including pro forma financial statements pursuant to section 32.7 of Form 41-101F1 to illustrate the impact of the acquisition on the issuer's financial position and results of operations. However, these pro forma financial statements are only required if their inclusion is necessary for the prospectus to contain full, true and plain disclosure of all material facts relating to the securities being distributed. Examples of when pro forma financial statements would likely be necessary are in cases where:
(a) the issuer has acquired multiple businesses over the relevant period; or
(b) the issuer has an active business and has acquired another business that will constitute its primary business going forward.
In certain circumstances, an issuer may need to disclose multiple acquisitions in its prospectus where the acquisitions include an acquisition of a primary business or predecessor entity to which section 32.1 of Form 41-101F1 applies and a significant acquisition to which only item 35 of Form 41-101F1 applies. In this case, the issuer may wish to present one set of pro forma financial statements reflecting the results of all of the acquisitions, as contemplated separately in each of sections 32.8 and 35.7 of Form 41-101F1. The securities regulatory authority or regulator would not generally object to providing this relief. However the issuer must request the relief when filing its preliminary prospectus.
PART 6: Advertising or Marketing Activities in Connection with Prospectus Offerings
Scope
6.1(1) The discussion below is focused on the impact of the prospectus requirement on advertising or marketing activities in connection with a prospectus offering.
(2) Issuers and market participants who engage in advertising or marketing activities must also consider the impact of the registration requirement in each jurisdiction where such advertising or marketing activities are undertaken. Unless an exemption to the registration requirement is available, such activities may be made only by a person or company who is registered in the appropriate category having regard to the securities that are the subject of the advertising or marketing activities.
(3) Advertising or marketing activities are also subject to regulation under securities legislation and other rules, including those relating to disclosure, and insider trading and registration, which are not discussed below.
The prospectus requirement
6.2(1) Securities legislation generally provides that no one may trade in a security where that trade would be a distribution unless the prospectus requirement has been satisfied, or an exemption is available.
(2) The analysis of whether any particular advertising or marketing activities is prohibited by virtue of the prospectus requirement turns largely on whether the activities constitute a trade and, if so, whether such a trade would constitute a distribution.
(3) In Québec, since securities legislation has been designed without the notion of a "trade", the analysis is dependent solely on whether the advertising or marketing activities constitute a distribution.
Definition of "trade"
(4) Securities legislation (other than the securities legislation of Québec) defines a "trade" in a non-exhaustive manner to include, among other things
• any sale or disposition of a security for valuable consideration,
• any receipt by a registrant of an order to buy or sell a security, and
• any act, advertisement, solicitation, conduct or negotiation directly or indirectly in furtherance of any of the foregoing.
(5) Any advertising or marketing activities that can be reasonably regarded as intended to promote a distribution of securities would be "conduct directly or indirectly in furtherance" of the distribution of a security and, therefore, would fall within the definition of a trade.
Definition of distribution
(6) Even though advertising or marketing activities constitute a "trade" for the purposes of securities legislation (other than the securities legislation of Québec), they would be prohibited by virtue of the prospectus requirement only if they also constitute a distribution under securities legislation. Securities legislation (other than the securities legislation of Québec) defines a distribution to include a "trade" in, among other things, previously unissued securities and securities that form part of a control block.
(7) The definition of distribution under the securities legislation of Québec includes the endeavour to obtain or the obtaining of subscribers or purchasers of previously unissued securities.
Prospectus exemptions
(8) It has been suggested by some that advertising or marketing activities, even if clearly made in furtherance of a distribution, could be undertaken in certain circumstances on a prospectus exempt basis. Specifically, it has been suggested that if an exemption from the prospectus requirement is available in respect of a specific distribution (even though the securities will be distributed under a prospectus), advertising or marketing related to such distribution would be exempt from the prospectus requirement. This analysis is premised on an argument that the advertising or marketing activities constitute one distribution that is exempt from the prospectus requirement while the actual sale of the security to the purchaser constitutes a second discrete distribution effected pursuant to the prospectus.
(9) We are of the view that this analysis is contrary to securities legislation. In these circumstances, the distribution in respect of which the advertising or marketing activities are undertaken is the distribution pursuant to the anticipated prospectus. Advertising or marketing must be viewed in the context of the prospectus offering and as an activity in furtherance of that distribution. If it were otherwise, the overriding concerns implicit and explicit in securities legislation regarding equal access to information, conditioning of the market, tipping and insider trading, and the provisions of the legislation designed to ensure such access to information and curb such abuses, could be easily circumvented.
(10) We recognize that an issuer and a dealer may have a demonstrable bona fide intention to effect an exempt distribution and this distribution may be abandoned in favour of a prospectus offering. In these very limited circumstances, there may be two separate distributions. From the time when it is reasonable for a dealer to expect that a bona fide exempt distribution will be abandoned in favour of a prospectus offering, the general rules relating to advertising or marketing activities that constitute an act in furtherance of a distribution will apply.
Advertising or marketing activities
6.3(1) The prospectus requirement applies to any act, advertisement, solicitation, conduct or negotiation directly or indirectly in furtherance of a distribution unless a prospectus exemption is available. Accordingly, advertising or marketing activities intended to promote the distribution of securities, in any form, would be prohibited by virtue of the prospectus requirement. Advertising or marketing activities subject to the prospectus requirement may be oral, written or electronic and include the following:
• television or radio advertisements or commentaries;
• published materials;
• correspondence;
• records;
• videotapes or other similar material;
• market letters;
• research reports;
• circulars;
• promotional seminar text;
• telemarketing scripts;
• reprints or excerpts of any other sales literature.
(2) Advertising or marketing activities that are not in furtherance of a distribution of securities would not generally fall within the definition of a distribution and, therefore, would not be prohibited by virtue of the prospectus requirement. The following activities would not generally be subject to the prospectus requirement:
• advertising and publicity campaigns that are aimed at either selling products or services of the issuer or raising public awareness of the issuer;
• communication of factual information concerning the business of the issuer that is released in a manner, timing and form that is consistent with the regular past communications practices of the issuer if that communication does not refer to or suggest the distribution of securities;
• the release or filing of information that is required to be released or filed pursuant to securities legislation.
(3) Any activities that form part of a plan or series of activities undertaken in anticipation or in furtherance of a distribution would usually trigger the prospectus requirement, even if they would be permissible if viewed in isolation. Similarly, we may still consider advertising or marketing activities that do not indicate that a distribution of securities is contemplated to be in furtherance of a distribution by virtue of their timing and content. In particular, where a private placement or other exempt distribution occurs prior to or contemporaneously with a prospectus offering, we may consider activities undertaken in connection with the exempt distribution as being in furtherance of the prospectus offering.
Pre-marketing and solicitation of expressions of interest in the context of a bought deal
6.4(1) In general, any advertising or marketing activities undertaken in connection with a prospectus prior to the issuance of a receipt for the preliminary prospectus are prohibited under securities legislation by virtue of the prospectus requirement.
(2) In the context of a bought deal, a limited exception to the prospectus requirement has been provided in Part 7 of NI 44-101. The exception is limited to communications by a dealer, directly or through any of its directors, officers, employees or agents, with any person or company (other than another dealer) for the purpose of obtaining from that person or company information as to the interest that it, or any person or company that it represents, may have in purchasing securities of the type that are proposed to be distributed, prior to a preliminary prospectus relating to those securities being filed with the relevant securities regulatory authorities.
(3) The conditions set out in Part 7 of NI 44-101, including the entering into of an enforceable agreement between the issuer and an underwriter or underwriters who have agreed to purchase the securities and the issuance and filing of a press release announcing the agreement, must be satisfied prior to any solicitation of expressions of interest.
(4) A distribution of securities commences at the time when
• a dealer has had discussions with an issuer or a selling securityholder, or with another dealer that has had discussions with an issuer or a selling securityholder about the distribution, and
• those distribution discussions are of sufficient specificity that it is reasonable to expect that the dealer (alone or together with other dealers) will propose to the issuer or the selling securityholder an underwriting of the securities.
(5) We understand that many dealers communicate on a regular basis with clients and prospective clients concerning their interest in purchasing various securities of various issuers. We will not generally consider such ordinary course communications as being made in furtherance of a distribution. However, from the commencement of a distribution, communications by the dealer, with a person or company designed to have the effect of determining the interest that it, or any person or company that it represents, may have in purchasing securities of the type that are the subject of distribution discussions, that are undertaken by any director, officer, employee or agent of the dealer
(a) who participated in or had actual knowledge of the distribution discussions, or
(b) whose communications were directed, suggested or induced by a person referred to in (a), or another person acting directly or indirectly at or upon the direction, suggestion or inducement of a person referred to in (a),
are considered to be in furtherance of the distribution and contrary to securities legislation.
(6) From the commencement of the distribution no communications, market making, or other principal trading activities in securities of the type that are the subject of distribution discussions may be undertaken by a person referred to in paragraph 5(a), above, or at or upon the direction, suggestion or inducement of a person or persons referred to in paragraph 5(a) or (b) above until the earliest of
• the issuance of a receipt for a preliminary prospectus in respect of the distribution,
• the time at which a press release that announces the entering into of an enforceable agreement in respect of a bought deal is issued and filed in accordance with Part 7 of NI 44-101, and
• the time at which the dealer determines not to pursue the distribution.
(7) We note that the Investment Industry Regulatory Organization of Canada has adopted IIROC Rule 29.13 which is consistent with the above discussion relating to pre-marketing of bought deals of equity securities. However, the principles articulated above apply to all offerings, whether of debt or equity securities, or a combination.
Advertising or marketing activities during the waiting period
6.5(1) Securities legislation provides an exception to the prospectus requirement for limited advertising or marketing activities during the waiting period between the issuance of the receipt for the preliminary prospectus and the receipt for the final prospectus. Despite the prospectus requirement, it is permissible during the waiting period to
(a) distribute notices, circulars, advertisements, letters or other communications that
• "identify" the securities proposed to be issued,
• state the price of such securities, if then determined, and
• state the name and address of a person or company from whom purchases of securities may be made,
provided that any such notice, circular, advertisement, letter or other communication states the name and address of a person or company from whom a preliminary prospectus may be obtained,
(b) distribute the preliminary prospectus, and
(c) solicit expressions of interest from a prospective purchaser, if prior to such solicitation or forthwith after the prospective purchaser indicates an interest in purchasing the securities, a copy of the preliminary prospectus is forwarded to the prospective purchaser.
(2) The use of any other marketing information or materials during the waiting period would result in the violation of the prospectus requirement.
(3) The "identification" of the security does not permit an issuer or dealer to include a summary of the commercial features of the issue. These details are set out in the preliminary prospectus which is intended as the main disclosure vehicle pending the issuance of the final receipt. The purpose of the permitted advertising or marketing activities during the waiting period is essentially to alert the public to the availability of the preliminary prospectus.
(4) For the purpose of identifying a security, the advertising or marketing material may only
• indicate whether a security represents debt or a share in a company or an interest in a non-corporate entity (e.g. a unit of undivided ownership in a film property) or a partnership interest,
• name the issuer if the issuer is a reporting issuer, or name and describe briefly the business of the issuer if the issuer is not already a reporting issuer (the description of the business should be cast in general terms and should not attempt to summarize the proposed use of proceeds),
• indicate, without giving details, whether the security qualifies the holder for special tax treatment, and
• indicate how many securities will be made available.
Green sheets
6.6(1) Some dealers prepare summaries of the principal terms of an offering, sometimes referred to as green sheets. Typically green sheets include information beyond the limited information for which an exemption to the prospectus requirement is available during the waiting period. If so, we would consider the distribution of a green sheet to a potential investor to contravene the prospectus requirement.
(2) Including material information in a green sheet or other marketing communication that is not contained in the preliminary prospectus could indicate a failure to provide in the preliminary prospectus full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and result in the prospectus certificate constituting a misrepresentation.
(3) We may request copies of green sheets and other advertising or marketing materials as part of our prospectus review procedures. Any discrepancies between the content of a green sheet and the preliminary prospectus could result in the delay or refusal of a receipt for a final prospectus and, in appropriate circumstances, could result in enforcement action.
Advertising or marketing activities following the issuance of a receipt for a final prospectus
6.7 Advertising or marketing activities that are not prohibited by the prospectus requirement during the waiting period may also be undertaken on the same basis after a receipt has been issued for the final prospectus relating to the distribution. In addition, the prospectus and any document filed with or referred to in the prospectus may be distributed.
Sanctions and enforcement
6.8 Any contravention of the prospectus requirement through the advertising or marketing activities is a serious matter that could result in a cease trade order in respect of the preliminary prospectus to which such advertising or marketing activities relate. In addition, a receipt for a final prospectus relating to any such offering may be refused. In appropriate circumstances, enforcement proceedings may be initiated.
Media reports and coverage
6.9(1) We recognize that an issuer does not have control over media coverage; however, an issuer should take appropriate precautions to ensure that media coverage which can reasonably be considered to be in furtherance of a distribution of securities does not occur after a decision has been made to file a preliminary prospectus or during the waiting period.
(2) We may investigate the circumstances surrounding media coverage of an issuer which appears immediately prior to or during the waiting period and which can reasonably be considered as being in furtherance of a distribution of securities. Action will be taken in appropriate circumstances.
Disclosure practices
6.10 At a minimum, participants in all prospectus distributions should consider the following practices to avoid contravening securities legislation:
• Directors or officers of an issuer should not give interviews to the media immediately prior to or during the waiting period. Directors and officers should normally limit themselves to responding to unsolicited inquiries of a factual nature made by shareholders, securities analysts, financial analysts, the media and others who have a legitimate interest in such information.
• No director or officer of an issuer should make any statement during the period of distribution of securities (which includes the period from the commencement of the distribution as described in subsection 6.4(4) until the closing of the distribution) which constitutes a forecast, projection or prediction with respect to future financial performance, unless that statement relates to and is consistent with a forecast contained in the prospectus.
• Underwriters and legal counsel have the responsibility of ensuring that the issuer and all directors and officers of the issuer who may come in contact with the media are fully aware of the restrictions applicable during the period of distribution of securities. It is not sufficient to make those restrictions known only to the officers comprising the working group.
• Issuers, dealers and other market participants should develop, implement, maintain and enforce procedures to ensure that advertising or marketing activities that are contrary to securities legislation are not undertaken whether intentionally or through inadvertence.
Misleading or untrue statements
6.11 In addition to the prohibitions on advertising or marketing activities that result from the prospectus requirement, securities legislation in certain jurisdictions prohibits any person or company from making any misleading or untrue statements that would reasonably be expected to have a significant effect on the market value of securities. Therefore, in addition to ensuring that advertising or marketing activities are carried out in compliance with the prospectus requirement, issuers, dealers and their advisors must ensure that any statements made in the course of advertising or marketing activities are not untrue or misleading and otherwise comply with securities legislation.
PART 7: TRANSITION
Transition -- Application of Amendments
7.1 The amendments to the Instrument and this Policy which came into effect on January 1, 2011 only apply to a preliminary prospectus, an amendment to a preliminary prospectus, a final prospectus or an amendment to a final prospectus of an issuer which includes financial statements of the issuer in respect of periods relating to financial years beginning on or after January 1, 2011.
Appendix A
Financial Statement Disclosure Requirements for Significant Acquisitions
Chart 1 -- Reporting Issuer
Chart 2 -- Non - Reporting Issuer
Schedule C-1 -- Proposed Amendments to National Instrument 44-101 Short Form Prospectus Distributions
APPENDIX C
SCHEDULE C-1
Amendments to
National Instrument 44-101 Short Form Prospectus Distributions
1. National Instrument 44-101 Short Form Prospectus Distributions is amended by this Instrument.
2. Section 1.1 is amended by
(a) after the definition of "permitted supranational agency", adding the following definition:
""reverse takeover acquiree" has the same meaning as in section 1.1 of NI 51-102;", and
(b) replacing the definition of "successor issuer" with the following:
""successor issuer" means
(a) except for an issuer which, in the case where the restructuring transaction involved a divestiture of a portion of a reporting issuer's business, succeeded to or otherwise acquired less than substantially all of the business divested, an issuer that meets any of the following requirements:
(i) it was a reverse takeover acquiree in a completed reverse takeover;
(ii) it exists as a result of a completed restructuring transaction;
(iii) it participated in a restructuring transaction and its existence continued following the completion of the restructuring transaction; or
(b) an issuer that issued securities to the securityholders of a second issuer that was a reporting issuer, in a reorganization that did not alter those securityholders' proportionate interest in the second issuer or the second issuer's proportionate interest in its assets;".
3. Section 2.7 is amended by
(a) replacing "Exemptions for New Reporting Issuers and Successor Issuers" in the title with "Exemptions for Reporting Issuers that Previously Filed a Prospectus and Successor Issuers", and
(b) adding the following subsection after subsection (1):
"(1.1) Subparagraphs 2.2(d)(ii), 2.3(1)(d)(ii) and 2.6(1)(b)(ii) do not apply to an issuer if
(a) the issuer has filed annual financial statements as required under the applicable CD rule, and
(b) unless the issuer is seeking qualification under section 2.6, the issuer has filed and obtained a receipt for a final prospectus that included the issuer's or each predecessor entity's comparative annual financial statements for its most recently completed financial year or the financial year immediately preceding its most recently completed financial year, together with the auditor's report accompanying those financial statements and, if there has been a change of auditors since the comparative period, an auditor's report on the financial statements for the comparative period.".
4. Subsection 2.7(1) is amended by replacing "Paragraph 2.2(d), paragraph 2.3(1)(d) and paragraph 2.6(1)(b)" with "Paragraphs 2.2(d), 2.3(1)(d) and 2.6(1)(b)".
5. Paragraph 2.7(1)(a) is amended by adding "any" after "has not yet been required under the applicable CD rule to file".
6. Paragraph 2.7(2)(a) is amended by adding "or the reorganization described in paragraph (b) of the definition of "successor issuer"," after "transaction".
7. Paragraph 2.7(2)(b) is amended by
(a) replacing "that" with "or the reorganization described in paragraph (b) of the definition of "successor issuer", in which the successor issuer participated or which ",
(b) adding "or reorganization" after "an issuer that was a party to the restructuring transaction", and
(c) adding ", in the case of a restructuring transaction" after "circular".
8. Section 2.7 is amended by adding the following subsection after subsection (2):
"(3) Paragraphs 2.2(d), 2.3(1)(d) and 2.6(1)(b) do not apply to an issuer if
(a) the issuer is not exempt from the requirement in the applicable CD rule to file annual financial statements within a prescribed period after its financial year end, but the issuer has not yet, since the completion of a qualifying transaction or reverse takeover (as both terms are defined in the TSX Venture Exchange Corporate Finance Manual as amended from time to time) been required under the applicable CD rule to file annual financial statements, and
(b) a CPC filing statement (as defined in the TSX Venture Exchange Corporate Finance Manual as amended from time to time) or other filing statement of the TSX Venture Exchange was filed by the issuer, and
(i) in the case of a CPC filing statement, such statement
(A) was filed in connection with a qualifying transaction, and
(B) complied with the TSX Venture Exchange Corporate Finance Manual, as amended from time to time, in respect of that qualifying transaction; or
(ii) in the case of a TSX Venture Exchange filing statement, other than a CPC filing statement, such statement
(A) was filed in connection with a reverse takeover, and
(B) complied with TSX Venture Exchange Corporate Finance Manual, as amended from time to time, in respect of that reverse takeover.".
9. Subsection 2.8(5) is repealed.
10. Section 2.8 is amended by adding the following subsection after subsection (5):
"(6) For the purposes of this section, an issuer is exempted from the requirement to wait at least 10 business days between filing the notice referred to in subsection (1) and filing its first preliminary short form prospectus if
(a) in the case of an issuer that is relying on section 2.4 or 2.5 in order to qualify to file a short form prospectus, the following requirements are met:
(i) the issuer satisfies the requirements of section 2.4 or 2.5, as applicable, at the time of filing its short form prospectus;
(ii) the issuer files its notice of intention before or concurrently with the filing of its preliminary short form prospectus; and
(iii) the issuer's credit supporter
(A) previously filed a notice of intention under subsection (1) which has not been withdrawn; or
(B) is deemed to have filed a notice of intention under subsection (4); or
(b) in the case of an issuer that is a successor issuer, the following requirements are met:
(i) the issuer satisfies the requirements of any of section 2.2, 2.3 or 2.6 and subsection 2.7(2);
(ii) the issuer files its notice of intention before or concurrently with the filing of its preliminary short form prospectus; and
(iii) the issuer has acquired substantially all of its business from a predecessor entity which
(A) previously filed a notice of intention under subsection (1) which has not been withdrawn; or
(B) is deemed to have filed a notice of intention under subsection (4).".
11. Section 4.1 is amended by renumbering it as subsection 4.1(1).
12. Subparagraph 4.1(1)(b)(i) is amended by
(a) replacing "Appendix A to NI 41-101" with "personal information form", and
(b) deleting ";" after "for".
13. Clause 4.1(1)(b)(i)(D) is amended by
(a) replacing "executive officer of the promoter," with "executive officer of the promoter; and", and
(b) deleting "for whom the issuer has not previously filed or delivered,".
14. Clause 4.1(1)(b)(i)(E) is repealed.
15. Clause 4.1(1)(b)(i)(F) is repealed.
16. Clause 4.1(1)(b)(i)(G) is repealed.
17. Section 4.1 is amended by adding the following after subsection (1):
"(2) Despite subparagraph (1)(b)(ii), an issuer is not required to file a personal information form for an individual if all of the following are satisfied:
(a) a personal information form of the individual has been executed by the individual within three years preceding the date of the filing of the preliminary short form prospectus;
(b) the personal information form was delivered to the regulator or, in Québec, the securities regulatory authority
(i) by an issuer on behalf of the individual on or after [insert effective date of amendments]; or
(ii) by the issuer on behalf of the individual after March 16, 2008 but before [insert effective date of amendments] in the form set out in Appendix A to NI 41-101 in effect during this period;
(c) the information concerning the individual contained in the responses to
(i) questions 6 through 10 of the personal information form referenced in subparagraph (b)(i) remain correct as at the date of the certificate referred to in paragraph (d); or
(ii) questions 4(B) and (C) and questions 6 through 9 of the personal information form referenced in subparagraph (b)(ii) remain correct as at the date of the certificate referred to in paragraph (d);
(d) the issuer delivers to the regulator or, in Québec, the securities regulatory authority, concurrently with the filing of the preliminary short form prospectus, a certificate of the issuer in the form set out in Schedule 4 of Appendix A to NI 41-101 stating that the individual has provided the issuer with confirmation in respect of the requirement contained in paragraph (c);
(e) the certificate referenced in paragraph (d) is dated no earlier than 30 days before the filing of the preliminary short form prospectus.".
18. Subparagraph 4.2(a)(vi) is amended by
(a) deleting "and" in clause (A),
(b) adding the following clause after clause (A):
"(A.1) each director of the issuer, and ", and
(c) replacing "each person or company required to provide a certificate under Part 5 of NI 41-101 or other securities legislation, other than an issuer," in clause (B) with "any other person or company that provides or signs a certificate under Part 5 of NI 41-101 or other securities legislation, other than an issuer,".
19. Subparagraph 4.2(a)(x) is amended by
(a) after "Undertaking to File",replacing "Documents and Material Contracts" with "Agreements, Contracts and Material Contracts",
(b) replacing "a document referred to in subparagraph (iii) or (iii.1)" with "an agreement or contract referred to in subparagraph (iii) or a material contract under subparagraph (iii.1)",
(c) deleting "or become effective" wherever it appears,
(d) adding "final" before "short form prospectus", and
(e) replacing "file the document promptly and in any event within seven days after the completion of the distribution; and" with "file the agreement, contract or material contract promptly and in any event no later than seven days after the execution of the agreement, contract or material contract;".
20. Paragraph 4.2(a) is amended by adding the following subparagraph after subparagraph (x):
"(x.1) Undertaking to File Unexecuted Documents -- if a document referred to in subparagraph (iii) will not be executed in order to become effective and has not become effective before the filing of the final short form prospectus, but will become effective on or before the completion of the distribution, the issuer must file with the securities regulatory authority, no later than the time of filing of the final short form prospectus, an undertaking of the issuer to the securities regulatory authority to file the document promptly and in any event no later than seven days after the document becomes effective; and".
21. Section 7.1 is amended by replacing "filing of a preliminary short form prospectus" with "issuance of a receipt for a preliminary short form prospectus".
22. Section 7.2 is amended by replacing "filing of a preliminary short form prospectus" with "issuance of a receipt for a preliminary short form prospectus".
23. Subsection 1.6(2) of Form 44-101F1 Information Required in a Prospectus is amended by replacing
"(a) disclose that a purchaser who acquires securities forming part of the underwriters' over-allocation position acquires those securities under this short form prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the over-allotment option or secondary market purchases, and
(b) describe the terms of the option."
with the following:
"(a) describe the terms of the option, and
(b) provide the following disclosure:
"A purchaser who acquires [insert type of securities qualified for distribution under the prospectus] forming part of the underwriters' over-allocation position acquires those securities under this short form prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the over-allotment option or secondary market purchases.""
24. Subsection 1.6(3) of Form 44-101F1 is amended by replacing ", provide totals for both the minimum and maximum subscriptions, if applicable." with the following:
"and a minimum offering amount
(a) is required for the issuer to achieve one or more of the purposes of the offering, provide totals for both the minimum and maximum offering amount, or
(b) is not required for the issuer to achieve any of the purposes of the offering, state the following in boldface type:
"There is no minimum amount of funds that must be raised under this offering. This means that the issuer could complete this offering after raising only a small proportion of the offering amount set out above."" .
25. Subsection 1.9(1) of Form 44-101F1 is amended by adding "or series" after "class".
26. Section 1.11 of Form 44-101F1 is amended by
(a) replacing "International Issuers" with "Enforcement of Judgments against Foreign Persons or Companies",
(b) replacing
"If the issuer, a selling securityholder, or any person or company required to provide a certificate under Part 5 of NI 41-101"
with the following:
"If the issuer, a director of the issuer, a selling securityholder, or any other person or company that is signing or providing a certificate under Part 5 of NI 41-101",
(c) replacing
"[issuer, selling securityholder, person or company signing a certificate under Part 5 of NI 41-101 or securities legislation]"
with the following:
"[issuer, director of the issuer, selling securityholder, or any other person or company signing or providing a certificate under Part 5 of NI 41-101 or other securities legislation]", and
(d) replacing "addresses" with "address(es)".
27. Subsection 4.2(2) of Form 44-101F1 is amended by
(a) replacing "subscription" with "offering amount", and
(b) replacing "subscriptions" with "offering amounts".
28. Section 4.2 of Form 44-101F1 is amended by adding the following subsections after subsection (2):
"(3) If all of the following apply, disclose how the proceeds will be used by the issuer, with reference to various potential thresholds of proceeds raised, in the event that the issuer raises less than the maximum offering amount:
(a) the closing of the distribution is not subject to a minimum offering amount;
(b) the distribution of the securities is to be on a best efforts basis; and
(c) the issuer has significant short-term non-discretionary expenditures including those for general corporate purposes, or significant short-term capital or contractual commitments, and may not have other readily accessible resources to satisfy those expenditures or commitments.
(4) If the issuer is required to provide disclosure under subsection (3), the issuer must discuss, in respect of each threshold, the impact (if any) of raising this amount on its liquidity, operations, capital resources and solvency.
INSTRUCTIONS
If the issuer is required to disclose the use of proceeds at various thresholds under subsections 4.2(3) and (4), include as an example a threshold that reflects the receipt of a small portion of the offering."
29. Subsection 4.10(1) of Form 44-101F1 is amended by
(a) replacing "acquired on a short-form prospectus-exempt basis" with "acquired on a prospectus-exempt basis", and
(b) replacing "proceeds of the short-form prospectus-exempt financing" with "proceeds of the prospectus-exempt financing".
30. Section 7.6 of Form 44-101F1 is amended by
(a) replacing "disclose" with "provide the following disclosure in the short form prospectus to indicate", and
(b) deleting "and provide the following disclosure in the short form prospectus, with the bracketed information completed".
31. Section 7A.1 of Form 44-101F1 is amended by
(a) adding "or series" after "each class",
(b) adding "or exchangeable" after "convertible", and
(c) adding "or series" after "those classes".
32. Paragraph 7A.1(a) of Form 44-101F1 is amended by adding "sold by the" before "selling securityholder".
33. Paragraph 7A.1(b) of Form 44-101F1 is amended by adding "or sold" after "issued".
34. Paragraph 7A.1(c) of Form 44-101F1 is amended by adding "or sold" after "issued".
35. Subsection 7A.2(1) of Form 44-101F1 is amended by
(a) replacing "each class of" with "the following",
(b) replacing "is" with "are",
(c) adding "for the securities" after "quotation", and
(d) replacing "generally occurs." with the following:
"generally occurs:
(a) each class or series of securities of the issuer distributed under the short form prospectus;
(b) securities of the issuer into which those classes or series of securities are convertible or exchangeable.".
36. Subsection 7A.2(2) of Form 44-101F1 is amended by
(a) replacing "If a class of"with "For the following",
(b) replacing "is" with "that are",
(c) replacing "but is traded " with "but are traded",
(d) adding "for the securities" after "quotation", and
(e) replacing "generally occurs. " with the following:
"generally occurs:
(a) each class or series of securities of the issuer distributed under the short form prospectus;
(b) securities of the issuer into which those classes or series of securities are convertible or exchangeable.".
37. Subsection 11.1(2) of Form 44-101F1 is amended by adding "applicable portions of" after "clarify that".
38. Section 11.1 of Form 44-101F1 is amended by adding the following subsection after subsection (2):
"(3) Despite item (7.) of subsection (1), an issuer may exclude from its short form prospectus a report, valuation, statement or opinion of a person or company contained in an information circular prepared in connection with a special meeting of securityholders of the issuer and any references therein, if:
(a) the report is not an auditor's report in respect of financial statements of a person or company; and
(b) the report, valuation, statement or opinion was prepared in respect of a specific transaction contemplated in the information circular, unrelated to the distribution of securities under the short form prospectus, and that transaction has been previously abandoned or completed.".
39. Subsection 11.3(2) of Form 44-101F1 is amended by replacing "Item 14.2 or 14.5 of Form 51-102F5 in the information circular referred to in paragraph 2.7(2)(b) of the Instrument." with the following:
"(a) Item 14.2 or 14.5 of Form 51-102F5 in the information circular referred to in paragraph 2.7(2)(b) of the Instrument; or
(b) the policies and requirements of the TSX Venture Exchange prescribed for disclosure of a qualifying transaction in a CPC filing statement or a reverse takeover in a filing statement referred to in paragraph 2.7(3)(b) of the Instrument.".
40. The INSTRUCTION section of section 11.3 of Form 44-101F1 is amended by numbering the existing text as subsection (1).
41. Subsection (1) of the INSTRUCTION section of section 11.3 is amended by
(a) adding "11.3" before "(2)", and
(b) adding ", CPC filing statement or other filing statement of the TSX Venture Exchange" after "information circular".
42. The INSTRUCTION section of section 11.3 of Form 44-101F1 is amended by adding the following subsection after subsection (1):
"(2) The disclosure referenced in instruction (1) above must be presented in a way that supplements, but does not replace, the disclosure prescribed for a transaction that also constitutes a significant acquisition for the issuer or a reverse takeover in which the issuer was involved, if applicable.".
43. Item 11 of Form 44-101F1 is amended by adding the following after the INSTRUCTION section of section 11.4:
"11.5 Additional Disclosure for Issuers of Asset-Backed Securities
If the issuer has not filed or been required to file interim financial statements and related MD&A in respect of an interim period, if any, subsequent to the financial year in respect of which it has included annual financial statements in the short form prospectus because it is not a reporting issuer and is qualifying to file the short form prospectus under section 2.6 of the Instrument, include the interim financial statements and related MD&A that the issuer would have been required to incorporate by reference under paragraph 3 of subsection 11.1(1) if the issuer were a reporting issuer at the relevant time.".
44. Section 15.3 of Form 44-101F1 is amended by adding "and that disclosure is correct as at the date of the prospectus" after "AIF".
45. Section 20.1 of Form 44-101F1 is amended by replacing "revisions of the price of damages" with "revisions of the price or damages".
46. Item 20 of Form 44-101F1 is amended by adding the following section after section 20.2:
"20.3 Convertible, Exchangeable or Exercisable Securities - In the case of an offering of convertible, exchangeable or exercisable securities, provide a statement in the following form:
"In an offering of [state name of convertible, exchangeable or exercisable securities], investors are cautioned that the statutory right of action for damages for a misrepresentation contained in the prospectus is limited, in certain provincial [or territorial] securities legislation, to the price at which the [state name of convertible, exchangeable or exercisable securities] is offered to the public under the prospectus offering. This means that, under the securities legislation of certain provinces [or territories], if the purchaser pays additional amounts upon [conversion, exchange or exercise] of the security, those amounts may not be recoverable under the statutory right of action for damages that applies in such provinces [or territories]. The purchaser should refer to the applicable provisions of the purchaser's province [or territory] for the particulars of this right of action for damages or consult with a legal adviser.""
47. This Instrument comes into force on •, 2012.
Schedule C-2 -- Proposed Amendments to Companion Policy 44-101CP to National Instrument 44-101 Short Form Prospectus Distributions
APPENDIX C
SCHEDULE C-2
Amendments to
Companion Policy 44-101 CP to National Instrument 44-101
Short Form Prospectus Distributions
1. Companion Policy 44-101 CP to National Instrument 44-101 Short Form Prospectus Distributions is amended.
2. Subsection 1.7(5) is amended by
(a) replacing "The definition of "successor issuer" requires that the issuer exist "as a result of a restructuring transaction"." with the following:
"A successor issuer is defined to include a reverse takeover acquiree in a completed reverse takeover. Alternatively, the definition of "successor issuer" requires that the issuer exist "as a result of a restructuring transaction" or that the issuer participate in the restructuring transaction and continue to exist following completion of the restructuring transaction. In both instances, prospectus level disclosure or comparable disclosure prescribed by the TSX Venture Exchange for such issuer must be provided in an information circular or similar disclosure document pursuant to subsections 2.7(2) and (3) of NI 44-101.",
(b) deleting the following:
"Also, if a corporation is incorporated for the sole purpose of facilitating a restructuring transaction, the securities regulatory authorities regard the new corporation as "existing as a result of a restructuring transaction" despite the fact that the corporation may have been incorporated before the restructuring transaction.", and
(c) adding the following at the end:
"However, if the divestiture represents a divestiture of substantially all of the business of the predecessor entity to the issuer, the issuer would be considered a successor issuer. In such circumstances, the financial information concerning the predecessor entity should be representative of the financial information of the successor issuer. Therefore, if an issuer is relying on this basis for short form prospectus qualification, it must ensure that the financial statements of the predecessor entity are a relevant, accurate proxy for its financial statements as a successor issuer.
An issuer may also be considered a successor issuer to a second issuer where there has been an internal reorganization of the second issuer, provided that the conditions in paragraph (b) of the definition of "successor issuer" are met. In particular, the internal reorganization must not result in an alteration of the securityholders' proportionate interest in the second issuer nor the second issuer's proportionate interest in its assets. For example, this may arise in an internal reorganization in which all of the securityholders of the second issuer exchange their securities in the second issuer for securities of the successor issuer. The second issuer would become a subsidiary of the successor issuer and its ownership in its assets would remain the same. The successor issuer definition was expanded to include this type of internal reorganization as it may not be considered a "restructuring transaction" as defined in NI 51-102 by virtue of the exclusion found at the end of the definition of "restructuring transaction".".
3. Subsection 2.1(1) is amended in the second paragraph by deleting "and, in Québec, disclosure of material facts likely to affect the value or the market price of the securities to be distributed".
4. Part 3 is amended by
(a) adding the following section after section 3.4:
"3.4.1 Special meeting information circular -- Subsection 11.1(3) of Form 44-101F1 sets out certain circumstances where an issuer is not required to incorporate by reference into its prospectus a report, valuation, statement or opinion of an expert that is indirectly incorporated by reference into its prospectus through the incorporation by reference of an information circular prepared for a special meeting of the issuer. A special meeting information circular often relates to a restructuring transaction of an issuer or other special business of the issuer. In these circumstances, the issuer or its board of directors may engage an expert to provide an opinion that is specific to the business that will be considered at the special meeting of securityholders. For example, the board may retain a person or company to provide a fairness opinion which would assist the board in determining whether to recommend the approval of the proposed transaction to its securityholders. Similarly, the issuer may include a tax opinion in the information circular to illustrate the tax consequences of the proposed transaction to its securityholders. Pursuant to subsection 11.1(3), we would not require the incorporation by reference of these particular opinions, provided that these opinions were prepared in respect of the specific transaction contemplated in the information circular and this transaction has been completed or abandoned prior to the filing of the prospectus.", and
(b) adding the following section after section 3.9:
"3.10 No Minimum Offering Amount -- Issuers distributing securities on a best efforts basis that have not specified a minimum offering amount in their prospectus, should refer to section 2.2.1 and subsection 4.3(3) of the Companion Policy to NI 41-101 for further guidance.".
5. These amendments become effective on •, 2012.
Schedule D-1 -- Blackline Showing Proposed Changes to National Instrument 44-101 Short Form Prospectus Distributions
APPENDIX D
SCHEDULE D-1
NATIONAL INSTRUMENT 44-101
SHORT FORM PROSPECTUS DISTRIBUTIONS
PART 1 DEFINITIONS AND INTERPRETATIONS
1.1 Definitions -- In this Instrument
"AIF" has the same meaning as in NI 51-102 for a reporting issuer other than an investment fund, and for an investment fund means an annual information form as such term is used in NI 81-106;
"applicable CD rule" means, for a reporting issuer other than an investment fund, NI 51-102 and, for an investment fund, NI 81-106;
"approved rating" means, for a security, a rating at or above one of the following rating categories issued by an approved rating organization for the security or a rating category that replaces a category listed below:
"cash equivalent" means an evidence of indebtedness that has a remaining term to maturity of 365 days or less and that is issued, or fully and unconditionally guaranteed as to principal and interest, by
(a) the government of Canada or the government of a jurisdiction of Canada,
(b) the government of the United States of America, the government of one of the states of the United States of America, the government of another sovereign state or a permitted supranational agency, if, in each case, the evidence of indebtedness has an approved rating, or
(c) a Canadian financial institution, or other entity that is regulated as a banking institution, loan corporation, trust company, or insurance company or credit union by the government, or an agency of the government, of the country under whose laws the entity is incorporated or organized or a political subdivision of that country, if, in either case, the Canadian financial institution or other entity has outstanding short term debt securities that have received an approved rating from any approved rating organization;
"cash settled derivative" means a derivative, the terms of which provide for settlement only by means of cash or cash equivalent the amount of which is determinable by reference to the underlying interest of the derivative;
"current AIF" means,
(a) if the issuer has filed an AIF for its most recently completed financial year, that AIF, or
(b) the issuer's AIF filed for the financial year immediately preceding its most recently completed financial year if
(i) the issuer has not filed an AIF for its most recently completed financial year, and
(ii) the issuer is not yet required under the applicable CD rule to have filed its annual financial statements for its most recently completed financial year,
"current annual financial statements" means,
(a) if the issuer has filed its comparative annual financial statements in accordance with the applicable CD rule for its most recently completed financial year, those financial statements together with the auditor's report accompanying the financial statements and, if there has been a change of auditors since the comparative period, an auditor's report on the financial statements for the comparative period, or
(b) the issuer's comparative annual financial statements filed for the financial year immediately preceding its most recently completed financial year, together with the auditor's report accompanying the financial statements and, if there has been a change of auditors since the comparative period, an auditor's report on the financial statements for the comparative period if
(i) the issuer has not filed its comparative annual financial statements for its most recently completed financial year, and
(ii) the issuer is not yet required under the applicable CD rule to have filed its annual financial statements for its most recently completed financial year;
"material change report" means, for a reporting issuer other than an investment fund, a completed Form 51-102F3, and for an investment fund, a completed Form 51-102F3Material Change Report of NI 51-102 adjusted as directed by NI 81-106;
"MD&A" has the same meaning as in NI 51-102 in relation to a reporting issuer other than an investment fund, and in relation to an investment fund means an annual or interim management report of fund performance as defined in NI 81-106;
"NI 13-101" means National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR);
"NI 41-101" means National Instrument 41-101 General Prospectus Requirements;
"permitted supranational agency" means the International Bank for Reconstruction and Development, the International Finance Corporation, the Inter-American Development Bank, the Asian Development Bank, the Caribbean Development Bank, the European Bank for Reconstruction and Development, the African Development Bank and any person or company prescribed under paragraph (g) of the definition of "foreign property" in subsection 206(1) of the ITA;
"reverse takeover acquiree" has the same meaning as in section 1.1 of NI 51-102;
"short form eligible exchange" means each of the Toronto Stock Exchange, Tier 1 and Tier 2 of the TSX Venture Exchange and the Canadian National Stock Exchange;
"successor issuer" means
(a) "successor issuer"
meansexcept for an issuerexisting as a result of a restructuring transaction, other thanwhich, in the case where the restructuring transaction involved a divestiture of a portion ofana reporting issuer's business,an issuer thatsucceeded to or otherwise acquiredthe portionless than substantially all of the business divested;, an issuer that meets any of the following requirements:(i) it was a reverse takeover acquiree in a completed reverse takeover;
(ii) it exists as a result of a completed restructuring transaction;
(iii) it participated in a restructuring transaction and its existence continued following the completion of the restructuring transaction; or
(b) an issuer that issued securities to the securityholders of a second issuer that was a reporting issuer, in a reorganization that did not alter those securityholders' proportionate interest in the second issuer or the second issuer's proportionate interest in its assets;
"underlying interest" means, for a derivative, the security, commodity, financial instrument, currency, interest rate, foreign exchange rate, economic indicator, index, basket, agreement, benchmark or any other reference, interest or variable, and, if applicable, the relationship between any of the foregoing, from, to or on which the market price, value or any payment obligation of the derivative is derived, referenced or based; and
"U.S. credit supporter" means a credit supporter that
(a) is incorporated or organized under the laws of the United States of America or any state or territory of the United States of America or the District of Columbia,
(b) either
(i) has a class of securities registered under section 12(b) or section 12(g) of the 1934 Act, or
(ii) is required to file reports under section 15(d) of the 1934 Act,
(c) has filed with the SEC all 1934 Act filings for a period of 12 calendar months immediately before the filing of the preliminary short form prospectus,
(d) is not registered or required to be registered as an investment company under theInvestment Company Act of 1940 of the United States of America, and
(e) is not a commodity pool issuer as defined in National Instrument 71-101 The Multijurisdictional Disclosure System.
1.1.1 Definitions in NI 41-101 -- Every term that is defined or interpreted in NI 41-101, the definition or interpretation of which is not restricted to a specific portion of NI 41-101, has, if used in this Instrument, the meaning ascribed to it in NI 41-101, unless otherwise defined or interpreted in this Instrument.
1.2 References to Information Included in a Document -- References in this Instrument to information included in a document refer to both information contained directly in the document and information incorporated by reference in the document.
1.3 References to Information to be Included in a Document -- Provisions of this Instrument that require an issuer to include information in a document require an issuer either to insert the information directly in the document or to incorporate the information in the document by reference.
1.4 Interpretation of "short form prospectus" -- In this Instrument, other than in Parts 4 through 8 or unless otherwise stated, a reference to a short form prospectus includes a preliminary short form prospectus.
1.5 [Repealed]
PART 2 QUALIFICATION TO FILE A PROSPECTUS IN THE FORM OF A SHORT FORM PROSPECTUS
2.1 Short Form Prospectus
(1) An issuer shall not file a prospectus in the form of Form 44-101F1 of this Instrument unless the issuer is qualified under any of sections 2.2 through 2.6 to file a prospectus in the form of a short form prospectus.
(2) An issuer that is qualified under any of sections 2.2 through 2.6 to file a prospectus in the form of a short form prospectus for a distribution may file, for that distribution,
(a) a preliminary prospectus, prepared and certified in the form of Form 44-101F1; and
(b) a prospectus, prepared and certified in the form of Form 44-101F1.
2.2 Basic Qualification Criteria -- An issuer is qualified to file a prospectus in the form of a short form prospectus for a distribution of any of its securities in the local jurisdiction, if the following criteria are satisfied:
(a) the issuer is an electronic filer under NI 13-101;
(b) the issuer is a reporting issuer in at least one jurisdiction of Canada;
(c) the issuer has filed with the securities regulatory authority in each jurisdiction in which it is a reporting issuer all periodic and timely disclosure documents that it is required to have filed in that jurisdiction
(i) under applicable securities legislation,
(ii) pursuant to an order issued by the securities regulatory authority, or
(iii) pursuant to an undertaking to the securities regulatory authority;
(d) the issuer has, in at least one jurisdiction in which it is a reporting issuer,
(i) current annual financial statements, and
(ii) a current AIF;
(e) the issuer's equity securities are listed and posted for trading on a short form eligible exchange and the issuer is not an issuer
(i) whose operations have ceased, or
(ii) whose principal asset is cash, cash equivalents, or its exchange listing.
2.3 Alternative Qualification Criteria for Issuers of Approved Rating Non-Convertible Securities
(1) An issuer is qualified to file a prospectus in the form of a short form prospectus for a distribution of non-convertible securities in the local jurisdiction, if the following criteria are satisfied:
(a) the issuer is an electronic filer under NI 13-101;
(b) the issuer is a reporting issuer in at least one jurisdiction of Canada;
(c) the issuer has filed with the securities regulatory authority in each jurisdiction in which it is a reporting issuer all periodic and timely disclosure documents that it is required to have filed in that jurisdiction
(i) under applicable securities legislation,
(ii) pursuant to an order issued by the securities regulatory authority, or
(iii) pursuant to an undertaking to the securities regulatory authority;
(d) the issuer has, in at least one jurisdiction in which it is a reporting issuer,
(i) current annual financial statements, and
(ii) a current AIF;
(e) the securities to be distributed
(i) have received an approved rating on a provisional basis,
(ii) are not the subject of an announcement by an approved rating organization, of which the issuer is or ought reasonably to be aware, that the approved rating given by the organization may be down-graded to a rating category that would not be an approved rating, and
(iii) have not received a provisional or final rating lower than an approved rating from any approved rating organization.
(2) Paragraph (1)(e) does not apply to an issuer filing a short form prospectus that is a base shelf prospectus under NI 44-102.
2.4 Alternative Qualification Criteria for Issuers of Guaranteed Non-Convertible Debt Securities, Preferred Shares and Cash Settled Derivatives
(1) An issuer is qualified to file a prospectus in the form of a short form prospectus for a distribution of non-convertible debt securities, non-convertible preferred shares or non-convertible cash settled derivatives in the local jurisdiction, if the following criteria are satisfied:
(a) a credit supporter has provided full and unconditional credit support for the securities being distributed,
(b) at least one of the following is true:
(i) the credit supporter satisfies the criteria in paragraphs 2.2(a), (b), (c) and (d) if the word "issuer" is replaced with "credit supporter" wherever it occurs;
(ii) the credit supporter is a U.S. credit supporter and the issuer is incorporated or organized under the laws of Canada or a jurisdiction of Canada;
(c) unless the credit supporter satisfies the criteria in paragraph 2.2(e) if the word "issuer" is replaced with "credit supporter" wherever it occurs, at the time the preliminary short form prospectus is filed
(i) the credit supporter has outstanding non-convertible securities that
(A) have received an approved rating,
(B) have not been the subject of an announcement by an approved rating organization, of which the issuer is or ought reasonably to be aware, that the approved rating given by the organization may be down-graded to a rating category that would not be an approved rating, and
(C) have not received a rating lower than an approved rating from any approved rating organization, and
(ii) the securities to be issued by the issuer
(A) have received an approved rating on a provisional basis,
(B) have not been the subject of an announcement by an approved rating organization, of which the issuer is or ought reasonably to be aware, that the approved rating given by the organization may be down-graded to a rating category that would not be an approved rating, and
(C) have not received a provisional or final rating lower than an approved rating from any approved rating organization.
(2) Subparagraph (1)(c)(ii) does not apply to an issuer filing a short form prospectus that is a base shelf prospectus under NI 44-102.
2.5 Alternative Qualification Criteria for Issuers of Guaranteed Convertible Debt Securities or Preferred Shares -- An issuer is qualified to file a prospectus in the form of a short form prospectus for a distribution of convertible debt securities or convertible preferred shares in the local jurisdiction, if the following criteria are satisfied:
(a) the debt securities or the preferred shares are convertible into securities of a credit supporter that has provided full and unconditional credit support for the securities being distributed;
(b) the credit supporter satisfies the criteria in section 2.2 if the word "issuer" is replaced with "credit supporter" wherever it occurs.
2.6 Alternative Qualification Criteria for Issuers of Asset-Backed Securities
(1) An issuer established in connection with a distribution of asset-backed securities is qualified to file a prospectus in the form of a short form prospectus for a distribution of asset-backed securities in the local jurisdiction, if the following criteria are satisfied:
(a) the issuer is an electronic filer under NI 13-101;
(b) the issuer has, in at least one jurisdiction of Canada,
(i) current annual financial statements, and
(ii) a current AIF;
(c) the asset-backed securities to be distributed
(i) have received an approved rating on a provisional basis,
(ii) have not been the subject of an announcement by an approved rating organization, of which the issuer is or ought reasonably to be aware, that the approved rating given by the organization may be down-graded to a rating category that would not be an approved rating, and
(iii) have not received a provisional or final rating lower than an approved rating from any approved rating organization.
(2) Paragraph (1)(c) does not apply to an issuer filing a short form prospectus that is a base shelf prospectus under NI 44-102.
2.7 Exemptions for
NewReporting Issuers that Previously Filed a Prospectus and Successor Issuers(1)
ParagraphParagraphs 2.2(d),paragraph2.3(1)(d) andparagraph2.6(1)(b) do not apply to an issuer if(a) the issuer is not exempt from the requirement in the applicable CD rule to file annual financial statements within a prescribed period after its financial year end, but the issuer has not yet been required under the applicable CD rule to file any annual financial statements, and
(b) unless the issuer is seeking qualification under section 2.6, the issuer has filed and obtained a receipt for a final prospectus that included the issuer's or each predecessor entity's comparative annual financial statements for its most recently completed financial year or the financial year immediately preceding its most recently completed financial year, together with the auditor's report accompanying those financial statements and, if there has been a change of auditors since the comparative period, an auditor's report on the financial statements for the comparative period.
(
2) Paragraph1.1) Subparagraphs 2.2(d)(ii),paragraph2.3(1)(d)(ii) andparagraph2.6(1)(b)(ii) do not apply toa successoran issuer if(a) the issuer has filed annual financial statements as required under the applicable CD rule, and
(b) unless the issuer is seeking qualification under section 2.6, the issuer has filed and obtained a receipt for a final prospectus that included the issuer's or each predecessor entity's comparative annual financial statements for its most recently completed financial year or the financial year immediately preceding its most recently completed financial year, together with the auditor's report accompanying those financial statements and, if there has been a change of auditors since the comparative period, an auditor's report on the financial statements for the comparative period.
(2) Paragraphs 2.2(d), 2.3(1)(d) and 2.6(1)(b) do not apply to a successor issuer if
(a) the successor issuer is not exempt from the requirement in the applicable CD rule to file annual financial statements within a prescribed period after its financial year end, but the successor issuer has not yet, since the completion of the restructuring transactionor the reorganization described in paragraph (b) of the definition of "successor issuer", which resulted in the successor issuer, been required under the applicable CD rule to file annual financial statements, and
(b) an information circular relating to the restructuring transaction
thator the reorganization described in paragraph (b) of the definition of "successor issuer", in which the successor issuer participated or which resulted in the successor issuer, was filed by the successor issuer or an issuer that was a party to the restructuring transactionor reorganization, and such information circular, in the case of a restructuring transaction(i) complied with applicable securities legislation, and
(ii) included disclosure in accordance with section 14.2 or 14.5 of Form 51-102F5 for the successor issuer;
(3) Paragraphs 2.2(d), 2.3(1)(d) and 2.6(1)(b) do not apply to an issuer if
(a) the issuer is not exempt from the requirement in the applicable CD rule to file annual financial statements within a prescribed period after its financial year end, but the issuer has not yet, since the completion of a qualifying transaction or reverse takeover (as both terms are defined in the TSX Venture Exchange Corporate Finance Manual as amended from time to time) been required under the applicable CD rule to file annual financial statements, and
(b) a CPC filing statement (as defined in the TSX Venture Exchange Corporate Finance Manual as amended from time to time) or other filing statement of the TSX Venture Exchange was filed by the issuer, and
(i) in the case of a CPC filing statement, such statement
(A) was filed in connection with a qualifying transaction, and
(B) complied with the TSX Venture Exchange Corporate Finance Manual, as amended from time to time, in respect of that qualifying transaction; or
(ii) in the case of a TSX Venture Exchange filing statement, other than a CPC filing statement, such statement
(A) was filed in connection with a reverse takeover, and
(B) complied with TSX Venture Exchange Corporate Finance Manual, as amended from time to time, in respect of that reverse takeover.
2.8 Notice of Intention and Transition
(1) An issuer is not qualified to file a short form prospectus under this Part unless it has filed a notice declaring its intention to be qualified to file a short form prospectus at least 10 business days prior to the issuer filing its first preliminary short form prospectus after the notice
(a) with its notice regulator, and
(b) in substantially the form of Appendix A.
(2) The notice under subsection (1) is effective until withdrawn.
(3) For the purposes of subsection (1), "notice regulator" means, as determined on the date the notice is filed, the securities regulatory authority or regulator of the jurisdiction of Canada
(a) in which the issuer's head office is located, if the issuer is not an investment fund and the issuer is a reporting issuer in that jurisdiction,
(b) in which the investment fund manager's head office is located, if the issuer is an investment fund and the issuer is a reporting issuer in that jurisdiction, or
(c) with which the issuer has determined that it has the most significant connection, if paragraphs (a) and (b) do not apply to the issuer.
(4) For the purposes of this section, if, on December 29, 2005, an issuer had a current AIF under National Instrument 44-101 Short Form Prospectus Distributions that was in force on December 29, 2005, the issuer is deemed to have filed a notice on December 14, 2005 declaring its intention to be qualified to file a short form prospectus.
(5)
For the purposes of this Part, if, on December 29, 2005, an issuer or a credit supporter had an annual information form in Form 44-101F1 AIF, prior to its repeal on May 18, 2005, that was a current AIF under National Instrument 44-101 Short Form Prospectus Distributions that was in force on December 29, 2005, the issuer or credit supporter is deemed to have a current AIF under this Part until the date it is first required under the applicable CD rule to file its annual financial statements.Repealed.(6) For the purposes of this section, an issuer is exempted from the requirement to wait at least 10 business days between filing the notice referred to in subsection (1) and filing its first preliminary short form prospectus if
(a) in the case of an issuer that is relying on section 2.4 or 2.5 in order to qualify to file a short form prospectus, the following requirements are met:
(i) the issuer satisfies the requirements of section 2.4 or 2.5, as applicable, at the time of filing its short form prospectus;
(ii) the issuer files its notice of intention before or concurrently with the filing of its preliminary short form prospectus; and
(iii) the issuer's credit supporter
(A) previously filed a notice of intention under subsection (1) which has not been withdrawn; or
(B) is deemed to have filed a notice of intention under subsection (4); or
(b) in the case of an issuer that is a successor issuer, the following requirements are met:
(i) the issuer satisfies the requirements of aany of section 2.2, 2.3 or 2.6 and subsection 2.7(2);
(ii) the issuer files its notice of intention before or concurrently with the filing of its preliminary short form prospectus; and
(iii) the issuer has acquired substantially all of its business from a predecessor entity which
(A) previously filed a notice of intention under subsection (1) which has not been withdrawn; or
(B) is deemed to have filed a notice of intention under subsection (4).
PART 3 DEEMED INCORPORATION BY REFERENCE
3.1 Deemed Incorporation by Reference of Filed Documents -- If an issuer does not incorporate by reference in its short form prospectus a document required to be incorporated by reference under section 11.1 or 12.1 of Form 44-101F1, the document is deemed for purposes of securities legislation to be incorporated by reference in the issuer's short form prospectus as of the date of the short form prospectus to the extent not otherwise modified or superseded by a statement contained in the short form prospectus or in any other subsequently filed document that also is, or is deemed to be, incorporated by reference in the short form prospectus.
3.2 Deemed Incorporation by Reference of Subsequently Filed Documents -- If an issuer does not incorporate by reference in its short form prospectus a subsequently filed document required to be incorporated by reference under section 11.2 or 12.1 of Form 44-101F1, the document is deemed for purposes of securities legislation to be incorporated by reference in the issuer's short form prospectus as of the date the issuer filed the document to the extent not otherwise modified or superseded by a statement contained in the short form prospectus or in any other subsequently filed document that also is, or is deemed to be, incorporated by reference in the short form prospectus.
3.3 Incorporation by Reference -- A document deemed by this Instrument to be incorporated by reference in another document is deemed for purposes of securities legislation to be incorporated by reference in the other document.
PART 4 FILING REQUIREMENTS FOR A SHORT FORM PROSPECTUS
4.1 Required Documents for Filing a Preliminary Short Form Prospectus --
(1) An issuer that files a preliminary short form prospectus shall
(a) file the following with the preliminary short form prospectus:
(i) Signed Copy -- a signed copy of the preliminary short form prospectus;
(ii) Qualification Certificate -- a certificate, dated as of the date of the preliminary short form prospectus, executed on behalf of the issuer by one of its executive officers
(A) specifying which of the qualification criteria set out in Part 2 the issuer is relying on in order to be qualified to file a prospectus in the form of a short form prospectus, and
(B) certifying that
(I) all of those qualification criteria have been satisfied, and
(II) all of the material incorporated by reference in the preliminary short form prospectus and not previously filed is being filed with the preliminary short form prospectus;
(iii) Material Incorporated by Reference -- copies of all material incorporated by reference in the preliminary short form prospectus and not previously filed;
(iv) Documents Affecting the Rights of Securityholders -- a copy of any document required to be filed under subsection 12.1(1) of NI 51-102 or section 16.4 of NI 81-106, as applicable, that relates to the securities being distributed, and that has not previously been filed;
(iv.1) Material Contracts -- a copy of any material contract required to be filed under section 12.2 of NI 51-102 or section 16.4 of NI 81-106 that has not previously been filed;
(v) Mining Reports -- if the issuer has a mineral project, the technical reports required to be filed with a preliminary short form prospectus under NI 43-101;
(vi) Reports and Valuations -- a copy of each report or valuation referred to in the preliminary short form prospectus for which a consent is required to be filed under section 10.1 of NI 41-101 and that has not previously been filed, other than a technical report that
(A) deals with a mineral project or oil and gas activities, and
(B) is not otherwise required to be filed under paragraph (v); and
(b) deliver to the regulator, concurrently with the filing of the preliminary short form prospectus, the following:
(i) Personal Information Form and Authorization to Collect, Use and Disclose Personal Information -- a completed
Appendix A to NI 41-101personal information form for,(A) each director and executive officer of an issuer;
(B) if the issuer is an investment fund, each director and executive officer of the manager of the issuer;
(C) each promoter of the issuer; and
(D) if the promoter is not an individual, each director and executive officer of the promoter
,
for whom the issuer has not previously filed or delivered,
(E) a completed personal information form and authorization in the form set out in Appendix A of NI 41-101,
(F) before March 17, 2008, a completed authorization in
(I) the form set out in Appendix B to this Instrument,
(II) the form set out in Ontario Form 41-501F2 Authorization of Indirect Collection of Personal Information, or
(III) the form set out in Appendix A of Québec Regulation Q-28 Respecting General Prospectus Requirements, or
(G) before March 17, 2008, a completed personal information form or authorization in a form substantially similar to a personal information form or authorization in clause (E) or (F), as permitted under securities legislation; and(ii) Auditor's Comfort Letter Regarding Audited Financial Statements -- if a financial statement of an issuer or a business included in, or incorporated by reference into, a preliminary short form prospectus is accompanied by an unsigned auditor's report, a signed letter addressed to the regulator from the auditor of the issuer or of the business, as applicable, prepared in accordance with the form suggested for this circumstance in the Handbook.
(2) Despite subparagraph (1)(b)(ii), an issuer is not required to file a personal information form for an individual if all of the following are satisfied:
(a) a personal information form of the individual has been executed by the individual within three years preceding the date of the filing of the preliminary short form prospectus;
(b) the personal information form was delivered to the regulator or, in Québec, the securities regulatory authority
(i) by an issuer on behalf of the individual on or after [insert effective date of amendments]; or
(ii) by the issuer on behalf of the individual after March 16, 2008 but before [insert effective date of amendments] in the form set out in Appendix A to NI 41-101 in effect during this period;
(c) the information concerning the individual contained in the responses to
(i) questions 6 through 10 of the personal information form referenced in subparagraph (b)(i) remain correct as at the date of the certificate referred to in paragraph (d); or
(ii) questions 4(B) and (C) and questions 6 through 9 of the personal information form referenced in subparagraph (b)(ii) remain correct as at the date of the certificate referred to in paragraph (d);
(d) the issuer delivers to the regulator or, in Québec, the securities regulatory authority, concurrently with the filing of the preliminary short form prospectus, a certificate of the issuer in the form set out in Schedule 4 of Appendix A to NI 41-101stating that the individual has provided the issuer with confirmation in respect of the requirement contained in paragraph (c);
(e) the certificate referenced in paragraph (d) is dated no earlier than 30 days before the filing of the preliminary short form prospectus.
4.2 Required Documents for Filing a Short Form Prospectus -- An issuer that files a short form prospectus shall
(a) file the following with the short form prospectus:
(i) Signed Copy -- a signed copy of the short form prospectus;
(ii) Material Incorporated by Reference -- copies of all material incorporated by reference in the short form prospectus and not previously filed;
(iii) Documents Affecting the Rights of Securityholders -- a copy of any document described under subparagraph 4.1(a)(iv) that has not previously been filed;
(iii.1) Material Contracts -- a copy of any material contract described under subparagraph 4.1(a)(iv.1) that has not previously been filed;
(iv) Other Reports and Valuations -- a copy of any report or valuation referred to in the short form prospectus, for which a consent is required to be filed under section 10.1 of NI 41-101 and that has not previously been filed, other than a technical report that
(A) deals with a mineral project or oil and gas activities of the issuer, and
(B) is not otherwise required to be filed under subparagraph 4.1(a)(v) or (vi);
(v) Issuer's Submission to Jurisdiction -- a submission to jurisdiction and appointment of agent for service of process of the issuer in the form set out in Appendix B of NI 41-101, if an issuer is incorporated or organized in a foreign jurisdiction and does not have an office in Canada;
(vi) Non-Issuer's Submission to Jurisdiction -- a submission to jurisdiction and appointment of agent for service of process of
(A) each selling securityholder,
and(A.1) each director of the issuer, and
(B)
eachany other person or companyrequired to providethat provides or signs a certificate under Part 5 of NI 41-101 or other securities legislation, other than an issuer,in the form set out in Appendix C of NI 41-101, if the person or company is incorporated or organized under a foreign jurisdiction and does not have an office in Canada or is an individual who resides outside of Canada;
(vii) Expert's Consents -- the consents required to be filed under section 10.1 of NI 41-101;
(viii) Credit Supporter's Consent -- the written consent of the credit supporter to the inclusion of its financial statements in the short form prospectus, if financial statements of a credit supporter are required under section 12.1 of Form 44-101F1 to be included in a short form prospectus and a certificate of the credit supporter is not required under section 5.12 of NI 41-101 to be included in the short form prospectus;
(ix) Undertaking in Respect of Credit Supporter Disclosure -- an undertaking of the issuer to file the periodic and timely disclosure of a credit supporter similar to the disclosure provided under section 12.1 of Form 44-101F1, for so long as the securities being distributed are issued and outstanding;
(x) Undertaking to File
DocumentsAgreements, Contracts and Material Contracts -- ifa documentan agreement or contract referred to in subparagraph (iii) or a material contract under subparagraph (iii.1) has not been executedor become effectivebefore the filing of the final short form prospectus but will be executedor become effectiveon or before the completion of the distribution, the issuer must file with the securities regulatory authority, no later than the time of filing of the final short form prospectus, an undertaking of the issuer to the securities regulatory authority to file thedocumentagreement, contract or material contract promptly and in any eventwithin seven days afterno later than seven days after the execution of the agreement, contract or material contract;(x.1) Undertaking to File Unexecuted Documents -- if a document referred to in subparagraph (iii) will not be executed in order to become effective and has not become effective before the filing of the final short form prospectus, but will become effective on or before the completion of the distribution, the issuer must file with the securities regulatory authority, no later than the time of filing of the final short form prospectus, an undertaking of the issuer to the securities regulatory authority to file the document promptly and in any event no later than seven days after the document becomes effective; and
(xi) Undertaking in Respect of Restricted Securities -- for distributions of non-voting securities an undertaking of the issuer to give notice to holders of non-voting securities of a meeting of securityholders if a notice of such meeting is given to its registered holders of voting securities; and
(b) deliver the following to the regulator, no later than the filing of the short form prospectus,
(i) a copy of the short form prospectus, blacklined to show changes from the preliminary short form prospectus, and
(ii) if the issuer has made an application to list the securities being distributed on an exchange in Canada, a copy of a communication in writing from the exchange stating that the application for listing has been made and has been accepted subject to the issuer meeting the requirements for listing of the exchange.
4.3 Review of Unaudited Financial Statements
(1) Subject to subsection (2), any unaudited financial statements, other than pro forma financial statements, included in, or incorporated by reference into, a short form prospectus must have been reviewed in accordance with the relevant standards set out in the Handbook for a review of financial statements by the person or company's auditor or a public accountant's review of financial statements.
(2) If NI 52-107 permits the financial statements of the person or company in subsection (1) to be audited in accordance with
(a) U.S. AICPA GAAS, the unaudited financial statements may be reviewed in accordance with the review standards issued by the American Institute of Certified Public Accountants,
(a.1) U.S. PCAOB GAAS, the unaudited financial statements may be reviewed in accordance with the review standards issued by the Public Company Accounting Oversight Board (United States of America),
(b) International Standards on Auditing, the unaudited financial statements may be reviewed in accordance with International Standards on Review Engagement issued by the International Auditing and Assurance Standards Board, or
(c) auditing standards that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the issuer is subject, the unaudited financial statements
(i) may be reviewed in accordance with review standards that meet the foreign disclosure requirements of the designated foreign jurisdiction, or
(ii) do not have to be reviewed if
(A) the designated foreign jurisdiction does not have review standards for unaudited financial statements, and
(B) the short form prospectus includes disclosure that the unaudited financial statements have not been reviewed.
4.4 [Repealed]
4.5 [Repealed]
PART 5 [REPEALED]
PART 6 [REPEALED]
PART 7 SOLICITATIONS OF EXPRESSIONS OF INTEREST
7.1 Solicitations of Expressions of Interest -- The prospectus requirement does not apply to solicitations of expressions of interest before the
filingissuance ofa receipt for a preliminary short form prospectus for securities to be qualified for distribution under a short form prospectus in accordance with this Instrument, if(a) the issuer has entered into an enforceable agreement with an underwriter who has, or underwriters who have, agreed to purchase the securities,
(b) the agreement referred to in paragraph (a) has fixed the terms of the distribution and requires that the issuer file a preliminary short form prospectus for the securities and obtain from the regulator a receipt, dated as of a date that is not more than four business days after the date that the agreement is entered into, for the preliminary short form prospectus,
(c) the issuer has issued and filed a news release announcing the agreement immediately upon entering into the agreement,
(d) upon issuance of a receipt for the preliminary short form prospectus, a copy of the preliminary short form prospectus is sent to each person or company who has expressed an interest in acquiring the securities, and
(e) except as provided in paragraph (a), no agreement of purchase and sale for the securities is entered into until the short form prospectus has been filed and a receipt obtained.
7.2 Solicitations of Expressions of Interest -- Over-allotment Options -- The prospectus requirement does not apply to solicitations of expressions of interest before the
filingissuance ofa receipt for a preliminary short form prospectus for securities to be issued pursuant to an over-allotment option that are qualified for distribution under a short form prospectus in accordance with this Instrument, if(a) the issuer has entered into an enforceable agreement with the underwriters who have agreed to purchase the securities offered under a short form prospectus, other than the securities issuable on the exercise of an over-allotment option,
(b) the agreement referred to in paragraph (a) has fixed the terms of the distribution and requires that the issuer file a preliminary short form prospectus for the securities and obtain from the regulator a receipt, dated as of a date that is not more than four business days after the date that the agreement is entered into, for the preliminary short form prospectus,
(c) the issuer has issued and filed a news release announcing the agreement immediately upon entering into the agreement,
(d) upon issuance of a receipt for the preliminary short form prospectus, a copy of the preliminary short form prospectus is sent to each person or company who has expressed an interest in acquiring the securities, and
(e) except as provided in paragraph (a), no agreement of purchase and sale for the securities is entered into until the short form prospectus has been filed and a receipt obtained.
PART 8 EXEMPTION
8.1 Exemption
(1) The regulator or the securities regulatory authority may grant an exemption from the provisions of this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.
(2) Despite subsection (1), in Ontario only the regulator may grant such an exemption.
(3) An application made to the securities regulatory authority or regulator for an exemption from the provisions of this Instrument shall include a letter or memorandum describing the matters relating to the exemption, and indicating why consideration should be given to the granting of the exemption.
(4) Except in Ontario, an exemption referred to in subsection (1) is granted under the statute referred to in Appendix B of National Instrument 14-101 Definitions opposite the name of the local jurisdiction.
8.2 Evidence of Exemption
(1) Subject to subsection (2) and without limiting the manner in which an exemption under this Part may be evidenced, the granting under this Part of an exemption, other than an exemption, in whole or in part, from Part 2, may be evidenced by the issuance of a receipt for a short form prospectus or an amendment to a short form prospectus.
(2) The issuance of a receipt for a final short form prospectus or an amendment to a final short form prospectus is not evidence that the exemption has been granted unless
(a) the person or company that sought the exemption sent to the regulator
(i) the letter or memorandum referred to in subsection 8.1(3), on or before the date of the filing of the preliminary short form prospectus, or
(ii) the letter or memorandum referred to in subsection 8.1(3) after the date of the filing of the preliminary short form prospectus and received a written acknowledgement from the regulator that the exemption may be evidenced in the manner set out in subsection (1), and
(b) the regulator has not before, or concurrently with, the issuance of the receipt sent notice to the person or company that sought the exemption, that the exemption sought may not be evidenced in the manner set out in subsection (1).
PART 9 TRANSITION, REPEAL AND EFFECTIVE DATE
9.1 Applicable Rules -- A short form prospectus may, at the issuer's option be prepared in accordance with securities legislation in effect at either the date of issuance of a receipt for the preliminary short form prospectus or the date of issuance of a receipt for the short form prospectus.
9.2 Repeal -- National Instrument 44-101 Short Form Prospectus Distributions and Form 44-101F3 Short Form Prospectus, both of which came into force on December 31, 2000, are repealed on December 30, 2005.
9.3 Effective Date -- This Instrument comes into force on December 30, 2005.
APPENDIX A -- NOTICE DECLARING INTENTION TO BE QUALIFIED UNDER
NATIONAL INSTRUMENT 44-101 SHORT FORM PROSPECTUS DISTRIBUTIONS
("NI 44-101")
[date]
|
To:
|
[the issuer's notice regulator (as defined in subsection 2.8(2) of NI 44-101), and any other securities regulatory authority or regulator of a jurisdiction of Canada with whom the issuer may voluntarily file this notice]
|
[name of issuer] (the "Issuer") intends to be qualified to file a short form prospectus under NI 44-101. The Issuer acknowledges that it must satisfy all applicable qualification criteria prior to filing a preliminary short form prospectus. This notice does not evidence the Issuer's intent to file a short form prospectus, to enter into any particular financing or transaction or to become a reporting issuer in any jurisdiction. This notice will remain in effect until withdrawn by the Issuer.
[signature of Issuer]
[name and title of duly authorized signing officer of Issuer]
APPENDIX B -- AUTHORIZATION OF INDIRECT COLLECTION,
USE AND DISCLOSURE OF PERSONAL INFORMATION
[Repealed]
APPENDIX C -- ISSUER FORM OF SUBMISSION TO JURISDICTION AND A
PPOINTMENT OF AGENT FOR SERVICE OF PROCESS
[Repealed]
APPENDIX D -- NON-ISSUER FORM OF SUBMISSION TO JURISDICTION AND
APPOINTMENT OF AGENT FOR SERVICE OF PROCESS
[Repealed]
Schedule D-2 -- Blackline Showing Proposed Changes to Form 44-101F1 Short Form Prospectus
APPENDIX D
SCHEDULE D-2
FORM 44-101F1
SHORT FORM PROSPECTUS
INSTRUCTIONS
(1) The objective of the short form prospectus is to provide information concerning the issuer that an investor needs in order to make an informed investment decision. This Form sets out specific disclosure requirements that are in addition to the general requirement under securities legislation to provide full, true and plain disclosure of all material facts relating to the securities to be distributed. Certain rules of specific application impose prospectus disclosure obligations in addition to those described in this Form.
(2) Terms used and not defined in this Form that are defined or interpreted in the Instrument or NI 41-101 bear that definition or interpretation. Other definitions are set out in NI 14-101.
(3) In determining the degree of detail required, a standard of materiality must be applied. Materiality is a matter of judgement in the particular circumstance, and is determined in relation to an item's significance to investors, analysts and other users of information. An item of information, or an aggregate of items, is considered material if it is probable that its omission or misstatement would influence or change an investment decision with respect to the issuer's securities. In determining whether information is material, take into account both quantitative and qualitative factors. The potential significance of items must be considered individually rather than on a net basis, if the items have an offsetting effect.
(4) Unless an item specifically requires disclosure only in the preliminary short form prospectus, the disclosure requirements set out in this Form apply to both the preliminary short form prospectus and the short form prospectus. Details concerning the price and other matters dependent upon or relating to price, such as the number of securities being distributed, may be left out of the preliminary short form prospectus, along with specifics concerning the plan of distribution, to the extent that these matters have not been decided.
(5) Any information required in a short form prospectus may be incorporated by reference in the short form prospectus, other than confidential material change reports. Clearly identify in a short form prospectus any document incorporated by reference. If an excerpt of a document is incorporated by reference, clearly identify the excerpt in the short form prospectus by caption and paragraph of the document. Any material incorporated by reference in a short form prospectus is required under sections 4.1 and 4.2 of the Instrument to be filed with the short form prospectus unless it has been previously filed.
(6) The disclosure must be understandable to readers and presented in an easy-to-read format. The presentation of information should comply with the plain language principles listed in section 4.2 of Companion Policy 44-101CP Short Form Prospectus Distributions. If technical terms are required, clear and concise explanations should be included.
(7) No reference need be made to inapplicable items and, unless otherwise required in this Form, negative answers to items may be omitted.
(8) Where the term "issuer" is used, it may be necessary, in order to meet the requirement for full, true and plain disclosure of all material facts, to also include disclosure with respect to persons or companies that the issuer is required, under the issuer's GAAP, to consolidate, proportionately consolidate or account for using the equity method (for example, including "subsidiaries" as that term is used in Canadian GAAP applicable to publicly accountable enterprises). If it is more likely than not that a person or company will become an entity that the issuer will be required, under the issuer's GAAP, to consolidate, proportionately consolidate or account for using the equity method, it may be necessary to also include disclosure with respect to the person or company.
(9) An issuer that is a special purpose entity may have to modify the disclosure items to reflect the special purpose nature of its business.
(10) If disclosure is required as of a specific date and there has been a material change or change that is otherwise significant in the required information subsequent to that date, present the information as of the date of the change or a date subsequent to the change instead.
(11) If the term "class" is used in any item to describe securities, the term includes a series of a class.
(12) Disclosure in a preliminary short form prospectus or short form prospectus must be consistent with NI 51-101 if the issuer is engaged in oil and gas activities (as defined in NI 51-101).
(13) Forward-looking information included in a short form prospectus must comply with section 4A.2 of NI 51-102 and must include the disclosure described in section 4A.3 of NI 51-102. In addition to the foregoing, FOFI or a financial outlook, each as defined in NI 51-102, included in a short form prospectus must comply with Part 4B of NI 51-102. If the forward-looking information relates to an issuer or other entity that is not a reporting issuer, section 4A.2, section 4A.3 and Part 4B of NI 51-102 apply as if the issuer or other entity were a reporting issuer.
(14) If an issuer discloses financial information in a short form prospectus in a currency other than the Canadian dollar, prominently display the presentation currency.
(15) Except as otherwise required or permitted, include information in a narrative form. The issuer may include graphs, photographs, maps, artwork or other forms of illustration, if relevant to the business of the issuer or the distribution and not misleading. Include descriptive headings. Except for information that appears in a summary, information required under more than one Item need not be repeated.
(16) Certain requirements in this Form make reference to requirements in another instrument or form. Unless this Form states otherwise, issuers must also follow the instructions or requirements in the other instrument or form.
(17) Wherever this Form uses the word "subsidiary", the term includes companies and other types of business organizations such as partnerships, trusts, and other unincorporated business entities.
(18) Issuers must supplement any disclosure incorporated by reference into a short form prospectus if that supplemented disclosure is necessary to ensure that the short form prospectus provides full, true and plain disclosure of all material facts related to the securities to be distributed as required under Item 18 of this Form.
Item 1 -- Cover Page Disclosure
1.1 Required Language -- State in italics at the top of the cover page the following:
"No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise."
1.2 Preliminary Short Form Prospectus Disclosure -- Every preliminary short form prospectus shall have printed in red ink and italics on the top of the cover page the following, with the bracketed information completed:
"A copy of this preliminary short form prospectus has been filed with the securities regulatory authority[ies+] in [each of/certain of the provinces/provinces and territories of Canada] but has not yet become final for the purpose of the sale of securities. Information contained in this preliminary short form prospectus may not be complete and may have to be amended. The securities may not be sold until a receipt for the short form prospectus is obtained from the securities regulatory authority[ies]."
INSTRUCTION
Issuers shall complete the bracketed information by
(a) inserting the names of each jurisdiction in which the issuer intends to offer securities under the short form prospectus;
(b) stating that the filing has been made in each of the provinces of Canada or each of the provinces and territories of Canada; or
(c) identifying the filing jurisdictions by exception (i.e., every province of Canada or every province and territory of Canada, except [excluded jurisdiction]).
1.3 Disclosure Concerning Documents Incorporated by Reference -- State the following in italics on the cover page, with the first sentence in boldface type and the bracketed information completed:
"Information has been incorporated by reference in this prospectus from documents filed with securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the secretary of the issuer at [insert complete address and telephone number], and are also available electronically at www.sedar.com.
1.4 Basic Disclosure about the Distribution -- State the following, immediately below the disclosure required under sections 1.1, 1.2 and 1.3, with the bracketed information completed:
[PRELIMINARY] SHORT FORM PROSPECTUS
[INITIAL PUBLIC OFFERING OR NEW ISSUE AND/OR SECONDARY OFFERING]
(Date)
[Name of Issuer]
[number and type of securities qualified for distribution under the short form prospectus, including any options or warrants, and the price per security]
1.5 Name and Address of Issuer -- State the full corporate name of the issuer or, if the issuer is an unincorporated entity, the full name under which the entity exists and carries on business and the address(es) of the issuer's head and registered office.
1.6 Distribution
(1) If the securities are being distributed for cash, provide the information called for below, in substantially the following tabular form or in a note to the table:
Price to public
Underwriting discounts or commission
Proceeds to issuer or selling securityholders
(a)
(b)
(c)
Per Security
__________
__________
__________
Total
__________
__________
__________
(2) If there is an over-allotment option or an option to increase the size of the distribution before closing,
(a) describe the terms of the option, and
(b) provide the following disclosure:
(a) disclose that a"A purchaser who acquires [insert type of securities qualified for distribution under the prospectus] forming part of the underwriters' over-allocation position acquires those securities under this short form prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the over-allotment option or secondary market purchases, and(b) describe the terms of the option."(3) If the distribution of the securities is to be on a best efforts basis
, provide totals for both the minimum and maximum subscriptions, if applicable.and a minimum offering amount(a) is required for the issuer to achieve one or more of the purposes of the offering, provide totals for both the minimum and maximum offering amount, or
(b) is not required for the issuer to achieve any of the purposes of the offering, state the following in boldface type:
"There is no minimum amount of funds that must be raised under this offering. This means that the issuer could complete this offering after raising only a small proportion of the offering amount set out above."
(3.1) If a minimum subscription amount is required from each subscriber, provide details of the minimum subscription requirements in the table required under subsection (1).
(4) If debt securities are distributed at a premium or a discount, state in boldface type the effective yield if held to maturity.
(5) Disclose separately those securities that are underwritten, those under option and those to be sold on a best efforts basis and, in the case of a best efforts distribution, the latest date that the distribution is to remain open.
(6) In column (b) of the table, disclose only commissions paid or payable in cash by the issuer or selling securityholder and discounts granted. Set out in a note to the table
(a) commissions or other consideration paid or payable by persons or companies other than the issuer or selling securityholder;
(b) consideration other than discounts granted and cash paid or payable by the issuer or selling securityholder, other than securities described in section 1.10 below; and
(c) any finder's fees or similar required payment.
(7) If a security is being distributed for the account of a selling securityholder, state the name of the selling securityholder and a cross-reference to the applicable section in the short form prospectus where further information about the selling securityholder is provided. State the portion of expenses of the distribution to be borne by the selling securityholder and, if none of the expenses of the distribution are being borne by the selling securityholder, include a statement to that effect and discuss the reasons why this is the case.
INSTRUCTIONS
(1) Estimate amounts, if necessary. For non-fixed price distributions that are being made on a best efforts basis, disclosure of the information called for by the table may be set forth as a percentage or a range of percentages and need not be set forth in tabular form.
(2) If debt securities are being distributed, also express the information in the table as a percentage.
1.6.1 Offering price in currency other than Canadian dollar -- If the offering price of the securities being distributed is disclosed in a currency other than the Canadian dollar, disclose in boldface type the currency.
1.7 Non-Fixed Price Distributions -- If the securities are being distributed at non-fixed prices, disclose
(a) the discount allowed or commission payable to the underwriter;
(b) any other compensation payable to the underwriter and, if applicable, that the underwriter's compensation will be increased or decreased by the amount by which the aggregate price paid for the securities by the purchasers exceeds or is less than the gross proceeds paid by the underwriter to the issuer or selling securityholder;
(c) that the securities to be distributed under the short form prospectus will be distributed, as applicable, at
(i) prices determined by reference to the prevailing price of a specified security in a specified market,
(ii) market prices prevailing at the time of sale, or
(iii) prices to be negotiated with purchasers;
(d) that prices may vary from purchaser to purchaser and during the period of distribution;
(e) if the price of the securities is to be determined by reference to the prevailing price of a specified security in a specified market, the price of the specified security in the specified market at the latest practicable date;
(f) if the price of the securities will be the market price prevailing at the time of sale, the market price at the latest practicable date; and
(g) the net proceeds or, if the distribution is to be made on a best efforts basis, the minimum amount of net proceeds, if any, to be received by the issuer or selling securityholder.
1.7.1 Pricing Disclosure -- If the offering price or the number of securities being distributed, or an estimate of the range of the offering price or of the number of securities being distributed, has been publicly disclosed in a jurisdiction or a foreign jurisdiction as of the date of the preliminary short form prospectus, include this information in the preliminary short form prospectus.
1.8 Reduced Price Distributions -- If an underwriter wishes to be able to decrease the price at which securities are distributed for cash from the initial offering price disclosed in the short form prospectus, include in boldface type a cross-reference to the section in the short form prospectus where disclosure concerning the possible price decrease is provided.
1.9 Market for Securities
(1) Identify the exchange(s) and quotation system(s), if any, on which securities of the issuer of the same class or series as the securities being distributed are traded or quoted and the market price of those securities as of the latest practicable date.
(2) Disclose any intention to stabilize the market and provide a cross-reference to the section in the short form prospectus where further information about market stabilization is provided.
(3) If no market for the securities being distributed under the short form prospectus exists or is expected to exist upon completion of the distribution, state the following in boldface type:
There is no market through which the securities may be sold and purchasers may not be able to resell securities purchased under the short form prospectus. This may affect the pricing of the securities in the secondary market, the transparency and availability of trading prices, the liquidity of the securities, and the extent of issuer regulation. See Risk Factors.
1.10 Underwriter(s)
(1) State the name of each underwriter.
(2) If applicable, comply with the requirements of NI 33-105 for front page prospectus disclosure.
(3) If an underwriter has agreed to purchase all of the securities being distributed at a specified price and the underwriter's obligations are subject to conditions, state the following, with the bracketed information completed:
"We, as principals, conditionally offer these securities, subject to prior sale, if, as and when issued by [name of issuer] and accepted by us in accordance with the conditions contained in the underwriting agreement referred to under Plan of Distribution."
(4) If an underwriter has agreed to purchase a specified number or principal amount of the securities at a specified price, state that the securities are to be taken up by the underwriter, if at all, on or before a date not later than 42 days after the date of the receipt for the short form prospectus.
(5) If there is no underwriter involved in the distribution, provide a statement in boldface type to the effect that no underwriter has been involved in the preparation of the short form prospectus or performed any review of the contents of the short form prospectus.
(6) Provide the following tabular information:
INSTRUCTION
If the underwriter has been granted compensation securities, state, in a footnote, whether the prospectus qualifies the grant of all or part of the compensation securities and provide a cross-reference to the applicable section in the prospectus where further information about the compensation securities is provided.
1.11
International IssuersEnforcement of Judgments against Foreign Persons or Companies -- If the issuer, a director of the issuer, a selling securityholder, or any other person or companyrequired to providethat is signing or providing a certificate under Part 5 of NI 41-101 or other securities legislation, is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, state the following on the cover page or under a separate heading elsewhere in the short form prospectus, with the bracketed information completed:"The [issuer, director of the issuer, selling securityholder, or any other person or company signing or providing a certificate under Part 5 of NI 41-101 or other securities legislation] is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada. Although [the person or company described above] has appointed [name(s) and
addressesaddress(es) of agent(s) for service] as its agent(s) for service of process in [list jurisdictions] it may not be possible for investors to enforce judgments obtained in Canada against [the person or company described above]."1.12 Restricted Securities
(1) Describe the number and class or classes of restricted securities being distributed using the appropriate restricted security terms in the same type face and type size as the rest of the description.
(2) If the securities being distributed are restricted securities and the holders of the securities do not have the right to participate in a takeover bid made for other equity securities of the issuer, disclose that fact.
1.13 Earnings Coverage Ratios -- If any of the earnings coverage ratios required to be disclosed under section 6.1 is less than one-to-one, disclose this fact in boldface type.
Item 2 -- Summary Description of Business
2.1 Summary of Description of Business -- Provide a brief summary on a consolidated basis of the business carried on and intended to be carried on by the issuer.
Item 3 -- Consolidated Capitalization
3.1 Consolidated Capitalization -- Describe any material change in, and the effect of the material change on, the share and loan capital of the issuer, on a consolidated basis, since the date of the issuer's financial statements most recently filed in accordance with the applicable CD rule, including any material change that will result from the issuance of the securities being distributed under the short form prospectus.
Item 4 -- Use of Proceeds
4.1 Proceeds
(1) State the estimated net proceeds to be received by the issuer or selling securityholder or, in the case of a non-fixed price distribution or a distribution to be made on a best efforts basis, the minimum amount, if any, of net proceeds to be received by the issuer or selling securityholder from the sale of the securities distributed.
(2) State the particulars of any provision or arrangements made for holding any part of the net proceeds of the distribution in trust or escrow subject to the fulfillment of conditions.
(3) If the short form prospectus is used for a special warrant or similar transaction, state the amount that has been received by the issuer of the special warrants or similar securities on the sale of the special warrants or similar securities.
4.2 Principal Purposes -- Generally
(1) Describe in reasonable detail and, if appropriate, using tabular form, each of the principal purposes, with approximate amounts, for which the net proceeds will be used by the issuer.
(2) If the closing of the distribution is subject to a minimum
subscriptionoffering amount, provide disclosure of the use of proceeds for the minimum and maximumsubscriptionsoffering amounts.(3) If all of the following apply, disclose how the proceeds will be used by the issuer, with reference to various potential thresholds of proceeds raised, in the event that the issuer raises less than the maximum offering amount:
(a) the closing of the distribution is not subject to a minimum offering amount;
(b) the distribution of the securities is to be on a best efforts basis; and
(c) the issuer has significant short-term non-discretionary expenditures including those for general corporate purposes, or significant short-term capital or contractual commitments, and may not have other readily accessible resources to satisfy those expenditures or commitments.
(4) If the issuer is required to provide disclosure under subsection (3), the issuer must discuss, in respect of each threshold, the impact (if any) of raising this amount on its liquidity, operations, capital resources and solvency.
INSTRUCTIONS
If the issuer is required to disclose the use of proceeds at various thresholds under subsections 4.2(3) and (4), include as an example a threshold that reflects the receipt of a small portion of the offering.
4.3 Principal Purposes -- Indebtedness
(1) If more than 10% of the net proceeds will be used to reduce or retire indebtedness and the indebtedness was incurred within the two preceding years, describe the principal purposes for which the proceeds of the indebtedness were used.
(2) If the creditor is an insider, associate or affiliate of the issuer, identify the creditor and the nature of the relationship to the issuer and disclose the outstanding amount owed.
4.4 Principal Purposes -- Asset Acquisition
(1) If more than 10% of the net proceeds are to be used to acquire assets, describe the assets.
(2) If known, disclose the particulars of the purchase price being paid for or being allocated to the assets or categories of assets, including intangible assets.
(3) If the vendor of the assets is an insider, associate or affiliate of the issuer, identify the vendor and the nature of the relationship to the issuer, and disclose the method used in determining the purchase price.
(4) Describe the nature of the title to or interest in the assets to be acquired by the issuer.
(5) If part of the consideration for the acquisition of the assets consists of securities of the issuer, give brief particulars of the class, number or amount, voting rights, if any, and other appropriate information relating to the securities, including particulars of the issuance of securities of the same class within the two preceding years.
4.5 Principal Purposes -- Insiders, etc. -- If an insider, associate or affiliate of the issuer will receive more than 10% of the net proceeds, identify the insider, associate or affiliate and the nature of the relationship to the issuer, and disclose the amount of net proceeds to be received.
4.6 Principal Purposes -- Research and Development -- If more than 10% of the net proceeds from the distribution will be used for research and development of products or services, describe
(a) the timing and stage of research and development programs that management anticipates will be reached using such proceeds,
(b) the major components of the proposed programs that will be funded using the proceeds from the distribution, including an estimate of anticipated costs,
(c) if the issuer is conducting its own research and development, is subcontracting out the research and development or is using a combination of those methods, and
(d) the additional steps required to reach commercial production and an estimate of costs and timing.
4.7 Business Objectives and Milestones
(1) State the business objectives that the issuer expects to accomplish using the net proceeds of the distribution under section 4.1.
(2) Describe each significant event that must occur for the business objectives described under subsection (1) to be accomplished and state the specific time period in which each event is expected to occur and the costs related to each event.
4.8 Unallocated Funds in Trust or Escrow
(1) Disclose that unallocated funds will be placed in a trust or escrow account, invested or added to the working capital of the issuer.
(2) Give details of the arrangements made for, and the persons or companies responsible for,
(a) the supervision of the trust or escrow account or the investment of unallocated funds, and
(b) the investment policy to be followed.
4.9 Other Sources of Funding -- If any material amounts of other funds are to be used in conjunction with the proceeds, state the amounts and sources of the other funds.
4.10 Financing by Special Warrants, etc.
(1) If the short form prospectus is used to qualify the distribution of securities issued upon the exercise of special warrants or the exercise of other securities acquired on a
short formprospectus-exempt basis, describe the principal purposes for which the proceeds of theshort formprospectus-exempt financing were used or are to be used.(2) If all or a portion of the funds have been spent, explain how the funds were spent.
Item 5 -- Plan of Distribution
5.1 Disclosure of Conditions to Underwriters' Obligations -- If securities are distributed by an underwriter that has agreed to purchase all of the securities at a specified price and the underwriter's obligations are subject to conditions,
(a) include a statement in substantially the following form, with the bracketed information completed and with modifications necessary to reflect the terms of the distribution:
"Under an agreement dated [insert date of agreement] between [insert name of issuer or selling securityholder] and [insert name(s) of underwriter(s)], as underwriter[s], [insert name of issuer or selling securityholder] has agreed to sell and the underwriter[s] [has/have] agreed to purchase on [insert closing date] the securities at a price of [insert offering price], payable in cash to [insert name of issuer or selling securityholder] against delivery. The obligations of the underwriter[s] under the agreement may be terminated at [its/their] discretion on the basis of [its/their] assessment of the state of the financial markets and may also be terminated upon the occurrence of certain stated events. The underwriter[s] [is/are], however, obligated to take up and pay for all of the securities if any of the securities are purchased under the agreement.", and
(b) describe any other conditions and indicate any information known that is relevant to whether such conditions will be satisfied.
5.2 Best Efforts Offering -- Outline briefly the plan of distribution of any securities being distributed other than on the basis described in section 5.1.
5.3 Determination of Price -- Disclose the method by which the distribution price has been or will be determined and, if estimates have been provided, explain the process for determining the estimates.
5.4 Stabilization -- If the issuer, a selling securityholder or an underwriter knows or has reason to believe that there is an intention to over-allot or that the price of any security may be stabilized to facilitate the distribution of the securities, describe the nature of these transactions, including the anticipated size of any over-allocation position, and explain how the transactions are expected to affect the price of the securities.
5.4.1 Underwriting Discounts -- Interests of Management and Others in Material Transactions -- Disclose any material underwriting discounts or commissions on the sale of securities by the issuer if any of the persons or companies listed under section 13.1 of Form 51-102F2 were or are to be an underwriter or are associates, affiliates or partners of a person or company that was or is to be an underwriter.
5.5 Minimum Distribution -- If securities are being distributed on a best efforts basis and minimum funds are to be raised, state
(a) the minimum funds to be raised,
(b) that the issuer must appoint a registered dealer authorized to make the distribution, a Canadian financial institution, or a lawyer who is a practicing member in good standing with a law society of a jurisdiction in which the securities are being distributed, or a notary in Québec, to hold in trust all funds received from subscriptions until the minimum amount of funds stipulated in paragraph (a) has been raised, and
(c) that if the minimum amount of funds is not raised within the distribution period, the trustee must return the funds to the subscribers without any deduction.
5.5.1 Approvals -- If the proceeds of the distribution will be used to substantially fund a material undertaking that would constitute a material departure from the business or operations of the issuer and the issuer has not obtained all material licences, registrations and approvals necessary for the stated principal use of proceeds, include a statement that
(a) the issuer must appoint a registered dealer authorized to make the distribution, a Canadian financial institution, or a lawyer who is a practicing member in good standing with a law society of a jurisdiction in which the securities are being distributed, or a notary in Québec, to hold in trust all funds received from subscriptions until all material licences, registrations and approvals necessary for the stated principal use of proceeds have been obtained, and
(b) if all material licences, registrations and approvals necessary for the operation of the material undertaking have not been obtained within 90 days from the date of receipt of the final short form prospectus, the trustee must return the funds to subscribers.
5.6 Reduced Price Distributions -- If the underwriter may decrease the offering price after the underwriter has made a reasonable effort to sell all of the securities at the initial offering price disclosed in the short form prospectus in accordance with the procedures permitted by the Instrument, disclose this fact and that the compensation realised by the underwriter will be decreased by the amount that the aggregate price paid by purchasers for the securities is less than the gross proceeds paid by the underwriter to the issuer or selling securityholder.
5.7 Listing Application -- If application has been made to list or quote the securities being distributed, include a statement in substantially the following form with the bracketed information completed:
f"The issuer has applied to [list/quote] the securities distributed under this short form prospectus on [name of exchange or other market]. [Listing/Quotation] will be subject to the issuer fulfilling all the listing requirements of [name of exchange or other market]."
5.8 Conditional Listing Approval -- If application has been made to list or quote the securities being distributed and conditional listing approval has been received, include a statement in substantially the following form, with the bracketed information completed:
"[name of exchange or other market] has conditionally approved the [listing/quotation] of these securities. [Listing/Quotation] is subject to the [name of the issuer] fulfilling all of the requirements of the [name of exchange or market] on or before [date], [including distribution of these securities to a minimum number of public securityholders.]"
5.9 Constraints -- If there are constraints imposed on the ownership of securities of the issuer to ensure that the issuer has a required level of Canadian ownership, describe the mechanism, if any, by which the level of Canadian ownership of the securities of the issuer will be monitored and maintained.
5.10 Special Warrants Acquired by Underwriters or Agents -- Disclose the number and dollar value of any special warrants acquired by any underwriter or agent and the percentage of the distribution represented by those special warrants.
Item 6 -- Earnings Coverage Ratios
6.1 Earnings Coverage Ratios
(1) If the securities being distributed are debt securities having a term to maturity in excess of one year or are preferred shares, disclose the following earnings coverage ratios adjusted in accordance with subsection (2):
(a) the earnings coverage ratio based on the most recent 12 month period included in the issuer's current annual financial statements included in the short form prospectus,
(b) if there has been a change in year end and the issuer's most recent financial year is less than nine months in length, the earnings coverage calculation for its old financial year, and
(c) the earnings coverage ratio based on the 12-month period ended on the last day of the most recently completed period for which an interim financial report of the issuer has been included in the short form prospectus.
(2) Adjust the ratios referred to in subsection (1) to reflect
(a) the issuance of the securities being distributed under the short form prospectus, based on the price at which these securities are expected to be distributed;
(b) in the case of a distribution of preferred shares,
(i) the issuance of all preferred shares since the date of the annual financial statements or interim financial report, and
(ii) the repurchase, redemption or other retirement of all preferred shares repurchased, redeemed, or otherwise retired since the date of the annual financial statements or interim financial report and of all preferred shares to be repurchased, redeemed, or otherwise retired from the proceeds to be realized from the sale of securities under the short form prospectus;
(c) the issuance of all financial liabilities, as defined in accordance with the issuer's GAAP since the date of the annual financial statements or interim financial report; and
(d) the repayment, redemption or other retirement of all financial liabilities, as defined in accordance with the issuer's GAAP, since the date of the annual financial statements or interim financial report and all financial liabilities to be repaid or redeemed from the proceeds to be realized from the sale of securities distributed under the short form prospectus.
(e) [Repealed]
(3) [Repealed]
(4) If the earnings coverage ratio is less than one-to-one, disclose in the short form prospectus the dollar amount of the numerator required to achieve a ratio of one-to-one.
(5) If the short form prospectus includes a pro forma income statement, calculate the pro forma earnings coverage ratios for the periods of the pro forma income statement, and disclose them in the short form prospectus.
INSTRUCTIONS
(1) Cash flow coverage may be disclosed but only as a supplement to earnings coverage and only if the method of calculation is fully disclosed.
(2) Earnings coverage is calculated by dividing an entity's profit or loss attributable to owners of the parent (the numerator) by its borrowing costs and dividend obligations (the denominator).
(3) For the earnings coverage calculation
(a) the numerator should be calculated using consolidated profit or loss attributable to owners of the parent before borrowing costs and income taxes;
(b) imputed interest income from the proceeds of a distribution should not be added to the numerator;
(c) [Repealed]
(d) for distributions of debt securities, the appropriate denominator is borrowing costs, after giving effect to the new debt securities issue and any retirement of obligations, plus the borrowing costs that have been capitalized during the period;
(e) for distributions of preferred shares
(i) the appropriate denominator is dividends declared during the period, together with undeclared dividends on cumulative preferred shares, after giving effect to the new preferred share issue, plus the issuer's annual borrowing cost requirements, including the borrowing costs that have been capitalized during the period, less any retirement of obligations, and
(ii) dividends should be grossed-up to a before-tax equivalent using the issuer's effective income tax rate; and
(f) for distributions of both debt securities and preferred shares, the appropriate denominator is the same as for a preferred share issue, except that the denominator should also reflect the effect of the debt securities being offered pursuant to the short form prospectus.
(4) The denominator represents a pro forma calculation of the aggregate of an issuer's borrowing cost obligations on all financial liabilities and dividend obligations (including both dividends declared and undeclared dividends on cumulative preferred shares) with respect to all outstanding preferred shares, as adjusted to reflect
(a) the issuance of all financial liabilities and, in addition in the case of an issuance of preferred shares, all preferred shares issued, since the date of the annual financial statements or interim financial report;
(b) the issuance of the securities that are to be distributed under the short form prospectus, based on a reasonable estimate of the price at which these securities will be distributed; and
(c) the repayment or redemption of all financial liabilities since the date of the annual financial statements or interim financial report, all financial liabilities to be repaid or redeemed from the proceeds to be realized from the sale of securities under the short form prospectus and, in addition, in the case of an issuance of preferred shares, all preferred shares repaid or redeemed since the date of the annual financial statements or interim financial report and all preferred shares to be repaid or redeemed from the proceeds to be realized from the sale of securities under the short form prospectus.
(d) [Repealed]
(5) [Repealed]
(6) For debt securities, disclosure of earnings coverage shall include language similar to the following, with the bracketed and bulleted information completed:
"[Name of the issuer]'s borrowing cost requirements, after giving effect to the issue of [the debt securities to be distributed under the short form prospectus], amounted to $• for the 12 months ended •. [Name of the issuer]'s profit or loss attributable to owners of the parent before borrowing costs and income tax for the 12 months then ended was $•, which is • times [name of the issuer]'s borrowing cost requirements for this period."
(7) For preferred share issues, disclosure of earnings coverage shall include language similar to the following, with the bracketed and bulleted information completed:
"[Name of the issuer]'s dividend requirements on all of its preferred shares, after giving effect to the issue of [the preferred shares to be distributed under the short form prospectus], and adjusted to a before-tax equivalent using an effective income tax rate of •%, amounted to $• for the 12 months ended •. [Name of the issuer]'s borrowing cost requirements for the 12 months then ended amounted to $•. [Name of the issuer]'s profit or loss attributable to owners of the parent before borrowing costs and income tax for the 12 months ended • was $•, which is • times [name of the issuer]'s aggregate dividend and borrowing cost requirements for this period."
(8) [Repealed]
(9) Other earnings coverage calculations may be included as supplementary disclosure to the required earnings coverage calculations outlined above as long as their derivation is disclosed and they are not given greater prominence than the required earnings coverage calculations.
Item 7 -- Description of Securities Being Distributed
7.1 Equity Securities -- If equity securities are being distributed, state the description or the designation of the class of the equity securities and describe all material attributes and characteristics that are not described elsewhere in a document incorporated by reference in the short form prospectus including, as applicable,
(a) dividend rights;
(b) voting rights;
(c) rights upon dissolution or winding up;
(d) pre-emptive rights;
(e) conversion or exchange rights;
(f) redemption, retraction, purchase for cancellation or surrender provisions;
(g) sinking or purchase fund provisions;
(h) provisions permitting or restricting the issuance of additional securities and any other material restrictions; and
(i) provisions requiring a securityholder to contribute additional capital.
7.2 Debt Securities -- If debt securities are being distributed, describe all material attributes and characteristics of the indebtedness and the security, if any, for the debt that are not described elsewhere in a document incorporated by reference in the short form prospectus, including
(a) provisions for interest rate, maturity and premium, if any;
(b) conversion or exchange rights;
(c) redemption, retraction, purchase for cancellation or surrender provisions;
(d) sinking or purchase fund provisions;
(e) the nature and priority of any security for the debt securities, briefly identifying the principal properties subject to lien or charge;
(f) provisions permitting or restricting the issuance of additional securities, the incurring of additional indebtedness and other material negative covenants including restrictions against payment of dividends and restrictions against giving security on the assets of the issuer or its subsidiaries and provisions as to the release or substitution of assets securing the debt securities;
(g) the name of the trustee under any indenture relating to the debt securities and the nature of any material relationship between the trustee or any of its affiliates and the issuer or any of its affiliates; and
(h) any financial arrangements between the issuer and any of its affiliates or among its affiliates that could affect the security for the indebtedness.
7.3 Asset-backed Securities
(1) This section applies only if any asset-backed securities are being distributed.
(2) Describe the material attributes and characteristics of the asset-backed securities, including
(a) the rate of interest or stipulated yield and any premium,
(b) the date for repayment of principal or return of capital and any circumstances in which payments of principal or capital may be made before such date, including any redemption or pre-payment obligations or privileges of the issuer and any events that may trigger early liquidation or amortization of the underlying pool of financial assets,
(c) provisions for the accumulation of cash flows to provide for the repayment of principal or return of capital,
(d) provisions permitting or restricting the issuance of additional securities and any other material negative covenants applicable to the issuer,
(e) the nature, order and priority of the entitlements of holders of asset-backed securities and any other entitled persons or companies to receive cash flows generated from the underlying pool of financial assets, and
(f) any events, covenants, standards or preconditions that may reasonably be expected to affect the timing or amount of payments or distributions to be made under the asset-backed securities, including those that are dependent or based on the economic performance of the underlying pool of financial assets.
(3) Provide financial disclosure that describes the underlying pool of financial assets, for the period from the date as at which the following information was presented in the issuer's current AIF to a date not more than 90 days before the date of the issuance of a receipt for the preliminary short form prospectus, of
(a) the composition of the pool as at the end of the period,
(b) profit and losses from the pool for the period presented on at least an annual basis or such shorter period as is reasonable given the nature of the underlying pool of assets,
(c) the payment, prepayment and collection experience of the pool for the period on at least an annual basis or such shorter period as is reasonable given the nature of the underlying pool of assets;
(d) servicing and other administrative fees, and
(e) any significant variances experienced in the matters referred to in paragraphs (a) through (d).
(4) Describe the type of financial assets, the manner in which the financial assets originated or will originate and, if applicable, the mechanism and terms of the agreement governing the transfer of the financial assets comprising the underlying pool to or through the issuer, including the consideration paid for the financial assets.
(5) Describe any person or company who
(a) originated, sold or deposited a material portion of the financial assets comprising the pool, or has agreed to do so,
(b) acts, or has agreed to act, as a trustee, custodian, bailee or agent of the issuer or any holder of the asset-backed securities, or in a similar capacity,
(c) administers or services a material portion of the financial assets comprising the pool or provides administrative or managerial services to the issuer, or has agreed to do so, on a conditional basis or otherwise, if
(i) finding a replacement provider of the services at a cost comparable to the cost of the current provider is not reasonably likely.
(ii) a replacement provider of the services is likely to achieve materially worse results than the current provider,
(iii) the current provider of the services is likely to default in its service obligations because of its current financial condition, or
(iv) the disclosure is otherwise material,
(d) provides a guarantee, alternative credit support or other credit enhancement to support the obligations of the issuer under the asset-backed securities or the performance of some or all of the financial assets in the pool, or has agreed to do so, or
(e) lends to the issuer in order to facilitate the timely payment or repayment of amounts payable under the asset-backed securities, or has agreed to do so.
(6) Describe the general business activities and material responsibilities under the asset-backed securities of a person or company referred to in subsection (5).
(7) Describe the terms of any material relationships between
(a) any of the persons or companies referred to in subsection (5) or any of their respective affiliates, and
(b) the issuer.
(8) Describe any provisions relating to termination of services or responsibilities of any of the persons or companies referred to in subsection (5) and the terms on which a replacement may be appointed.
(9) Describe any risk factors associated with the asset-backed securities, including disclosure of material risks associated with changes in interest rates or prepayment levels, and any circumstances where payments on the asset-backed securities could be impaired or disrupted as a result of any reasonably foreseeable event that may delay, divert or disrupt the cash flows dedicated to service the asset-backed securities.
INSTRUCTIONS
(1) Present the information required under subsection (3) in a manner that will enable a reader to easily determine whether, and the extent to which, the events, covenants, standards and preconditions referred to in paragraph (2)(f) have occurred, are being satisfied or may be satisfied.
(2) If the information required under subsection (3) is not compiled specifically from the underlying pool of financial assets, but is compiled from a larger pool of the same assets from which the securitized assets are randomly selected so that the performance of the larger pool is representative of the performance of the pool of securitized assets, then an issuer may comply with subsection (3) by providing the financial disclosure required based on the larger pool and disclosing that it has done so.
(3) Issuers are required to summarize contractual arrangements in plain language and may not merely restate the text of the contracts referred to. The use of diagrams to illustrate the roles of, and the relationship among, the persons and companies referred to in subsection (5) and the contractual arrangements underlying the asset-backed securities is encouraged.
7.4 Derivatives -- If derivatives are being distributed, describe fully the material attributes and characteristics of the derivatives, including
(a) the calculation of the value or payment obligations under the derivatives;
(b) the exercise of the derivatives;
(c) settlements that are the result of the exercise of the derivatives;
(d) the underlying interest of the derivatives;
(e) the role of a calculation expert in connection with the derivatives;
(f) the role of any credit supporter of the derivatives; and
(g) the risk factors associated with the derivatives.
7.5 Other Securities -- If securities other than equity securities, debt securities, asset-backed securities or derivatives are being distributed, describe fully the material attributes and characteristics of those securities.
7.6 Special Warrants, etc. -- If the short form prospectus is used to qualify the distribution of securities issued upon the exercise of special warrants or other securities acquired on a prospectus-exempt basis,
disclose that holders of such securities have been provided with a contractual right of rescission andprovide the following disclosure in the short form prospectus, with the bracketed information completedto indicate that holders of such securities have been provided with a contractual right of rescission:"The issuer has granted to each holder of a special warrant a contractual right of rescission of the prospectus-exempt transaction under which the special warrant was initially acquired. The contractual right of rescission provides that if a holder of a special warrant who acquires another security of the issuer on exercise of the special warrant as provided for in the prospectus is, or becomes, entitled under the securities legislation of a jurisdiction to the remedy of rescission because of the short form prospectus or an amendment to the short form prospectus containing a misrepresentation,
(a) the holder is entitled to rescission of both the holder's exercise of its special warrant and the private placement transaction under which the special warrant was initially acquired,
(b) the holder is entitled in connection with the rescission to a full refund of all consideration paid to the underwriter or issuer, as the case may be, on the acquisition of the special warrant, and
(c) if the holder is a permitted assignee of the interest of the original special warrant subscriber, the holder is entitled to exercise the rights of rescission and refund as if the holder was the original subscriber."
7.7 Restricted Securities
(1) If the issuer has outstanding, or proposes to distribute under a short form prospectus restricted securities, subject securities or securities that are, directly or indirectly, convertible into or exercisable or exchangeable for restricted securities or subject securities, provide a detailed description of:
(a) the voting rights attached to the restricted securities that are the subject of the distribution or that will result from the distribution, either directly or following a conversion, exchange or exercise, and the voting rights, if any, attached to the securities of any other class of securities of the issuer that are the same as or greater than, on a per security basis, those attached to the restricted securities,
(b) any significant provisions under applicable corporate and securities law that do not apply to the holders of the restricted securities that are the subject of the distribution or that will result from the distribution, either directly or following a conversion, exchange or exercise, but do apply to the holders of another class of equity securities, and the extent of any rights provided in the constating documents or otherwise for the protection of holders of the restricted securities.
(c) any rights under applicable corporate law, in the constating documents or otherwise, of holders of restricted securities that are the subject of the distribution or that will result from the distribution, either directly or following a conversion, exchange or exercise, to attend, in person or by proxy, meetings of holders of equity securities of the issuer and to speak at the meetings to the same extent that holders of equity securities are entitled, and
(d) how the issuer complied with, or basis upon which it was exempt from, the requirements of Part 12 of NI 41-101
(2) If holders of restricted securities do not have all of the rights referred to in subsection (1) the detailed description referred to in that subsection must include, in boldface, a statement of the rights the holders do not have.
(3) If the issuer is required to include the disclosure referred to in subsection (1), state the percentage of the aggregate voting rights attached to the issuer's securities that will be represented by restricted securities after effect has been given to the issuance of the securities being offered.
7.8 Modification of Terms -- Describe provisions about the modification, amendment or variation of any rights or other terms attached to the securities being distributed. If the rights of holders of securities may be modified otherwise than in accordance with the provisions attached to the securities or the provisions of the governing statute relating to the securities, explain briefly.
7.9 Ratings -- If the issuer has asked for and received a stability rating, or if the issuer is aware that it has received any other kind of rating, including a provisional rating, from one or more approved rating organizations for the securities being distributed and the rating or ratings continue in effect, disclose
(a) each security rating, including a provisional rating or stability rating, received from an approved rating organization,
(b) the name of each approved rating organization that has assigned a rating for the securities to be distributed,
(c) a definition or description of the category in which each approved rating organization rated the securities to be distributed and the relative rank of each rating within the organization's overall classification system,
(d) an explanation of what the rating addresses and what attributes, if any, of the securities to be distributed are not addressed by the rating,
(e) any factors or considerations identified by the approved rating organization as giving rise to unusual risks associated with the securities to be distributed,
(f) a statement that a security rating or a stability rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the rating organization, and
(g) any announcement made by, or any proposed announcement known to the issuer that is to be made by, an approved rating organization to the effect that the organization is reviewing or intends to revise or withdraw a rating previously assigned and required to be disclosed under this section.
INSTRUCTION
There may be factors relating to a security that are not addressed by a ratings agency when they give a rating. For example, in the case of cash settled derivatives, factors in addition to the creditworthiness of the issuer, such as the continued subsistence of the underlying interest or the volatility of the price, value or level of the underlying interest may be reflected in the rating analysis. Rather than being addressed in the rating itself, these factors may be described by an approved rating organization by way of a superscript or other notation to a rating. Any such attributes must be discussed in the disclosure under this section.
7.10 Other Attributes
(1) If the rights attaching to the securities being distributed are materially limited or qualified by the rights of any other class of securities, or if any other class of securities ranks ahead of or equally with the securities being distributed, include information about the other securities that will enable investors to understand the rights attaching to the securities being distributed.
(2) If securities of the class being distributed may be partially redeemed or repurchased, state the manner of selecting the securities to be redeemed or repurchased.
INSTRUCTION
This Item requires only a brief summary of the provisions that are material from an investment standpoint. The provisions attaching to the securities being distributed or any other class of securities do not need to be set out in full. They may, in the issuer's discretion, be attached as a schedule to the short form prospectus.
Item 7A -- Prior Sales
7A.1 Prior Sales -- For each class or series of securities of the issuer distributed under the short form prospectus and for securities that are convertible or exchangeable into those classes or series of securities, state, for the 12-month period before the date of the short form prospectus,
(a) the price at which the securities have been issued or are to be issued by the issuer or sold by the selling securityholder,
(b) the number of securities issued or sold at that price, and
(c) the date on which the securities were issued or sold.
7A.2 Trading Price and Volume
(1) For
each class ofthe following securities of the issuer thatisare traded or quoted on a Canadian marketplace, identify the marketplace and the price ranges and volume traded or quoted on the Canadian marketplace on which the greatest volume of trading or quotation for the securities generally occurs.:(a) each class or series of securities of the issuer distributed under the short form prospectus;
(b) securities of the issuer into which those classes or series of securities are convertible or exchangeable.
(2)
If a class ofFor the following securities of the issueristhat are not traded or quoted on a Canadian marketplace, butisare traded or quoted on a foreign marketplace, identify the foreign marketplace and the price ranges and volume traded or quoted on the foreign marketplace on which the greatest volume or quotation for the securities generally occurs:(a) each class or series of securities of the issuer distributed under the short form prospectus;
(b) securities of the issuer into which those classes or series of securities are convertible or exchangeable.
(3) Provide the information required under subsections (1) and (2) on a monthly basis for each month or, if applicable, partial months of the 12-month period before the date of the short form prospectus.
Item 8 -- Selling Securityholder
8.1 Selling Securityholder
(1) If any securities are being distributed for the account of a securityholder, provide the following information for each securityholder:
1. The name.
2. The number or amount of securities owned, controlled or directed of the class being distributed.
3. The number or amount of securities of the class being distributed for the account of the securityholder.
4. The number or amount of securities of the issuer of any class to be owned, controlled or directed after the distribution, and the percentage that number or amount represents of the total outstanding.
5. Whether the securities referred to in paragraph 2, 3 or 4 are owned both of record and beneficially, of record only, or beneficially only.
(2) If securities are being distributed in connection with a restructuring transaction, indicate, to the extent known, the holdings of each person or company described in paragraph 1. of subsection (1) that will exist after effect has been given to the transaction.
(3) If any of the securities being distributed are being distributed for the account of a securityholder and those securities were purchased by the selling securityholder within the two years preceding the date of the short form prospectus, state the date the selling securityholder acquired the securities and, if the securities were acquired in the 12 months preceding the date of the short form prospectus, the cost to the securityholder in the aggregate and on an average cost-per-security basis.
(4) If, to the knowledge of the issuer or the underwriter of the securities being distributed, any selling securityholder is an associate or affiliate of another person or company named as a principal holder of voting securities in the issuer's information circular required to be incorporated by reference under paragraph 7. of subsection 11.1(1), disclose, to the extent known, the material facts of the relationship, including any basis for influence over the issuer held by the person or company other than the holding of voting securities of the issuer.
(5) In addition to the above, include in a footnote to the table the required calculation(s) on a fully-diluted basis.
(6) Describe any material change to the information required to be included in the short form prospectus under subsection (1) to the date of the short form prospectus.
INSTRUCTION
If a company, partnership, trust or other unincorporated entity is a selling securityholder, disclose, to the extent known, the name of each individual who, through ownership of or control or direction over the securities of that company, trust or other unincorporated entity, or membership in the partnership, as the case may be, is a principal securityholder of that entity.
Item 9 -- Mineral Property
9.1 Mineral Property -- If a material part of the proceeds of the distribution is to be expended on a particular mineral property and if the current AIF does not contain the disclosure required under section 5.4 of Form 51-102F2 for the property or that disclosure is inadequate or incorrect due to changes, disclose the information required under section 5.4 of Form 51-102F2.
Item 10 -- Recently Completed and Probable Acquisitions
10.1 Application and Definitions -- This Item does not apply to a completed or proposed transaction by the issuer that was or will be accounted for as a reverse takeover or a transaction that is a proposed reverse takeover that has progressed to a state where a reasonable person would believe that the likelihood of the reverse takeover being completed is high.
10.2 Significant Acquisitions
(1) Describe any acquisition
(a) that the issuer has completed within 75 days prior to the date of the short form prospectus;
(b) that is a significant acquisition for the purposes of Part 8 of NI 51-102; and
(c) for which the issuer has not yet filed a business acquisition report under NI 51-102.
(2) Describe any proposed acquisition by an issuer that
(a) has progressed to a state where a reasonable person would believe that the likelihood of the issuer completing the acquisition is high; and
(b) would be a significant acquisition for the purposes of Part 8 of NI 51-102 if completed as of the date of the short form prospectus.
(3) If disclosure about an acquisition or proposed acquisition is required under subsection (1) or (2), include financial statements or other information about the acquisition or proposed acquisition if the inclusion of the financial statements is necessary for the short form prospectus to contain full, true and plain disclosure of all material facts relating to the securities being distributed.
(4) The requirement to include financial statements or other information under subsection (3) must be satisfied by including
(a) the financial statements or other information that will be required to be included in, or incorporated by reference into, a business acquisition report filed under Part 8 of NI 51-102, or
(b) satisfactory alternative financial statements or other information.
INSTRUCTION
For the description of the acquisition or proposed acquisition, include the information required by sections 2.1 through 2.6 of Form 51-102F4. For a proposed acquisition, modify this information as necessary to convey that the acquisition is not yet completed.
Item 10A -- Reverse Takeover and Probable Reverse Takeover
10A.1 Completed Reverse Takeover Disclosure -- If the issuer has completed a reverse takeover since the end of the financial year in respect of which the issuer's current AIF is incorporated by reference into the short form prospectus under paragraph 1. of subsection 11.1(1), provide disclosure about the reverse takeover acquirer by complying with the following:
1. If the reverse takeover acquirer satisfies the criteria set out in paragraphs 2.2(a), (b), (c), and (d) of the Instrument, incorporate by reference into the short form prospectus all documents that would be required to be incorporated by reference under Item 11 if the reverse takeover acquirer were the issuer of the securities.
2. If paragraph 1 does not apply to the reverse takeover acquirer, include in the short form prospectus the same disclosure about the reverse takeover acquirer that would be required to be contained in Form 41-101F1 if the reverse takeover acquirer were the issuer of the securities being distributed and the reverse takeover acquirer were distributing those securities by way of the short form prospectus.
10A.2 Probable Reverse Takeover Disclosure -- If the issuer is involved in a proposed reverse takeover that has progressed to a state where a reasonable person would believe that the likelihood of the reverse takeover being completed is high, provide disclosure about the reverse takeover acquirer by complying with the following:
1. If the reverse takeover acquirer satisfies the criteria set out in paragraphs 2.2(a), (b), (c), and (d) of the Instrument, incorporate by reference into the short form prospectus all documents that would be required to be incorporated by reference under Item 11 if the reverse takeover acquirer were the issuer of the securities.
2. If paragraph 1 does not apply to the reverse takeover acquirer, include in the short form prospectus the same disclosure about the reverse takeover acquirer that would be required to be contained in Form 41-101F1 if the reverse takeover acquirer were the issuer of the securities being distributed and the reverse takeover acquirer were distributing those securities by way of the short form prospectus.
Item 11 -- Documents Incorporated by Reference
11.1 Mandatory Incorporation by Reference
(1) In addition to any other document that an issuer may choose to incorporate by reference, specifically incorporate by reference in the short form prospectus, by means of a statement in the short form prospectus to that effect, the documents set forth below:
1. The issuer's current AIF, if it has one.
2. The issuer's current annual financial statements, if any, and related MD&A.
3. The issuer's interim financial report most recently filed or required to have been filed under the applicable CD rule in respect of an interim period, if any, subsequent to the financial year in respect of which the issuer has filed its current annual financial statements or has included annual financial statements in the short form prospectus, and the related interim MD&A.
4. If, before the short form prospectus is filed, historical financial information about the issuer for a financial period more recent than the period for which financial statements are required under paragraphs 2 and 3 is publicly disseminated by, or on behalf of, the issuer through news release or otherwise, the content of the news release or public communication.
5. Any material change report, except a confidential material change report, filed under Part 7 of NI 51-102 or Part 11 of NI 81-106 since the end of the financial year in respect of which the issuer's current AIF is filed.
6. Any business acquisition report filed by the issuer under Part 8 of NI 51-102 for acquisitions completed since the beginning of the financial year in respect of which the issuer's current AIF is filed, unless the issuer
(a) incorporated the BAR by reference into its current AIF, or
(b) incorporated at least 9 months of the acquired business or related businesses operations into the issuer's current annual financial statements.
7. Any information circular filed by the issuer under Part 9 of NI 51-102 or Part 12 of NI 81-106 since the beginning of the financial year in respect of which the issuer's current AIF is filed, other than an information circular prepared in connection with an annual general meeting if the issuer has filed and incorporated by reference an information circular for a subsequent annual general meeting.
8. The most recent Form 51-101F1, Form 51-101F2 and Form 51-101F3, filed by an SEC issuer, unless
(a) the issuer's current AIF is in the form of Form 51-102F2; or
(b) the issuer is otherwise exempted from the requirements of NI 51-101.
9. Any other disclosure document which the issuer has filed pursuant to an undertaking to a provincial and territorial securities regulatory authority since the beginning of the financial year in respect of which the issuer's current AIF is filed.
10. Any other disclosure document of the type listed in paragraphs 1 through 8 that the issuer has filed pursuant to an exemption from any requirement under securities legislation since the beginning of the financial year in respect of which the issuer's current AIF is filed.
(2) In the statement incorporating the documents listed in subsection (1) by reference in a short form prospectus, clarify that applicable portions of the documents are not incorporated by reference to the extent their contents are modified or superseded by a statement contained in the short form prospectus or in any other subsequently filed document that is also incorporated by reference in the short form prospectus.
(3) Despite item (7.) of subsection (1), an issuer may exclude from its short form prospectus a report, valuation, statement or opinion of a person or company contained in an information circular prepared in connection with a special meeting of securityholders of the issuer and any references therein, if:
(a) the report is not an auditor's report in respect of financial statements of a person or company; and
(b) the report, valuation, statement or opinion was prepared in respect of a specific transaction contemplated in the information circular, unrelated to the distribution of securities under the short form prospectus, and that transaction has been previously abandoned or completed.
INSTRUCTIONS
(1) Paragraph 4 of subsection (1) requires issuers to incorporate only the news release or other public communication through which more recent financial information is released to the public. However, if the financial statements from which the information in the news release has been derived have been filed, then the financial statements must be incorporated by reference.
(2) Issuers must provide a list of the material change reports and business acquisition reports required under paragraphs 5 and 6 of subsection (1), giving the date of filing and briefly describing the material change or acquisition, as the case may be, in respect of which the report was filed.
(3) Any material incorporated by reference in a short form prospectus is required under sections 4.1 and 4.2 of the Instrument to be filed with the short form prospectus unless it has been previously filed.
11.2 Mandatory Incorporation by Reference of Future Documents -- State that any documents, of the type described in section 11.1, if filed by the issuer after the date of the short form prospectus and before the termination of the distribution, are deemed to be incorporated by reference in the short form prospectus.
11.3 Issuers without a Current AIF or Current Annual Financial Statements
(1) If the issuer does not have a current AIF or current annual financial statements and is relying on the exemption in subsection 2.7(1) of the Instrument, include the disclosure, including financial statements and related MD&A, that would otherwise have been required to have been included in a current AIF and current annual financial statements and related MD&A under section 11.1.
(1)
(2)If the issuer does not have a current AIF or current annual financial statements and is relying on the exemption in subsection 2.7(2) of the Instrument, include the disclosure, including financial statements, provided in accordance withItem 14.2 or 14.5 of Form 51-102F5 in the information circular referred to in paragraph 2.7(2)(b) of the Instrument.(a) Item 14.2 or 14.5 of Form 51-102F5 in the information circular referred to in paragraph 2.7(2)(b) of the Instrument; or
(b) the policies and requirements of the TSX Venture Exchange prescribed for disclosure of a qualifying transaction in a CPC filing statement or a reverse takeover in a filing statement referred to in paragraph 2.7(3)(b) of the Instrument.
INSTRUCTION
(1) If an issuer is required to include disclosure under subsection 11.3(2), it must include the historical financial statements of any entity that was a party to the restructuring transaction and any other information contained in the information circular, CPC filing statement or other filing statement of the TSX Venture Exchange that was used to construct financial statements for the issuer.
(2) The disclosure referenced in instruction (1) above must be presented in a way that supplements, but does not replace, the disclosure prescribed for a transaction that also constitutes a significant acquisition for the issuer or a reverse takeover in which the issuer was involved, if applicable.
11.4 Significant Acquisition for Which No Business Acquisition Report is Filed
(1) If the issuer has,
(a) since the beginning of the most recently completed financial year in respect of which annual financial statements are included in the short form prospectus; and
(b) more than 75 days prior to the date of filing the preliminary short form prospectus;
completed a transaction that would have been a significant acquisition for the purposes of Part 8 of NI 51-102 if the issuer had been a reporting issuer at the time of the transaction, and the issuer has not filed a business acquisition report in respect of the transaction, include the financial statements and other information in respect of the transaction that is prescribed by Form 51-102F4.
(2) If the issuer was exempt from the requirement to file a business acquisition report in respect of a transaction because the disclosure that would normally be included in a business acquisition report was included in another document, include that disclosure in the short form prospectus.
INSTRUCTION
Disclosure required by section 11.3 or 11.4 to be included in the short form prospectus may be incorporated by reference from another document or included directly in the short form prospectus.
11.5 Additional Disclosure for Issuers of Asset-Backed Securities
If the issuer has not filed or been required to file interim financial statements and related MD&A in respect of an interim period, if any, subsequent to the financial year in respect of which it has included annual financial statements in the short form prospectus because it is not a reporting issuer and is qualifying to file the short form prospectus under section 2.6 of the Instrument, include the interim financial statements and related MD&A that the issuer would have been required to incorporate by reference under paragraph 3 of subsection 11.1(1) if the issuer were a reporting issuer at the relevant time.
Item 12 -- Additional Disclosure for Issues of Guaranteed Securities
12.1 Credit Supporter Disclosure -- Provide disclosure about each credit supporter, if any, that has provided a guarantee or alternative credit support for all or substantially all of the payments to be made under the securities to be distributed, by complying with the following:
1. If the credit supporter is a reporting issuer in at least one jurisdiction and has a current AIF, incorporating by reference into the short form prospectus all documents that would be required to be incorporated by reference under Item 11 if the credit supporter were the issuer of the securities.
2. If the credit supporter is not a reporting issuer in any jurisdiction and has a class of securities registered under section 12(b) or 12(g) of the 1934 Act, or is required to file reports under section 15(d) of the 1934 Act, incorporating by reference into the short form prospectus all 1934 Act filings that would be required to be incorporated by reference in a Form S-3 or Form F-3 registration statement filed under the 1933 Act if the securities distributed under the short form prospectus were being registered on Form S-3 or Form F-3.
3. If neither paragraph 1 nor paragraph 2 applies to the credit supporter, providing directly in the short form prospectus the same disclosure that would be contained in the short form prospectus through the incorporation by reference of the documents referred to in Item 11 if the credit supporter were the issuer of the securities and those documents had been prepared by the credit supporter.
4. Providing such other information about the credit supporter as is necessary to provide full, true and plain disclosure of all material facts concerning the securities to be distributed, including the credit supporter's earnings coverage ratios under Item 6 as if the credit supporter were the issuer of the securities.
Item 13 -- Exemptions for Certain Issues of Guaranteed Securities
13.1 Definitions and Interpretation
(1) In this Item
(a) the impact of subsidiaries, on a combined basis, on the financial results of the parent entity is "minor" if each item of the summary financial information of the subsidiaries, on a combined basis, represents less than 3% of the total consolidated amounts,
(b) a parent entity has "limited independent operations" if each item of its summary financial information represents less than 3% of the total consolidated amounts,
(c) a subsidiary is a "finance subsidiary" if it has minimal assets, operations, revenue or cash flows other than those related to the issuance, administration and repayment of the security being distributed and any other securities guaranteed by its parent entity,
(d) "parent credit supporter" means a credit supporter of which the issuer is a subsidiary,
(e) "parent entity" means a parent credit supporter for the purposes of sections 13.2 and 13.3 and an issuer for the purpose of section 13.4,
(f) "subsidiary credit supporter" means a credit supporter that is a subsidiary of the parent credit supporter, and
(g) "summary financial information" includes the following line items:
(i) revenue;
(ii) profit or loss from continuing operations attributable to owners of the parent;
(iii) profit or loss attributable to owners of the parent; and
(iv) unless the issuer's GAAP permits the preparation of the credit support issuer's statement of financial position without classifying assets and liabilities between current and non-current and the credit support issuer provides alternative meaningful financial information which is more appropriate to the industry,
(A) current assets,
(B) non-current assets;
(C) current liabilities; and
(D) non-current liabilities.
INSTRUCTION
See section 1.1 of NI 41-101 for the definitions of "profit or loss attributable to owners of the parent" and "profit or loss from continuing operations attributable to owners of the parent".
(2) For the purpose of this Item, consolidating summary financial information must be prepared on the following basis
(a) an entity's annual or interim summary financial information must be derived from the entity's financial information underlying the corresponding consolidated financial statements of the parent entity included in the short form prospectus,
(b) the parent entity column must account for investments in all subsidiaries under the equity method, and
(c) all subsidiary entity columns must account for investments in non-credit supporter subsidiaries under the equity method.
13.2 Issuer is Wholly-owned Subsidiary of Parent Credit Supporter -- Despite Items 6 and 11, an issuer is not required to incorporate by reference into the short form prospectus any of its documents under paragraphs 1 to 4 and 6 to 8 of subsection 11.1(1) or include in the short form prospectus its earning coverage ratios under section 6.1, if
(a) a parent credit supporter has provided full and unconditional credit support for the securities being distributed;
(b) the parent credit supporter satisfies the criterion in paragraph 2.4(1)(b) of the Instrument;
(c) the securities being distributed are non-convertible debt securities, non-convertible preferred shares, or convertible debt securities or convertible preferred shares that are convertible, in each case, into non-convertible securities of the parent credit supporter;
(d) the parent credit supporter is the beneficial owner of all the issued and outstanding equity securities of the issuer;
(e) no other subsidiary of the parent credit supporter has provided a guarantee or alternative credit support for all or substantially all of the payments to be made under the securities being distributed;
(f) the issuer includes in the short form prospectus either
(i) a statement that the financial results of the issuer are included in the consolidated financial results of the parent credit supporter, if
(A) the issuer is a finance subsidiary, and
(B) the impact of any subsidiaries of the parent credit supporter on a combined basis, excluding the issuer, on the consolidated financial results of the parent credit supporter is minor, or
(ii) for the periods covered by the parent credit supporter's consolidated interim financial report and consolidated annual financial statements included in the short form prospectus under section 12.1, consolidating summary financial information for the parent credit supporter presented with a separate column for each of the following:
(A) the parent credit supporter;
(B) the issuer;
(C) any other subsidiaries of the parent credit supporter on a combined basis;
(D) consolidating adjustments;
(E) the total consolidated amounts.
13.3 Issuer is Wholly-owned Subsidiary of, and One or More Subsidiary Credit Supporters Controlled by, Parent Credit Supporter
(1) Despite Items 6, 11 and 12, an issuer is not required to incorporate by reference into the short form prospectus any of its documents under paragraphs 1 to 4 and 6 to 8 of subsection 11.1(1), or include in the short form prospectus its earning coverage ratios under section 6.1, or include in the short form prospectus the disclosure of one or more subsidiary credit supporters required by section 12.1, if
(a) a parent credit supporter and one or more subsidiary credit supporters have each provided full and unconditional credit support for the securities being distributed;
(b) the parent credit supporter satisfies the criterion in paragraph 2.4(1)(b) of the Instrument;
(c) the guarantees or alternative credit supports are joint and several;
(d) the securities being distributed are non-convertible debt securities, non-convertible preferred shares, or convertible debt securities or convertible preferred shares that are convertible in each case into non-convertible securities of the parent credit supporter;
(e) the parent credit supporter is the beneficial owner of all the issued and outstanding equity securities of the issuer;
(f) the parent credit supporter controls each subsidiary credit supporter and the parent credit supporter has consolidated the financial statements of each subsidiary credit supporter into the parent credit supporter's financial statements that are included in the short form prospectus; and
(g) the issuer includes in the short form prospectus for the periods covered by the parent credit supporter's financial statements included in the short form prospectus under section 12.1, consolidating summary financial information for the parent credit supporter presented with a separate column for each of the following:
(i) the parent credit supporter
(ii) the issuer;
(iii) each subsidiary credit supporter on a combined basis;
(iv) any other subsidiaries of the parent credit supporter on a combined basis;
(v) consolidating adjustments;
(vi) the total consolidated amounts.
(2) Despite paragraph (1)(g)
(a) if the impact of any subsidiaries of the parent credit supporter on a combined basis, excluding the issuer and all subsidiary credit supporters, on the consolidated financial results of the parent credit supporter is minor, column (iv) may be combined with another column, and
(b) if the issuer is a finance subsidiary, column (ii) may be combined with another column.
13.4 One or More Credit Supporters Controlled by Issuer -- Despite Item 12, an issuer is not required to include in the short form prospectus the credit supporter disclosure for one or more credit supporters required by section 12.1, if
(a) one or more credit supporters have each provided full and unconditional credit support for the securities being distributed,
(b) if there is more than one credit supporter, the guarantee or alternative credit supports are joint and several,
(c) the securities being distributed are non-convertible debt securities or non-convertible preferred shares, or convertible debt securities or convertible preferred shares that are convertible, in each case, into non-convertible securities of the issuer,
(d) the issuer controls each credit supporter and the issuer has consolidated the financial statements of each credit supporter into the issuer's financial statements that are included in the short form prospectus, and
(e) the issuer includes in the short form prospectus either
(i) a statement that the financial results of the credit supporter(s) are included in the consolidated financial results of the issuer, if
(A) the issuer has limited independent operations, and
(B) the impact of any subsidiaries of the issuer on a combined basis, excluding the credit supporter(s) but including any subsidiaries of the credit supporter(s) that are not themselves credit supporters, on the consolidated financial results of the issuer is minor, or
(ii) for the periods covered by the issuer's financial statements included in the short form prospectus under Item 11, consolidating summary financial information for the issuer, presented with a separate column for each of the following:
(A) the issuer;
(B) the credit supporters on a combined basis;
(C) any other subsidiaries of the issuer on a combined basis;
(D) consolidating adjustments;
(E) the total consolidated amounts.
Item 14 -- Relationship between Issuer or Selling Securityholder and Underwriter
14.1 Relationship between Issuer or Selling Securityholder and Underwriter
(1) If the issuer or selling securityholder is a connected issuer or related issuer of an underwriter of the distribution, or if the issuer or selling securityholder is also an underwriter of the distribution, comply with the requirements of NI 33-105.
(2) For the purposes of subsection (1), "connected issuer" and "related issuer" have the same meaning as in NI 33-105.
Item 15 -- Interest of Experts
15.1 Names of Experts -- Name each person or company
(a) who is named as having prepared or certified a report, valuation, statement or opinion in the short form prospectus or an amendment to the short form prospectus, either directly or in a document incorporated by reference; and
(b) whose profession or business gives authority to the report, valuation, statement or opinion made by the person or company.
15.2 Interest of Experts -- For each person or company referred to in section 15.1, provide the disclosure that would be required under section 16.2 of Form 51-102F2, as of the date of the short form prospectus, as if that person or company were a person or company referred to in section 16.1 of Form 51-102F2.
15.3 Exemption -- Sections 15.1 and 15.2 do not apply to a person or company if the disclosure regarding that person or company required under section 15.2 is already disclosed in the issuer's current AIF
.and that disclosure is correct as at the date of the prospectus.
Item 16 -- Promoters
16.1 Promoters
(1) For a person or company that is, or has been within the two years immediately preceding the date of the short form prospectus, a promoter of the issuer or subsidiary of the issuer, state, to the extent not disclosed elsewhere in a document incorporated by reference in the short form prospectus,
(a) the person or company's name;
(b) the number and percentage of each class of voting securities and equity securities of the issuer or any of its subsidiaries beneficially owned, or controlled or directed, directly or indirectly, by the person or company,
(c) the nature and amount of anything of value, including money, property, contracts, options or rights of any kind received or to be received by the promoter, directly or indirectly, from the issuer or from a subsidiary of the issuer, and the nature and amount of any assets, services or other consideration received or to be received by the issuer or a subsidiary of the issuer in return, and
(d) for an asset acquired within the two years before the date of the preliminary short form prospectus, or to be acquired, by the issuer or by a subsidiary of the issuer from a promoter
(i) the consideration paid or to be paid for the asset and the method by which the consideration has been or will be determined,
(ii) the person or company making the determination referred to in subparagraph (i) and the person or company's relationship with the issuer or the promoter or an affiliate of the issuer or promoter, and
(iii) the date that the asset was acquired by the promoter and the cost of the asset to the promoter.
(2) If a promoter referred to in subsection (1) is, as at the date of the preliminary short form prospectus, or was within 10 years before the date of the preliminary short form prospectus, a director, chief executive officer or chief financial officer of any person or company that
(a) was subject to an order that was issued while the promoter was acting in the capacity as director, chief executive officer or chief financial officer, or
(b) was subject to an order that was issued after the promoter ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while the promoter was acting in the capacity as director, chief executive officer or chief financial officer,
state the fact and describe the basis on which the order was made and whether the order is still in effect.
(3) For the purposes of subsection (2), "order" means:
(a) a cease trade order,
(b) an order similar to a cease trade order, or
(c) an order that denied the relevant person or company access to any exemption under securities legislation,
that was in effect for a period of more than 30 consecutive days.
(4) If a promoter referred to in subsection (1)
(a) is, at the date of the preliminary short form prospectus, or has been within the 10 years before the date of the preliminary short form prospectus, a director or executive officer of any person or company that, while the promoter was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, state the fact, or
(b) has, within the 10 years before the date of the preliminary short form prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the promoter, state the fact.
(5) Describe the penalties or sanctions imposed and the grounds on which they were imposed or the terms of the settlement agreement and the circumstances that gave rise to the settlement agreement, if a promoter referred to in subsection (1) has been subject to
(a) any penalties or sanctions imposed by a court relating to provincial and territorial securities legislation or by a provincial and territorial securities regulatory authority or has entered into a settlement agreement with a provincial and territorial securities regulatory authority, or
(b) any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor in making an investment decision.
(6) Despite subsection (5), no disclosure is required of a settlement agreement entered into before December 31, 2000 unless the disclosure would likely be considered important to a reasonable investor in making an investment decision.
INSTRUCTIONS
(1) The disclosure required by subsections (2), (4) and (5) also applies to any personal holding companies of any of the persons referred to in subsections (2), (4) and (5).
(2) A management cease trade order which applies to a promoter referred to in subsection (1) is an "order" for the purposes of paragraph (2)(a) and must be disclosed, whether or not the director, chief executive officer or chief financial officer was named in the order.
(3) For the purposes of this section, a late filing fee, such as a filing fee that applies to the late filing of an insider report, is not a "penalty or sanction".
(4) The disclosure in paragraph (2)(a) only applies if the promoter was a director, chief executive officer or chief financial officer when the order was issued against the person or company. The issuer does not have to provide disclosure if the promoter became a director, chief executive officer or chief financial officer after the order was issued.
Item 17 -- Risk Factors
17.1 Risk Factors -- Describe the factors material to the issuer that a reasonable investor would consider relevant to an investment in the securities being distributed.
INSTRUCTIONS
(1) Issuers may cross-reference to specific risk factors relevant to the securities being distributed that are discussed in their current AIF.
(2) Disclose risks in the order of seriousness from the most serious to the least serious.
(3) A risk factor should not be de-emphasized by including excessive caveats or conditions.
Item 18 -- Other Material Facts
18.1 Other Material Facts -- Give particulars of any material facts about the securities being distributed that are not disclosed under any other items or in the documents incorporated by reference into the short form prospectus and are necessary in order for the short form prospectus to contain full, true and plain disclosure of all material facts relating to the securities to be distributed.
Item 19 -- Exemptions from the Instrument
19.1 Exemptions from the Instrument -- List all exemptions from the provisions of the Instrument, including this Form, granted to the issuer applicable to the distribution or the short form prospectus, including all exemptions to be evidenced by the issuance of a receipt for the short form prospectus pursuant to section 8.2 of the Instrument.
Item 20 -- Statutory Rights of Withdrawal and Rescission
20.1 General -- Include a statement in substantially the following form, with the bracketed information completed:
Securities legislation in [certain of the provinces [and territories] of Canada/the Province of [insert name of local jurisdiction, if applicable]] provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. [In several of the provinces/provinces and territories,] {T/t]he securities legislation further provides a purchaser with remedies for rescission [or[, in some jurisdictions,] revisions of the price
ofor damages] if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission [, revision of the price or damages] are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province [or territory]. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province [or territory] for the particulars of these rights or consult with a legal adviser.20.2 Non-fixed Price Offerings -- In the case of a non-fixed price offering, replace, if applicable in the jurisdiction in which the short form prospectus is filed, the second sentence in the legend in section 20.1 with a statement in substantially the following form:
"This right may only be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment, irrespective of the determination at a later date of the purchase price of the securities distributed."
20.3 Convertible, Exchangeable or Exercisable Securities -- In the case of an offering of convertible, exchangeable or exercisable securities, provide a statement in the following form:
"In an offering of [state name of convertible, exchangeable or exercisable securities], investors are cautioned that the statutory right of action for damages for a misrepresentation contained in the prospectus is limited, in certain provincial [or territorial] securities legislation, to the price at which the [state name of convertible, exchangeable or exercisable securities] is offered to the public under the prospectus offering. This means that, under the securities legislation of certain provinces [or territories], if the purchaser pays additional amounts upon [conversion, exchange or exercise] of the security, those amounts may not be recoverable under the statutory right of action for damages that applies in such provinces [or territories]. The purchaser should refer to the applicable provisions of the purchaser's province [or territory] for the particulars of this right of action for damages or consult with a legal adviser."
Item 21 -- Certificates
21.1 Certificates -- Include the certificates required by Part 5 of NI 41-101 or by other securities legislation.
21.2 Issuer Certificate Form -- An issuer certificate form must state
"This short form prospectus, together with the documents incorporated by reference, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this short form prospectus as required by the securities legislation of [insert the jurisdictions in which qualified]."
21.3 Underwriter Certificate Form -- An underwriter certificate form must state
"To the best of our knowledge, information and belief, this short form prospectus, together with the documents incorporated by reference, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this short form prospectus as required by the securities legislation of [insert the jurisdictions in which qualified]."
21.4 Amendments
(1) For an amendment to a short form prospectus that does not restate the short form prospectus, change "short form prospectus" to "short form prospectus dated [insert date] as amended by this amendment" wherever it appears in the statements in sections 21.2 and 21.3.
(2) For an amended and restated short form prospectus, change "short form prospectus" to "amended and restated short form prospectus" wherever it appears in the statements in sections 21.2 and 21.3.
Schedule D-3 -- Blackline Showing Proposed Changes to Companion Policy 44-101CP to National Instrument 44-101 Short Form Prospectus Distributions
APPENDIX D
SCHEDULE D-3
COMPANION POLICY 44-101CP
TO NATIONAL INSTRUMENT 44-101
SHORT FORM PROSPECTUS DISTRIBUTIONS
PART 1 INTRODUCTION AND DEFINITIONS
1.1 Introduction and Purpose -- National Instrument 44-101 Short Form Prospectus Distributions ("NI 44-101") sets out the substantive tests for an issuer to qualify to file a prospectus in the form of a short form prospectus. The purpose of NI 44-101 is to shorten the time period in which, and streamline the procedures by which, qualified issuers and their selling securityholders can obtain access to the Canadian capital markets through a prospectus offering.
British Columbia, Alberta, Ontario, Manitoba, Nova Scotia and New Brunswick have adopted NI 44-101 by way of rule. Saskatchewan and Québec have adopted it by way of regulation. All other jurisdictions have adopted NI 44-101 by way of related blanket ruling or order. Each jurisdiction implements NI 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 NI 44-101 (also referred to as "this Companion Policy" or this "Policy") provides information relating to the manner in which the provisions of NI 44-101 are intended to be interpreted or applied by the provincial and territorial securities regulatory authorities, as well as the exercise of discretion under NI 44-101. The Companion Policy to NI 41-101 provides guidance for prospectuses filed under securities legislation including short form prospectuses. Issuers should refer to the Companion Policy to NI 41-101 as well as this Policy.
Terms used and not defined in this Companion Policy that are defined or interpreted in NI 44-101, NI 41-101 or a definition instrument in force in the jurisdiction should be read in accordance with NI 44-101, NI 41-101 or the 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 NI 44-101 and NI 41-101 in those jurisdictions that have adopted NI 44-101 by way of related blanket ruling or order, the provisions of NI 44-101 and NI 41-101 prevail over the provisions of this Policy.
1.2 Interrelationship with Local Securities Legislation -- NI 44-101 and NI 41-101, while being the primary instruments regulating short form prospectus distributions, are not exhaustive. Issuers are reminded to refer to the implementing law of the jurisdiction and other securities legislation of the local jurisdiction for additional requirements that may be applicable to the issuer's short form prospectus distribution.
1.3 Interrelationship with Continuous Disclosure (NI 51-102 and NI 81-106) -- The short form prospectus distribution system established under NI 44-101 is based on the continuous disclosure filings of reporting issuers pursuant to NI 51-102 or, in the case of an investment fund, NI 81-106. Issuers who wish to use the system should be mindful of their ongoing disclosure and filing obligations under the applicable CD rule. Issues raised in the context of a continuous disclosure review may be taken into consideration by the regulator when determining whether it is in the public interest to refuse to issue a receipt for a short form prospectus. Consequently, unresolved issues may delay or prevent the issuance of a receipt.
1.4 Process for Prospectus Reviews in Multiple Jurisdictions (NP 11-202) -- National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions ("NP 11-202") describes the process for filing and review of prospectuses, including investment fund and shelf prospectuses, amendments to prospectuses and related materials in multiple jurisdictions. NP 11-202 represents the means by which an issuer can enjoy the benefits of co-ordinated review by the securities regulatory authorities in the various jurisdictions in which the issuer has filed a prospectus. Under NP 11-202, one securities regulatory authority acts as the principal regulator for all materials relating to a filer.
1.5 Interrelationship with Shelf Distributions (NI 44-102) -- Issuers qualified under NI 44-101 to file a prospectus in the form of a short form prospectus and their securityholders can distribute securities under a short form prospectus using the shelf distribution procedures under NI 44-102. The Companion Policy to NI 44-102 explains that the distribution of securities under the shelf system is governed by the requirements and procedures of NI 44-101 and securities legislation, except as supplemented or varied by NI 44-102. Therefore, issuers qualified to file a prospectus in the form of a short form prospectus and selling securityholders of those issuers that wish to distribute securities under the shelf system should have regard to NI 44-101 and this Policy first, and then refer to NI 44-102 and the accompanying policy for any additional requirements.
1.6 Interrelationship with PREP Procedures (NI 44-103) -- NI 44-103 contains the post-receipt pricing procedures (the "PREP procedures"). All issuers and selling securityholders can use the PREP procedures of NI 44-103 to distribute securities, other than rights under a rights offering. Issuers and selling securityholders that wish to distribute securities under a prospectus in the form of a short form prospectus using the PREP procedures should have regard to NI 44-101 and this Policy first, and then refer to NI 44-103 and the accompanying policy for any additional requirements.
1.7 Definitions
(1) Approved rating -- Cash settled derivatives are covenant-based instruments that may be rated on a similar basis to debt securities. In addition to the creditworthiness of the issuer, other factors such as the continued subsistence of the underlying interest or the volatility of the price, value or level of the underlying 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 a superscript or other notation to a rating. The inclusion of such notations for covenant-based instruments that otherwise fall within one of the categories of an approved rating does not detract from the rating being considered to be an approved rating for the purposes of NI 44-101.
A rating agency may also restrict its rating to securities of an issuer that are denominated in local currency. This restriction may be denoted, for example, by the designation "LC". The inclusion of such a designation in a rating that would otherwise fall within one of the categories of an approved rating does not detract from the rating being considered to be an approved rating for the purposes of NI 44-101.
(2) Asset-backed security -- Issuers should refer to section 1.3(1) of the Companion Policy to NI 41-101.
(3) Current AIF -- An issuer's AIF filed under the applicable CD rule is a "current AIF" until the issuer files an AIF for the next financial year, or is required by the applicable CD rule to have filed its annual financial statements for the next financial year. If an issuer fails to file a new AIF by the filing deadline under the applicable CD rule for its annual financial statements, it will not have a current AIF and will not qualify under NI 44-101 to file a prospectus in the form of a short form prospectus. If an issuer files a revised or amended AIF for the same financial year as an AIF that has previously been filed, the most recently filed AIF will be the issuer's current AIF.
An issuer that is a venture issuer for the purpose of NI 51-102, and certain investment funds, may have no obligation under the applicable CD rule to file an AIF. However, to qualify under NI 44-101 to file a prospectus in the form of a short form prospectus, that issuer will be required to file an AIF in accordance with the applicable CD rule so as to have a "current AIF". A current AIF filed by an issuer that is a venture issuer for the purposes of NI 51-102 can be expected to expire later than a non-venture issuer's AIF, due to the fact that the deadlines for filing annual financial statements under NI 51-102 are later for venture issuers than for other issuers.
(4) Current annual financial statements -- An issuer's comparative annual financial statements filed under the applicable CD rule, together with the accompanying auditor's report, are "current annual financial statements" until the issuer files, or is required under the applicable CD rule to have filed, its comparative annual financial statements for the next financial year. If an issuer fails to file its comparative annual financial statements by the filing deadline under the applicable CD rule, it will not have current annual financial statements and will not be qualified under NI 44-101 to file a prospectus in the form of a short form prospectus.
Where there has been a change of auditor and the new auditor has not audited the comparative period, the report of the predecessor auditor on the comparative period must be included in the prospectus. The issuer may file the report of the predecessor auditor on the comparative period with the annual financial statements that are being incorporated by reference into the short form prospectus, and clearly incorporate by reference the predecessor auditor's report in addition to the new auditor's report. Alternatively, the issuer can incorporate by reference into the short form prospectus its comparative financial statements filed for the previous year, including the audit reports thereon.
(5) Successor Issuer --
TheA successor issuer is defined to include a reverse takeover acquiree in a completed reverse takeover. Alternatively, the definition of "successor issuer" requires that the issuer exist "as a result of a restructuring transaction".or that the issuer participate in the restructuring transaction and continue to exist following completion of the restructuring transaction. In both instances, prospectus level disclosure or comparable disclosure prescribed by the TSX Venture Exchange for such issuer must be provided in an information circular or similar disclosure document pursuant to subsections 2.7(2) and (3) of NI 44-101.In the case of an amalgamation, the amalgamated corporation is regarded by the securities regulatory authorities as existing "as a result of a restructuring transaction".
Also, if a corporation is incorporated for the sole purpose of facilitating a restructuring transaction, the securities regulatory authorities regard the new corporation as "existing as a result of a restructuring transaction" despite the fact that the corporation may have been incorporated before the restructuring transaction.The definition of "successor issuer" also contains an exclusion applicable to divestitures. For example, an issuer may carry out a restructuring transaction that results in the distribution to securityholders of a portion of its business or the transfer of a portion of its business to another issuer. In that case, the entity that carries on the portion of the business that was "spun-off" is not a successor issuer within the meaning of the definition.
However, if the divestiture represents a divestiture of substantially all of the business of the predecessor entity to the issuer, the issuer would be considered a successor issuer. In such circumstances, the financial information concerning the predecessor entity should be representative of the financial information of the successor issuer. Therefore, if an issuer is relying on this basis for short form prospectus qualification, it must ensure that the financial statements of the predecessor entity are a relevant, accurate proxy for its financial statements as a successor issuer.
An issuer may also be considered a successor issuer to a second issuer where there has been an internal reorganization of the second issuer, provided that the conditions in paragraph (b) of the definition of "successor issuer" are met. In particular, the internal reorganization must not result in an alteration of the securityholders' proportionate interest in the second issuer nor the second issuer's proportionate interest in its assets. For example, this may arise in an internal reorganization in which all of the securityholders of the second issuer exchange their securities in the second issuer for securities of the successor issuer. The second issuer would become a subsidiary of the successor issuer and its ownership in its assets would remain the same. The successor issuer definition was expanded to include this type of internal reorganization as it may not be considered a "restructuring transaction" as defined in NI 51-102 by virtue of the exclusion found at the end of the definition of "restructuring transaction".
PART 2 QUALIFICATION TO FILE A PROSPECTUS IN THE FORM OF A SHORT FORM PROSPECTUS
2.1 Basic Qualification Criteria -- Reporting Issuers with Equity Securities Listed on a Short Form Eligible Exchange (Section 2.2 of NI 44-101)
(1) Section 2.2 of NI 44-101 provides that an issuer with equity securities listed and posted for trading on a short form eligible exchange and that is up-to-date in its periodic and timely disclosure filings in all jurisdictions in which it is a reporting issuer satisfies the criteria for being qualified to file a prospectus in the form of a short form prospectus if it meets the other general qualification criteria. In addition to the listing requirement, the issuer may not be an issuer whose operations have ceased or whose principal asset is its exchange listing. The purpose of this requirement is to ensure that eligible issuers have an operating business in respect of which the issuer must provide current disclosure through application of the applicable CD rule.
The basic qualification criteria are structured to allow most Canadian listed issuers to participate in the expedited offering system created by NI 44-101, provided their public disclosure record provides investors with satisfactory and sufficient information about the issuer and its business, operations or capital. The securities regulatory authorities believe that it is in the public interest to allow an issuer's public disclosure to be incorporated into a short form prospectus, provided that the resulting prospectus provides prospective investors with full, true and plain disclosure about the issuer and the securities being distributed. The securities regulatory authority may not be prepared to issue a receipt for a short form prospectus if the prospectus, together with the documents incorporated by reference, fails to provide such full, true and plain disclosure
and, in Québec, disclosure of material facts likely to affect the value or the market price of the securities to be distributed. In such circumstances, the securities regulatory authority may require, in the public interest, that the issuer utilize the long form prospectus regime. In addition, the securities regulatory authority may also require that the issuer utilize the long form prospectus regime if the offering is, in essence, an initial public offering by a business or if:(a) the offering is for the purpose of financing a dormant or inactive issuer whether or not the issuer intends to use the proceeds to reactivate the issuer or to acquire an active business; or
(b) the offering is for the purpose of financing a material undertaking that would constitute a material departure from the business or operations of the issuer as at the date of its current annual financial statements and current AIF.
(2) A new reporting issuer or a successor issuer may satisfy the criteria to have current annual financial statements or a current AIF by filing its comparative annual financial statements or an AIF, respectively, in accordance with NI 51-102 or NI 81-106, as applicable, for its most recently completed financial year. It is not necessary that the issuer be required by the applicable CD rule to have filed such documents. An issuer may voluntarily choose to file either of these documents in accordance with the applicable CD rule for the purposes of satisfying the eligibility criteria under NI 44-101.
Alternatively, an issuer may rely on the exemption from the requirement to file such documents in section 2.7 of NI 44-101. That section provides an exemption from the current AIF and current annual financial statement requirements for new reporting issuers and successor issuers who have not yet been required to file such documents and who have filed a prospectus or information circular containing disclosure which would have been included in such documents had they been filed under the applicable CD rule.
(3) An issuer need not have filed all of its continuous disclosure filings in the local jurisdiction in order to be qualified to file a short form prospectus, but under sections 4.1 and 4.2 of NI 44-101 it will be required to file in the local jurisdiction all documents incorporated by reference into the short form prospectus no later than the date of filing the preliminary short form prospectus.
2.2 Alternative Qualification Criteria -- Issuers that are Not Listed (Sections 2.3, 2.4, 2.5 and 2.6 of NI 44-101) -- Issuers that do not have equity securities listed and posted for trading on a short form eligible exchange in Canada may nonetheless be qualified to file a prospectus in the form of a short form prospectus under the following alternative qualification criteria of NI 44-101:
1. Section 2.3, which applies to issuers which are reporting issuers in at least one jurisdiction, and who are intending to issue non-convertible securities with a provisional approved rating.
2. Section 2.4, which applies to issuers of non-convertible debt securities, non-convertible preferred shares or non-convertible cash settled derivatives, if another person or company that satisfies prescribed criteria provides full and unconditional credit support for the payments to be made by the issuer of the securities.
3. Section 2.5, which applies to issuers of convertible debt securities or convertible preferred shares, if the securities are convertible into securities of a credit supporter that satisfies prescribed criteria and provides full and unconditional credit support for the payments to be made by the issuer of the securities.
4. Section 2.6, which applies to issuers of asset-backed securities.
Under sections 2.4, 2.5 and 2.6 of NI 44-101, an issuer is not required to be a reporting issuer in any jurisdiction in order to qualify to file a prospectus in the form of a short form prospectus. Section 2.3 requires the issuer to be a reporting issuer in at least one jurisdiction of Canada.
2.3 Alternative Qualification Criteria -- Issuers of Guaranteed Debt Securities, Preferred Shares and Cash Settled Derivatives (Sections 2.4 and 2.5 of NI 44-101) -- Sections 2.4 and 2.5 of NI 44-101 allow an issuer to qualify to file a prospectus in the form of a short form prospectus based on full and unconditional credit support, which may take the form of a guarantee or alternative credit support. The securities regulatory authorities are of the view that a person or company that provides the full and unconditional guarantee or alternative credit support is not, simply by providing that guarantee or alternative credit support, issuing a security.
2.4 Alternative Qualification Criteria -- Issuers of Asset-Backed Securities (Section 2.6 of NI 44-101)
(1) In order to be qualified to file a prospectus in the form of a short form prospectus under section 2.6 of NI 44-101, an issuer must have been established in connection with a distribution of asset-backed securities. Ordinarily, asset-backed securities are issued by special purpose issuers established for the sole purpose of purchasing financial assets with the proceeds of one or more distributions of these securities. This ensures that the credit and performance attributes of the asset-backed securities are dependent on the underlying financial assets, rather than upon concerns relating to ancillary business activities and their attendant risks. Qualification to file a prospectus in the form of a short form prospectus under section 2.6 of NI 44-101 has been limited to special purpose issuers to avoid the possibility that an otherwise ineligible issuer would structure securities falling within the definition of "asset-backed security".
(2) The qualification criteria for a distribution of asset-backed securities under a prospectus in the form of a short form prospectus are intended to provide sufficient flexibility to accommodate future developments. To qualify under section 2.6 of NI 44-101, the securities to be distributed 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 or determinable period of time.
2. Second, the securities must (i) receive an approved rating on a provisional basis, (ii) not have been the subject of an announcement regarding a downgrade to a rating that is not an approved rating, and (iii) not have received a provisional or final rating lower than an approved rating from any approved rating organization.
The qualification criteria do not distinguish between pass-through (i.e., equity) and pay-through (i.e., debt) asset-backed securities. Consequently, both pay-through and pass-through securities, as well as residual or subordinate interests, may be distributed under a prospectus in the form of a short form prospectus if all other applicable requirements are met.
2.5 Timely and Periodic Disclosure Documents -- To be qualified to file a short form prospectus under sections 2.2 and 2.3 of NI 44-101, an issuer must file with the securities regulatory authority in each jurisdiction in which it is a reporting issuer all periodic and timely disclosure documents that it is required to have filed in that jurisdiction under applicable securities legislation, pursuant to an order issued by the securities regulatory authority, or pursuant to an undertaking to the securities regulatory authority. Similarly, a credit supporter must satisfy this qualification criterion for an issuer to be qualified to file a short form prospectus under sections 2.4 and 2.5 of NI 44-101.
This qualification criterion applies to all disclosure documents including, if applicable, a disclosure document the issuer or credit supporter (i) has undertaken to file with a provincial or territorial securities regulatory authority, (ii) must file pursuant to a condition in a written order or decision granting exemptive relief to the issuer or credit supporter from a requirement to file periodic and timely disclosure documents, (iii) must file pursuant to a condition in securities legislation exempting the issuer or credit supporter from a requirement to file periodic and timely disclosure documents, and (iv) has represented that it will file pursuant to a representation in a written order or decision granting exemptive relief to the issuer or credit supporter from a requirement to file periodic and timely disclosure documents. These disclosure documents must be incorporated by reference into a short form prospectus pursuant to paragraph 9 or 10 of subsection 11.1(1) of Form 44-101F1.
2.6 Notice Declaring Intention -- Subsection 2.8(1) of NI 44-101 provides that an issuer is not qualified to file a short form prospectus under Part 2 of NI 44-101 unless it has filed, with its notice regulator, a notice declaring its intention to be qualified to file a short form prospectus under NI 44-101. This notice must be filed in substantially the form of Appendix A of NI 44-101 at least 10 business days prior to the issuer filing its first preliminary short form prospectus. This is a new requirement that came into effect on December 30, 2005. The securities regulatory authorities expect that this notice will be a one-time filing for issuers that intend to be participants in the short form prospectus distribution system established under NI 44-101. Subsection 2.8(2) provides that this notice is operative until withdrawn. Though the notice must be filed with the notice regulator, an issuer may voluntarily file the notice with any other securities regulatory authority or regulator of a jurisdiction of Canada.
Subsection 2.8(4) of NI 44-101 is a transitional provision that has the effect of deeming issuers that, as of December 29, 2005, have a current AIF under the pre-December 30, 2005 short form prospectus distribution system to have filed this notice and no additional filing is required to satisfy the notice requirements set out in subsection 2.8(1) of NI 44-101.
PART 3 FILING AND RECEIPTING OF SHORT FORM PROSPECTUS
3.1 Previously filed documents -- Sections 4.1 and 4.2 of NI 44-101 require the filing of specified documents that have not been previously filed. Issuers that are relying on previous filing of these specified documents are reminded that the documents should have been filed on the issuer's filer profile for SEDAR.
3.2 Confidential Material Change Reports -- Confidential material change reports cannot be incorporated by reference into a short form prospectus. Issuers should refer to section 3.2 of the Companion Policy to NI 41-101 for further guidance.
3.3 Supporting Documents -- Issuers should refer to section 3.3 of the Companion Policy to NI 41-101.
3.4 Experts' Consent -- Issuers are reminded that under section 10.1 of NI 41-101 an auditor's consent is required to be filed for audited financial statements that are included as part of other continuous disclosure filings that are incorporated by reference into a short form prospectus. For example, a separate auditor's consent is required for each set of audited financial statements that are included as part of a business acquisition report or an information circular incorporated by reference into a short form prospectus. Issuers should also refer to section 3.4 of the Companion Policy to NI 41-101 for further guidance.
3.4.1 Special meeting information circular -- Subsection 11.1(3) of Form 44-101F1 sets out certain circumstances where an issuer is not required to incorporate by reference into its prospectus a report, valuation, statement or opinion of an expert that is indirectly incorporated by reference into its prospectus through the incorporation by reference of an information circular prepared for a special meeting of the issuer. A special meeting information circular often relates to a restructuring transaction of an issuer or other special business of the issuer. In these circumstances, the issuer or its board of directors may engage an expert to provide an opinion that is specific to the business that will be considered at the special meeting of securityholders. For example, the board may retain a person or company to provide a fairness opinion which would assist the board in determining whether to recommend the approval of the proposed transaction to its securityholders. Similarly, the issuer may include a tax opinion in the information circular to illustrate the tax consequences of the proposed transaction to its securityholders. Pursuant to subsection 11.1(3), we would not require the incorporation by reference of these particular opinions, provided that these opinions were prepared in respect of the specific transaction contemplated in the information circular and this transaction has been completed or abandoned prior to the filing of the prospectus.
3.5 Undertaking in Respect of Credit Supporter Disclosure -- Under subparagraph 4.2(a)(ix) of NI 44-101, an issuer must file an undertaking to file the periodic and timely disclosure of a credit supporter. For credit supporters that are reporting issuers with a current AIF, the undertaking will likely be to continue to file the documents it is required to file under NI 51-102. For credit supporters registered under the 1934 Act, the undertaking will likely be to file the types of documents that would be required to be incorporated by reference into a Form S-3 or Form F-3 registration statement. For other credit supporters, the types of documents to be filed pursuant to the undertaking will be determined through discussions with the regulators on a case-by-case basis.
If an issuer, a parent credit supporter, and a subsidiary credit supporter satisfy the conditions of the exemption in section 13.3 of Form 44-101F1, an undertaking may provide that the subsidiary credit supporter will file periodic and timely disclosure if the issuer and the credit supporters no longer satisfy the conditions of the exemption in that section.
If an issuer and a credit supporter satisfy the conditions of the exemption in section 13.4 of Form 44-101F1, an undertaking may provide that the credit supporter will file periodic and timely disclosure if the issuer and the credit supporter no longer satisfy the conditions of the exemption in that section.
For the purposes of such an undertaking, references to disclosure included in the short form prospectus should be replaced with references to the issuer or parent credit supporter's continuous disclosure filings. For example, if an issuer and subsidiary credit supporter(s) plan to continue to satisfy the conditions of the exemption in section 13.4 of Form 44-101F1 for continuous disclosure filings, the undertaking should provide that the issuer will file with its consolidated financial statements,
(a) a statement that the financial results of the credit supporter(s) are included in the consolidated financial results of the issuer if
(i) the issuer continues to have limited independent operations, and
(ii) the impact of any subsidiaries of the issuer on a combined basis, excluding the credit supporter(s) but including any subsidiaries of the credit supporter(s) that are not themselves credit supporters, on the consolidated financial statements of the issuer continues to be minor, or
(b) for any periods covered by issuer's consolidated financial statements, consolidating summary financial information for the issuer presented in the format set out in subparagraph 13.4(e)(ii) of Form 44-101F1.
3.6 Amendments and Incorporation by Reference of Subsequently Filed Material Change Reports -- The requirement in NI 41-101 and securities legislation for the filing of an amendment to a preliminary prospectus and prospectus is not satisfied by the incorporation by reference in a preliminary short form prospectus or a short form prospectus of a subsequently filed material change report. Issuers should refer to the Companion Policy to NI 41-101 for further guidance regarding amendments.
3.7 Short Form Prospectus Review -- No target time frame applies to the review of a short form prospectus of an issuer if the issuer has not elected to use the process set out in NP 11-202.
3.8 Review time frames for "equity line" short form prospectuses -- An issuer that is eligible to use the short form prospectus system may file a preliminary short form prospectus relating to the distribution of securities in connection with an "equity line" financing. Under an equity line arrangement, the issuer typically enters into an agreement with one or more purchasers which provides that, over a certain term, the issuer may from time to time require the purchasers to subscribe for a certain number of securities of the issuer usually at a discount from the market price. Equity line financing raises a number of important policy issues relating to the appropriate treatment of such offerings under existing securities law. Accordingly, these prospectuses will generally be reviewed within the time periods applicable to a long form prospectus.
3.9 Registration Requirements -- Issuers should refer to section 3.13 of the Companion Policy to NI 41-101 for further guidance.
3.10 No Minimum Offering Amount -- Issuers distributing securities on a best efforts basis that have not specified a minimum offering amount in their prospectus, should refer to section 2.2.1 and subsection 4.3(3) of the Companion Policy to NI 41-101 for further guidance.
PART 4 CONTENT OF SHORT FORM PROSPECTUS
4.1 Prospectus Liability -- Nothing in the short form prospectus regime established by NI 44-101 is intended to provide relief from liability arising under the provisions of securities legislation of any jurisdiction in which a short form prospectus is filed if the short form prospectus contains 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 not misleading in light of the circumstances in which it was made.
4.2 Style of Short Form Prospectus -- Securities legislation requires that a short form prospectus contain "full, true and plain" disclosure of the securities to be distributed. Issuers should apply plain language principles when they prepare a short form prospectus, including:
• using short sentences;
• using definite everyday language;
• using the active voice;
• avoiding superfluous words;
• organizing the document into clear, concise sections, paragraphs and sentences;
• avoiding jargon;
• using personal pronouns to speak directly to the reader;
• avoiding reliance on glossaries and defined terms unless it facilitates understanding of the disclosure;
• avoiding vague boilerplate wording;
• avoiding abstract terms by using more concrete terms or examples;
• avoiding multiple negatives;
• using technical terms only when necessary and explaining those terms;
• using charts, tables and examples where it makes disclosure easier to understand.
Question and answer and bullet point formats are consistent with the disclosure requirements of NI 44-101.
4.3 Pricing Disclosure
(1) If the offering price or the number of securities being distributed, or an estimate of the range of the offering price or the number of securities being distributed, has been publicly disclosed in a jurisdiction or a foreign jurisdiction as of the date of the preliminary short form prospectus, section 1.7.1 of Form 44-101F1 requires the issuer to disclose that information in the preliminary short form prospectus. For example, if an issuer has previously disclosed this information in a public filing or a press release, in a foreign jurisdiction, the information must also be disclosed in the preliminary short form prospectus. If the issuer discloses this information in the preliminary short form prospectus, we will not consider a difference between this information and the actual offering price or number of securities being distributed to be, in itself, a material adverse change for which the issuer must file an amended preliminary short form prospectus.
(2) No disclosure is required under section 1.7.1 of Form 44-101F1 if the offering price or size of the offering has not been disclosed as of the date of the preliminary short form prospectus. However, given the materiality of pricing or offering size information, subsequent disclosure of this information on a selective basis could constitute conduct that is prejudicial to the public interest.
4.4 Principal Purposes -- Generally
(1) Section 4.2 of Form 44-101F1 requires disclosure of each of the principal purposes for which the net proceeds will be used by an issuer. If an issuer has negative cash flow from operating activities in its most recently completed financial year for which financial statements have been included in the short form prospectus, the issuer should prominently disclose that fact in the use of proceeds section of the short form prospectus. The issuer should also disclose whether, and if so, to what extent, the proceeds of the distribution will be used to fund any anticipated negative cash flow from operating activities in future periods. An issuer should disclose negative cash flow from operating activities as a risk factor under subsection 17.1(1) of Form 44-101F1 or section 5.2 in NI 51-102F2. For the purposes of this section, in determining cash flow from operating activities, the issuer must include cash payments related to dividends and borrowing costs.
(2) For the purposes of the disclosure required under section 4.2 of Form 44-101F1, the phrase "for general corporate purposes" is not generally sufficient.
4.5 Distribution of Asset-backed Securities
Section 7.3 of Form 44-101F1 specifies additional disclosure that applies to distributions of asset-backed securities. Disclosure for a special purpose issuer of asset-backed securities will generally explain
• the nature, performance and servicing of the underlying pool of financial assets,
• the structure of the securities and dedicated cash flows, and
• any third party or internal support arrangements established to protect holders of the asset-backed securities from losses associated with non-performance of the financial assets or disruptions in payment.
The nature and extent of required disclosure may vary depending on the type and attributes of the underlying pool and the contractual arrangements through which holders of the asset-backed securities take their interest in such assets.
An issuer of asset-backed securities should consider these factors when preparing its short form prospectus:
(a) The extent of disclosure respecting an issuer will depend on the extent of the issuer's on-going involvement in the conversion of the assets comprising the pool to cash and the distribution of cash to securityholders; this involvement may, in turn, vary dramatically depending on the type, quality and attributes of the assets comprising the pool and on the overall structure of the transaction.
(b) Requested disclosure respecting the business and affairs of the issuer should be interpreted to apply to the financial assets underlying the asset-backed securities.
(c) Disclosure respecting the originator or the seller of the underlying financial assets will be relevant to investors in the asset-backed securities particularly in circumstances where the originator or seller has an on-going relationship with the financial assets comprising the pool. For example, if asset-backed securities are serviced with the cash flows from a revolving pool of receivables, an evaluation of the nature and reliability of the future origination or the future sales of underlying assets by the seller to or through the issuer may be 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 assets should deal with whether there are current circumstances that indicate that the originator or seller will not generate adequate assets in the future to avoid an early liquidation of the pool and, correspondingly, an early payment of the asset-backed securities. Summary historical financial information respecting the originator or seller will ordinarily be adequate to satisfy the disclosure requirements applicable to the originator or seller in circumstances where the originator or seller has an ongoing relationship with the assets comprising the pool.
Subsection 7.3(5) of Form 44-101F1 requires issuers of asset-backed securities to describe any person or company who originated, sold or deposited a material portion of the financial assets comprising the pool, irrespective of whether the person or company has an on-going relationship with the assets comprising the pool. The securities regulatory authorities consider 33?% of the dollar value of the financial assets comprising the pool to be a material portion in this context.
4.6 Distribution of Derivatives -- Section 7.4 of Form 44-101F1 specifies additional disclosure applicable to distributions of derivatives. This prescribed disclosure is formulated in general terms for issuers to customize appropriately in particular circumstances.
4.7 Underlying Securities -- If securities being distributed are convertible into or exchangeable for other securities, or are a derivative of, or otherwise linked to, other securities, a description of the material attributes of the underlying securities would generally be necessary to meet the requirement of securities legislation that a prospectus contain full, true and plain disclosure of all material facts relating to the securities being distributed.
4.8 Restricted Securities -- Section 7.7 of Form 44-101F1 specifies additional disclosure applicable to restricted securities, including a detailed description of any significant provisions under applicable corporate and securities law that do not apply to the holders of the restricted securities but do apply to the holders of another class of equity securities. An example of such provisions would be rights under takeover bids.
4.9 Recent and Proposed Acquisitions
(1) Subsection 10.2(2) of Form 44-101F1 requires prescribed disclosure of a proposed acquisition that has progressed to a state "where a reasonable person would believe that the likelihood of the acquisition being completed is high" and that would, if completed on the date of the short form prospectus, be a significant acquisition for the purposes of Part 8 of NI 51-102. When interpreting the phrase "where a reasonable person would believe that the likelihood of the acquisition being completed is high", it is our view that the following factors may be relevant in determining whether the likelihood of an acquisition being completed is high:
(a) whether the acquisition has been publicly announced;
(b) whether the acquisition is the subject of an executed agreement; and
(c) the nature of conditions to the completion of the acquisition including any material third party consents required.
The test of whether a proposed acquisition "has progressed to a state where a reasonable person would believe that the likelihood of the acquisition being completed is high" is an objective, rather than subjective, test in that the question turns on what a "reasonable person" would believe. It is not sufficient for an officer of an issuer to determine that he or she personally believes that the likelihood of the acquisition being completed is or is not high. The officer must form an opinion as to what a reasonable person would believe in the circumstances. In the event of a dispute, an objective test requires an adjudicator to decide whether a reasonable person would believe in the circumstances that the likelihood of an acquisition being completed was high. By contrast, if the disclosure requirement involved a subjective test, the adjudicator would assess an individual's credibility and decide whether the personal opinion of the individual as to whether the likelihood of the acquisition being completed was high was an honestly held opinion. Formulating the disclosure requirement using an objective test rather than a subjective test strengthens the basis upon which the regulator may object to an issuer's application of the test in particular circumstances.
(2) Subsection 10.2(3) of Form 44-101F1 requires inclusion of the financial statements or other information relating to certain acquisitions or proposed acquisitions if the inclusion of the financial statements or other information is necessary in order for the short form prospectus to contain full, true and plain disclosure of all material facts relating to the securities being distributed. We generally presume that the inclusion of financial statements or other information is required for all acquisitions that are, or would be, significant under Part 8 of NI 51-102. Issuers can rebut this presumption if they can provide evidence that the financial statements or other information are not required for full, true and plain disclosure.
Subsection 10.2(4) of Form 44-101F1 provides that issuers must satisfy the requirements of subsection 10.2(3) of Form 44-101F1 by including either:
(i) the financial statements or other information that would be required by Part 8 of NI 51-102; or
(ii) satisfactory alternative financial statements or other information.
Satisfactory alternative financial statements or other information may be provided to satisfy the requirements of subsection 10.2(3) when the financial statements or other information that would be required by Part 8 of NI 51-102 relate to a financial year ended within 90 days before the date of the prospectus or an interim period ended within 60 days before the date of the prospectus for issuers that are venture issuers, and 45 days for issuers that are not venture issuers. In these circumstances, we believe that satisfactory alternative financial statements or other information would not have to include any financial statements or other information for the acquisition or probable acquisition related to:
(a) a financial year ended within 90 days before the date of the short form prospectus; or
(b) an interim period ended within 60 days before the date of the short form prospectus for issuers that are venture issuers, and 45 days for issuers that are not venture issuers.
An example of satisfactory alternative financial statements or other information that we will generally find acceptable would be:
(c) comparative annual financial statements or other information for the acquisition or probable acquisition for at least the number of financial years as would be required under Part 8 of NI 51-102 that ended more than 90 days before the date of the short form prospectus, audited for the most recently completed financial period in accordance with NI 52-107, and reviewed for the comparative period in accordance with section 4.3 of NI 44-101;
(d) a comparative interim financial report or other information for the acquisition or probable acquisition for any interim period ended subsequent to the latest annual financial statements included in the short form prospectus and more than 60 days before the date of the short form prospectus for issuers that are venture issuers, and 45 days for issuers that are not venture issuers reviewed in accordance with section 4.3 of NI 44-101; and
(e) pro forma financial statements or other information required under Part 8 of NI 51-102.
If the issuer intends to include financial statements as set out in the example above as satisfactory alternative financial statements or other information, we ask that this be highlighted in the cover letter to the prospectus. If the issuer does not intend to include financial statements or other information, or intends to file financial statements or other information that are different from those set out above, we encourage the utilization of pre-filing procedures.
(3) When an issuer acquires a business or related businesses that has itself recently acquired another business or related businesses (an "indirect acquisition"), the issuer should consider whether prospectus disclosure about the indirect acquisition, including historical financial statements, is necessary to satisfy the requirement that the prospectus contain full, true and plain disclosure of all material facts relating to the securities being distributed. In making this determination, the issuer should consider the following factors:
• if the indirect acquisition would meet any of the significance tests in Part 8 of NI 51-102 when the issuer applies each of those tests to its proportionate interest in the indirect acquisition of the business; and
• if the amount of time between the separate acquisitions is such that the effect of the first acquisition is not adequately reflected in the results of the business or related businesses the issuer is acquiring.
(4) Subsection 10.2(3) discusses financial statements or other information for the completed or proposed acquisition of the business or related businesses. This "other information" is intended to capture the financial information disclosures required under Part 8 of NI 51-102 other than financial statements. An example of "other information" would include the operating statements, property descriptions, production volumes and reserves disclosures described under section 8.10 of NI 51-102.
4.10 Updated pro forma financial statements to date of prospectus -- In addition to the pro forma financial statements for completed acquisitions that are required to be included in a business acquisition report incorporated by reference into a prospectus under Item 11 of Form 44-101F1, an issuer may include a set of pro forma financial statement prepared as at the date of the prospectus.
4.11 General Financial Statement Requirements -- A reporting issuer is required under the applicable CD rule to file its annual financial statements and related MD&A 90 days after year end (or 120 days if the issuer is a venture issuer as defined in NI 51-102). Certain transition rules in the applicable CD rule apply to the first interim financial report required to be filed in the year of adopting IFRS in respect of an interim period beginning on or after January 1, 2011. Otherwise, an interim financial report and related MD&A must be filed 45 days after the last day of an interim period (or 60 days for a venture issuer). The financial statement requirements in NI 44-101 are based on these continuous disclosure reporting time frames and do not impose accelerated filing deadlines for a reporting issuer's financial statements. However, to the extent an issuer has filed financial statements in advance of the deadline for doing so, those financial statements must be incorporated by reference in the short form prospectus. We are of the view that directors of an issuer should endeavor to consider and approve financial statements in a timely manner and should not delay the approval and filing of the financial statements for the purpose of avoiding their inclusion in a short form prospectus. Once the financial statements have been approved, they should be filed as soon as possible.
4.12 Credit Supporter Disclosure -- In addition to the issuer's documents required to be incorporated by reference under sections 11.1 and 11.2 of Form 44-101F1 and the issuer's earnings coverage ratios required to be included under Item 6 of Form 44-101F1, a short form prospectus must include, under section 12.1 of Form 44-101F1, disclosure about any credit supporters that have provided a guarantee or alternative credit support for all or substantially all of the payments to be made under the securities being distributed. Accordingly, disclosure about a credit supporter may be required even if the credit supporter has not provided full and unconditional credit support.
4.13 Exemptions for Certain Issuers of Guaranteed Securities -- Requiring disclosure about the issuer and any applicable credit supporters in a short form prospectus may result in unnecessary disclosure in some instances. Item 13 of Form 44-101F1 provides exemptions from the requirement to include both issuer and credit supporter disclosure where such disclosure is not necessary to ensure that the short form prospectus includes full, true and plain disclosure of all material facts concerning the securities to be distributed.
The exemptions in Item 13 of Form 44-101F1 are based on the principle that, in these instances, investors will generally require either issuer disclosure or credit supporter disclosure to make an informed investment decision. The exemptions set out in Item 13 of Form 44-101F1 are not intended to be comprehensive and issuers may apply for exemptive relief from the requirement to provide both issuer and credit supporter disclosure, as appropriate.
4.14 Previously Disclosed Material Forward-Looking Information -- If an issuer, at the time it files a short form prospectus,
1. has previously disclosed to the public material forward-looking information for a period that is not yet complete;
2. is aware of events and circumstances that are reasonably likely to cause actual results to differ materially from the material forward-looking information; and
3. has not filed an MD&A with the securities regulatory authorities that discusses those events and circumstances and expected differences from the material forward-looking information, as required by section 5.8 of NI 51-102,
the issuer should discuss those events and circumstances, and the expected differences from the material forward-looking information, in the short form prospectus.
PART 5 CERTIFICATES
5.1 General -- Issuers should refer to section 2.6 of the Companion Policy to NI 41-101.
PART 6 TRANSITION
6.1 Transition -- The amendments to NI 44-101 and this Policy which came into effect on January 1, 2011 only apply to a preliminary short form prospectus, an amendment to a preliminary short form prospectus, a final short form prospectus or an amendment to a final short form prospectus of an issuer which includes or incorporates by reference financial statements of the issuer in respect of periods relating to financial years beginning on or after January 1, 2011.
Schedule E-1 -- Proposed Amendments to National Instrument 44-102 Shelf Distributions
APPENDIX E
SCHEDULE E-1
Amendments to
National Instrument 44-102 Shelf Distributions
1. National Instrument 44-102 Shelf Distributions is amended by this Instrument.
2. Section 5.6 is amended by adding the following paragraph after paragraph 6:
"6.1 The information required under item 7A of Form 44-101F1 concerning prior sales and trading price and volume disclosure for securities that may be distributed under the base shelf prospectus, if the specific series or class of securities that will be distributed under the base shelf prospectus is not known on the date the base shelf prospectus is filed.".
3. Section 7.2 is amended by adding the following new subsections after subsection (1):
"(1.1) Despite subsection (1), if the expert whose consent is required is a "qualified person" as defined in NI 43-101, the issuer is not required to file the consent of the qualified person if
(a) the qualified person's consent is required in connection with a technical report that was not required to be filed with the preliminary base shelf prospectus,
(b) the qualified person was employed by a person or company at the date of signing the technical report,
(c) the principal business of the person or company is providing engineering or geoscientific services, and
(d) the issuer files the consent of the person or company.
(1.2) A consent filed under subsection (1.1) must be signed by an individual who is an authorized signatory of the person or company and who falls within paragraphs (a), (b), (d) and (e) of the definition of "qualified person" in NI 43-101."
4. Subsection 7.2(2) is amended by adding, after "subsection 1", the words "or subsections (1.1) and (1.2)".
5. Subsection 9.1(1) is amended by
(a) replacing "6.1" with "7.2", and
(b) replacing "44-101" with "41-101".
6. This Instrument comes into force on •, 2012.
Schedule E-2 -- Proposed Amendments to Companion Policy 44-102CP to National Instrument 44-102 Shelf Distributions
APPENDIX E
SCHEDULE E-2
Amendments to
Companion Policy 44-102 CP to National Instrument 44-102
Shelf Distributions
1. Companion Policy 44-102CP to National Instrument 44-102 Shelf Distributions is amended.
2. Section 2.6.1 is amended by adding "for which a consent was not previously filed" after "financial statements incorporated by reference".
3. This amendment becomes effective on •, 2012.
Proposed Amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure
APPENDIX F
Amendment to
National Instrument 81-101 Mutual Fund Prospectus Disclosure
1. National Instrument 81-101 Mutual Fund Prospectus Disclosure is amended by this Instrument.
2. Section 1.1 is amended by
(a) repealing the definition of "Personal Information Form and Authorization",
(b) after the definition of "Part B Section",adding the following definition:
""personal information form" means in respect of an individual,
(a) a completed Schedule 1 of Appendix A to National Instrument 41-101 General Prospectus Requirements, or
(b) a TSX/TSXV personal information form submitted by an individual to the Toronto Stock Exchange or to the TSX Venture Exchange to which is attached a completed certificate and consent in the form set out in Schedule 1 -- Part B of Appendix A to National Instrument 41-101 General Prospectus Requirements, if the personal information in the form continues to be correct at the time that the certificate and consent is executed by the individual;"
(c) in the definition of "single AIF", deleting "and",
(d) in the definition of "single SP", replacing "." with "; and" after the words "under subsection 5.1(1)"; and
(e) after the definition of "single SP", adding the following definition;
""TSX/TSXV personal information form" means a completed personal information form of an individual in compliance with the requirements of Form 4 for the Toronto Stock Exchange or Form 2A for the TSX Venture Exchange, as applicable, each as amended from time to time."
3. Paragraph 2.3(1)(b) is amended by replacing:
"(ii) personal information in the form of the Personal Information Form and Authorization for:
(A) each director and executive officer of the mutual fund,
(B) each director and executive officer of the manager of the mutual fund,
(C) each promoter of the mutual fund, and
(D) if the promoter is not an individual, each director and executive officer of the promoter,
unless
(E) a completed Personal Information Form and Authorization,
(F) before March 17, 2008, a completed authorization in
(I) the form set out in Appendix B of NI 44-101,
(II) the form set out in Ontario Form 41-501F2 Authorization of Indirect Collection of Personal Information, or
(III) the form set out in Appendix A of Québec Regulation Q-28 Respecting General Prospectus Requirements, or
(G) before March 17, 2008, a completed personal information form or authorization in a form substantially similar to a personal information form or authorization in clause (E) or (F), as permitted under securities legislation,
was previously delivered in connection with the simplified prospectus of another mutual fund managed by the manager of the mutual fund,"
with the following:
"(ii) a personal information form for:
(A) each director and executive officer of the mutual fund,
(B) each director and executive officer of the manager of the mutual fund,
(C) each promoter of the mutual fund, and
(D) if the promoter is not an individual, each director and executive officer of the promoter,".
4. Section 2.3 is amended by adding the following subsection after subsection 2.3(1):
"(1.1) Despite subparagraph 2.3(1)(b)(ii), a mutual fund is not required to file a personal information form for an individual if all of the following requirements are satisfied:
(a) a personal information form of the individual has been executed by the individual within three years preceding the date of the filing of the preliminary simplified prospectus, preliminary annual information form and preliminary fund facts document for each class or series of securities of the mutual fund;
(b) the personal information form was delivered to the regulator, or in Québec, the securities regulatory authority
(i) by an issuer on behalf of the individual on or after [insert effective date of amendments]; or
(ii) by the mutual fund on behalf of the individual after March 16, 2008 but before [insert effective date of amendments] in the form set out in Appendix A to National Instrument 41-101 General Prospectus Requirements in effect during this period;
(c) the information concerning the individual contained in the responses to
(i) questions 6 through 10 of the personal information form referenced in subparagraph (b)(i) remain correct as at the date of the certificate referenced to in paragraph (d); or
(ii) questions 4(B) and (C) and questions 6 through 9 of the personal information form referenced in subparagraph (b)(ii) remain correct as at the date of the certificate referenced to in paragraph (d);
(d) the mutual fund delivers to the regulator or, in Québec, the securities regulatory authority, concurrently with the filing of the preliminary simplified prospectus, preliminary annual information form and preliminary fund facts document for each class or series of securities of the mutual fund, a certificate of the mutual fund in the form set out in Schedule 4 of Appendix A to National Instrument 41-101 General Prospectus Requirements stating that the individual has provided the mutual fund with confirmation in respect of the requirement contained in paragraph (c);
(e) the certificate referenced in paragraph (d) is dated no earlier than 30 days before the filing of the preliminary simplified prospectus, preliminary annual information form and preliminary fund facts document for each class or series of securities of the mutual fund.".
(a) deleting "and" after "has not already been filed," from subparagraph 2.3(2)(a)(ii),
(b) adding the following after subparagraph 2.3(2)(a)(ii):
"(ii.1) a copy of the following documents and a copy of any amendment to the following documents that have not previously been filed:
(A) by-laws or other corresponding instruments currently in effect,
(B) any securityholder or voting trust agreement that the mutual fund has access to and that can reasonably be regarded as material to an investor in securities of the mutual fund, and".
5. Subparagraph 2.3(2)(b)(iii) is repealed.
6. Paragraph 2.3(2)(b) is amended by replacing:
"(iv) personal information in the form of the Personal Information Form and Authorization for:
(A) each director and executive officer of the mutual fund,
(B) each director and executive officer of the manager of the mutual fund,
(C) each promoter of the mutual fund, and
(D) if the promoter is not an individual, each director and executive officer of the promoter,
unless
(E) a completed Personal Information Form and Authorization,
(F) before March 17, 2008, a completed authorization in
(I) the form set out in Appendix B of NI 44-101,
(II) the form set out in Ontario Form 41-501F2 Authorization of Indirect Collection of Personal Information, or
(III) the form set out in Appendix A of Québec Regulation Q-28 Respecting General Prospectus Requirements, or
(G) before March 17, 2008, a completed personal information form or authorization in a form substantially similar to a personal information form or authorization in clause (E) or (F), as permitted under securities legislation,
was previously delivered in connection with a simplified prospectus of the mutual fund or another mutual fund managed by the manager of the mutual fund, and"
with the following:
"(iv) a personal information form for:
(A) each director and executive officer of the mutual fund,
(B) each director and executive officer of the manager of the mutual fund,
(C) each promoter of the mutual fund, and
(D) if the promoter is not an individual, each director and executive officer of the promoter, and".
7. Section 2.3 is amended by adding the following subsection after subsection 2.3(2):
"(2.1) Despite subparagraph 2.3(2)(b)(vi), a mutual fund is not required to file a personal information form for an individual if all of the following requirements are satisfied:
(a) a personal information form of the individual has been executed by the individual within three years preceding the date of the filing of the pro forma simplified prospectus, pro forma annual information form and pro forma fund facts document for each class or series of securities of the mutual fund;
(b) the personal information form was delivered to the regulator, or in Québec, the securities regulatory authority
(i) by an issuer on behalf of the individual on or after [insert effective date of amendments]; or
(ii) by the mutual fund on behalf of the individual after March 16, 2008 but before [insert effective date of amendments] in the form set out in Appendix A to National Instrument 41-101 General Prospectus Requirements in effect during this period;
(c) the information concerning the individual contained in the responses to
(i) questions 6 through 10 of the personal information form referenced in subparagraph (b)(i) remain correct as at the date of the certificate referenced to in paragraph (d); or
(ii) questions 4(B) and (C) and questions 6 through 9 of the personal information form referenced in subparagraph (b)(ii) remain correct as at the date of the certificate referenced to in paragraph (d);
(d) the mutual fund delivers to the regulator or, in Québec, the securities regulatory authority, concurrently with the filing of the pro forma simplified prospectus, pro forma annual information form and pro forma fund facts document for each class or series of securities of the mutual fund, a certificate of the mutual fund in the form set out in Schedule 4 of Appendix A to National Instrument 41-101 General Prospectus Requirements stating that the individual has provided the mutual fund with confirmation in respect of the requirement contained in paragraph (c);
(e) the certificate referenced in paragraph (d) is dated no earlier than 30 days before the filing of the preliminary simplified prospectus, preliminary annual information form and preliminary fund facts document for each class or series of securities of the mutual fund.".
8. Paragraph 2.3(3)(a) is amended by adding the following subparagraph after subparagraph 2.3(3)(a)(i):
"(i.1) a copy of the following documents and a copy of any amendment to the following documents that have not previously been filed:
(A) by-laws or other corresponding instruments currently in effect,
(B) any securityholder or voting trust agreement that the mutual fund has access to and that can reasonably be regarded as material to an investor in securities of the mutual fund,".
9. Section 3.1 is amended by adding the following paragraphs after paragraph 1.1:
"1.2 If the mutual fund has not yet filed comparative annual financial statements of the mutual fund, the most recently filed interim financial statements of the mutual fund that were filed before or after the date of the simplified prospectus.
1.3 If the mutual fund has not yet filed interim financial statements or comparative annual financial statements of the mutual fund, the audited balance sheet that was filed with the simplified prospectus.
1.4 If the mutual fund has not yet filed an annual management report of fund performance of the mutual fund, the most recently filed interim management report of fund performance of the mutual fund that was filed before or after the date of the simplified prospectus.".
10. Subsection 1.1(3) of Form 81-101F2 Contents of Annual Information Formis amended by replacing "distributed" with "sold".
11. Subsection 1.2(3) of Form 81-101F2 is amended by replacing "distributed" with "sold".
12. Section 10.2 of Form 81-101F2 is amended by
(a) adding "executive" before "officers" in subsection 10.2(2), and
(b) adding "executive" before "officer" in
(i) subsection 10.2(3)
(ii) subsection10.2(4).
13. Section 10.6 of Form 81-101F2 is amended by
(a) adding "Executive" before "Officers" in the title,
(b) adding "executive" before "officers" in subsection 10.6(1); and
(c) adding "executive" before "officer" in
(i) subsection 10.6(4)
(ii) subsection10.6(5).
14. Subsection 16(1) of Form 81-101F2 is amended by replacing:
"(f) any other contract or agreement that can reasonably be regarded as material to an investor in the securities of the mutual fund."
with the following:
"(f) any other contract or agreement that is material to the mutual fund."
15. Section 22 of Form 81-101F2 is amended by replacing:
"(1) Include a certificate of the principal distributor of the mutual fund that states:
"To the best of our knowledge, information and belief, this annual information form, the financial statements of the fund [specify] for the financial period ended [specify] and the auditors' report on those financial statements, together with the simplified prospectus and the fund facts document dated [specify], constitute full, true and plain disclosure of all material facts relating to the securities offered by the simplified prospectus and do not contain any misrepresentation.""
with the following:
"(1) Include a certificate of the principal distributor of the mutual fund that states:
"This annual information form, together with the simplified prospectus and the documents incorporated by reference into the simplified prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by the simplified prospectus, as required by the securities legislation of [insert the jurisdictions in which qualified] and do not contain any misrepresentations.""
16.This Instrument comes into force on •, 2012.
Schedule G-1 -- Blackline Showing Proposed Changes to National Instrument 81-101 Mutual Fund Prospectus Disclosure
APPENDIX G
SCHEDULE G-1
National Instrument 81-101
Mutual Fund Prospectus Disclosure
Part 1 -- Definitions, Interpretation and Application
1.1 Definitions -- In this Instrument
"business day" means any day other than a Saturday, a Sunday or a statutory holiday;
"commodity pool" means a mutual fund, other than a precious metals fund, that has adopted fundamental investment objectives that permit it to use
(a) specified derivatives other than as permitted by National Instrument 81-102 Mutual Funds, or
(b) physical commodities other than as permitted by that Instrument;
"educational material" means material containing general information about one or more of investing in general, mutual funds, portfolio management, capital markets, retirement savings, income or education saving plans and financial planning, if the material does not promote a particular mutual fund or mutual fund family or the products or services offered by a particular mutual fund or mutual fund family;
"executive officer" means, for a mutual fund, a manager of a mutual fund or a promoter of a mutual fund, an individual who is
(a) a chair, vice-chair or president,
(b) a vice-president in charge of a principal business unit, division or function including sales, finance or product development, or
(c) performing a policy-making function;
"financial year" includes the first completed financial period of a mutual fund beginning with the inception of the mutual fund and ending on the date of its first financial year end;
"fund facts document" means a completed Form 81-101F3 Contents of Fund Facts Document;
"independent review committee" means the independent review committee of the investment fund established under National Instrument 81-107 Independent Review Committee for Investment Funds;
"material contract" means, for a mutual fund, a contract listed in the annual information form of the mutual fund in response to Item 16 of Form 81-101F2 Contents of Annual Information Form;
"multiple AIF" means a document containing two or more annual information forms that have been consolidated in accordance with section 5.4;
"multiple SP" means a document containing two or more simplified prospectuses that have been consolidated in accordance with subsection 5.1(1);
"NI 81-107"[Repealed.]
"Part A section" means the section of a simplified prospectus that contains the disclosure required by Part A of Form 81-101F1 Contents of Simplified Prospectus;
"Part B section" means the section of a simplified prospectus that contains the disclosure required by Part B of Form 81-101F1;
"Personal Information Form and Authorization" means the Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information"personal information form" means in respect of an individual,(a) a completed Schedule 1 of Appendix A to National Instrument 41-101 General Prospectus Requirements, or
(b) a TSX/TSXV personal information form submitted by an individual to the Toronto Stock Exchange or to the TSX Venture Exchange to which is attached a completed certificate and consent in the form set out in Schedule 1 -- Part B of Appendix A to National Instrument 41-101 General Prospectus Requirements, if the personal information in the form continues to be correct at the time that the certificate and consent is executed by the individuals;
"Personal Information Form and Authorization" [Repealed]
"plain language" means language that can be understood by a reasonable person, applying a reasonable effort;
"precious metals fund" means a mutual fund that has adopted fundamental investment objectives, and received all required regulatory approvals, that permit it to invest in precious metals or in entities that invest in precious metals and that otherwise complies with National Instrument 81-102 Mutual Funds;
"single AIF" means an annual information form that has not been consolidated with another annual information form under section 5.4;
and"single SP" means a simplified prospectus that has not been consolidated with another simplified prospectus under subsection 5.1(1); and
"TSX/TSXV personal information form" means a completed personal information form of an individual in compliance with the requirements of Form 4 for the Toronto Stock Exchange or Form 2A for the TSX Venture Exchange, as applicable, each as amended from time to time.
1.2 Interpretation -- Terms defined in National Instrument 81-102 Mutual Funds or National Instrument 81-105 Mutual Fund Sales Practices and used in this Instrument have the respective meanings ascribed to them in those Instruments.
1.3 Application -- This Instrument does not apply to mutual funds that are
(a) labour-sponsored venture capital corporations;
(b) commodity pools; or
(c) listed and posted for trading on a stock exchange or quoted on an over-the-counter market.
Part 2 -- Disclosure Documents
2.1 Filing of Disclosure Documents -- (1) A mutual fund
(a) that files a preliminary prospectus must file the preliminary prospectus in the form of a preliminary simplified prospectus prepared in accordance with Form 81-101F1 and concurrently file
(i) a preliminary annual information form prepared and certified in accordance with Form 81-101F2; and
(ii) a preliminary fund facts document for each class or series of securities of the mutual fund prepared in accordance with Form 81-101F3;
(b) that files a pro forma prospectus must file the pro forma prospectus in the form of a pro forma simplified prospectus prepared in accordance with Form 81-101F1 and concurrently file
(i) a pro forma annual information form prepared in accordance with Form 81-101F2; and
(ii) a pro forma fund facts document for each class or series of securities of the mutual fund prepared in accordance with Form 81-101F3;
(c) that files a prospectus must file the prospectus in the form of a simplified prospectus prepared in accordance with Form 81-101F1 and concurrently file
(i) an annual information form prepared and certified in accordance with Form 81-101F2; and
(ii) a fund facts document for each class or series of securities of the mutual fund prepared in accordance with Form 81-101F3;
(d) that files an amendment to a prospectus must
(i) file an amendment
(A) to the simplified prospectus and concurrently file an amendment to the related annual information form, or
(B) to the related annual information form if changes are made only to the annual information form;
(ii) if the amendment relates to the information contained in a fund facts document, concurrently file an amendment to the fund facts document;
(iii) if the amendment relates to a new class or series of securities of the mutual fund that is referable to the same portfolio of assets, concurrently file a fund facts document for the new class or series; and
(e) must file an amendment to a fund facts document, if a material change occurs that relates to the information contained in the fund facts document, as soon as practicable and, in any event, within 10 days after the day the change occurs.
(2) A mutual fund must not file a prospectus more than 90 days after the date of the receipt for the preliminary prospectus that relates to the prospectus.
2.2 Amendments to Disclosure Documents -- (1) An amendment to a simplified prospectus or to an annual information form may consist of either
(a) an amendment that does not fully restate the text of the simplified prospectus or annual information form; or
(b) an amended and restated simplified prospectus or annual information form.
(2) Despite subsection (1), an amendment to the Part B section that is separately bound from the Part A section of a simplified prospectus must be effected only by way of an amended and restated Part B section.
(3) An amendment to a simplified prospectus or to an annual information form must be identified and dated as follows:
1. For an amendment that does not restate the text of a simplified prospectus or annual information form:
Amendment No. [insert amendment number] dated [insert date of amendment] to [identify document] dated [insert date of document being amended].
2. For an amended and restated simplified prospectus, other than an amendment to which subsection (2) applies, or annual information form:
Amended and Restated [identify document] dated [insert date of amendment], amending and restating [identify document] dated [insert date of document being amended].
(4) An amendment to a fund facts document must be prepared in accordance with Form 81-101F3 without any further identification and dated as of the date the fund facts document is being amended.
2.2.1 Amendment to a Preliminary Simplified Prospectus -- (1) Except in Ontario, if, after a receipt for a preliminary simplified prospectus is issued but before a receipt for the simplified prospectus is issued, a material adverse change occurs, an amendment to the preliminary simplified prospectus must be filed as soon as practicable, but in any event within 10 days after the change occurs.
[Note: In Ontario, subsection 57(1) of the Securities Act(Ontario) imposes a similar requirement to file an amendment to a preliminary prospectus.]
(2) The regulator must issue a receipt for an amendment to a preliminary simplified prospectus as soon as practicable after the amendment is filed.
2.2.2 Delivery of Amendments -- Except in Ontario, a mutual fund must deliver an amendment to a preliminary simplified prospectus as soon as practicable to each recipient of the preliminary simplified prospectus according to the record of recipients required to be maintained under securities legislation.
[Note: In Ontario, subsection 57(3) of the Securities Act(Ontario) imposes similar requirements regarding the delivery of amendments to a preliminary prospectus.]
2.2.3 Amendment to a Simplified Prospectus -- (1) Except in Ontario, if, after a receipt for a simplified prospectus is issued but before the completion of the distribution under the simplified prospectus, a material change occurs, a mutual fund must file an amendment to the simplified prospectus as soon as practicable, but in any event within 10 days after the day the change occurs.
[Note: In Ontario, subsection 57(1) of the Securities Act(Ontario) imposes a similar obligation to file an amendment to a final prospectus where there has been a material change.]
(2) Except in Ontario, if, after a receipt for a simplified prospectus or an amendment to a simplified prospectus is issued but before the completion of the distribution under the simplified prospectus or the amendment to the simplified prospectus, securities in addition to the securities previously disclosed in the simplified prospectus or the amendment to the simplified prospectus are to be distributed, an amendment to the simplified prospectus disclosing the additional securities must be filed, as soon as practicable, but in any event within 10 days after the decision to increase the number of securities offered.
[Note: In Ontario, subsection 57(2) of the Securities Act(Ontario) imposes a similar requirement to file an amendment to a prospectus any time there is a proposed distribution of securities in addition to that disclosed under the prospectus.]
(3) Except in Ontario, the regulator must issue a receipt for an amendment to a simplified prospectus filed under this section unless the regulator considers that there are grounds set out in securities legislation that would cause the regulator not to issue the receipt for a simplified prospectus.
[Note: In Ontario, subsection 57(2.1) of the Securities Act(Ontario) imposes a similar obligation for the Director to issue a receipt for an amendment to a prospectus unless there are proper grounds for refusing the receipt.]
(4) Except in Ontario, the regulator must not refuse to issue a receipt under subsection (3) without giving the mutual fund that filed the simplified prospectus an opportunity to be heard.
[Note: In Ontario, subsections 57(2.1) and 61(3) of the Securities Act(Ontario) impose a similar restriction on the Director to refuse to issue a receipt for a prospectus without first giving an issuer an opportunity to be heard.]
2.3 Supporting Documents -- (1) A mutual fund must
(a) file with a preliminary simplified prospectus, a preliminary annual information form and a preliminary fund facts document for each class or series of securities of the mutual fund
(i) a copy of the preliminary annual information form certified in accordance with Part 5.1,
(ii) a submission to the jurisdiction and appointment of an agent for service of process of the manager of the mutual fund in the form set out in Appendix C to National Instrument 41-101 General Prospectus Requirements, if the manager of the mutual fund is incorporated, continued or organized under the laws of a foreign jurisdiction or resides outside of Canada,
(iii) a copy of any material contract and a copy of any amendment to a material contract that have not previously been filed, other than a contract entered into in the ordinary course of business,
(iv) a copy of the following documents and a copy of any amendment to the following documents that have not previously been filed:
(A) by-laws or other corresponding instruments currently in effect,
(B) any securityholder or voting trust agreement that the mutual fund has access to and that can reasonably be regarded as material to an investor in securities of the mutual fund, and
(C) any other contract of the mutual fund that creates or can reasonably be regarded as materially affecting the rights or obligations of the mutual fund's securityholders generally, and
(v) any other supporting documents required to be filed under securities legislation; and
(b) at the time a preliminary simplified prospectus, a preliminary annual information form and a preliminary fund facts document for each class or series of securities of the mutual fund are filed, deliver or send to the securities regulatory authority
(i) for
(A) a new mutual fund, a copy of a draft opening balance sheet of the mutual fund, and
(B) an existing mutual fund, a copy of the latest audited financial statements of the mutual fund,
(ii) a personal information
in the form of the Personal Information Form and Authorizationform for:(A) each director and executive officer of the mutual fund,
(B) each director and executive officer of the manager of the mutual fund,
(C) each promoter of the mutual fund, and
(D) if the promoter is not an individual, each director and executive officer of the promoter,
unless
(E) a completed Personal Information Form and Authorization,
(F) before March 17, 2008, a completed authorization in
(I) the form set out in Appendix B of NI 44-101,
(II) the form set out in Ontario Form 41-501F2 Authorization of Indirect Collection of Personal Information, or
(III) the form set out in Appendix A of Québec Regulation Q-28 Respecting General Prospectus Requirements, or
(G) before March 17, 2008, a completed personal information form or authorization in a form substantially similar to a personal information form or authorization in clause (E) or (F), as permitted under securities legislation,
was previously delivered in connection with the simplified prospectus of another mutual fund managed by the manager of the mutual fund,(iii) a signed letter to the regulator from the auditor of the mutual fund prepared in accordance with the form suggested for this circumstance by the Handbook, if a financial statement of the mutual fund incorporated by reference in the preliminary simplified prospectus is accompanied by an unsigned auditor's report, and
(iv) any other supporting documents required to be delivered or sent to the securities regulatory authority under securities legislation.
(1.1) Despite subparagraph 2.3(1)(b)(ii), a mutual fund is not required to file a personal information form for an individual if all of the following requirements are satisfied:
(a) a personal information form of the individual has been executed by the individual within three years preceding the date of the filing of the preliminary simplified prospectus, preliminary annual information form and preliminary fund facts document for each class or series of securities of the mutual fund;
(b) the personal information form was delivered to the regulator, or in Québec, the securities regulatory authority
(i) by an issuer on behalf of the individual on or after [insert effective date of amendments]; or
(ii) by the mutual fund on behalf of the individual after March 16, 2008 but before [insert effective date of amendments] in the form set out in Appendix A to National Instrument 41-101 General Prospectus Requirements in effect during this period;
(c) the information concerning the individual contained in the responses to
(i) questions 6 through 10 of the personal information form referenced in subparagraph (b)(i) remain correct as at the date of the certificate referenced to in paragraph (d); or
(ii) questions 4(B) and (C) and questions 6 through 9 of the personal information form referenced in subparagraph (b)(ii) remain correct as at the date of the certificate referenced to in paragraph (d);
(d) the mutual fund delivers to the regulator or, in Québec, the securities regulatory authority, concurrently with the filing of the preliminary simplified prospectus, preliminary annual information form and preliminary fund facts document for each class or series of securities of the mutual fund, a certificate of the mutual fund in the form set out in Schedule 4 of Appendix A to National Instrument 41-101 General Prospectus Requirements stating that the individual has provided the mutual fund with confirmation in respect of the requirement contained in paragraph (c);
(e) the certificate referenced in paragraph (d) is dated no earlier than 30 days before the filing of the preliminary simplified prospectus, preliminary annual information form and preliminary fund facts document for each class or series of securities of the mutual fund.
(2) A mutual fund must
(a) file with a pro forma simplified prospectus, a pro forma annual information form and a pro forma fund facts document for each class or series of securities of the mutual fund
(i) a copy of any material contract of the mutual fund, and a copy of any amendment to a material contract of the mutual fund, not previously filed,
(ii) a submission to the jurisdiction and appointment of an agent for service of process of the manager of the mutual fund in the form set out in Appendix C to National Instrument 41-101 General Prospectus Requirements, if the manager of the mutual fund is incorporated, continued or organized under the laws of a foreign jurisdiction or resides outside of Canada and if that document has not already been filed,
(ii.1) a copy of the following documents and a copy of any amendments to the following documents that have not previously been filed :
(A) by-laws or other corresponding instruments currently in effect,
(B) any securityholder or voting trust agreement that the mutual fund has access to and that can reasonably be regarded as material to an investor in the securities of the mutual fund, and
(iii) any other supporting documents required to be filed under securities legislation; and
(b) at the time a pro forma simplified prospectus, a pro forma annual information form and a pro forma fund facts document for each class or series of securities of the mutual fund are filed, deliver or send to the securities regulatory authority
(i) a copy of the pro forma simplified prospectus, blacklined to show changes and the text of deletions from the latest simplified prospectus previously filed,
(ii) a copy of the pro forma annual information form, blacklined to show changes and the text of deletions from the latest annual information form previously filed,
(ii.1) a copy of the pro forma fund facts document for each class or series of securities of the mutual fund, blacklined to show changes, including the text of deletions, from the latest fund facts document previously filed,
(iii)
a copy of a draft of each material contract of the mutual fund, and a copy of each draft amendment to a material contract of the mutual fund, in either case not yet executed but proposed to be executed by the time of filing of the simplified prospectus,[REPEALED](iv) a personal information
in the form of the Personal Information Form and Authorizationform for:(A) each director and executive officer of the mutual fund,
(B) each director and executive officer of the manager of the mutual fund,
(C) each promoter of the mutual fund, and
(D) if the promoter is not an individual, each director and executive officer of the promoter
,
unless
(E) a completed Personal Information Form and Authorization,
(F) before March 17, 2008, a completed authorization in
(I) the form set out in Appendix B of NI 44-101,
(II) the form set out in Ontario Form 41-501F2 Authorization of Indirect Collection of Personal Information, or
(III) the form set out in Appendix A of Québec Regulation Q-28 Respecting General Prospectus Requirements, or
(G) before March 17, 2008, a completed personal information form or authorization in a form substantially similar to a personal information form or authorization in clause (E) or (F), as permitted under securities legislation,was previously delivered in connection with a simplified prospectus of the mutual fund or another mutual fund managed by the manager of the mutual fund, and(v) any other supporting documents required to be delivered or sent to the securities regulatory authority under securities legislation.
(2.1) Despite subparagraph 2.3(2)(b)(vi), a mutual fund is not required to file a personal information form for an individual if all of the following requirements are satisfied:
(a) a personal information form of the individual has been executed by the individual within three years preceding the date of the filing of the pro forma simplified prospectus, pro forma annual information form and pro forma fund facts document for each class or series of securities of the mutual fund;
(b) the personal information form was delivered to the regulator, or in Québec, the securities regulatory authority
(i) by an issuer on behalf of the individual on or after [insert effective date of amendments]; or
(ii) by the mutual fund on behalf of the individual after March 16, 2008 but before [insert effective date of amendments] in the form set out in Appendix A to National Instrument 41-101 General Prospectus Requirements in effect during this period;
(c) the information concerning the individual contained in the responses to
(i) questions 6 through 10 of the personal information form referenced in subparagraph (b)(i) remain correct as at the date of the certificate referenced to in paragraph (d); or
(ii) questions 4(B) and (C) and questions 6 through 9 of the personal information form referenced in subparagraph (b)(ii) remain correct as at the date of the certificate referenced to in paragraph (d);
(d) the mutual fund delivers to the regulator or, in Québec, the securities regulatory authority, concurrently with the filing of the pro forma simplified prospectus, pro forma annual information form and pro forma fund facts document for each class or series of securities of the mutual fund, a certificate of the mutual fund in the form set out in Schedule 4 of Appendix A to National Instrument 41-101 General Prospectus Requirements stating that the individual has provided the mutual fund with confirmation in respect of the requirement contained in paragraph (c);
(e) the certificate referenced in paragraph (d) is dated no earlier than 30 days before the filing of the preliminary simplified prospectus, preliminary annual information form and preliminary fund facts document for each class or series of securities of the mutual fund.
(3) A mutual fund must
(a) file with a simplified prospectus, an annual information form and a fund facts document for each class or series of securities of the mutual fund
(i) a copy of any material contract, and a copy of any amendment to a material contract, of the mutual fund and not previously filed,
(i.1) a copy of the following documents and a copy of any amendment to the following documents that have not previously been filed:
(A) by-laws or other corresponding instruments currently in effect,
(B) any securityholder or voting trust agreement that the mutual fund has access to and that can reasonably be regarded as material to an investor in securities of the mutual fund,
(ii) for a new mutual fund, a copy of the audited balance sheet of the mutual fund,
(iii) a copy of the annual information form certified in accordance with Part 5.1,
(iv) a submission to the jurisdiction and appointment of an agent for service of process of the manager of the mutual fund in the form set out in Appendix C to National Instrument 41-101 General Prospectus Requirements, if the manager of the mutual fund is incorporated, continued or organized under the laws of a foreign jurisdiction or resides outside of Canada and if that document has not already been filed,
(v) any consents required by section 2.6,
(vi) a copy of each report or valuation referred to in the simplified prospectus, for which a consent is required to be filed under section 2.6 and that has not previously been filed, and
(vii) any other supporting documents required to be filed under securities legislation; and
(b) at the time a simplified prospectus is filed, deliver or send to the securities regulatory authority
(i) a copy of the simplified prospectus, blacklined to show changes and the text of deletions from the preliminary or pro forma simplified prospectus,
(ii) a copy of the annual information form, blacklined to show changes and the text of deletions from the preliminary or pro forma annual information form,
(ii.1) a copy of the fund facts document for each class or series of securities of the mutual fund, blacklined to show changes, including the text of deletions, from the preliminary or pro forma fund facts document,
(iii) details of any changes to the personal information required to be delivered under subparagraph (1)(b)(ii) or (2)(b)(iv), in the form of the Personal Information Form and Authorization, since the delivery of that information in connection with the filing of the simplified prospectus of the mutual fund or another mutual fund managed by the manager, and
(iv) any other supporting documents required to be delivered or sent to the securities regulatory authority under securities legislation.
(4) A mutual fund must
(a) file with an amendment to a simplified prospectus and an amendment to the annual information form
(i) a copy of the amendment to the annual information form certified in accordance with Part 5.1,
(ii) any consents required by section 2.6,
(iii) a copy of any material contract of the mutual fund, and a copy of any amendment to a material contract of the mutual fund, not previously filed,
(iii.1) if the amendment relates to the information contained in a fund facts document, an amendment to the fund facts document, and
(iv) any other supporting documents required to be filed under securities legislation;
(b) at the time an amendment to a simplified prospectus is filed, deliver or send to the securities regulatory authority
(i) if the amendment to the simplified prospectus is in the form of an amended and restated simplified prospectus, a copy of that document blacklined to show changes and the text of deletions from the simplified prospectus,
(ii) if the amendment to the annual information form is in the form of an amended and restated annual information form, a copy of the amended annual information form, blacklined to show changes and the text of deletions from the annual information form,
(ii.1) if an amendment to a fund facts document is filed, a copy of the fund facts document, blacklined to show changes, including the text of deletions, from the latest fund facts document previously filed,
(iii) details of any changes to the personal information required to be delivered under subparagraph (1)(b)(ii), (2)(b)(iv) or (3)(b)(iii), in the form of the Personal Information Form and Authorization, since the delivery of that information in connection with the filing of the simplified prospectus of the mutual fund or another mutual fund managed by the manager, and
(iv) any other supporting documents required to be delivered or sent to the securities regulatory authority under securities legislation.
(5) A mutual fund must
(a) file with an amendment to an annual information form in circumstances in which the corresponding simplified prospectus is not amended
(i) a copy of the amendment to the annual information form certified in accordance with Part 5.1,
(ii) any consents required by section 2.6,
(iii) a copy of any material contract of the mutual fund, and a copy of any amendment to a material contract of the mutual fund, not previously filed,
(iii.1) if the amendment relates to the information contained in a fund facts document, an amendment to the fund facts document, and
(iv) any other supporting documents required to be filed under securities legislation; and
(b) at the time an amendment to an annual information form is filed, deliver or send to the securities regulatory authority
(i) details of any changes to the personal information required to be delivered under subparagraph (1)(b)(ii), (2)(b)(iv) or (3)(b)(iii), in the form of the Personal Information Form and Authorization, since the delivery of that information in connection with the filing of the simplified prospectus of the mutual fund or another mutual fund managed by the manager,
(ii) if the amendment is in the form of an amended and restated annual information form, a copy of the amended and restated annual information form blacklined to show changes and the text of deletions from the annual information form,
(ii.1) if an amendment to a fund facts document is filed, a copy of the fund facts document, blacklined to show changes, including the text of deletions, from the latest fund facts document previously filed, and
(iii) any other supporting documents required to be delivered or sent to the securities regulatory authority under securities legislation.
(5.1) A mutual fund must
(a) file the following documents with an amendment to a fund facts document unless subsection (4) or (5) applies:
(i) an amendment to the corresponding annual information form, certified in accordance with Part 5.1,
(ii) any other supporting documents required to be filed under securities legislation; and
(b) at the time an amendment to a fund facts document is filed, deliver or send to the securities regulatory authority
(i) details of any changes to the personal information required to be delivered under subparagraph (1)(b)(ii), (2)(b)(iv) or (3)(b)(iii), in the form of the Personal Information Form and Authorization, since the delivery of that information in connection with the filing of the simplified prospectus of the mutual fund or another mutual fund managed by the manager,
(ii) a copy of the amended and restated fund facts document blacklined to show changes, including the text of deletions, from the most recently filed fund facts document; and
(iii) any other supporting documents required to be delivered or sent to the securities regulatory authority under securities legislation.
(6) Despite any other provision of this section, a mutual fund may
(a) omit or mark to be unreadable certain provisions of a material contract or an amendment to a material contract filed under this section
(i) if the manager of the mutual fund reasonably believes that disclosure of those provisions would be seriously prejudicial to the interests of the mutual fund or would violate confidentiality provisions, and
(ii) if a provision is omitted or marked to be unreadable under subparagraph (i), the mutual fund must include a description of the type of information that has been omitted or marked to be unreadable immediately after the provision that is omitted or marked to be unreadable in the copy of the material contract or amendment to the material contract filed by the mutual fund; and
(b) delete commercial or financial information from the copy of an agreement of the mutual fund, its manager or trustee with a portfolio adviser or portfolio advisers of the mutual fund filed under this section if the disclosure of that information could reasonably be expected to
(i) prejudice significantly the competitive position of a party to the agreement, or
(ii) interfere significantly with negotiations in which parties to the agreement are involved.
2.3.1 Websites -- (1) If a mutual fund or the mutual fund's family has a website, the mutual fund must post to at least one of those websites a fund facts document filed under this Part as soon as practicable and, in any event, within 10 days after the date that the document is filed.
(2) A fund facts document posted to the website referred to in subsection (1) must
(a) be displayed in a manner that would be considered prominent to a reasonable person; and
(b) not be attached to or bound with another fund facts document.
(3) Subsection (1) does not apply if the fund facts document is posted to a website of the manager of the mutual fund in the manner required under subsection (2).
2.4 Simplified Prospectus -- A simplified prospectus is a prospectus for the purposes of securities legislation.
2.5 Lapse Date -- (1) This section does not apply in Ontario.
(2) In this section, "lapse date" means, with reference to the distribution of a security that has been qualified under a simplified prospectus, the date that is 12 months after the date of the most recent simplified prospectus relating to the security.
(3) A mutual fund must not continue the distribution of a security to which the prospectus requirement applies after the lapse date unless the mutual fund files a new simplified prospectus that complies with securities legislation and a receipt for that new simplified prospectus is issued by the regulator.
(4) Despite subsection (3), a distribution may be continued for a further 12 months after a lapse date if,
(a) the mutual fund delivers a pro forma simplified prospectus within 30 days before the lapse date of the previous simplified prospectus;
(b) the mutual fund files a new final simplified prospectus within 10 days after the lapse date of the previous simplified prospectus; and
(c) a receipt for the new final simplified prospectus is issued by the regulator within 20 days after the lapse date of the previous simplified prospectus.
(5) The continued distribution of securities after the lapse date does not contravene subsection (3) unless and until any of the conditions of subsection (4) are not complied with.
(6) Subject to any extension granted under subsection (7), if a condition in subsection (4) is not complied with, a purchaser may cancel a purchase made in a distribution after the lapse date in reliance on subsection (4) within 90 days after the purchaser first became aware of the failure to comply with the condition.
(7) The regulator may, on an application of a mutual fund, extend, subject to such terms and conditions as it may impose, the times provided by subsection (4) where in its opinion it would not be prejudicial to the public interest to do so.
[Note: In Ontario, section 62 of the Securities Act(Ontario) imposes similar requirements regarding refiling of prospectuses.]
2.6 Consents of Experts -- (1) A mutual fund must file the written consent of
(a) any solicitor, auditor, accountant, engineer, or appraiser;
(b) any notary in Québec; and
(c) any person or company whose profession or business gives authority to a statement made by that person or company
if that person or company is named in a simplified prospectus or an amendment to a simplified prospectus, directly or, if applicable, in a document incorporated by reference,
(d) as having prepared or certified any part of the simplified prospectus or the amendment;
(e) as having opined on financial statements from which selected information included in the simplified prospectus has been derived and which audit opinion is referred to in the simplified prospectus directly or in a document incorporated by reference; or
(f) as having prepared or certified a report, valuation, statement or opinion referred to in the simplified prospectus or the amendment, directly or in a document incorporated by reference.
(2) The consent referred to in subsection (1) must
(a) be filed no later than the time the simplified prospectus or the amendment to the simplified prospectus is filed or, for the purposes of future financial statements that have been incorporated by reference in a simplified prospectus, no later than the date that those financial statements are filed;
(b) state that the person or company being named consents
(i) to being named, and
(ii) to the use of that person or company's report, valuation, statement or opinion;
(c) refer to the report, valuation, statement or opinion stating the date of the report, valuation, statement or opinion; and
(d) contain a statement that the person or company being named
(i) has read the simplified prospectus, and
(ii) has no reason to believe that there are any misrepresentations in the information contained in it that are
(A) derived from the report, valuation, statement or opinion, or
(B) within the knowledge of the person or company as a result of the services performed by the person or company in connection with the report, financial statements, valuation, statement or opinion.
(3) In addition to any other requirement of this section, the consent of an auditor or accountant must also state
(a) the dates of the financial statements on which the report of the auditor or accountant is made; and
(b) that the auditor or accountant has no reason to believe that there are any misrepresentations in the information contained in the simplified prospectus that are
(i) derived from the financial statements on which the auditor or accountant has reported, or
(ii) within the knowledge of the auditor or accountant as a result of the audit of the financial statements.
(4) Subsection (1) does not apply to an approved rating organization that issues a rating to the securities being distributed under the simplified prospectus.
2.7 Language of Documents -- (1) A mutual fund must file a simplified prospectus and any other document required to be filed under this Instrument in French or in English.
(2) In Québec, a simplified prospectus and any document required to be incorporated by reference into a simplified prospectus must be in French or in French and English.
(3) Despite subsection (1), if a mutual fund files a document only in French or only in English but delivers to a securityholder or prospective securityholder a version of the document in the other language, the mutual fund must file that other version not later than when it is first delivered to the securityholder or prospective securityholder.
2.8 Statement of Rights -- Except in Ontario, a simplified prospectus must contain a statement of the rights given to a purchaser under securities legislation in case of a failure to deliver the simplified prospectus or in case of a misrepresentation in the simplified prospectus.
[Note: In Ontario, section 60 of the Securities Act(Ontario) imposes a similar requirement for the inclusion of a statement of rights in a prospectus.]
Part 3 -- Documents Incorporated by Reference and Delivery to Securityholders
3.1 Documents Incorporated by Reference -- The following documents must, by means of a statement to that effect, be incorporated by reference into, and form part of, a simplified prospectus:
1. The annual information form that is filed concurrently with the simplified prospectus.
1.1 The most recently filed fund facts document for each class or series of securities of the mutual fund, filed either concurrently with or after the date of the simplified prospectus.
1.2 If the mutual fund has not yet filed comparative annual financial statements of the mutual fund, the most recently filed interim financial statements of the mutual fund that were filed before or after the date of the simplified prospectus.
1.3 If the mutual fund has not yet filed interim financial statements or comparative annual financial statements of the mutual fund, the audited balance sheet that was filed with the simplified prospectus.
1.4 If the mutual fund has not yet filed an annual management report of fund performance of the mutual fund, the most recently filed interim management report of fund performance of the mutual fund that was filed before or after the date of the simplified prospectus.
2. The most recently filed comparative annual financial statements of the mutual fund, together with the accompanying report of the auditor, filed either before or after the date of the simplified prospectus.
3. The most recently filed interim financial statements of the mutual fund that were filed before or after the date of the simplified prospectus and that pertain to a period after the period to which the annual financial statements then incorporated by reference in the simplified prospectus pertain.
4. The most recently filed annual management report of fund performance of the mutual fund that was filed before or after the date of the simplified prospectus.
5. The most recently filed interim management report of fund performance of the mutual fund that was filed before or after the date of the simplified prospectus and that pertains to a period after the period to which the annual management report of fund performance then incorporated by reference in the simplified prospectus pertains.
3.1.1 Audit of Financial Statements -- Any financial statements, other than interim financial statements, incorporated by reference in a simplified prospectus must meet the audit requirements in Part 2 of National Instrument 81-106 Investment Fund Continuous Disclosure.
3.1.2 Review of Unaudited Financial Statements -- Any unaudited financial statements incorporated by reference in a simplified prospectus at the date of filing of the simplified prospectus must have been reviewed in accordance with the relevant standards set out in the Handbook for a review of financial statements by the mutual fund's auditor or a review of financial statements by a public accountant.
3.1.3 Approval of Financial Statements and Related Documents -- A mutual fund must not file a simplified prospectus unless each financial statement and each management report of fund performance incorporated by reference in the simplified prospectus has been approved in accordance with the requirements in Part 2 and Part 4 of National Instrument 81-106 Investment Fund Continuous Disclosure.
3.2 Delivery of Preliminary Simplified Prospectus and Simplified Prospectus -- (1) The requirement under securities legislation to deliver or send a preliminary prospectus of a mutual fund to a person or company is satisfied by delivering or sending a preliminary simplified prospectus for the mutual fund filed under this Instrument, prepared in accordance with Form 81-101F1, either with or without the documents incorporated by reference.
(2) The requirement under securities legislation to deliver or send a prospectus of a mutual fund to a person or company is satisfied by delivering or sending a simplified prospectus for the mutual fund filed under this Instrument, prepared in accordance with Form 81-101F1, either with or without the documents incorporated by reference.
(3) Except in Ontario, any dealer distributing a security during the waiting period must
(a) send a copy of the preliminary simplified prospectus to each prospective purchaser who indicates an interest in purchasing the security and requests a copy of such preliminary simplified prospectus; and
(b) maintain a record of the names and addresses of all persons and companies to whom the preliminary simplified prospectus has been forwarded.
[Note: In Ontario, sections 66 and 67 of the Securities Act(Ontario) impose similar requirements regarding the distribution of a preliminary prospectus and maintaining a distribution list.]
3.3 Documents to be Delivered or Sent upon Request -- (1) A mutual fund must deliver or send to any person or company that requests the simplified prospectus of the mutual fund or any of the documents incorporated by reference into the simplified prospectus, a copy of the simplified prospectus or requested document.
(2) A mutual fund must deliver or send, to any person or company that requests the annual information form of the mutual fund, the current simplified prospectus of the mutual fund with the annual information form, unless the mutual fund has previously delivered or sent that simplified prospectus to that person or company.
(3) A mutual fund must deliver or send all documents requested under this section within three business days of receipt of the request and free of charge.
3.4 Toll-Free Telephone Number or Collect Telephone Calls -- A mutual fund must have a toll-free telephone number for, or accept collect telephone calls from, persons or companies that want to receive a copy of the simplified prospectus of the mutual fund and any or all documents incorporated by reference into the simplified prospectus.
3.5 Soliciting Expressions of Interest Prohibited -- Neither a multiple SP that includes both a pro forma simplified prospectus and a preliminary simplified prospectus nor a multiple AIF that includes both a pro forma annual information form and a preliminary annual information form must be used to solicit expressions of interest.
Part 4 -- Plain Language and Presentation
4.1 Plain Language and Presentation -- (1) A simplified prospectus, annual information form and fund facts document must be prepared using plain language and in a format that assists in readability and comprehension.
(2) A simplified prospectus
(a) must present all information briefly and concisely;
(b) must present the items listed in the Part A section of Form 81-101F1 and the items listed in the Part B section of Form 81-101F1 in the order stipulated in those parts;
(c) may, unless the Part B section is being bound separately from the Part A section as permitted by subsection 5.3(1), place the Part B section of the simplified prospectus in any location in the simplified prospectus;
(d) must use the headings and sub-headings stipulated in Form 81-101F1, and may use sub-headings in items for which no sub-headings are stipulated;
(e) must contain only educational material or the information that is specifically mandated or permitted by Form 81-101F1; and
(f) must not incorporate by reference into the simplified prospectus, from any other document, information that is required to be included in a simplified prospectus.
(3) A fund facts document must
(a) be prepared for each class and each series of securities of a mutual fund in accordance with Form 81-101F3;
(b) present the items listed in the Part I section of Form 81-101F3 and the items listed in the Part II section of Form 81-101F3 in the order stipulated in those parts;
(c) use the headings and sub-headings stipulated in Form 81-101F3;
(d) contain only the information that is specifically required or permitted to be in Form 81-101F3;
(e) not incorporate any information by reference; and
(f) not exceed four pages in length.
4.2 Preparation in the Required Form -- Despite provisions in securities legislation relating to the presentation of the content of a prospectus, a simplified prospectus, an annual information form and a fund facts document must be prepared in accordance with this Instrument.
Part 5 -- Packaging
5.1 Combinations of Documents -- (1) A simplified prospectus must not be consolidated with one or more other simplified prospectuses to form a multiple SP unless the Part A sections of each simplified prospectus are substantially similar.
(2) A multiple SP must be prepared in accordance with the applicable requirements of Form 81-101F1.
(3) A simplified prospectus or a multiple SP may only be attached to, or bound with, one or more of the following documents:
1. Documents incorporated by reference.
2. Educational material.
3. Account application documents.
4. Registered tax plan applications and documents.
5. Any point of sale disclosure documents required by securities legislation.
5.2 Order of Contents of Bound Documents -- (1) If the material or documents referred to in paragraphs 1 to 5 of subsection 5.1(3) are attached to, or bound with, a single SP or multiple SP
(a) the single SP or multiple SP must be the first document contained in the package; and
(b) no pages must come before the single SP or multiple SP in the package other than, at the option of the mutual fund, a general front cover and a table of contents pertaining to the entire package.
(1.1) Despite subsection (1), if attached to or bound with a single SP or multiple SP, the fund facts document must be the first document contained in the package.
(2) The general front cover referred to in paragraph 1(b) may contain only the names of the mutual funds to which the package relates, trademark or tradenames identifying those mutual funds or other members of the organization of those mutual funds, and artwork.
5.3 Separate Binding of Part B Sections of a Multiple SP -- (1) The Part B sections of a multiple SP may be bound separately from the Part A section of that document.
(2) If a Part B section of a multiple SP is bound separately from the Part A section of the multiple SP
(a) all of the Part B sections of the multiple SP must be bound separately from the Part A section; and
(b) all or some of the Part B sections may be bound together with each other or separately.
5.4 Annual Information Forms -- (1) An annual information form must be consolidated with one or more other annual information forms into a multiple AIF if the related simplified prospectuses are consolidated into a multiple SP.
(2) A multiple AIF must be prepared in accordance with the applicable requirements of Form 81-101F2.
5.5 Combinations of Fund Facts Documents for Filing Purposes -- For the purposes of section 2.1, a fund facts document may be attached to or bound with another fund facts document of a mutual fund in a simplified prospectus or, if a multiple SP, another fund facts document of a mutual fund combined in the multiple SP.
Part 5.1 -- Certificates
5.1.1 Interpretation -- For the purposes of this Part,
"manager certificate form" means a certificate in the form set out in Item 20 of Form 81-101F2 and attached to the annual information form,
"mutual fund certificate form" means a certificate in the form set out in Item 19 of Form 81-101F2 and attached to the annual information form,
"principal distributor certificate form" means a certificate in the form set out in Item 22 of Form 81-101F2 and attached to the annual information form, and
"promoter certificate form" means a certificate in the form set out in Item 21 of Form 81-101F2 and attached to the annual information form.
5.1.2 Date of Certificates -- The date of the certificates required by this Instrument must be within 3 business days before the filing of the preliminary simplified prospectus, the simplified prospectus, the amendment to the simplified prospectus, the amendment to the annual information form or the amendment to the fund facts document, as applicable.
5.1.3 Certificate of the Mutual Fund -- (1) Except in Ontario, a simplified prospectus of a mutual fund must be certified by the mutual fund.
[Note: In Ontario, section 58 of the Securities Act(Ontario) imposes a similar requirement that a prospectus contain a certificate of the issuer.]
(2) A mutual fund must certify its simplified prospectus in the form of the mutual fund certificate form.
5.1.4 Certificate of Principal Distributor -- A simplified prospectus of a mutual fund must be certified by each principal distributor in the form of the principal distributor certificate form.
5.1.5 Certificate of the Manager -- A simplified prospectus of a mutual fund must be certified by the manager of the mutual fund in the form of the manager certificate form.
5.1.6 Certificate of Promoter -- (1) Except in Ontario, a simplified prospectus of a mutual fund must be certified by each promoter of the mutual fund.
[Note: In Ontario, subsection 58(1) of the Securities Act(Ontario) imposes a similar requirement that a prospectus contain a certificate signed by each promoter of the issuer.]
(2) A prospectus certificate required under this Instrument or other securities legislation to be signed by a promoter must be in the form of the promoter certificate form.
(3) Except in Ontario, the regulator may require any person or company who was a promoter of the mutual fund within the two preceding years to sign a certificate in the promoter certificate form.
[Note: In Ontario, subsection 58(6) of the Securities Act(Ontario) provides the Director with similar discretion to require a person or company who was a promoter of the issuer within the two preceding years to sign a prospectus certificate, subject to such conditions as the Director considers proper.]
(4) Despite subsection (3), in British Columbia, the powers of the regulator with respect to the matters described in subsection (3) are set out in the Securities Act (British Columbia).
(5) Except in Ontario, with the consent of the regulator, a certificate of a promoter for a simplified prospectus may be signed by an agent duly authorized in writing by the person or company required to sign the certificate.
[Note: In Ontario, subsection 58(7) of the Securities Act(Ontario) provides the Director with similar discretion to permit the certificate to be signed by an agent of a promoter.]
5.1.7 Certificates of Corporate Mutual Funds -- (1) Except in Ontario, if the mutual fund is a company, the certificate of the mutual fund required under section 5.1.3 must be signed
(a) by the chief executive officer and the chief financial officer of the mutual fund; and
(b) on behalf of the board of directors of the mutual fund, by
(i) any two directors of the mutual fund, other than the persons referred to in paragraph (a) above, or
(ii) if the mutual fund has only three directors, two of whom are the persons referred to in paragraph (a) above, all the directors of the mutual fund.
(2) Except in Ontario, if the regulator is satisfied that either or both of the chief executive officer or chief financial officer cannot sign a certificate in a simplified prospectus, the regulator may accept a certificate signed by another officer.
[Note: In Ontario, section 58 of the Securities Act(Ontario) imposes similar requirements regarding who must sign the issuer certificate.]
Part 6 -- Exemptions
6.1 Grant of Exemption -- (1) The regulator or the securities regulatory authority may grant an exemption from the provisions of this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.
(2) Despite subsection (1), in Ontario, only the regulator may grant such an exemption.
(3) Except in Ontario, an exemption referred to in subsection (1) is granted under the statute referred to in Appendix B of National Instrument 14-101 Definitions opposite the name of the local jurisdiction.
6.2 Evidence of exemption -- (1) Subject to subsection (2) and without limiting the manner in which an exemption may be evidenced, the granting under this Part of an exemption from any form or content requirements relating to a simplified prospectus, annual information form or fund facts document, may be evidenced by the issuance of a receipt for a simplified prospectus and annual information form, or an amendment to a simplified prospectus or annual information form.
(2) The issuance of a receipt for a simplified prospectus and annual information form or an amendment to a simplified prospectus or annual information form is not evidence that the exemption has been granted unless
(a) the person or company that sought the exemption sent to the regulator or securities regulatory authority a letter or memorandum describing the matters relating to the exemption and indicating why consideration should be given to the granting of the exemption:
(i) on or before the date of the filing of the preliminary or pro forma simplified prospectus and annual information form;
(ii) at least 10 days before the issuance of the receipt in the case of an amendment to a simplified prospectus or annual information form; or
(iii) after the date of the filing of the preliminary or pro forma simplified prospectus and annual information form and received a written acknowledgement from the regulator or securities regulatory authority that the exemption may be evidenced in the manner set out in subsection (1); and
(b) the regulator or securities regulatory authority has not before, or concurrently with, the issuance of the receipt sent notice to the person or company that sought the exemption, that the exemption sought may not be evidenced in the manner set out in subsection (1).
Part 7 -- Effective Date
7.1 Effective Date -- This Instrument comes into force on February 1, 2000.
7.2 [Repealed]
7.3 [Repealed]
7.4 Introduction of Management Reports of Fund Performance -- Items 8, 11 and 13.1 of Part B of Form 81-101F1 do not apply to a mutual fund that has filed an annual management report of fund performance as required by National Instrument 81-106 Investment Fund Continuous Disclosure.
Schedule G-2 -- Blackline Showing Proposed Changes to Form 81-101F2 Contents of Annual Information Form
APPENDIX G
SCHEDULE G-2
Form 81-101F2
Contents of Annual Information Form
General Instructions
General
(1) This Form describes the disclosure that is required in an annual information form of a mutual fund. Each Item of this Form outlines disclosure requirements. Instructions to help you provide this disclosure are printed in italic type.
(2) Terms defined in National Instrument 81-101 Mutual Fund Prospectus Disclosure, National Instrument 81-102 Mutual Funds or National Instrument 81-105 Mutual Fund Sales Practices and used in this Form have the meanings that they have in those national instruments. However, subsection 1.3(3) of National Instrument 81-102 does not apply to this Form.
(3) An annual information form is intended to supplement the information contained in the related simplified prospectus. Information contained in the related simplified prospectus need not be repeated except as required to make the annual information form comprehensible as an independent document. Generally speaking, all of the disclosure required to be provided in connection with a particular requirement of Form 81-101F1 ("the SP Form") in order to satisfy statutory disclosure requirements should be contained in the simplified prospectus. For some Items, it may be appropriate to expand in the annual information form on matters discussed in the simplified prospectus; for instance, a mutual fund organization may wish to describe in an annual information form some of its optional services in more detail than in the simplified prospectus. Generally speaking, however, an annual information form is intended to provide disclosure about different matters than those discussed in the simplified prospectus, which may be of assistance or interest to some investors.
(4) Unless otherwise required by this Form, information may be presented in a different format and style in an annual information form than in a simplified prospectus. An annual information form is required by National Instrument 81-101 to be presented in a format that assists in readability and comprehension. This Form generally does not mandate the use of a specific format to achieve this goal and mutual funds are encouraged to use, as appropriate, tables, captions, bullet points or other organizational techniques that assist in presenting the disclosure clearly.
(5) An annual information form may contain photographs and artwork only if they are relevant to the business of the mutual fund, mutual fund family or members of the organization of the mutual fund and are not misleading.
(6) As with a simplified prospectus, an annual information form is to be prepared using plain language. Reference should be made to Part 3 of Companion Policy 81-101CP for a discussion concerning plain language and presentation.
(7) Any footnotes provided for under any Item of this Form may be deleted if the substance of the footnotes is otherwise provided.
Contents of an Annual Information Form
(8) An annual information form pertains to one mutual fund but, unlike a simplified prospectus, is not required to be divided into a discrete Part A section, pertaining to general disclosure, and a Part B section, pertaining to fund-specific disclosure.
(9) It is not necessary to disclose the Items required by this Form in an annual information form in any particular order or under any particular heading. This is unlike the rule for a simplified prospectus, which provides that information contained in a simplified prospectus must be in the order and under the headings required by the SP Form.
Consolidation of Annual Information Forms into a Multiple AIF
(10) Section 5.4 of National Instrument 81-101 requires an annual information form to be consolidated with one or more other annual information forms into a multiple AIF if the related simplified prospectuses are consolidated into a multiple SP. As the Instrument does not prevent the consolidation of annual information forms even if the related simplified prospectuses are not consolidated, a mutual fund organization may prepare one multiple AIF that pertains to all of its mutual funds, even if the simplified prospectuses for those mutual funds are not fully or even partially consolidated.
(11) Unlike the situation with a multiple SP, National Instrument 81-101 does not permit parts of a multiple AIF to be bound separately.
(12) Unlike the requirements for a multiple SP, there are no requirements that disclosure concerning each mutual fund described in a multiple AIF be organized in any particular manner or order. In particular, it is not necessary to use the catalogue approach required to be used in a multiple SP in which disclosure about individual mutual funds is required to be separately presented. Information may be presented separately for each mutual fund, or consolidated, at the option of the mutual fund organization.
(13) The requirements in this Form generally speak of "a mutual fund". These requirements apply to each mutual fund to which a multiple AIF pertains.
Multi-Class Mutual Funds
(14) A mutual fund that has more than one class or series that are referable to the same portfolio may treat each class or series as a separate mutual fund for purposes of this Form, or may combine disclosure of one or more of the classes or series in one annual information form. If disclosure pertaining to mroe than one class or series is combined in one annual information form, separate disclosure in response to each Item in this Form must be provided for each class or series unless the responses would be identical for each class or series.
(15) As provided in National Instrument 81-102, a section, party, class or series of a class of securities of a mutual fund that is referable to a separate portfolio of assets is considered to be a separate mutual fund. Those principles are applicable to National Instrument 81-101 and this Form.
Item 1: -- Front Cover Disclosure
1.1 -- For a Single AIF
(1) Indicate on the front cover whether the document is a preliminary annual information form, a pro forma annual information form or an annual information form.
(2) Indicate on the front cover the name of the mutual fund to which the annual information form pertains. If the mutual fund has more than one class or series of securities, indicate the name of each of those classes or series covered in the annual information form.
(3) Despite securities legislation, state on the front cover of a preliminary annual information form the following:
A copy of this annual information form has been filed with [the securities authority(ies) in each of/certain of the provinces/provinces and territories of Canada] but has not yet become final for the purpose of a distribution. Information contained in this annual information form may not be complete and may have to be amended. The securities described in this annual information form may not be
distributedsold to you until a receipt for the annual information form is obtained by the mutual fund from the securities regulatory [authority(ies)].(4) If a commercial copy of the preliminary annual information form is prepared, print the legend referred to in subsection (3) in red ink.
(5) For a preliminary annual information form or annual information form, indicate the date of the document, which shall be the date of the certificates for the document. This date shall be within three business days of the date it is filed with the securities regulatory authority. Write the date of the document in full, writing the name of the month in words. A pro forma annual information form need not be dated, but may reflect the anticipated date of the annual information form.
(6) State, in substantially the following words:
No securities regulatory authority has expressed an opinion about these [units/shares] and it is an offence to claim otherwise.
1.2 -- For a Multiple AIF
(1) Indicate on the front cover whether the document is a preliminary annual information form, a pro forma annual information form or an annual information form for each of the mutual funds to which the document pertains.
(2) Indicate on the front cover the names of the mutual funds and, at the option of the mutual funds, the name of the mutual fund family to which the document pertains. If the mutual fund has more than one class or series of securities, indicate the name of each of those classes or series covered in the document.
(3) Despite securities legislation, state on the front cover of a document that contains a preliminary annual information form the following:
A copy of this annual information form has been filed with [the securities authority(ies) in each of/certain of the provinces/provinces and territories of Canada] but has not yet become final for the purpose of a distribution. Information contained in this annual information form may not be complete and may have to be amended. The securities described in this annual information form may not be
distributedsold to you until a receipt for the annual information form is obtained by the mutual fund from the securities regulatory [authority(ies)].(4) If a commercial copy of a document that contains a preliminary annual information form is prepared, print the legend referred to in subsection (3) in red ink.
(5) If the document contains a preliminary annual information form or annual information form, indicate the date of the document, which shall be the date of the certificates for the document. This date shall be within three business days of the date it is filed with the securities regulatory authority. Write the date of the document in full, writing the name of the month in words. A document that is a pro forma multiple AIF need not be dated, but may reflect the anticipated date of the multiple AIF.
(6) State, in substantially the following words:
No securities regulatory authority has expressed an opinion about these [units/shares] and it is an offence to claim otherwise.
Item 2: -- Table of Contents
Include a table of contents.
Item 3: -- Name, Formation and History of the Mutual Fund
(1) State the full name of the mutual fund and the address of its head or registered office.
(2) State the laws under which the mutual fund was formed and the date and manner of its formation.
(3) Identify the constating documents of the mutual fund and, if material, state whether the constating documents have been amended in the last 10 years and describe the amendments.
(4) If the mutual fund's name has been changed in the last 10 years, state the mutual fund's former name or names and the date on which it was changed.
(5) Disclose, and provide details about, any major events affecting the mutual fund in the last 10 years. Include information, if applicable, about
(a) the mutual fund having participated in, or been formed from, an amalgamation or merger with one or more other mutual funds;
(b) the mutual fund having participated in any reorganization or transfer of assets in which the securityholders of another issuer became securityholders of the mutual fund;
(c) any changes in fundamental investment objectives or material investment strategies;
(d) any changes in the portfolio adviser or changes in, or of control of, the manager; and
(e) the mutual fund, before it filed a prospectus as a mutual fund, having existed as a closed-end investment fund, non-public mutual fund or other entity.
Item 4: -- Investment Restrictions
(1) Include a statement to the effect that the mutual fund is subject to certain restrictions and practices contained in securities legislation, including National Instrument 81-102, which are designed in part to ensure that the investments of the mutual fund are diversified and relatively liquid and to ensure the proper administration of the mutual fund, and state that the mutual fund is managed in accordance with these restrictions and practices.
(2) If the mutual fund has received the approval of the securities regulatory authorities to vary any of the investment restrictions and practices contained in securities legislation, including National Instrument 81-102, provide details of the permitted variations.
(2.1) If the mutual fund has relied on the approval of the independent review committee and the relevant requirements of NI 81-107 to vary any of the investment restrictions and practices contained in securities legislation, including NI 81-102, provide details of the permitted variations.
(2.2) If the mutual fund has relied on the approval of the independent review committee to implement a reorganization with, or transfer of assets to, another mutual fund or to proceed with a change of auditor of the mutual fund as permitted by NI 81-102, provide details.
(3) Describe the nature of any securityholder or other approval that may be required in order to change the fundamental investment objectives and any of the material investment strategies to be used to achieve the investment objectives.
(4) State the restrictions on the investment objectives and strategies that arise out of any of the following matters:
1. Whether the securities of the mutual fund are or will be a qualified investment within the meaning of the ITA for retirement savings plans, retirement income funds, education savings plans, deferred profit sharing plans or other plans registered under the ITA.
2. Whether the securities of the mutual fund are or will be recognized as a registered investment within the meaning of the ITA.
3. Whether the securities of the mutual fund will constitute foreign property within the meaning of the ITA.
(5) State whether the mutual fund has deviated in the last year from the rules under the ITA that apply to the status of its securities as
(a) qualified investments within the meaning of the ITA for retirement savings plans, retirement income funds, education savings plans, deferred profit sharing plans or other plans registered under the ITA;
(b) registered investments within the meaning of the ITA; or
(c) non-foreign property under the ITA.
(6) State the consequences of any deviation described in response to subsection (5).
Item 5: -- Description of Securities Offered by the Mutual Fund
(1) State the description or the designation of securities, or the series or classes of securities, offered by the mutual fund under the related simplified prospectus and describe the securities or all material attributes and characteristics, including
(a) dividend or distribution rights;
(b) voting rights;
(c) liquidation or other rights upon the termination of the mutual fund;
(d) conversion rights;
(e) redemption rights; and
(f) provisions as to amendment of any of these rights or provisions.
(2) Describe the rights of securityholders to approve
(a) the matters set out in section 5.1 of National Instrument 81-102; and
(b) any matters provided for in the constating documents of the mutual fund.
Item 6: -- Valuation of Portfolio Securities
(1) Describe the methods used to value the various types or classes of portfolio assets of the mutual fund and its liabilities for the purpose of calculating net asset value.
(1.1) If the valuation principles and practices established by the manager differ from Canadian GAAP, describe the differences.
(2) If the manager has discretion to deviate from the mutual fund's valuation practices described in subsection (1), disclose when and to what extent that discretion may be exercised and, if it has been exercised in the past three years, provide an example of how it has been exercised or, if it has not been exercised in the past three years, so state.
Item 7: -- Calculation of Net Asset Value
(1) State that the issue and redemption price of securities of the mutual fund is based on the mutual fund's net asset value next determined after the receipt of a purchase order and a redemption order. Describe the method followed or to be followed by the mutual fund in determining the net asset value.
(2) State the frequency at which the net asset value is determined and the date and time of day at which it is determined.
(3) If a money market mutual fund intends to maintain a constant net asset value per security, disclose this intention and disclose how the mutual fund intends to maintain this constant net asset value.
Item 8: -- Purchases and Switches
(1) Describe the procedure followed or to be followed by investors who desire to purchase securities of the mutual fund or switch them for securities of other mutual funds.
(2) State that the issue price of securities is based on the net asset value of a security of that class, or series of a class, next determined after the receipt by the mutual fund of the purchase order.
(3) Describe how the securities of the mutual fund are distributed. If sales are effected through a principal distributor, give brief details of any arrangements with the principal distributor.
(4) Describe all available purchase options and state, if applicable, that the choice of different purchase options requires the investor to pay different fees and expenses and, if applicable, that the choice of different purchase options affects the amount of compensation paid by a member of the organization of the mutual fund to the dealer.
(5) Disclose that a dealer may make provision in arrangements that it has with an investor that will require the investor to compensate the dealer for any losses suffered by the dealer in connection with a failed settlement of a purchase of securities of the mutual fund caused by the investor.
(6) For a mutual fund that is being sold on a best efforts basis, state whether the issue price will be fixed during the initial distribution period, and state when the mutual fund will begin issuing securities at the net asset value per security of the mutual fund.
Item 9: -- Redemption of Securities
(1) Describe the procedures followed, or to be followed, by an investor who desires to redeem securities of the mutual fund, specifying the procedures to be followed and documents to be delivered before a redemption order pertaining to securities of the mutual fund is accepted by the mutual fund for processing and before payment of the proceeds of redemption is made by the mutual fund.
(2) State that the redemption price of the securities is based on the net asset value of a security of that class, or series of a class, next determined after the receipt by the mutual fund of the redemption order.
(3) Disclose that a dealer may make provision in arrangements that it has with an investor that will require the investor to compensate the dealer for any losses suffered by the dealer in connection with any failure of the investor to satisfy the requirements of the mutual fund or securities legislation for a redemption of securities of the mutual fund.
(4) Discuss the circumstances under which the mutual fund may suspend redemptions of the securities of the mutual fund.
Item 10: -- Responsibility for Mutual Fund Operations
10.1 -- General
Describe how each of the following aspects of the operations of the mutual fund are administered and who administers those functions:
(a) the management and administration of the mutual fund, including valuation services, fund accounting and securityholder records, other than the management of the portfolio assets;
(b) the management of the portfolio assets, including the provision of investment analysis or investment recommendations and the making of investment decisions;
(c) the purchase and sale of portfolio assets by the mutual fund and the making of brokerage arrangements relating to the portfolio assets;
(d) the distribution of the securities of the mutual fund;
(e) if the mutual fund is a trust, the trusteeship of the mutual fund;
(f) if the mutual fund is a corporation, the oversight of the affairs of the mutual fund by the directors of the mutual fund;
(g) the custodianship of the assets of the mutual fund; and
(h) the oversight of the manager of the mutual fund by the independent review committee.
INSTRUCTION:
The disclosure required under Item 10.1 may be provided separately from, or combined with, the detailed disclosure concerning the persons or companies that provide services to the mutual fund required by Items 10.2 through 10.10.
10.2 -- Manager
(1) State the name, address, telephone number, e-mail address and, if applicable, website address of the manager of the mutual fund.
(2) List the names and home addresses in full or, alternatively, solely the municipality of residence or postal address, and the respective positions and offices held with the manager and their respective principal occupations at, and within the five years preceding, the date of the annual information form, of all partners, directors andexecutive officers of the manager of the mutual fund at the date of the annual information form.
(3) If a partner, director orexecutive officer of the manager of the mutual fund has held more than one office with the manager of the mutual fund within the past five years, state only the current office held.
(4) If the principal occupation of a director orexecutive officer of the manager of the mutual fund is with an organization other than the manager of the mutual fund, state the principal business in which the organization is engaged.
(5) Describe the circumstances under which any agreement with the manager of the mutual fund may be terminated, and include a brief description of the essential terms of this agreement.
10.3 -- Portfolio Adviser
(1) If the manager of the mutual fund provides the portfolio management services in connection with the mutual fund, so state.
(2) If the manager does not provide portfolio management services, state the names and municipality of the principal or head office for each portfolio adviser of the mutual fund.
(3) State
(a) the extent to which investment decisions are made by certain individuals employed by the manager or a portfolio adviser and whether those decisions are subject to the oversight, approval or ratification of a committee; and
(b) the name, title, and length of time of service of the person or persons employed by or associated with either the manager or a portfolio adviser of the mutual fund who is or are principally responsible for the day-to-day management of a material portion of the portfolio of the mutual fund, implementing a particular material strategy or managing a particular segment of the portfolio of the mutual fund, and each person's business experience in the last five years.
(4) Describe the circumstances under which any agreement with a portfolio adviser of the mutual fund may be terminated, and include a brief description of the essential terms of this agreement.
10.4 -- Brokerage Arrangements
(1) If any brokerage transactions involving the client brokerage commissions of the mutual fund have been or might be directed to a dealer in return for the provision of any good or service, by the dealer or a third party, other than order execution, state
(a) the process for, and factors considered in, selecting a dealer to effect securities transactions for the mutual fund, including whether receiving goods or services in addition to order execution is a factor, and whether and how the process may differ for a dealer that is an affiliated entity;
(b) the nature of the arrangements under which order execution goods and services or research goods and services might be provided;
(c) each type of good or service, other than order execution, that might be provided; and
(d) the method by which the portfolio adviser makes a good faith determination that the mutual fund, on whose behalf the portfolio adviser directs any brokerage transactions involving client brokerage commissions to a dealer in return for the provision of any order execution goods and services or research goods and services, by the dealer or a third party, receives reasonable benefit considering both the use of the goods or services and the amount of client brokerage commissions paid.
(2) Since the date of the last annual information form, if any brokerage transactions involving the client brokerage commissions of the mutual fund have been or might be directed to a dealer in return for the provision of any good or service, by the dealer or third party, other than order execution, state
(a) each type of good or service, other than order execution, that has been provided to the manager or the portfolio adviser of the mutual fund; and
(b) the name of any affiliated entity that provided any good or service referred to in paragraph (a), separately identifying each affiliated entity and each type of good or service provided by each affiliated entity.
(3) If any brokerage transactions involving the client brokerage commissions of the mutual fund have been or might be directed to a dealer in return for the provision of any good or service, by the dealer or a third party, other than order execution, state that the name of any other dealer or third party that provided a good or service referred to in paragraph (2)(a), that was not disclosed under paragraph (2)(b), will be provided upon request by contacting the mutual fund or mutual fund family at [insert telephone number] or at [insert mutual fund or mutual fund family e-mail address].
INSTRUCTION:
Terms defined in NI 23-102 -- Use of Client Brokerage Commissions have the same meaning where used in this Item.
10.5 -- Principal Distributor
(1) If applicable, state the name and address of the principal distributor of the mutual fund.
(2) Describe the circumstances under which any agreement with the principal distributor of the mutual fund may be terminated, and include a brief description of the essential terms of this agreement.
10.6 -- Directors, Executive Officers and Trustees
(1) List the names and home addresses in full or, alternatively, solely the municipality of residence or postal address, and the principal occupations at, or within the five years preceding, the date of the annual information form, of all directors orexecutive officers of an incorporated mutual fund or of the individual trustee or trustees, if any, of a mutual fund that is a trust.
(2) State, for a mutual fund that is a trust, the names and municipality of residence for each person or company that is responsible for performing the trusteeship function of the mutual fund.
(3) Indicate, for an incorporated mutual fund, all positions and offices with the mutual fund then held by each person named in response to subsection (1).
(4) If the principal occupation of a director, executive officer or trustee is that of a partner, director or officer of a company other than the mutual fund, state the business in which the company is engaged.
(5) If a director orexecutive officer of an incorporated mutual fund has held more than one position in the mutual fund, state only the first and last position held.
(6) For a mutual fund that is a limited partnership, provide the information required by this Item for the general partner of the mutual fund, modified as appropriate.
10.7 -- Custodian
(1) State the name, municipality of the principal or head office, and nature of business of the custodian and any principal sub-custodian of the mutual fund.
(2) Describe generally the sub-custodian arrangements of the mutual fund.
INSTRUCTION:
A "principal sub-custodian" is a sub-custodian to whom custodial authority has been delegated in respect of a material portion or segment of the portfolio assets of the mutual fund.
10.8 -- Auditor
State the name and municipality of the auditor of the mutual fund.
10.9 -- Registrar
If applicable, state the name of the registrar of securities of the mutual fund and the municipalities in which the register of securities of the mutual fund are kept.
10.10 -- Other Service Providers
State the name, municipality of the principal or head office, and the nature of business of each other person or company that provides services relating to portfolio valuation, securityholder records, fund accounting, or other material services, in respect of the mutual fund, and describe the material features of the contractual arrangements by which the person or company has been retained.
Item 11: -- Conflicts of Interest
11.1 -- Principal Holders of Securities
(1) The information required in response to this Item shall be given as of a specified date within 30 days before the date of the annual information form.
(2) Disclose the number and percentage of securities of each class or series of voting securities of the mutual fund and of the manager of the mutual fund owned of record or beneficially, directly or indirectly, by each person or company that owns of record, or is known by the mutual fund or the manager to own beneficially, directly or indirectly, more than 10 percent of any class or series of voting securities, and disclose whether the securities are owned both of record and beneficially, of record only, or beneficially only.
(3) For any entity that is named in response to subsection (2), disclose the name of any person or company of which that entity is a "controlled entity".
(4) If any person or company named in respect of subsection (2) owns of record or beneficially, directly or indirectly, more than 10 percent of any class of voting securities of the principal distributor of the mutual fund, disclose the number and percentage of securities of the class so owned.
(5) Disclose the percentage of securities of each class or series of voting or equity securities beneficially owned, directly or indirectly, in aggregate, by all the directors, senior officers and trustees
(a) of the mutual fund
(i) in the mutual fund if the aggregate level of ownership exceeds 10 percent,
(ii) in the manager, or
(iii) in any person or company that provides services to the mutual fund or the manager; and
(b) of the manager
(i) in the mutual fund if the aggregate level of ownership exceeds 10 percent,
(ii) in the manager, or
(iii) in any person or company that provides services to the mutual fund or the manager.
(6) Disclose the percentage of securities of each class or series of voting or equity securities beneficially owned, directly or indirectly, in aggregate, by all the independent review committee members of the mutual fund
(a) in the mutual fund if the aggregate level of ownership exceeds 10 percent,
(b) in the manager, or
(c) in any person or company that provides services to the mutual fund or the manager.
11.2 -- Affiliated Entities
(1) State whether any person or company that provides services to the mutual fund or the manager in relation to the mutual fund is an affiliated entity of the manager, and show the relationships of those affiliated entities in the form of an appropriately labelled diagram.
(2) State that disclosure of the amount of fees received from the mutual fund by each person or company described in subsection (1) is contained in the audited financial statements of the mutual fund.
(3) Identify any individual who is a director or senior officer of the mutual fund or partner, director or officer of the manager and also of any affiliated entity of the manager described in response to subsection (1), and give particulars of the relationship.
INSTRUCTIONS:
(1) A person or company is an "affiliated entity" of another person or company if one is a subsidiary entity of the other or if both are subsidiary entities of the same person or company or if each of them is a controlled entity of the same person or company.
(2) A person or company is a "controlled entity" of a person or company if
(a) in the case of a person or company
(i) voting securities of the first-mentioned person or company carrying more than 50 percent of the votes for the election of directors are held, otherwise than by way of security only, by or for the benefit of the other person or company, and
(ii) the votes carried by the securities are entitled, if exercised, to elect a majority of the directors of the first-mentioned person or company;
(b) in the case of a partnership that does not have directors, other than a limited partnership, the second-mentioned person or company holds more than 50 percent of the interests in the partnership; or
(c) in the case of a limited partnership, the general partner is the second-mentioned person or company.
(3) A person or company is a "subsidiary entity" of another person or company if
(a) it is a controlled entity of
(i) that other,
(ii) that other and one or more persons or companies, each of which is a controlled entity of that other, or
(iii) two or more persons or companies, each of which is a controlled entity of that other; or
(b) it is a subsidiary entity of a person or company that is that other's subsidiary entity.
(4) For the purposes of subsection (1) of Item 11.2, the provision of services includes the provision of brokerage services in connection with execution of portfolio transactions for the mutual fund.
11.3 -- Dealer Manager Disclosure
If the mutual fund is dealer managed, disclose this fact and that the mutual fund is subject to the restrictions set out in section 4.1 of National Instrument 81-102, and summarize section 4.1 of National Instrument 81-102.
Item 12: -- Fund Governance
(1) Provide detailed information concerning the governance of the mutual fund, including information concerning
(a) the mandate and responsibilities of the independent review committee and the reasons for any change in the composition of the independent review committee since the date of the most recently filed annual information form;
(a.1) any other body or group that has responsibility for fund governance and the extent to which its members are independent of the manager of the mutual fund; and
(b) descriptions of the policies, practices or guidelines of the mutual fund or the manager relating to business practices, sales practices, risk management controls and internal conflicts of interest, and if the mutual fund or the manager have no such policies, practices or guidelines, a statement to that effect.
(2) If the mutual fund intends to use derivatives, describe the policies and practices of the mutual fund to manage the risks associated with the use of derivatives.
(3) In the disclosure provided under subsection (2), include disclosure of
(a) whether there are written policies and procedures in place that set out the objectives and goals for derivatives trading and the risk management procedures applicable to derivatives trading;
(b) who is responsible for setting and reviewing the policies and procedures referred to in paragraph (a), how often are the policies and procedures reviewed, and the extent and nature of the involvement of the board of directors or trustee in the risk management process;
(c) whether there are trading limits or other controls on derivative trading in place and who is responsible for authorizing the trading and placing limits or other controls on the trading;
(d) whether there are individuals or groups that monitor the risks independent of those who trade; and
(e) whether risk measurement procedures or simulations are used to test the portfolio under stress conditions.
(4) If the mutual fund intends to enter into securities lending, repurchase of reverse repurchase transactions, describe the policies and practices of the mutual fund to manage the risks associated with those transactions.
(5) In the disclosure provided under subsection (4), include disclosure of
(a) the involvement of an agent to administer the transactions on behalf of the instructions provided by the mutual fund to the agent under the agreement between the mutual fund and the agent;
(b) whether there are written policies and procedures in place that set out the objectives and goals for securities lending, repurchase transactions or reverse repurchase transactions, and the risk management procedures applicable to the mutual fund's entering into of those transactions;
(c) who is responsible for setting and reviewing the agreement referred to in paragraph (a) and the policies and procedures referred to in paragraph (b), how often the policies and procedures are reviewed, and the extent and nature of the involvement of the board of directors or trustee inthe risk management process;
(d) whether there are limits or other controls in place on the entering into of those transactions by the mutual fund and who is responsible for authorizing those limits or other controls on those transactions;
(e) whether there are individuals or groups that monitor the risks independent of those who enter into those transactions on behalf of the mutual fund; and
(f) whether risk measurement procedures or simulations are used to test the portfolio under stress conditions.
(6) If the mutual fund held securities of other mutual funds during the year, provide details on how the manager of the mutual fund exercised its discretion with regard to the voting rights attached to the securities of the other mutual funds when the securityholders of the other mutual funds were called upon to vote.
INSTRUCTION:
(1) The disclosure provided under this Item should make appropriate distinctions between the risks associated with the intended use by the mutual fund of derivatives for hedging purposes as against the mutual fund's intended use of derivatives for non-hedging purposes.
(2) If the mutual fund has an independent review committee, state in the disclosure provided under paragraph (1)(b) that NI 81-107 requires the manager to have policies and procedures relating to conflicts of interest.
(7) Unless the mutual fund invests exclusively in non-voting securities, describe the policies and procedures that the mutual fund follows when voting proxies relating to portfolio securities including
(a) the procedures followed when a vote presents a conflict between the interests of securityholders and those of the mutual fund's manager, portfolio adviser, or any affiliate or associate of the mutual fund, its manager or its portfolio adviser;
(b) the procedures followed when a vote presents a conflict between the interests of securityholders and those of the mutual fund's manager, portfolio adviser, or any affiliate or associate of the mutual fund, its manager or its portfolio adviser;
State that the policies and procedures that the mutual fund follows when voting proxies relating to portfolio securities are available on request, at no cost, by calling [toll-free/collect call telephone number] or by writing to [address].
(8) State that the mutual fund's proxy voting record for the most recent period ended June 30 of each year is available free of charge to any securityholder of the mutual fund upon request at any time after August 31 of that year. If the proxy voting record is available on the mutual fund's website, provide the website address.
INSTRUCTION:
The mutual fund's proxy voting policies and procedures must address the requirements of section 10.2 of National Instrument 81-106 Investment Fund Continuous Disclosure
(9) Describe the policies and procedures of the mutual fund relating to the monitoring, detection and deterrence of short-term trades of mutual fund securities by investors. If the mutual fund has no such policies and procedures, provide a statement to that effect.
(10) Describe any arrangements, whether formal or informal, with any person or company, to permit short-term trades in securities of the mutual fund, including
(a) the name of such person or company, and
(b) the terms of such arrangements, including
(i) any restrictions imposed on the short-term trades; and
(ii) any compensation or other consideration received by the manager, the mutual fund or any other party pursuant to such arrangements.
Item 13: -- Fees and Expenses
13.1 -- Management Fee Rebate or Distribution Programs
(1) Disclose details of all arrangements that are in effect or will be in effect during the currency of the annual information form that will result, directly or indirectly, in one securityholder in the mutual fund paying as a percentage of the securityholder's investment in the mutual fund a management fee that differs from that payable by another securityholder.
(2) In the disclosure required by subsection (1), describe
(a) who pays the management fee;
(b) whether a reduced fee is paid at the relevant time or whether the full fee is paid at that time with a repayment of a portion of the management fee to follow at a later date;
(c) who funds the reduction or repayment of management fees, when the reduction or repayment is made and whether it is made in cash or in securities of the mutual fund;
(d) whether the differing management fees are negotiable or calculated in accordance with a fixed schedule;
(e) if the management fees are negotiable, the factors or criteria relevant to the negotiations and state who negotiates the fees with the investor;
(f) whether the differing management fees payable are based on the number or value of the securities of the mutual fund purchased during a specified period or the number or value of the securities of the mutual fund held at a particular time; and
(g) any other factors that could affect the amount of the management fees payable.
(3) Disclose the income tax consequences to the mutual fund and its securityholders of a management fee structure that results in one securityholder paying a management fee that differs from another.
Item 14: -- Income Tax Considerations
(1) State in general terms the bases upon which the income and capital receipts of the mutual fund are taxed.
(2) State in general terms the income tax consequences to the holders of the securities offered of
(a) any distribution to the holders in the form of dividends or otherwise, including amounts reinvested in securities of the mutual fund;
(b) the redemption of securities;
(c) the issue of securities; and
(d) any transfers between mutual funds.
Item 15: -- Remuneration of Directors, Officers and Trustees
(1) If the management functions of the mutual fund are carried out by employees of the mutual fund, provide for those employees the disclosure concerning executive compensation that is required to be provided for executive officers of an issuer under securities legislation.
(2) Describe any arrangements under which compensation was paid or payable by the mutual fund during the most recently completed financial year of the mutual fund, for the services of directors of the mutual fund, members of an independent board of governors or advisory board of the mutual fund and members of the independent review committee of the mutual fund, including the amounts paid, the name of the individual and any expenses reimbursed by the mutual fund to the individual
(a) in that capacity, including any additional amounts payable for committee participation or special assignments; and
(b) as consultant or expert.
(3) For a mutual fund that is a trust, describe the arrangements, including the amounts paid and expenses reimbursed, under which compensation was paid or payable by the mutual fund during the most recently completed financial year of the mutual fund for the services of the trustee or trustees of the mutual fund.
INSTRUCTION:
The disclosure required under Item 15(1) regarding executive compensation for management functions carried out by employees of a mutual fund must be made in accordance with the disclosure requirements of Form 51-102F6 Statement of Executive Compensation.
Item 16: -- Material Contracts
(1) List and provide particulars of
(a) the articles of incorporation, continuation or amalgamation, the declaration of trust or trust agreement of the mutual fund, the limited partnership agreement or any other constating or establishing documents of the mutual fund;
(b) any agreement of the mutual fund or trustee with the manager of the mutual fund;
(c) any agreement of the mutual fund, the manager or trustee with the portfolio adviser or portfolio advisers of the mutual fund;
(d) any agreement of the mutual fund, the manager or trustee with the custodian of the mutual fund;
(e) any agreement of the mutual fund, the manager or trustee with the principal distributor of the mutual fund; and
(f) any other contract or agreement that
can reasonably be regarded asis material toan investor in the securities ofthe mutual fund.(2) State a reasonable time at which and place where the contracts or agreements listed in response to subsection (1) may be inspected by prospective or existing securityholders.
(3) Include, in describing particulars of contracts, the date of, parties to, consideration paid by the mutual fund under, termination provisions of, and general nature of, the contracts.
INSTRUCTION:
This Item does not require disclosure of contracts entered into in the ordinary course of business of the mutual fund.
Item 17: -- Legal and Administrative Proceedings
(1) Describe briefly any ongoing legal and administrative proceedings material to the mutual fund, to which the mutual fund, its manager or principal distributor is a party.
(2) For all matters disclosed under subsection (1), disclose
(a) the name of the court or agency having jurisdiction;
(b) the date on which the proceeding was instituted;
(c) the principal parties to the proceeding;
(d) the nature of the proceeding and, if applicable, the amount claimed; and
(e) whether the proceedings are being contested and the present status of the proceedings.
(3) Provide similar disclosure about any proceedings known to be contemplated.
(4) Describe the penalties or sanctions imposed and the grounds on which they were imposed or the terms of any settlement agreement and the circumstances that gave rise to the settlement agreement, if the manager of the mutual fund, or a director or officer of the mutual fund or the partner, director or officer of the manager of the mutual fund has,
(a) in the 10 years before the date of the simplified prospectus, been subject to any penalties or sanctions imposed by a court or securities regulator relating to trading in securities, promotion or management of a publicly-traded mutual fund, or theft of fraud, or been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor in determining whether to purchase securities of the mutual fund; or
(b) in the 10 years before the date of the simplified prospectus but after the date that National Instrument 81-101 came into force, entered into a settlement agreement with a court, securities regulatory or other regulatory body, in relation to any of the matters referred to in paragraph (a).
(5) If the manager of the mutual fund, or a director or officer of the mutual fund or the partner, director or officer of the manager of the mutual fund has, within the 10 years before the date of the simplified prospectus, been subject to any penalties or sanctions imposed by a court or securities regulator relating to trading in securities, promotion or management of a publicly traded mutual fund, or theft or fraud, or has entered into a settlement agreement with a regulatory authority in relation to any of these matters, describe the penalties or sanctions imposed and the grounds on which they were imposed or the terms of the settlement agreement.
Item 18: -- Other Material Information
(1) Give particulars of any other material facts relating to the securities proposed to be offered that are not otherwise required to be disclosed by this Form or the SP Form.
(2) Provide any specific disclosure required or permitted to be disclosed in a prospectus under securities legislation that is not otherwise required to be disclosed by this Form.
(3) Subsection (2) does not apply to requirements of securities legislation that are form requirements for a prospectus.
INSTRUCTION:
The disclosure provided under subsection (2) may also be provided under Item 12 of Part A or Item 14 of Part B of the SP Form. If the disclosure is provided under one of these Items, it need not be provided under this Item.
Item 19: -- Certificate of the Mutual Fund
(1) Include a certificate of the mutual fund that states:
(a) for a simplified prospectus and annual information form,
This annual information form, together with the simplified prospectus and the documents incorporated by reference into the simplified prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by the simplified prospectus, as required by the securities legislation of [insert the jurisdictions in which qualified] and do not contain any misrepresentations.
(b) for an amendment to a simplified prospectus or annual information form that does not restate the simplified prospectus or annual information form,
This amendment no. [specify amendment number and date], together with the [amended and restated] annual information form dated [specify], [amending and restating the annual information form dated [specify],] [as amended by (specify prior amendments and dates)] and the [amended and restated] simplified prospectus dated [specify], [amending and restating the simplified prospectus dated [specify],] [as amended by (specify prior amendments and dates)] and the documents incorporated by reference into the [amended and restated] simplified prospectus, [as amended,] constitute full, true and plain disclosure of all material facts relating to the securities offered by the [amended and restated] simplified prospectus, [as amended,] as required by the securities legislation of [insert the jurisdictions in which qualified] and do not contain any misrepresentations.
, and
(c) for an amendment that amends and restates a simplified prospectus or annual information form,
This amended and restated annual information form dated [specify], amending and restating the annual information form dated [specify] [, as amended by (specify prior amendments and dates)], together with the [amended and restated] simplified prospectus dated [specify] [, amending and restating the simplified prospectus dated [specify]] [, as amended by (specify prior amendments and dates)] and the documents incorporated by reference into the [amended and restated] simplified prospectus, [as amended,] constitute full, true and plain disclosure of all material facts relating to the securities offered by the [amended and restated] simplified prospectus, [as amended,] as required by the securities legislation of [insert the jurisdictions in which qualified] and do not contain any misrepresentations.
(1.1) For a non-offering prospectus, change "securities offered by the simplified prospectus" to "securities previously issued by the mutual fund" wherever it appears in the statement in Item 19(1)(a).
(2) The certificate required to be signed by the mutual fund shall, if the mutual fund is established as a trust, be signed
(a) if any trustee of the mutual fund is an individual, by each individual who is a trustee or by a duly authorized attorney of the individual; or
(b) if any trustee of the mutual fund is a body corporate, by the duly authorized signing officer or officers of the body corporate.
(3) Despite subsection (2), if the declaration of trust or trust agreement establishing the mutual fund delegates the authority to do so, or otherwise authorizes a person to do so, the certificate form required to be signed by the trustee or trustees of the mutual fund may be signed by the person to whom the authority is delegated or who is authorized.
(4) Despite subsections (2) and (3), if the trustee of the mutual fund is also its manager, the certificate shall indicate that it is being signed by the person or company both in its capacity of trustee and in its capacity as manager of the mutual fund and shall be signed in the manner prescribed by Item 20.
Item 20: -- Certificate of the Manager of the Mutual Fund
(1) Include a certificate of the manager of the mutual fund in the same form as the certificate signed by the mutual fund.
(2) The certificate shall, if the manager is a company, be signed by the chief executive officer and the chief financial officer of the manager, and on behalf of the board of directors of the manager by any two directors of the manager other than the chief executive officer or chief financial officer, duly authorized to sign.
(3) Despite subsection (2), if the manager has only three directors, two of whom are the chief executive officer and chief financial officer, the certificate required by subsection (2) to be signed on behalf of the board of directors of the manager shall be signed by the remaining director of the manager.
Item 21: -- Certificate of Each Promoter of the Mutual Fund
(1) Include a certificate of each promoter of the mutual fund in the same form as the certificate signed by the mutual fund.
(2) The certificate to be signed by the promoter shall be signed by any officer or director of the promoter duly authorized to sign.
Item 22: -- Certificate of the Principal Distributor of the Mutual Fund
(1) Include a certificate of the principal distributor of the mutual fund that states:
To the best of our knowledge, information and belief, thisThis annual information form,the financial statements of the fund [specify] for the financial period ended [specify] and the auditors' report on those financial statements,together with the simplified prospectus and thefund facts document dated [specify]documents incorporated by reference into the simplified prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by the simplified prospectus, as required by the securities legislation of [insert the jurisdictions in which qualified] and do not contain anymisrepresentationmisrepresentations..(2) The certificate to be signed by the principal distributor shall be signed by any officer or director of the principal distributor duly authorized to sign.
INSTRUCTION:
For a mutual fund that has a principal distributor, the certificate required by this Item is necessary to satisfy the requirements of securities legislation that an underwriter sign a certificate to a prospectus.
Item 23: -- Exemptions and Approvals
(1) Describe all exemptions from, or approvals under, this Instrument, National Instrument 81-102, National Instrument 81-105 or National Policy Statement No. 39, obtained by the mutual fund or the manager that continue to be relied upon by the mutual fund or the manager.
(2) Include the disclosure required by subsection (1) in the section of the annual information form that describes the matter to which the exemption pertains.
Item 24: -- Back Cover
(1) State on the back cover the name of the mutual fund or funds included in the annual information form or the mutual fund family, as well as the name, address and telephone number of the manager of the mutual fund or funds.
(2) State, in substantially the following words:
• Additional information about the Fund[s] is available in the Fund['s/s'] Fund Facts, management reports of fund performance and financial statements.
• You can get a copy of these documents at no cost by calling [toll-free/collect] [insert the toll-free telephone number or telephone number where collect calls are accepted, as required by section 3.4 of the Instrument], or from your dealer or by e-mail at [insert e-mail address].
• These documents and other information about the Fund[s], such as information circulars and material contracts, are also available [on the [insert name of mutual fund manager] internet site at [insert website address] or] at www.sedar.com.
Schedule H-1 -- Proposed Amendments to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
APPENDIX H
SCHEDULE H-1
Amendments to National Instrument 52-107
Acceptable Accounting Principles and Auditing Standards
1. National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards is amended by this Instrument.
2. Section 1.1 is amended by adding the following definitions after "multiple convertible security":
""predecessor statements" mean the financial statements referred to in paragraph 32.1(1)(a) of Form 41-101F1 Information Required in a Prospectus;
"primary business statements" mean the financial statements referred to in paragraph 32.1(1)(b) of Form 41-101F1 Information Required in a Prospectus;".
3. Paragraph 2.1(2)(d) is amended by
(a) adding "acquisition statements, predecessor statements or a primary business statement that are an" after "any", and
(b) adding a comma after "acquired business".
4. Subsection 3.11(5) is amended by replacing "subsections (1), (2) and (4)" with "subsections (1) and (2)".
5. Subparagraph 3.11(5)(a)(i) is amended by replacing "gross revenue" with "gross sales".
6. Subparagraph 3.11(5)(a)(ii) is amended by replacing "royalty expenses" with "royalties".
7. Section 3.11 is amended by repealing subsection 3.11(6).
8. Paragraph 3.12(2)(e) is amended by replacing "subsection 3.11(5) or (6)" with "subsection 3.11(5)".
9. Part 3 is amended by adding the following at the end:
"3.17 Acceptable Accounting Principles for Predecessor Statements or Primary Business Statements that are an Operating Statement -- If predecessor statements or primary business statements are an operating statement for an oil and gas property,
(a) the operating statement must include at least the following line items:
(i) gross sales;
(ii) royalties;
(iii) production costs;
(iv) operating income;
(b) the line items in the operating statement must be prepared using accounting policies that
(i) are permitted by one of
(A) Canadian GAAP applicable to publicly accountable enterprises,
(B) U.S. GAAP if the issuer is an SEC issuer or an SEC foreign issuer, or
(C) IFRS if the issuer is a foreign issuer, and
(ii) would apply to those line items if those line items were presented as part of a complete set of financial statements, and
(c) the operating statement must
(i) include the following statement:
This operating statement is prepared in accordance with the financial reporting framework specified in section 3.17 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for an operating statement.
and
(ii) describe the accounting policies used to prepare the operating statement.
3.18 Acceptable Auditing Standards for Predecessor Statements or Primary Business Statements that are an Operating Statement --
(1) If predecessor statements or primary business statements are an operating statement for an oil and gas property that are required by securities legislation to be audited, the operating statement must be accompanied by an auditor's report and audited in accordance with one of the following auditing standards:
(a) Canadian GAAS;
(b) U.S. PCAOB GAAS if the issuer is an SEC issuer or an SEC foreign issuer;
(c) International Standards on Auditing if the issuer is a foreign issuer.
(2) The auditor's report must,
(a) if paragraph 1(a) or (c) applies, express an unmodified opinion,
(b) if paragraph 1(b) applies, express an unqualified opinion,
(c) identify all financial periods presented for which the auditor's report applies,
(d) identify the auditing standards used to conduct the audit, and
(e) identify the financial reporting framework used to prepare the operating statement.".
10. This Instrument comes into force on •, 2012.
Schedule H-2 -- Proposed Amendments to Companion Policy 52-107CP to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
APPENDIX H
SCHEDULE H-2
Amendments to Companion Policy 52-107CP
Acceptable Accounting Principles and Auditing Standards
1. Companion Policy 52-107CP Acceptable Accounting Principles and Auditing Standards is amended.
2. Section 2.14 is amended by deleting the following:
"If acquisition statements are carve-out statements prepared in accordance with Canadian GAAP for private enterprises, as discussed in section 2.18 of this Companion Policy, subparagraph 3.11(6)(d)(iii) requires reconciliation information for non-venture issuers similar to that required by subparagraph 3.11(1)(f)(iv). The above guidance on subparagraph 3.11(1)(f)(iv) also applies to subparagraph 3.11(6)(d)(iii).".
3. Section 2.17 is amended by
(a) adding ", predecessor statements, or primary business statements" after "Acquisition statements",
(b) replacing "Subsection" with "In the case of acquisition statements that are an operating statement, subsection",
(c) replacing "an operating statement to be prepared" with "the operating statement to be prepared",
(d) before "For the purpose of preparing",adding the following:
"In the case of predecessor statements or primary business statements that are an operating statement, section 3.17 requires the line items in the operating statement to be prepared in accordance with accounting policies that comply with the accounting policies permitted by one of: Canadian GAAP applicable to publicly accountable enterprises, U.S. GAAP if the issuer is an SEC issuer or SEC foreign issuer, or IFRS if the issuer is a foreign issuer.", and
(e) by replacing "For the purpose of preparing the operating statement" with "For the purpose of preparing an operating statement".
4. Section 2.18 is amended by
(a) adding ", predecessor statements, or primary business statements" after "Acquisition statements",
(b) replacing "Subsection 3.11(6) specifies the financial reporting framework required for acquisition statements that are" with "Acquisition statements, predecessor statements or primary business statements may be",
(c) after "acquired business", replacing "or" with ",",
(d) after "business to be acquired,",replacing "and" with "the predecessor entity or primary business. In some cases,",
(e) adding ",which" after "Such financial statements", and
(f) replacing the following:
""carve-out" financial statements. Subsection 3.11(6) requires carve-out financial statements to be prepared in accordance with one of Canadian GAAP applicable to publicly accountable enterprises, IFRS, U.S. GAAP, or Canadian GAAP applicable to private enterprises, and in each case include specified line items. For carve-out financial statements prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises or IFRS, the exceptions and exemptions included as Appendices in IFRS 1 would be relevant for determining the opening statement of financial position at the date of transition to IFRS.",
with the following:
"carve-out financial statements, should generally include:
(a) all assets and liabilities directly attributable to the business;
(b) all revenue and expenses directly attributable to the business;
(c) if there are expenses for the business that are common expenses shared with the other entity, a portion of those expenses allocated on a reasonable basis to the business;
(d) income and capital taxes calculated as if the business had been a separate legal entity and had filed a separate tax return for the period presented; and
(e) a description of the method of allocation for each significant line item presented in financial statements.".
5. Section 3.5 is amended by
(a) deleting "or carve-out financial statements" wherever it appears,
(b) replacing "Paragraph 3.12(2)(e) requires" with "Paragraphs 3.12(2)(e) and 3.18(2)(e) require", and
(c) replacing "subsections 3.11(5) and (6)" with "subsection 3.11(5) and section 3.17".
6. These amendments become effective on •, 2012.
Schedule I-1 -- Blackline Showing Proposed Changes to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
APPENDIX I
SCHEDULE I-1
National Instrument 52-107
Acceptable Accounting Principles and Auditing Standards
PART 1: DEFINITIONS AND INTERPRETATION
1.1 Definitions -- In this Instrument:
"accounting principles" means a body of principles relating to accounting that are generally accepted in a jurisdiction of Canada or a foreign jurisdiction and includes, without limitation, IFRS, Canadian GAAP and U.S. GAAP;
"acquisition statements" means financial statements of an acquired business or a business to be acquired, or an operating statement for an oil and gas property that is an acquired business or a business to be acquired, that are
(a) required to be filed under National Instrument 51-102 Continuous Disclosure Obligations,
(b) included in a prospectus pursuant to Item 35 of Form 41-101F1 Information Required in a Prospectus,
(c) required to be included in a prospectus under National Instrument 44-101 Short Form Prospectus Distributions, or
(d) except in Ontario, included in an offering memorandum required under National Instrument 45-106 Prospectus and Registration Exemptions;
"auditing standards" means a body of standards relating to auditing that are generally accepted in a jurisdiction of Canada or a foreign jurisdiction and includes, without limitation, Canadian GAAS, International Standards on Auditing, U.S. AICPA GAAS and U.S. PCAOB GAAS;
"business acquisition report" means a completed Form 51-102F4 Business Acquisition Report;
"convertible security" means a security of an issuer that is convertible into, or carries the right of the holder to acquire, or of the issuer to cause the acquisition of, a security of the same issuer;
"credit support issuer" means an issuer of securities for which a credit supporter has provided a guarantee or alternative credit support;
"credit supporter" means a person or company that provides a guarantee or alternative credit support for any of the payments to be made by an issuer of securities as stipulated in the terms of the securities or in an agreement governing rights of, or granting rights to, holders of the securities;
"designated foreign issuer" means a foreign issuer
(a) that does not have a class of securities registered under section 12 of the 1934 Act and is not required to file reports under section 15(d) of the 1934 Act,
(b) that is subject to foreign disclosure requirements in a designated foreign jurisdiction, and
(c) for which the total number of equity securities beneficially owned by residents of Canada does not exceed 10%, on a fully-diluted basis, of the total number of equity securities of the issuer, calculated in accordance with sections 1.2 and 1.3;
"designated foreign jurisdiction" means Australia, France, Germany, Hong Kong, Italy, Japan, Mexico, the Netherlands, New Zealand, Singapore, South Africa, Spain, Sweden, Switzerland or the United Kingdom of Great Britain and Northern Ireland;
"exchangeable security" means a security of an issuer that is exchangeable for, or carries the right of the holder to acquire, or of the issuer to cause the acquisition of, a security of another issuer;
"exchange-traded security" means a security that is listed on a recognized exchange or is quoted on a recognized quotation and trade reporting system or is listed on an exchange or quoted on a quotation and trade reporting system that is recognized for the purposes of National Instrument 21-101 Marketplace Operation and National Instrument 23-101 Trading Rules;
"executive officer" means, for an issuer, an individual who is
(a) a chair, vice-chair or president;
(b) a vice-president in charge of a principal business unit, division or function including sales, finance or production; or
(c) performing a policy-making function in respect of the issuer;
"financial statements" includes interim financial reports;
"foreign disclosure requirements" means the requirements to which a foreign issuer is subject concerning disclosure made to the public, to securityholders of the issuer or to a foreign regulatory authority
(a) relating to the foreign issuer and the trading in its securities, and
(b) that is made publicly available in the foreign jurisdiction under
(i) the securities laws of the foreign jurisdiction in which the principal trading market of the foreign issuer is located, or
(ii) the rules of the marketplace that is the principal trading market of the foreign issuer;
"foreign issuer" means an issuer that is incorporated or organized under the laws of a foreign jurisdiction, unless
(a) outstanding voting securities of the issuer carrying more than 50% of the votes for the election of directors are beneficially owned by residents of Canada, and
(b) any of the following apply:
(i) the majority of the executive officers or directors of the issuer are residents of Canada;
(ii) more than 50% of the consolidated assets of the issuer are located in Canada; or
(iii) the business of the issuer is administered principally in Canada;
"foreign registrant" means a registrant that is incorporated or organized under the laws of a foreign jurisdiction, unless
(a) outstanding voting securities of the registrant carrying more than 50% of the votes for the election of directors are beneficially owned by residents of Canada, and
(b) any of the following apply:
(i) the majority of the executive officers or directors of the registrant are residents of Canada;
(ii) more than 50% of the consolidated assets of the registrant are located in Canada; or
(iii) the business of the registrant is administered principally in Canada;
"foreign regulatory authority" means a securities commission, exchange or other securities market regulatory authority in a designated foreign jurisdiction;
"IAS 27" means International Accounting Standard 27 Consolidated and Separate Financial Statements, as amended from time to time;
"IAS 34" means International Accounting Standard 34 Interim Financial Reporting, as amended from time to time;
"inter-dealer bond broker" means a person or company that is approved by the Investment Industry Regulatory Organization of Canada under its Rule No. 36 Inter-Dealer Bond Brokerage Systems, as amended, and is subject to its Rule No. 36 and its Rule 2100 Inter-Dealer Bond Brokerage Systems, as amended from time to time;
"IPO venture issuer" has the same meaning as in section 1.1 of National Instrument 41-101 General Prospectus Requirements;
"issuer's GAAP" means the accounting principles used to prepare an issuer's financial statements, as permitted by this Instrument;
"marketplace" means
(a) an exchange,
(b) a quotation and trade reporting system,
(c) a person or company not included in paragraph (a) or (b) that
(i) constitutes, maintains or provides a market or facility for bringing together buyers and sellers of securities,
(ii) brings together the orders for securities of multiple buyers and sellers, and
(iii) uses established, non-discretionary methods under which the orders interact with each other, and the buyers and sellers entering the orders agree to the terms of a trade, or
(d) a dealer that executes a trade of an exchange-traded security outside of a marketplace,
but does not include an inter-dealer bond broker;
"multiple convertible security" means a security of an issuer that is convertible into, or exchangeable for, or carries the right of the holder to acquire, or of the issuer to cause the acquisition of, a convertible security, an exchangeable security or another multiple convertible security;
"predecessor statements" mean the financial statements referred to in paragraph 32.1(1)(a) of Form 41-101F1 Information Required in a Prospectus;
"primary business statements" mean the financial statements referred to in paragraph 32.1(1)(b) of Form 41-101F1 Information Required in a Prospectus;
"principal trading market" means the published market on which the largest trading volume in the equity securities of the issuer occurred during the issuer's most recently completed financial year that ended before the date the determination is being made;
"published market" means, for a class of securities, a marketplace on which the securities have traded that discloses, regularly in a publication of general and regular paid circulation or in a form that is broadly distributed by electronic means, the prices at which those securities have traded;
"recognized exchange" means
(a) in Ontario, an exchange recognized by the securities regulatory authority to carry on business as a stock exchange,
(b) in Québec, a person or company authorized by the securities regulatory authority to carry on business as an exchange, and
(c) in every other jurisdiction of Canada, an exchange recognized by the securities regulatory authority as an exchange, self-regulatory organization or self-regulatory body;
"recognized quotation and trade reporting system" means
(a) in every jurisdiction of Canada other than British Columbia, a quotation and trade reporting system recognized by the securities regulatory authority under securities legislation to carry on business as a quotation and trade reporting system, and
(b) in British Columbia, a quotation and trade reporting system recognized by the securities regulatory authority under securities legislation as a quotation and trade reporting system or as an exchange;
"SEC issuer" means an issuer that
(a) has a class of securities registered under section 12 of the 1934 Act or is required to file reports under section 15(d) of the 1934 Act, and
(b) is not registered or required to be registered as an investment company under the Investment Company Act of 1940 of the United States of America, as amended from time to time;
"SEC foreign issuer" means a foreign issuer that is also an SEC issuer;
"underlying security" means a security issued or transferred, or to be issued or transferred, in accordance with the terms of a convertible security, an exchangeable security or a multiple convertible security;
"U.S. GAAP" means generally accepted accounting principles in the United States of America that the SEC has identified as having substantial authoritative support, as supplemented by Regulation S-X under the 1934 Act, as amended from time to time;
"U.S. AICPA GAAS" means auditing standards of the American Institute of Certified Public Accountants, as amended from time to time;
"U.S. PCAOB GAAS" means auditing standards of the Public Company Accounting Oversight Board (United States of America), as amended from time to time;
"venture issuer",
(a) in the case of acquisition statements required by National Instrument 51-102 Continuous Disclosure Obligations, has the same meaning as in subsection 1.1(1) of that Instrument, and
(b) in the case of acquisition statements referred to in paragraph (b), (c) or (d) of the definition of "acquisition statements", has the same meaning as in section 1.1 of National Instrument 41-101 General Prospectus Requirements.
1.2 Determination of Canadian Shareholders for Calculation of Designated Foreign Issuer and Foreign Issuer --
(1) For the purposes of paragraph (c) of the definition of "designated foreign issuer" in section 1.1 and for the purposes of paragraphs 3.9(1)(c) and 4.9(c), a reference to equity securities beneficially owned by residents of Canada includes
(a) any underlying securities that are equity securities of the foreign issuer, and
(b) the equity securities of the foreign issuer represented by an American depositary receipt or an American depositary share issued by a depositary holding equity securities of the foreign issuer.
(2) For the purposes of paragraph (a) of the definition of "foreign issuer" in section 1.1, securities represented by American depositary receipts or American depositary shares issued by a depositary holding voting securities of the foreign issuer must be included as outstanding in determining both the number of votes attached to securities beneficially owned by residents of Canada and the number of votes attached to all of the issuer's outstanding voting securities.
1.3 Timing for Calculation of Designated Foreign Issuer, Foreign Issuer and Foreign Registrant -- For the purposes of paragraph (c) of the definition of "designated foreign issuer" in section 1.1, paragraph (a) of the definition of "foreign issuer" in section 1.1, and paragraph (a) of the definition of "foreign registrant" in section 1.1, the calculation is made
(a) if the issuer has not completed one financial year, on the earlier of
(i) the date that is 90 days before the date of its prospectus, and
(ii) the date that it became a reporting issuer; and
(b) for all other issuers and for registrants, on the first day of the most recent financial year or interim period for which financial performance is presented in the financial statements or interim financial information filed or delivered or included in a prospectus.
1.4 Interpretation --
(1) For the purposes of this Instrument, a reference to "prospectus" includes a preliminary prospectus, a prospectus, an amendment to a preliminary prospectus and an amendment to a prospectus.
(2) For the purposes of this Instrument, a reference to information being "included in" another document means information reproduced in the document or incorporated into the document by reference.
PART 2: APPLICATION
2.1 Application --
(1) This Instrument does not apply to investment funds.
(2) This Instrument applies to
(a) all financial statements and interim financial information delivered by registrants to the securities regulatory authority or regulator under National Instrument 31-103 Registration Requirements and Exemptions,
(b) all financial statements filed, or included in a document that is filed, by an issuer under National Instrument 51-102 Continuous Disclosure Obligations or National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers,
(c) all financial statements included in
(i) a prospectus, a take-over bid circular or any other document that is filed by or in connection with an issuer, or
(ii) except in Ontario, an offering memorandum required to be delivered by an issuer under National Instrument 45-106 Prospectus and Registration Exemptions,
(d) any acquisition statements, predecessor statements or primary business statements that are an operating statement for an oil and gas property that is an acquired business, or a business to be acquired, that is
(i) filed by an issuer under National Instrument 51-102 Continuous Disclosure Obligations,
(ii) included in a prospectus, take-over bid circular or any other document that is filed by or in connection with an issuer, or
(iii) except in Ontario, included in an offering memorandum required to be delivered by an issuer under National Instrument 45-106 Prospectus and Registration Exemptions,
(e) any other financial statements filed, or included in a document that is filed, by a reporting issuer,
(f) summary financial information for a credit supporter or credit support issuer that is
(i) filed under National Instrument 51-102 Continuous Disclosure Obligations,
(ii) included in a prospectus, take-over bid circular or any other document that is filed by or in connection with an issuer, or
(iii) except in Ontario, included in an offering memorandum required to be delivered by an issuer under National Instrument 45-106 Prospectus and Registration Exemptions,
(g) summarized financial information of an acquired business or business to be acquired that is, or will be, an investment accounted for by the issuer using the equity method, that is
(i) filed by an issuer under National Instrument 51-102 Continuous Disclosure Obligations,
(ii) included in a prospectus, take-over bid circular or any other document that is filed by or in connection with an issuer, or
(iii) except in Ontario, included in an offering memorandum required to be delivered by an issuer under National Instrument 45-106 Prospectus and Registration Exemptions, and
(h) pro forma financial statements
(i) filed, or included in a document that is filed, by an issuer under National Instrument 51-102 Continuous Disclosure Obligations or National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers,
(ii) included in a prospectus, take-over bid circular or any other document that is filed by or in connection with an issuer, or
(iii) otherwise filed, or included in a document that is filed, by a reporting issuer.
PART 3:
RULES APPLYING TO FINANCIAL YEARS BEGINNING ON OR AFTER JANUARY 1, 2011
3.1 Definitions and Application --
(1) In this Part:
"publicly accountable enterprise" means a publicly accountable enterprise as defined in the Handbook;
"private enterprise" means a private enterprise as defined in the Handbook.
(2) This Part applies to financial statements, financial information, operating statements and pro forma financial statements for periods relating to financial years beginning on or after January 1, 2011.
3.2 Acceptable Accounting Principles -- General Requirements --
(1) Financial statements referred to in paragraphs 2.1(2)(b), (c) and (e), other than acquisition statements, must
(a) be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises, and
(b) disclose
(i) in the case of annual financial statements, an unreserved statement of compliance with IFRS, and
(ii) in the case of an interim financial report, an unreserved statement of compliance with IAS 34.
(2) Despite subsection (1), in the case of an interim financial report that is not required under securities legislation to provide comparative interim financial information,
(a) the statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows and explanatory notes must be prepared in accordance with IAS 34 other than the requirement in IAS 34 to include comparative financial information; and
(b) the interim financial report must disclose that
(i) it does not comply with IAS 34 because it does not include comparative interim financial information, and
(ii) the statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows and explanatory notes have been prepared in accordance with IAS 34 other than the requirement in IAS 34 to include comparative financial information.
(3) Financial statements and interim financial information referred to in paragraph 2.1(2)(a) must
(a) be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in IAS 27, and
(b) in the case of annual financial statements,
(i) include the following statement:
These financial statements are prepared in accordance with the financial reporting framework specified in [insert "paragraph 3.2(3)(a) ", "subsection 3.2(4)" or "section 3.15" as applicable] of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for financial statements delivered by registrants.
and
(ii) describe the financial reporting framework used to prepare the financial statements.
(4) Despite paragraph (3)(a), financial statements and interim financial information referred to in paragraph 2.1(2)(a) for periods relating to a financial year beginning in 2011 may be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises, except that
(a) any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in IAS 27,
(b) comparative information relating to the preceding financial year must be excluded, and
(c) the first day of the financial year to which the financial statements or interim financial information relates must be used as the date of transition to the financial reporting framework.
(5) Financial statements must be prepared in accordance with the same accounting principles for all periods presented in the financial statements.
(6) Financial information referred to in paragraphs 2.1(2)(f) and (g) must
(a) present the line items for summary financial information or summarized financial information required by National Instrument 45-106 Prospectus and Registration Exemptions or National Instrument 51-102 Continuous Disclosure Obligations, as the case may be, and
(b) in the case of summarized financial information of an acquired business or business to be acquired that is, or will be, an investment accounted for by the issuer using the equity method,
(i) be prepared using accounting policies that
(A) are permitted by one of Canadian GAAP applicable to publicly accountable enterprises, IFRS, U.S. GAAP or Canadian GAAP applicable to private enterprises, and
(B) would apply to the information if the information were presented as part of a complete set of financial statements,
(ii) include the following statement:
This information is prepared in accordance with the financial reporting framework specified in subsection 3.2(6) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for summarized financial information of a business accounted for using the equity method.
and
(iii) describe the accounting policies used to prepare the information.
3.3 Acceptable Auditing Standards -- General Requirements --
(1) Financial statements, other than acquisition statements, that are required by securities legislation to be audited must
(a) be audited in accordance with Canadian GAAS and be accompanied by an auditor's report that
(i) expresses an unmodified opinion,
(ii) identifies all financial periods presented for which the auditor has issued an auditor's report,
(iii) is in the form specified by Canadian GAAS for an audit of financial statements prepared in accordance with a fair presentation framework, and
(iv) refers to IFRS as the applicable fair presentation framework if the financial statements are prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises, and
(b) if the issuer or registrant has changed its auditor and one or more of the comparative periods presented in the financial statements were audited by a predecessor auditor, be accompanied by the predecessor auditor's reports on the comparative periods.
(2) Paragraph (1)(b) does not apply to financial statements referred to in paragraphs 2.1(2)(a) and (b) if the auditor's report described in paragraph (1)(a) refers to the predecessor auditor's reports on the comparative periods.
3.4 Acceptable Auditors -- An auditor's report filed by an issuer or delivered by a registrant must be prepared and signed by a person or company that is authorized to sign an auditor's report under the laws of a jurisdiction of Canada or a foreign jurisdiction, and that meets the professional standards of that jurisdiction.
3.5 Presentation and Functional Currencies --
(1) The presentation currency must be prominently displayed in financial statements.
(2) Financial statements must disclose the functional currency if it is different than the presentation currency.
3.6 Credit Supporters --
(1) Unless subsection 3.2(1) applies, if a credit support issuer files, or includes in a prospectus, financial statements of a credit supporter, the credit supporter's financial statements must
(a) be prepared in accordance with the accounting principles and audited in accordance with the auditing standards that would apply under this Instrument if the credit supporter were to file financial statements referred to in paragraph 2.1(2)(b), and
(b) identify the accounting principles used to prepare the financial statements.
(2) If a credit support issuer files, or includes in a prospectus, summary financial information for the credit supporter or credit support issuer,
(a) the summary financial information must, in addition to satisfying other requirements in this Instrument
(i) prominently display the presentation currency, and
(ii) disclose the functional currency if it is different from the presentation currency, and
(b) the amounts presented in the summary financial information must be derived from financial statements of the credit supporter or credit support issuer that, if required by securities legislation to be audited, are audited in accordance with the auditing standards that would apply under this Instrument if the credit supporter or credit support issuer, as the case may be, were to file financial statements referred to in paragraph 2.1(2)(b).
3.7 Acceptable Accounting Principles for SEC Issuers --
(1) Despite subsection 3.2(1), an SEC issuer's financial statements referred to in paragraphs 2.1(2)(b), (c) and (e) and financial information referred to in paragraphs 2.1(2)(f) and (g) that are filed with or delivered to a securities regulatory authority or regulator, other than acquisition statements, may be prepared in accordance with U.S. GAAP.
(2) The notes to the financial statements referred to in subsection (1) must identify the accounting principles used to prepare the financial statements.
3.8 Acceptable Auditing Standards for SEC Issuers --
(1) Despite subsection 3.3(1), an SEC issuer's financial statements referred to in paragraphs 2.1(2)(b), (c) and (e) and financial information referred to in paragraphs 2.1(2)(f) and (g) that are filed with or delivered to a securities regulatory authority or regulator, other than acquisition statements, and that are required by securities legislation to be audited, may be audited in accordance with U.S. PCAOB GAAS if the financial statements are accompanied by
(a) an auditor's report prepared in accordance with U.S. PCAOB GAAS that
(i) expresses an unqualified opinion,
(ii) identifies all financial periods presented for which the auditor has issued an auditor's report, and
(iii) identifies the auditing standards used to conduct the audit and the accounting principles used to prepare the financial statements, and
(b) the predecessor auditor's reports on the comparative periods, if the issuer has changed its auditor and one or more of the comparative periods presented in the financial statements were audited by the predecessor auditor.
(2) Paragraph (1)(b) does not apply to financial statements referred to in paragraph 2.1(2)(b) if the auditor's report described in paragraph (1)(a) refers to the predecessor auditor's reports on the comparative periods.
3.9 Acceptable Accounting Principles for Foreign Issuers --
(1) Despite subsection 3.2(1), a foreign issuer's financial statements referred to in paragraphs 2.1(2)(b), (c) and (e) that are filed with or delivered to a securities regulatory authority or regulator, other than acquisition statements, may be prepared in accordance with
(a) IFRS,
(b) U.S. GAAP, if the issuer is an SEC foreign issuer,
(c) accounting principles that meet the disclosure requirements for foreign private issuers, as that term is defined for the purposes of the 1934 Act, if
(i) the issuer is an SEC foreign issuer,
(ii) on the last day of the most recently completed financial year the total number of equity securities of the issuer beneficially owned by residents of Canada does not exceed 10%, on a fully-diluted basis, of the total number of equity securities of the issuer, and
(iii) the financial statements include any reconciliation to U.S. GAAP required by the SEC, or
(d) accounting principles that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the issuer is subject, if the issuer is a designated foreign issuer.
(2) The notes to the financial statements must identify the accounting principles used to prepare the financial statements.
3.10 Acceptable Auditing Standards for Foreign Issuers --
(1) Despite subsection 3.3(1), a foreign issuer's financial statements referred to in paragraphs 2.1(2)(b), (c) and (e) that are filed with or delivered to a securities regulatory authority or regulator, other than acquisition statements, that are required by securities legislation to be audited may be audited in accordance with
(a) International Standards on Auditing if the financial statements are accompanied by
(i) an auditor's report that
(A) expresses an unmodified opinion,
(B) identifies all financial periods presented for which the auditor has issued the auditor's report,
(C) identifies the auditing standards used to conduct the audit and the accounting principles used to prepare the financial statements, and
(D) is prepared in accordance with the same auditing standards used to conduct the audit, and
(ii) the predecessor auditor's reports on the comparative periods, if the issuer has changed its auditor and one or more of the comparative periods presented in the financial statements were audited by the predecessor auditor,
(b) U.S. PCAOB GAAS if the financial statements are accompanied by
(i) an auditor's report that
(A) expresses an unqualified opinion,
(B) identifies all financial periods presented for which the auditor has issued the auditor's report,
(C) identifies the auditing standards used to conduct the audit and the accounting principles used to prepare the financial statements, and
(D) is prepared in accordance with the same auditing standards used to conduct the audit, and
(ii) the predecessor auditor's reports on the comparative periods, if the issuer has changed its auditor and one or more of the comparative periods presented in the financial statements were audited by the predecessor auditor, or
(c) auditing standards that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the issuer is subject if
(i) the issuer is a designated foreign issuer,
(ii) the financial statements are accompanied by an auditor's report prepared in accordance with the same auditing standards used to conduct the audit, and
(iii) the auditor's report identifies the auditing standards used to conduct the audit and the accounting principles used to prepare the financial statements.
(2) Subparagraph (1)(a)(ii) or (b)(ii) does not apply to financial statements referred to in paragraph 2.1(2)(b) if the auditor's report described in subparagraph (1)(a)(i) or (b)(i), as the case may be, refers to the predecessor auditor's reports on the comparative periods.
3.11 Acceptable Accounting Principles for Acquisition Statements --
(1) Acquisition statements must be prepared in accordance with one of the following accounting principles:
(a) Canadian GAAP applicable to publicly accountable enterprises;
(b) IFRS;
(c) U.S. GAAP;
(d) accounting principles that meet the disclosure requirements for foreign private issuers, as that term is defined for the purposes of the 1934 Act, if
(i) the issuer or the acquired business or business to be acquired is an SEC foreign issuer,
(ii) on the last day of the most recently completed financial year the total number of equity securities of the SEC foreign issuer beneficially owned by residents of Canada does not exceed 10%, on a fully-diluted basis, of the total number of equity securities of the SEC foreign issuer, and
(iii) the financial statements include any reconciliation to U.S. GAAP required by the SEC;
(e) accounting principles that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the issuer or the acquired business or business to be acquired is subject, if
(i) the issuer or business is a designated foreign issuer, and
(ii) in the case where the issuer's GAAP differs from the accounting principles used to prepare the acquisition statements, for the most recently completed financial year and interim period presented, the notes to the acquisition statements:
(A) describe the material differences between the issuer's GAAP and the accounting principles used to prepare the acquisition statements that relate to recognition, measurement and presentation, and
(B) quantify the effect of each difference referred to in clause (A) and include a tabular reconciliation between profit or loss reported in the acquisition statements and profit or loss computed in accordance with the issuer's GAAP;
(f) Canadian GAAP applicable to private enterprises if
(i) the acquisition statements consolidate any subsidiaries and account for significantly influenced investees and joint ventures using the equity method,
(ii) financial statements for the acquired business or business to be acquired were not previously prepared in accordance with one of the accounting principles specified in paragraphs (a) to (e) for the periods presented in the acquisition statements,
(iii) the acquisition statements are accompanied by a notice stating:
These financial statements are prepared in accordance with Canadian GAAP applicable to private enterprises, which are Canadian accounting standards for private enterprises in Part II of the Handbook.
The recognition, measurement and disclosure requirements of Canadian GAAP applicable to private enterprises differ from those of Canadian GAAP applicable to publicly accountable enterprises, which are International Financial Reporting Standards incorporated into the Handbook.
The pro forma financial statements included in the document include adjustments relating to the [insert "acquired business" or "business to be acquired" as applicable] and present pro forma information prepared using principles that are consistent with the accounting principles used by the issuer.
and
(iv) in the case of acquisition statements included in a document filed by an issuer that is not a venture issuer, and is not an IPO venture issuer, for all financial years and the most recently completed interim period presented, the notes to the acquisition statements
(A) describe the material differences between the issuer's GAAP and the accounting principles used to prepare the acquisition statements that relate to recognition, measurement and presentation,
(B) quantify the effect of each difference referred to in clause (A), and include a tabular reconciliation between profit or loss reported in the acquisition statements and profit or loss computed in accordance with the issuer's GAAP, and
(C) for each difference referred to in clause (A) that relates to measurement, disclose and discuss the material inputs or assumptions underlying the measurement of the relevant amount computed in accordance with the issuer's GAAP, consistent with the disclosure requirements of the issuer's GAAP.
(2) Acquisition statements must be prepared in accordance with the same accounting principles for all periods presented.
(3) Acquisition statements to which paragraph (1)(a) applies must disclose
(a) in the case of annual financial statements, an unreserved statement of compliance with IFRS, and
(b) in the case of interim financial reports, an unreserved statement of compliance with IAS 34.
(4) Unless paragraph (1)(a) applies, the notes to the acquisition statements must identify the accounting principles used to prepare the acquisition statements.
(5) Despite subsections (1)
, (2)and (4),2) if acquisition statements are an operating statement for an oil and gas property that is an acquired business or business to be acquired(a) the operating statement must include at least the following line items:
(i) gross
revenuesales;(ii)
royalty expenses;royalties;(iii) production costs;
(iv) operating income;
(b) the line items in the operating statement must be prepared using accounting policies that
(i) are permitted by one of Canadian GAAP applicable to publicly accountable enterprises, IFRS, U.S. GAAP or Canadian GAAP applicable to private enterprises, and
(ii) would apply to those line items if those line items were presented as part of a complete set of financial statements, and
(c) the operating statement must
(i) include the following statement:
This operating statement is prepared in accordance with the financial reporting framework specified in subsection 3.11(5) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for an operating statement.
and
(ii) describe the accounting policies used to prepare the operating statement.
(6)
Despite subsections (1), (2) and (4), if the acquisition statements are based on information from the financial records of another entity whose operations included the acquired business or the business to be acquired and there are no separate financial records for the acquired business or the business to be acquired,Repealed.
(a) the acquisition statements must be prepared in accordance with one of Canadian GAAP applicable to publicly accountable enterprises, IFRS, U.S. GAAP or Canadian GAAP applicable to private enterprises and, in addition, must include
(i) all assets and liabilities directly attributable to the acquired business or business to be acquired,
(ii) all revenue and expenses directly attributable to the acquired business or business to be acquired,
(iii) if there are expenses for the acquired business or business to be acquired that are common expenses shared with the other entity, a portion of those expenses allocated on a reasonable basis to the acquired business or business to be acquired, and
(iv) income and capital taxes calculated as if the entity had been a separate legal entity and had filed a separate tax return for the period presented,
(b) the acquisition statements must include the following statement:
The financial statements are prepared in accordance with a financial reporting framework specified in subsection 3.11(6) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for carve-out financial statements.
(c) the acquisition statements must describe the financial reporting framework used to prepare the acquisition statements, including the method of allocation for each significant line item, and
(d) in the case of acquisition statements prepared in accordance with Canadian GAAP applicable to private enterprises
(i) the acquisition statements must consolidate any subsidiaries and account for significantly influenced investees and joint ventures using the equity method,
(ii) the acquisition statements must be accompanied by a notice stating:
These financial statements are prepared in accordance with Canadian GAAP applicable to private enterprises, which are Canadian accounting standards for private enterprises in Part II of the Handbook.
The recognition, measurement and disclosure requirements of Canadian GAAP applicable to private enterprises differ from those of Canadian GAAP applicable to publicly accountable enterprises, which are International Financial Reporting Standards incorporated into the Handbook.
The pro forma financial statements included in the document include adjustments relating to the [insert "acquired business" or "business to be acquired" as applicable] and present pro forma information prepared using principles that are consistent with the accounting principles used by the issuer.
and
(iii) in the case of acquisition statements included in a document filed by an issuer that is not a venture issuer, and is not an IPO venture issuer, for all financial years and the most recently completed interim period presented, the notes to the acquisition statements must
(A) describe the material differences between the issuer's GAAP and the accounting principles used to prepare the acquisition statements that relate to recognition, measurement and presentation,
(B) quantify the effect of each difference referred to in clause (A), and include a tabular reconciliation between profit or loss reported in the acquisition statements and profit or loss computed in accordance with the issuer's GAAP, and
(C) for each difference referred to in clause (A) that relates to measurement, disclose and discuss the material inputs or assumptions underlying the measurement of the relevant amount computed in accordance with the issuer's GAAP, consistent with the disclosure requirements of the issuer's GAAP.3.12 Acceptable Auditing Standards for Acquisition Statements --
(1) Acquisition statements that are required by securities legislation to be audited must be accompanied by an auditor's report and audited in accordance with one of the following auditing standards:
(a) Canadian GAAS;
(b) International Standards on Auditing;
(c) U.S. PCAOB GAAS;
(d) U.S. AICPA GAAS, if the acquired business or business to be acquired is not an SEC issuer;
(e) auditing standards that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the issuer is subject, if the issuer is a designated foreign issuer.
(2) The auditor's report must,
(a) if paragraph (1)(a) or (b) applies, express an unmodified opinion,
(b) if paragraph (1)(c) or (d) applies, express an unqualified opinion,
(c) unless paragraph (1)(e) applies, identify all financial periods presented for which the auditor's report applies,
(d) identify the auditing standards used to conduct the audit,
(e) identify the accounting principles used or, if subsection 3.11(5
) or (6) applies, the financial reporting framework used, to prepare the acquisition statements, unless the auditor's report accompanies acquisition statements prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and audited in accordance with Canadian GAAS, and(f) if paragraph (1) (a) or (b) applies and subsection 3.11(5) does not,
(i) be in the form specified by the standards referred to in paragraph (1)(a) or (b), as applicable, for an audit of financial statements prepared in accordance with a fair presentation framework, and
(ii) refer to IFRS as the applicable fair presentation framework if the financial statements are prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises.
(3) Despite paragraphs (2)(a) and (b), an auditor's report that accompanies acquisition statements may express a qualification of opinion relating to inventory if
(a) the issuer includes in the business acquisition report, prospectus or other document containing the acquisition statements, a statement of financial position for the acquired business or business to be acquired that is for a date that is subsequent to the date to which the qualification relates, and
(b) the statement of financial position referred to in paragraph (a) is accompanied by an auditor's report that does not express a qualification of opinion relating to closing inventory.
3.13 Financial Information for Acquisitions Accounted for by the Issuer Using the Equity Method --
(1) If an issuer files, or includes in a prospectus, summarized financial information of an acquired business or business to be acquired that is, or will be, an investment accounted for by the issuer using the equity method, the financial information must
(a) meet the requirements in subsections 3.11(1), (2) and (4) if the term "acquisition statements" in those subsections is read as "summarized financial information", and
(b) disclose the presentation currency for the financial information, and disclose the functional currency if it is different than the presentation currency.
(2) If the financial information referred to in subsection (1) is required by securities legislation to be audited or derived from audited financial statements, the financial information must
(a) either
(i) meet the requirements in section 3.12 if the term "acquisition statements" in that section is read as "summarized financial information", or
(ii) be derived from financial statements that meet the requirements in section 3.12 if the term "acquisition statements" in that section is read as "financial statements from which is derived summarized financial information", and
(b) be audited, or derived from financial statements that are audited, by a person or company that is authorized to sign an auditor's report under the laws of a jurisdiction of Canada or a foreign jurisdiction, and that meets the professional standards of that jurisdiction.
3.14 Acceptable Accounting Policies for Pro Forma Financial Statements --
(1) An issuer's pro forma financial statements must be prepared using accounting policies that
(a) are permitted by the issuer's GAAP, and
(b) would apply to the information presented in the pro forma financial statements if that information were included in the issuer's financial statements for the same period as that of the pro forma financial statements.
(2) Despite subsection (1), if an issuer's financial statements include, or are accompanied by, a reconciliation to U.S. GAAP, the issuer's pro forma financial statements for the same period as the issuer's financial statements may be prepared using accounting policies that
(a) are permitted by U.S. GAAP, and
(b) would apply to the information presented in the pro forma financial statements if that information were included in the reconciliation.
(3) Despite subsection (1), if the accounting principles used to prepare an issuer's most recent annual financial statements differ from the accounting principles used to prepare the issuer's interim financial report for a subsequent period, the issuer may prepare a pro forma income statement for the same period as that of its most recent annual financial statements using accounting policies that
(a) are permitted by the accounting principles that were used to prepare the issuer's interim financial report, and
(b) would apply to the information presented in the pro forma income statement if that information were included in the issuer's interim financial report.
3.15 Acceptable Accounting Principles for Foreign Registrants -- Despite paragraph 3.2 (3)(a), financial statements and interim financial information delivered by a foreign registrant may be prepared in accordance with
(a) IFRS, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in IAS 27,
(b) U.S. GAAP, except that any investments in subsidiaries, jointly controlled entities and associates must be accounted for as specified for separate financial statements in IAS 27, or
(c) accounting principles that meet the disclosure requirements of a foreign regulatory authority to which the registrant is subject, if it is a foreign registrant incorporated or organized under the laws of that designated foreign jurisdiction.
3.16 Acceptable Auditing Standards for Foreign Registrants --
(1) Despite subsection 3.3(1), financial statements referred to in paragraph 2.1(2)(a) that are delivered by a foreign registrant and required by securities legislation to be audited may be audited in accordance with
(a) International Standards on Auditing if the financial statements are accompanied by
(i) an auditor's report that
(A) expresses an unmodified opinion,
(B) identifies all financial periods presented for which the auditor has issued the auditor's report,
(C) identifies the auditing standards used to conduct the audit and the accounting principles used to prepare the financial statements, and
(D) is prepared in accordance with the same auditing standards used to conduct the audit, and
(ii) the predecessor auditor's reports on the comparative periods, if the foreign registrant has changed its auditor and one or more of the comparative periods presented in the financial statements were audited by the predecessor auditor,
(b) U.S. PCAOB GAAS or U.S. AICPA GAAS if the financial statements are accompanied by
(i) an auditor's report that
(A) expresses an unqualified opinion,
(B) identifies all financial periods presented for which the auditor has issued the auditor's report,
(C) identifies the auditing standards used to conduct the audit and the accounting principles used to prepare the financial statements, and
(D) is prepared in accordance with the same auditing standards used to conduct the audit, and
(ii) the predecessor auditor's reports on the comparative periods, if the foreign registrant has changed its auditor and one or more of the comparative periods presented in the financial statements were audited by the predecessor auditor, or
(c) auditing standards that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the registrant is subject if
(i) it is a foreign registrant incorporated or organized under the laws of that designated foreign jurisdiction,
(ii) the financial statements are accompanied by an auditor's report prepared in accordance with the same auditing standards used to conduct the audit, and
(iii) the auditor's report identifies the accounting principles used to prepare the financial statements.
(2) Subparagraph (1)(a)(ii) or (b)(ii) does not apply if the auditor's report described in subparagraph (1)(a)(i) or (b)(i), as the case may be, refers to the predecessor auditor's reports on the comparative periods.
3.17 Acceptable Accounting Principles for Predecessor Statements or Primary Business Statements that are an Operating Statement -- If predecessor statements or primary business statements are an operating statement for an oil and gas property,
(a) the operating statement must include at least the following line items:
(i) gross sales;
(ii) royalties;
(iii) production costs;
(iv) operating income;
(b) the line items in the operating statement must be prepared using accounting policies that
(i) are permitted by one of
(A) Canadian GAAP applicable to publicly accountable enterprises,
(B) U.S. GAAP if the issuer is an SEC issuer or an SEC foreign issuer, or
(C) IFRS if the issuer is a foreign issuer, and
(ii) would apply to those line items if those line items were presented as part of a complete set of financial statements, and
(c) the operating statement must
(i) include the following statement:
This operating statement is prepared in accordance with the financial reporting framework specified in section 3.17 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for an operating statement.
and
(ii) describe the accounting policies used to prepare the operating statement.
3.18 Acceptable Auditing Standards for Predecessor Statements or Primary Business Statements that are an Operating Statement --
(1) If predecessor statements or primary business statements are an operating statement for an oil and gas property that are required by securities legislation to be audited, the operating statement must be accompanied by an auditor's report and audited in accordance with one of the following auditing standards:
(a) Canadian GAAS;
(b) U.S. PCAOB GAAS if the issuer is an SEC issuer or an SEC foreign issuer;
(c) International Standards on Auditing if the issuer is a foreign issuer.
(2) The auditor's report must,
(a) if paragraph 1(a) or (c) applies, express an unmodified opinion,
(b) if paragraph 1(b) applies, express an unqualified opinion,
(c) identify all financial periods presented for which the auditor's report applies,
(d) identify the auditing standards used to conduct the audit, and
(e) identify the financial reporting framework used to prepare the operating statement.
PART 4:
RULES APPLYING TO FINANCIAL YEARS BEGINNING BEFORE JANUARY 1, 2011
4.1 Definitions and Application --
(1) In this Part:
"Canadian GAAP -- Part V" means generally accepted accounting principles determined with reference to Part V of the Handbook applicable to public enterprises;
"public enterprise" means a public enterprise as defined in Part V of the Handbook.
(2) This Part applies to financial statements, financial information, operating statements and pro forma financial statements for periods relating to financial years beginning before January 1, 2011.
4.2 Acceptable Accounting Principles -- General Requirements --
(1) Financial statements, other than financial statements delivered by registrants and acquisition statements, must be prepared in accordance with Canadian GAAP -- Part V.
(2) Financial statements and interim financial information delivered by a registrant to the securities regulatory authority, must be prepared in accordance with Canadian GAAP -- Part V except that the financial statements and interim financial information must be prepared on a non-consolidated basis.
(3) Financial statements must be prepared in accordance with the same accounting principles for all periods presented in the financial statements.
(4) The notes to the financial statements must identify the accounting principles used to prepare the financial statements.
4.3 Acceptable Auditing Standards -- General Requirements -- Financial statements, other than acquisition statements, that are required by securities legislation to be audited must be audited in accordance with Canadian GAAS and be accompanied by an auditor's report that
(a) expresses an unmodified opinion,
(b) identifies all financial periods presented for which the auditor has issued an auditor's report,
(c) refers to the predecessor auditor's reports on the comparative periods, if the issuer or registrant has changed its auditor and one or more of the comparative periods presented in the financial statements were audited by the predecessor auditor, and
(d) identifies the accounting principles used to prepare the financial statements.
4.4 Acceptable Auditors -- An auditor's report filed by an issuer or delivered by a registrant must be prepared and signed by a person or company that is authorized to sign an auditor's report under the laws of a jurisdiction of Canada or a foreign jurisdiction, and that meets the professional standards of that jurisdiction.
4.5 Measurement and Reporting Currencies --
(1) The reporting currency must be disclosed on the face page of the financial statements or in the notes to the financial statements unless the financial statements are prepared in accordance with Canadian GAAP -- Part V and the reporting currency is the Canadian dollar.
(2) The notes to the financial statements must disclose the measurement currency if it is different than the reporting currency.
4.6 Credit Supporters --
(1) Unless subsection 4.2(1) applies, if a credit support issuer files, or includes in a prospectus, financial statements of a credit supporter, the credit supporter's financial statements must
(a) be prepared in accordance with the accounting principles and audited in accordance with the auditing standards that apply under this Instrument if the credit supporter were to file financial statements referred to in paragraph 2.1(2)(b),
(b) identify the accounting principles used to prepare the financial statements, and
(c) disclose the reporting currency for the financial statements, and disclose the measurement currency if it is different than the reporting currency.
(2) If a credit support issuer files, or includes in a prospectus, summary financial information for the credit supporter or credit support issuer,
(a) the summary financial information must
(i) be prepared in accordance with the accounting principles that this Instrument requires to be used in preparing financial statements if the credit supporter or credit support issuer, as the case may be, were to file financial statements referred to in paragraph 2.1(2)(b),
(ii) identify the accounting principles used to prepare the summary financial information, and
(iii) disclose the reporting currency for the financial information, and disclose the measurement currency if it is different than the reporting currency, and
(b) the amounts presented in the summary financial information must be derived from financial statements of the credit supporter or credit support issuer that, if required by securities legislation to be audited, are audited in accordance with the auditing standards that apply under this Instrument if the credit supporter or credit support issuer, as the case may be, were to file financial statements referred to in paragraph 2.1(2)(b).
4.7 Acceptable Accounting Principles for SEC Issuers --
(1) Despite subsections 4.2(1) and (3), financial statements of an SEC issuer that are filed with or delivered to a securities regulatory authority or regulator, other than acquisition statements, may be prepared in accordance with U.S. GAAP provided that, if the SEC issuer previously filed or included in a prospectus financial statements prepared in accordance with Canadian GAAP -- Part V, the SEC issuer complies with the following:
(a) the notes to the first two sets of the issuer's annual financial statements after the change from Canadian GAAP -- Part V to U.S. GAAP and the notes to the issuer's interim financial statements for interim periods during those two years
(i) explain the material differences between Canadian GAAP -- Part V and U.S. GAAP that relate to recognition, measurement and presentation,
(ii) quantify the effect of material differences between Canadian GAAP -- Part V and U.S. GAAP that relate to recognition, measurement and presentation, including a tabular reconciliation between net income reported in the financial statements and net income computed in accordance with Canadian GAAP -- Part V, and
(iii) provide disclosure consistent with disclosure requirements of Canadian GAAP -- Part V to the extent not already reflected in the financial statements;
(b) financial information for any comparative periods that were previously reported in accordance with Canadian GAAP -- Part V are presented
(i) as previously reported in accordance with Canadian GAAP -- Part V,
(ii) as restated and presented in accordance with U.S. GAAP, and
(iii) supported by an accompanying note that
(A) explains the material differences between Canadian GAAP -- Part V and U.S. GAAP that relate to recognition, measurement and presentation, and
(B) quantifies the effect of material differences between Canadian GAAP -- Part V and U.S. GAAP that relate to recognition, measurement and presentation, including a tabular reconciliation between net income as previously reported in the financial statements in accordance with Canadian GAAP -- Part V and net income as restated and presented in accordance with U.S. GAAP, and
(c) if the SEC issuer has filed financial statements prepared in accordance with Canadian GAAP -- Part V for one or more interim periods of the current year, those interim financial statements are restated in accordance with U.S. GAAP and comply with paragraphs (a) and (b).
(2) The comparative information specified in subparagraph (1)(b)(i) may be presented on the face of the balance sheet and statements of income and cash flow or in the note to the financial statements required by subparagraph (1)(b)(iii).
4.8 Acceptable Auditing Standards for SEC Issuers -- Despite section 4.3, financial statements of an SEC issuer that are filed with or delivered to the securities regulatory authority or regulator, other than acquisition statements, and that are required by securities legislation to be audited, may be audited in accordance with U.S. PCAOB GAAS if the financial statements are accompanied by an auditor's report prepared in accordance with U.S. PCAOB GAAS that
(a) expresses an unqualified opinion,
(b) identifies all financial periods presented for which the auditor has issued an auditor's report,
(c) refers to the predecessor auditor's reports on the comparative periods, if the issuer has changed its auditor and one or more of the comparative periods presented in the financial statements were audited by the predecessor auditor, and
(d) identifies the accounting principles used to prepare the financial statements.
4.9 Acceptable Accounting Principles for Foreign Issuers -- Despite subsection 4.2(1), financial statements of a foreign issuer that are filed with or delivered to a securities regulatory authority or regulator, other than acquisition statements, may be prepared in accordance with one of the following accounting principles:
(a) U.S. GAAP, if the issuer is an SEC foreign issuer;
(b) IFRS;
(c) accounting principles that meet the disclosure requirements for foreign private issuers, as that term is defined for the purposes of the 1934 Act, if
(i) the issuer is an SEC foreign issuer,
(ii) on the last day of the most recently completed financial year the total number of equity securities of the issuer beneficially owned by residents of Canada does not exceed 10%, on a fully-diluted basis, of the total number of equity securities of the issuer, and
(iii) the financial statements include any reconciliation to U.S. GAAP required by the SEC;
(d) accounting principles that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the issuer is subject, if the issuer is a designated foreign issuer;
(e) accounting principles that cover substantially the same core subject matter as Canadian GAAP -- Part V, including recognition and measurement principles and disclosure requirements, if the notes to the financial statements
(i) explain the material differences between Canadian GAAP -- Part V and the accounting principles used that relate to recognition, measurement and presentation,
(ii) quantify the effect of material differences between Canadian GAAP -- Part V and the accounting principles used that relate to recognition, measurement and presentation, including a tabular reconciliation between net income reported in the issuer's financial statements and net income computed in accordance with Canadian GAAP -- Part V, and
(iii) provide disclosure consistent with Canadian GAAP -- Part V requirements to the extent not already reflected in the financial statements.
4.10 Acceptable Auditing Standards for Foreign Issuers -- Despite section 4.3, financial statements of a foreign issuer that are filed with or delivered to a securities regulatory authority or regulator, other than acquisition statements, that are required by securities legislation to be audited may, if the financial statements are accompanied by an auditor's report prepared in accordance with the same auditing standards used to conduct the audit and the auditor's report identifies the accounting principles used to prepare the financial statements, be audited in accordance with
(a) U.S. PCAOB GAAS, if the auditor's report
(i) expresses an unqualified opinion,
(ii) identifies all financial periods presented for which the auditor has issued an auditor's report, and
(iii) refers to the predecessor auditor's reports on the comparative periods, if the issuer has changed its auditor and one or more of the comparative periods presented in the financial statements were audited by the predecessor auditor,
(b) International Standards on Auditing, if the auditor's report is accompanied by a statement by the auditor that
(i) describes any material differences in the form and content of the auditor's report as compared to an auditor's report prepared in accordance with Canadian GAAS, and
(ii) indicates that an auditor's report prepared in accordance with Canadian GAAS would express an unmodified opinion, or
(c) auditing standards that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the issuer is subject, if the issuer is a designated foreign issuer.
4.11 Acceptable Accounting Principles for Acquisition Statements --
(1) Acquisition statements must be prepared in accordance with one of the following accounting principles:
(a) Canadian GAAP -- Part V;
(b) U.S. GAAP;
(c) IFRS;
(d) accounting principles that meet the disclosure requirements for foreign private issuers, as that term is defined for the purposes of the 1934 Act, if
(i) the issuer or the acquired business or business to be acquired is an SEC foreign issuer,
(ii) on the last day of the most recently completed financial year the total number of equity securities of the SEC foreign issuer beneficially owned by residents of Canada does not exceed 10%, on a fully-diluted basis, of the total number of equity securities of the SEC foreign issuer, and
(iii) the financial statements include any reconciliation to U.S. GAAP required by the SEC;
(e) accounting principles that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the issuer or the acquired business or business to be acquired is subject, if the issuer or business is a designated foreign issuer;
(f) accounting principles that cover substantially the same core subject matter as Canadian GAAP -- Part V, including recognition and measurement principles and disclosure requirements.
(2) Acquisition statements must be prepared in accordance with the same accounting principles for all periods presented.
(3) The notes to the acquisition statements must identify the accounting principles used to prepare the acquisition statements.
(4) If acquisition statements are prepared using accounting principles that are different from the issuer's GAAP, the acquisition statements for the most recently completed financial year and interim period that are required to be filed must be reconciled to the issuer's GAAP and the notes to the acquisition statements must
(a) explain the material differences between the issuer's GAAP and the accounting principles used to prepare the acquisition statements that relate to recognition, measurement, and presentation,
(b) quantify the effect of material differences between the issuer's GAAP and the accounting principles used to prepare the acquisition statements that relate to recognition, measurement and presentation, including a tabular reconciliation between net income reported in the acquisition statements and net income computed in accordance with the issuer's GAAP, and
(c) provide disclosure consistent with the issuer's GAAP to the extent not already reflected in the acquisition statements.
(5) Despite subsections (1) and (4), if the issuer is required to reconcile its financial statements to Canadian GAAP -- Part V, the acquisition statements for the most recently completed financial year and interim period that are required to be filed must be
(a) prepared in accordance with Canadian GAAP -- Part V, or
(b) reconciled to Canadian GAAP -- Part V and the notes to the acquisition statements must
(i) explain the material differences between Canadian GAAP -- Part V and the accounting principles used to prepare the acquisition statements that relate to recognition, measurement, and presentation,
(ii) quantify the effect of material differences between Canadian GAAP -- Part V and the accounting principles used to prepare the acquisition statements that relate to recognition, measurement and presentation, including a tabular reconciliation between net income reported in the acquisition statements and net income computed in accordance with Canadian GAAP -- Part V, and
(iii) provide disclosure consistent with disclosure requirements of Canadian GAAP -- Part V to the extent not already reflected in the acquisition statements.
4.12 Acceptable Auditing Standards for Acquisition Statements --
(1) Acquisition statements that are required by securities legislation to be audited must be audited in accordance with one of the following auditing standards:
(a) Canadian GAAS;
(b) U.S. PCAOB GAAS;
(c) U.S. AICPA GAAS, if the acquired business or business to be acquired is not an SEC issuer.
(2) Despite subsection (1), acquisition statements filed by or included in a prospectus of a foreign issuer may be audited in accordance with
(a) International Standards on Auditing, if the auditor's report is accompanied by a statement by the auditor that
(i) describes any material differences in the form and content of the auditor's report as compared to an auditor's report prepared in accordance with Canadian GAAS, and
(ii) indicates that an auditor's report prepared in accordance with Canadian GAAS would express an unmodified opinion, or
(b) auditing standards that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the issuer is subject, if the issuer is a designated foreign issuer.
(3) Acquisition statements must be accompanied by an auditor's report prepared in accordance with the same auditing standards used to conduct the audit and the auditor's report must identify the accounting principles used to prepare the acquisition statements.
(4) If acquisition statements are audited in accordance with paragraph (1)(a), the auditor's report must express an unmodified opinion.
(5) If acquisition statements are audited in accordance with paragraph (1)(b) or (c), the auditor's report must express an unqualified opinion.
(6) Despite paragraph (2)(a) and subsections (4) and (5) an auditor's report that accompanies acquisition statements may express a qualification of opinion relating to inventory if
(a) the issuer includes in the business acquisition report, prospectus or other document containing the acquisition statements, a balance sheet for the acquired business or business to be acquired that is for a date that is subsequent to the date to which the qualification relates, and
(b) the balance sheet referred to in paragraph (a) is accompanied by an auditor's report that does not express a qualification of opinion relating to closing inventory.
4.13 Financial Information for Acquisitions Accounted for by the Issuer Using the Equity Method --
(1) If an issuer files, or includes in a prospectus, summarized financial information as to the assets, liabilities and results of operations of an acquired business or business to be acquired that is, or will be, an investment accounted for by the issuer using the equity method, the financial information must
(a) meet the requirements in section 4.11 if the term "acquisition statements" in that section is read as "summarized financial information", and
(b) disclose the reporting currency for the financial information, and disclose the measurement currency if it is different than the reporting currency.
(2) If the financial information referred to in subsection (1) is for any completed financial year, the financial information must
(a) either
(i) meet the requirements in section 4.12 if the term "acquisition statements" in that section is read as "summarized financial information", or
(ii) be derived from financial statements that meet the requirements in section 4.12 if the term "acquisition statements" in that section is read as "financial statements from which is derived summarized financial information", and
(b) be audited, or derived from financial statements that are audited, by a person or company that is authorized to sign an auditor's report under the laws of a jurisdiction of Canada or a foreign jurisdiction, and that meets the professional standards of that jurisdiction.
4.14 Acceptable Accounting Principles for Pro Forma Financial Statements --
(1) Pro forma financial statements must be prepared in accordance with the issuer's GAAP.
(2) Despite subsection (1), if an issuer's financial statements have been reconciled to Canadian GAAP -- Part V under subsection 4.7(1) or paragraph 4.9(e), the issuer's pro forma financial statements must be prepared in accordance with, or reconciled to, Canadian GAAP -- Part V.
(3) Despite subsection (1), if an issuer's financial statements have been prepared in accordance with the accounting principles referred to in paragraph 4.9(c) and those financial statements are reconciled to U.S. GAAP, the pro forma financial statements may be prepared in accordance with, or reconciled to, U.S. GAAP.
4.15 Acceptable Accounting Principles for Foreign Registrants --
(1) Despite subsection 4.2(2), and subject to subsection (2), financial statements delivered by a foreign registrant may be prepared in accordance with one of the following accounting principles:
(a) U.S. GAAP;
(b) IFRS;
(c) accounting principles that meet the disclosure requirements of a foreign regulatory authority to which the registrant is subject, if it is a foreign registrant incorporated or organized under the laws of that designated foreign jurisdiction;
(d) accounting principles that cover substantially the same core subject matter as Canadian GAAP -- Part V, including recognition and measurement principles and disclosure requirements, if the notes to the financial statements, interim balance sheets, or interim income statements
(i) explain the material differences between Canadian GAAP -- Part V and the accounting principles used that relate to recognition, measurement and presentation,
(ii) quantify the effect of material differences between Canadian GAAP -- Part V and the accounting principles used that relate to recognition, measurement, and presentation, and
(iii) provide disclosure consistent with disclosure requirements of Canadian GAAP -- Part V to the extent not already reflected in the financial statements, interim balance sheets or interim income statements.
(2) Financial statements, interim balance sheets, and interim income statements delivered by a foreign registrant prepared in accordance with accounting principles specified in paragraph (1)(a), (b) or (d) must be prepared on a non-consolidated basis.
4.16 Acceptable Auditing Standards for Foreign Registrants -- Despite section 4.3, financial statements delivered by a foreign registrant that are required by securities legislation to be audited may, if the financial statements are accompanied by an auditor's report prepared in accordance with the same auditing standards used to conduct the audit and the auditor's report identifies the accounting principles used to prepare the financial statements, be audited in accordance with
(a) U.S. PCAOB GAAS or U.S. AICPA GAAS if the auditor's report expresses an unqualified opinion,
(b) International Standards on Auditing, if the auditor's report is accompanied by a statement by the auditor that
(i) describes any material differences in the form and content of the auditor's report as compared to an auditor's report prepared in accordance with Canadian GAAS, and
(ii) indicates that an auditor's report prepared in accordance with Canadian GAAS would express an unmodified opinion, or
(c) auditing standards that meet the foreign disclosure requirements of the designated foreign jurisdiction to which the registrant is subject, if it is a foreign registrant incorporated or organized under the laws of that designated foreign jurisdiction.
PART 5: EXEMPTIONS
5.1 Exemptions --
(1) The regulator or securities regulatory authority may grant an exemption from this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.
(2) Despite subsection (1), in Ontario, only the regulator may grant an exemption.
(3) Except in Ontario, an exemption referred to in subsection (1) is granted under the statute referred to in Appendix B of National Instrument 14-101 Definitions opposite the name of the local jurisdiction.
5.2 Certain Exemptions Evidenced by Receipt --
(1) Subject to subsections (2) and (3), without limiting the manner in which an exemption may be evidenced, an exemption from this Instrument as it pertains to financial statements or auditor's reports included in a prospectus, may be evidenced by the issuance of a receipt for the prospectus or an amendment to the prospectus.
(2) A person or company must not rely on a receipt as evidence of an exemption unless the person or company
(a) sent to the regulator or securities regulatory authority, on or before the date the preliminary prospectus or the amendment to the preliminary prospectus or prospectus was filed, a letter or memorandum describing the matters relating to the exemption application, and indicating why consideration should be given to the granting of the exemption, or
(b) sent to the regulator or securities regulatory authority the letter or memorandum referred to in paragraph (a) after the date of the preliminary prospectus or the amendment to the preliminary prospectus or prospectus has been filed and receives a written acknowledgement from the securities regulatory authority or regulator that issuance of the receipt is evidence that the exemption is granted.
(3) A person or company must not rely on a receipt as evidence of an exemption if the regulator or securities regulatory authority has before, or concurrently with, the issuance of the receipt for the prospectus, sent notice to the person or company that the issuance of a receipt does not evidence the granting of the exemption.
(4) For the purpose of this section, a reference to a prospectus does not include a preliminary prospectus.
5.3 Financial Years ending between December 21 and 31, 2010 -- Despite subsections 3.1(2) and 4.1(2), Part 3 may be applied by an issuer or registrant to all financial statements, financial information, operating statements and pro forma financial statements for periods relating to a financial year that begins before January 1, 2011 if the immediately preceding financial year ends no earlier than December 21, 2010.
5.4 Rate-Regulated Activities --
(1) Despite subsections 3.1(2) and 4.1(2),
(a) Part 3 may be applied by a qualifying entity to all financial statements, financial information, operating statements and pro forma financial statements as if the expression "January 1, 2011" in subsection 3.1(2) were read as "January 1, 2012", and
(b) if the qualifying entity relies on paragraph (a) in respect of a period, Part 4 must be applied as if the expression "January 1, 2011" in subsection 4.1(2) were read as "January 1, 2012".
(2) For the purposes of subsection (1), a "qualifying entity" means a person or company that
(a) has activities subject to rate regulation, as defined in Part V of the Handbook, and
(b) is permitted under Canadian GAAP to apply Part V of the Handbook.
PART 6: REPEAL, TRANSITION AND EFFECTIVE DATE
6.1 Repeal -- National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, which came into force on March 30, 2004, is repealed.
6.2 Effective Date -- This Instrument comes into force on January 1, 2011.
6.3 Existing Exemptions -- A person or company that has obtained an exemption from National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, in whole or in part, is exempt from any substantially similar provision of this Instrument to the same extent and on the same conditions, if any, as contained in the exemption, unless the regulator or securities regulatory authority has revoked that exemption.
Schedule I-2 -- Blackline Showing Proposed Changes to Companion Policy 52-107CP to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards
APPENDIX I
SCHEDULE I-2
Companion Policy 52-107CP
Acceptable Accounting Principles and Auditing Standards
PART I: INTRODUCTION AND DEFINITIONS
1.1 Introduction and Purpose -- This Companion Policy provides information about how the securities regulatory authorities interpret or apply National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (the Instrument). The Instrument is linked closely with the application of other national instruments, including National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) and National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102). These and other national instruments also contain a number of references to International Financial Reporting Standards (IFRS) and the requirements in the Handbook of the Canadian Institute of Chartered Accountants (the Handbook). Full definitions of IFRS and the Handbook are provided in National Instrument 14-101 Definitions.
The Instrument does not apply to investment funds. National Instrument 81-106 Investment Fund Continuous Disclosure applies to investment funds.
1.2 Multijurisdictional Disclosure System -- National Instrument 71-101 The Multijurisdictional Disclosure System (NI 71-101) permits certain U.S. incorporated issuers to satisfy Canadian disclosure filing obligations, including financial statements, by using disclosure documents prepared in accordance with U.S. federal securities laws. The Instrument does not replace or alter NI 71-101. There are instances in which NI 71-101 and the Instrument offer similar relief to a reporting issuer. There are other instances in which the relief differs. If both NI 71-101 and the Instrument are available to a reporting issuer, the issuer should consider both instruments. It may choose to rely on the less onerous instrument in a given situation.
1.3 Calculation of Voting Securities Owned by Residents of Canada -- The definition of "foreign issuer" is based upon the definition of foreign private issuer in Rule 405 of the 1933 Act and Rule 3b-4 of the 1934 Act. For the purposes of the definition of "foreign issuer", in determining the outstanding voting securities that are beneficially owned by residents of Canada, an issuer should
(a) use reasonable efforts to identify securities held by a broker, dealer, bank, trust company or nominee or any of them for the accounts of customers resident in Canada,
(b) count securities beneficially owned by residents of Canada as reported on reports of beneficial ownership, including insider reports and early warning reports, and
(c) assume that a customer is a resident of the jurisdiction or foreign jurisdiction in which the nominee has its principal place of business if, after reasonable inquiry, information regarding the jurisdiction or foreign jurisdiction of residence of the customer is unavailable.
This method of calculation differs from that in NI 71-101 which only requires a calculation based on the address of record. Some SEC foreign issuers may therefore qualify for exemptive relief under NI 71-101 but not under the Instrument.
1.4 Exemptions Evidenced by the Issuance of a Receipt -- Section 5.2 of the Instrument states that an exemption from any of the requirements of the Instrument pertaining to financial statements or auditor's reports included in a prospectus may be evidenced by the issuance of a receipt for that prospectus. Issuers should not assume that the relief evidenced by the receipt will also apply to financial statements or auditors' reports filed in satisfaction of continuous disclosure obligations or included in any other filing.
1.5 Filed or Delivered -- Financial statements that are filed in a jurisdiction will be made available for public inspection in that jurisdiction, subject to the provisions of securities legislation in the local jurisdiction regarding confidentiality of filed material. Material that is delivered to a regulator, but not filed, is not required under securities legislation to be made available for public inspection. However, the regulator may choose to make such material available for inspection by the public.
1.6 Other Legal Requirements -- Issuers and auditors should refer to National Instrument 52-108 Auditor Oversight for requirements relating to auditor oversight by the Canadian Public Accountability Board. In addition, issuers and registrants are reminded that they and their auditors may be subject to requirements under the laws and professional standards of a jurisdiction that address matters similar to those addressed by the Instrument, and which may impose additional or more onerous requirements. For example, applicable corporate law may prescribe the accounting principles or auditing standards required for financial statements. Similarly, applicable federal, provincial or state law may impose licensing requirements on an auditor practising public accounting in certain jurisdictions.
PART 2: APPLICATION -- ACCOUNTING PRINCIPLES
2.1 Application of Part 3 -- Part 3 of the Instrument generally applies to periods relating to financial years beginning on or after January 1, 2011. Part 3 refers to Canadian GAAP applicable to publicly accountable enterprises, which is IFRS incorporated into the Handbook, contained in Part I of the Handbook.
2.2 Application of Part 4 -- Part 4 of the Instrument generally applies to periods relating to financial years beginning before January 1, 2011. Part 4 refers to Canadian GAAP-Part V, which is generally accepted accounting principles determined with reference to Part V of the Handbook applicable to public enterprises. These are the pre-changeover accounting standards for public companies. Part V of the Handbook has differing requirements for public enterprises and non-public enterprises. The following are some of the significant differences in Canadian GAAP applicable to public enterprises compared to those applicable to non-public enterprises:
(a) financial statements for public enterprises cannot be prepared using the differential reporting options as set out in Part V of the Handbook;
(b) transition provisions applicable to enterprises other than public enterprises are not available; and
(c) financial statements must include any additional disclosure requirements applicable to public enterprises.
2.3 IFRS in English and French -- The Handbook provides IFRS in English and French. Both versions have equal status and effect under Canadian GAAP. Issuers, auditors, and other market participants may use either version to comply with the requirements in the Instrument.
2.4 Reference to accounting principles -- Section 3.2 of the Instrument requires certain financial statements to be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises. This section includes requirements for an unreserved statement of compliance with IFRS in annual financial statements, and an unreserved statement of compliance with International Accounting Standard 34Interim Financial Reporting in interim financial reports. These provisions distinguish between the basis of preparation and disclosure requirements.
There are two options for referring to accounting principles in the applicable financial statements and, in the case of annual financial statements, accompanying auditor's reports referred to in section 3.3 of the Instrument:
(a) refer only to IFRS in the notes to the financial statements and in the auditor's report, or
(b) refer to both IFRS and Canadian GAAP in the notes to the financial statements and in the auditor's report.
2.5 IFRS as adopted by the IASB -- The definition of IFRS in National Instrument 14-101 Definitions refers to standards and interpretations adopted by the International Accounting Standards Board. The definition does not extend to national accounting standards that are modified or adapted from IFRS, sometimes referred to as a "jurisdictional" version of IFRS.
2.6 Presentation and functional currencies -- If financial statements comply with requirements contained in IFRS in International Accounting Standard 1 Presentation of Financial Statements and International Accounting Standard 21 The Effects of Changes in Foreign Exchange Rates relating to the disclosure of presentation currency and functional currency, then they will comply with section 3.5 of the Instrument.
2.7 Registrants' financial statements and interim financial information -- Subsections 3.2(3) and (4) and paragraphs 3.15(a) and (b) of the Instrument mandate accounting for any investments in subsidiaries, jointly controlled entities and associates as specified for separate financial statements in International Accounting Standard 27 Consolidated and Separate Financial Statements (IAS 27). Separate financial statements are sometimes referred to as non-consolidated financial statements. These requirements apply regardless of whether a registrant meets the criteria set out in IAS 27 for not presenting consolidated financial statements. Paragraph 3.2(3)(b) also requires a registrant's annual financial statements to describe the financial reporting framework used to prepare the financial statements. The description should refer to the requirement to account for any investments in subsidiaries, jointly controlled entities and associates as specified for separate financial statements in IAS 27, even if the registrant does not have these types of investments. In addition, if annual financial statements for a year beginning in 2011 are prepared using the financial reporting framework permitted by subsection 3.2(4), the description of the framework should explain the lack of comparatives and the date of transition, as specified in paragraphs 3.2(4)(b) and (c).
The financial reporting frameworks prescribed by subsections 3.2(3) and (4) are Canadian GAAP applicable to publicly accountable enterprises with specified differences. Although these frameworks differ in specified ways from IFRS, the exceptions and exemptions included as Appendices in IFRS 1 First-time Adoption of International Financial Reporting Standards (IFRS 1) would be relevant for determining an opening statement of financial position at the date of transition to the financial reporting framework prescribed in subsection 3.2(3) or (4).
Subparagraph 3.3(1)(a)(iii) requires an auditor's report in the form specified by Canadian GAAS for an audit of financial statements prepared in accordance with a fair presentation framework. The financial reporting frameworks prescribed by subsections 3.2(3) and (4) are fair presentation frameworks.
Subsection 3.2(4) of the Instrument allows a registrant to file financial statements and interim financial information for periods relating to a financial year beginning in 2011 that exclude comparative information relating to the preceding year and to use a date of transition to the financial reporting framework that is the first day of the financial year beginning in 2011. When such a registrant prepares the comparative information for financial statements and interim financial information for periods relating to a financial year beginning in 2012, the registrant should consider whether it must adjust the comparative information in order to comply with subsection 3.2(3). Adjustments may be necessary if a registrant changes one or more accounting policies for its year beginning in 2012 compared to its year beginning in 2011.
2.8 Use of different accounting principles -- Subsection 3.2(5) of the Instrument requires financial statements to be prepared in accordance with the same accounting principles for all periods presented in the financial statements.
An issuer that is required to file, or include in a document that is filed, financial statements for three years can, except in the situation discussed in section 2.9 of this Companion Policy, choose to present two sets of financial statements. For example, if the earliest of the three financial years relates to a financial year beginning before January 1, 2010, the issuer should provide one set of financial statements that presents information for the most recent two years using the accounting principles in Part 3 of the Instrument and one set of financial statements that either:
(a) presents information for a third and fourth year using the accounting principles in Part 4, or
(b) presents information for a second and third year using the accounting principles in Part 4.
Note that under option (a), a fourth year not otherwise required would be included to satisfy the requirement in the issuer's GAAP for comparative financial statements. Under option (b), information for a second year would be presented in both sets of financial statements. This second year would be included in the most recent set of financial statements using accounting principles in Part 3 of the Instrument and also in the earliest set of financial statements using accounting principles in Part 4 of the Instrument.
If the accounting principles used for the earliest of the three financial years and the most recent two years differ, but both are acceptable in Part 3 of the Instrument, presentation of information for the earliest year would be similar to the example described above.
2.9 Date of transition to IFRS if financial statements include a transition year of less than nine months - Subsection 4.8(6) of NI 51-102 states that if a transition year is less than nine months in length, the reporting issuer must include comparative financial information for the transition year and old financial year in its financial statements for its new financial year. Similarly, subsection 32.2(4) in Form 41-101F1 states that if an issuer changed its financial year end during any of the financial years referred to in section 32.2 and the transition year is less than nine months, the transition year is deemed not to be a financial year for purposes of the requirement to provide financial statements for a specified number of financial years in section 32.2.
If an issuer's first set of annual financial statements with an unreserved statement of compliance with IFRS includes comparatives for both a transition year of less than nine months and the old financial year, the date of transition to IFRS should be the first day of the old financial year. Since subsection 3.2(5) of the Instrument requires financial statements to be prepared in accordance with the same accounting principles for all periods presented in the financial statements, a date of transition to IFRS using the first day of the transition year would not be appropriate.
2.10 Acceptable Accounting Principles -- Readers are likely to assume that financial information disclosed in a news release is prepared on a basis consistent with the accounting principles used to prepare the issuer's most recently filed financial statements. To avoid misleading readers, an issuer should alert readers if financial information in a news release is prepared using accounting principles that differ from those used to prepare an issuer's most recently filed financial statements or includes non-GAAP financial measures discussed in CSA Staff Notice 52-306 Non-GAAP Financial Measures.
2.11 Financial statements for a reverse takeover or capital pool company acquisition -- Subsection 8.1(2) of NI 51-102 states that Part 8 of that rule does not apply to a transaction that is a reverse takeover. Similarly, subsection 35.1(1) in Form 41-101F1 indicates that item 35 of that Form does not apply to a completed or proposed transaction that was or will be accounted for as a reverse takeover. Therefore, if a document includes financial statements for a reverse takeover acquirer, as defined in NI 51-102, for a period prior to completion of the reverse takeover, section 3.11 of the Instrument does not apply to the financial statements. Such financial statements must comply with section 3.2, 3.7, 3.9, 4.2, 4.7 or 4.9 of the Instrument as applicable.
Paragraph 32.1(b) of Form 41-101F1 indicates that financial statements of an issuer required under Item 32 of that Form include the financial statements of a business acquired or business proposed to be acquired by the issuer if a reasonable investor would regard the primary business of the issuer upon completion of the acquisition to be the acquired business or business proposed to be acquired. Consistent with this provision, if a capital pool company acquires or proposes to acquire a business, regardless of whether or not the transaction will be accounted for as a reverse takeover, financial statements for the acquired business or business proposed to be acquired must comply with section 3.2, 3.7, 3.9, 4.2, 4.7 or 4.9 of the Instrument as applicable.
2.12 Acquisition statements prepared using Canadian GAAP applicable to private enterprises -- Paragraph 3.11(1)(f) of the Instrument permits acquisition statements to be prepared using Canadian GAAP applicable to private enterprises, which is Canadian accounting standards for private enterprises in Part II of the Handbook.
2.13 Conditions for acquisition statements prepared using Canadian GAAP applicable to private enterprises -- Paragraph 3.11(1)(f) of the Instrument specifies certain conditions for the use of Canadian GAAP applicable to private enterprises. One of these conditions, in subparagraph 3.11(1)(f)(ii), is that financial statements for the business were not previously prepared in accordance with any of the accounting principles specified in paragraphs 3.11(1)(a) through (e) for the periods presented in the acquisition statements. Paragraph 3.11(1)(a) refers to Canadian GAAP applicable to publicly accountable enterprises, which is IFRS incorporated into the Handbook contained in Part I of the Handbook. The condition in subparagraph 3.11(1)(f)(ii) does not preclude Canadian GAAP - Part V, as defined in section 4.1 of the Instrument.
2.14 Acquisition statements prepared using Canadian GAAP applicable to private enterprises that include a reconciliation to the issuer's GAAP -- If acquisition statements included in a document filed by an issuer that is not a venture issuer and not an IPO venture issuer are prepared using Canadian GAAP applicable to private enterprises, the reconciliation requirement in subparagraph 3.11(1)(f)(iv) applies.
For each difference presented in the quantified reconciliation that relates to measurement, clause 3.11(1)(f)(iv)(C) requires disclosure and discussion of the material inputs or assumptions underlying the measurement of the relevant amount computed in accordance with the issuer's GAAP, consistent with the disclosure requirements of the issuer's GAAP. If the relevant amount was measured using a valuation technique, disclose the valuation technique, and disclose and discuss the inputs used. If changing one or more of the inputs to reasonably possible alternative assumptions would change the measurement significantly, a discussion of that fact and the effect of the changes on the measurement would facilitate readers' understanding of the measurement.
Clause 3.11(1)(f)(iv)(C) does not require disclosure and discussion of all the disclosure elements identified in the issuer's GAAP that relate to a difference presented in the reconciliation. As well, the clause does not require disclosure of information not required by the issuer's GAAP.
As an example of the disclosure required by clause 3.11(1)(f)(iv)(C), if the issuer's GAAP is IFRS and the relevant amount is share based payments measured using an option pricing model, disclose the option pricing model used and the inputs used in the model (i.e., weighted average share price, exercise price, expected volatility, option life, expected dividends, risk-free interest rate and any other inputs to the model). Also, discuss how expected volatility was determined and how any other features of the option grant (e.g., market condition) were incorporated into the measurement of the relevant amount.
If acquisition statements are carve-out statements prepared in accordance with Canadian GAAP for private enterprises, as discussed in section 2.18 of this Companion Policy, subparagraph 3.11(6)(d)(iii) requires reconciliation information for non-venture issuers similar to that required by subparagraph 3.11(1)(f)(iv). The above guidance on subparagraph 3.11(1)(f)(iv) also applies to subparagraph 3.11(6)(d)(iii).2.15 Acquisition statements prepared using Canadian GAAP applicable to private enterprises that include a reconciliation to IFRS -- If the reconciliation requirement in subparagraph 3.11(1)(f)(iv) applies, and the issuer's GAAP requires the annual financial statements to include an explicit and unreserved statement of compliance with IFRS, the reconciliation information in annual and interim acquisition statements must address material differences between Canadian GAAP applicable to private enterprises and IFRS that relate to recognition, measurement and presentation.
Consistent with IFRS requirements, for the purpose of preparing the reconciliation information required by subparagraph 3.11(1)(f)(iv), the date of transition to IFRS would be the first day of the earliest period for which comparative information is presented in the annual acquisition statements. For example, if annual acquisition statements present information for the most recently completed financial year and the comparative year, the date of transition to IFRS would be the first day of the comparative year.
Also consistent with IFRS, for the purpose of preparing the reconciliation, IFRS 1 would be applied to determine the opening IFRS statement of financial position at the date of transition to IFRS. The exceptions and exemptions included as Appendices in IFRS 1 would be relevant for determining the entity's statement of financial position at the date of transition to IFRS.
The opening IFRS statement of financial position is the starting point for identifying material differences from Canadian GAAP applicable to private enterprises. Although an opening IFRS statement of financial position must be prepared in order to prepare the information required by subparagraph 3.11(1)(f)(iv), that subparagraph does not require disclosure of the opening IFRS statement of financial position. Similarly, that subparagraph does not require disclosure of differences relating to equity as at the date of transition to IFRS.
As discussed in section 2.14 of this Companion Policy, clause 3.11(1)(f)(iv)(C) does not require disclosure and discussion of all the disclosure elements identified in the issuer's GAAP that relate to a difference presented in the reconciliation. Therefore, it would be inappropriate to include an explicit and unreserved statement of compliance with IFRS in acquisition statements that include reconciliation information for material differences between Canadian GAAP applicable to private enterprises and IFRS.
2.16 Acquisition statements prepared using Canadian GAAP applicable to private enterprises that do not include a reconciliation to the issuer's GAAP -- If acquisition statements included in a document filed by a venture issuer or IPO venture issuer are prepared using Canadian GAAP applicable to private enterprises, the reconciliation requirements in subparagraph 3.11(1)(f)(iv) do not apply. However, subsection 3.14(1) requires pro forma financial statements to be prepared using accounting policies that are permitted by the issuer's GAAP and would apply to the information presented in the pro forma financial statements if that information were included in the issuer's financial statements for the same time. Companion Policy 51-102CP Continuous Disclosure Obligations provides further guidance on preparation of pro forma financial statements in this circumstance.
2.17 Acquisition statements, predecessor statements, or primary business statements that are an operating statement --
SubsectionIn the case of acquisition statements that are an operating statement, subsection 3.11(5) requires the line items inanthe operating statement to be prepared in accordance with accounting policies that comply with the accounting policies permitted by one of Canadian GAAP applicable to publicly accountable enterprises, IFRS, U.S. GAAP, or Canadian GAAP applicable to private enterprises.For the purpose of preparing the operating statement, the exceptions and exemptions included as Appendices in IFRS 1 would be relevant for determining the opening statement of financial position at the date of transition to IFRS. 2.18 Acquisition statements that are carve-out financial statements -- Subsection 3.11(6) specifies the financial reporting framework required for acquisition statements that are based on information from the financial records of another entity whose operations included the acquired business or the business to be acquired, and there are no separate financial records for the business. Such financial statements are commonly referred to as "carve-out" financial statements. Subsection 3.11(6) requires carve-out financial statementsIn the case of predecessor statements or primary business statements that are an operating statement, section 3.17 requires the line items in the operating statement to be prepared in accordance withone ofaccounting policies that comply with the accounting policies permitted by one of: Canadian GAAP applicable to publicly accountable enterprises,IFRS, U.S. GAAP, or Canadian GAAP applicable to private enterprises, and in each case include specified line items. For carve-out financial statements prepared in accordance with Canadian GAAP applicable to publicly accountable enterprisesU.S. GAAP if the issuer is an SEC issuer or SEC foreign issuer, or IFRS if the issuer is a foreign issuer. For the purpose of preparing an operating statement, the exceptions and exemptions included as Appendices in IFRS 1 would be relevant for determining the opening statement of financial position at the date of transition to IFRS.2.18 Acquisition statements, predecessor statements, or primary business statements that are carve-out financial statements -- Acquisition statements, predecessor statements or primary business statements may be based on information from the financial records of another entity whose operations included the acquired business, the business to be acquired, the predecessor entity or primary business. In some cases, there are no separate financial records for the business. Such financial statements, which are commonly referred to as carve-out financial statements, should generally include:
(a) all assets and liabilities directly attributable to the business;
(b) all revenue and expenses directly attributable to the business;
(c) if there are expenses for the business that are common expenses shared with the other entity, a portion of those expenses allocated on a reasonable basis to the business;
(d) income and capital taxes calculated as if the business had been a separate legal entity and had filed a separate tax return for the period presented; and
(e) a description of the method of allocation for each significant line item presented in financial statements.
2.19 Preparation of pro forma financial statements when there is a change in accounting principles -- Subsection 3.14(1) requires pro forma financial statements to be prepared using accounting policies that are permitted by the issuer's GAAP and would apply to the information presented in the pro forma financial statements if that information were included in the issuer's financial statement for the same period as that of the pro forma financial statements. If the accounting principles used to prepare an issuer's most recent annual financial statements differ from the accounting principles used to prepare the issuer's interim financial report for a subsequent period, subsection 3.14(3) provides an issuer the option of preparing its annual pro forma income statement using accounting policies that are permitted by the accounting principles used to prepare the interim financial report and would apply to the information presented in the pro forma income statement if that information were included in the interim financial report. In this case, the annual pro forma income statement should include adjustments to the amounts reported in the issuer's most recent statement of comprehensive income in order to restate the amounts on the basis of the accounting principles used to prepare the issuer's interim financial report. The pro forma income statement should present such adjustments separate from other adjustments relating to significant acquisitions.
If an issuer does not use the option provided by subsection 3.14(3), in order to avoid confusion, it would be appropriate to present the issuer's annual and interim pro forma financial statements as separate sets of pro forma financial statements.
2.20 Reconciliation requirements for an SEC issuer -- If financial statements of an SEC issuer, other than acquisition statements, filed with or delivered to a securities regulatory authority or regulator are
(a) for a financial year beginning before January 1, 2011,
(b) prepared in accordance with U.S. GAAP, and
(c) the SEC issuer previously filed or included in a prospectus financial statements prepared in accordance with Canadian GAAP -- Part V,
then subsection 4.7(1) applies. Subsection 4.7(1) requires the notes of the first two sets of the SEC issuer's annual financial statements, and interim financial report during those first two years, to provide reconciling information between Canadian GAAP -- Part V and U.S. GAAP that complies with subparagraphs 4.7(1)(a)(i) to (iii).
If an SEC issuer's second set of annual financial statements after a change in accounting principles is for a financial year beginning after January 1, 2011, the reconciliation requirements in subsection 4.7(1) no longer apply. Financial statements for a financial year beginning after January 1, 2011 are required to be prepared in accordance with Part 3 of the Instrument, which does not include any reconciliation requirements when an SEC issuer changes its accounting principles.
PART 3: APPLICATION - AUDITING STANDARDS
3.1 Auditor's Expertise -- The securities legislation in most jurisdictions prohibits a regulator or securities regulatory authority from issuing a receipt for a prospectus if it appears to the regulator or securities regulatory authority that a person or company who has prepared any part of the prospectus or is named as having prepared or certified a report used in connection with a prospectus is not acceptable.
3.2 Canadian Auditors for Canadian GAAP and GAAS Financial Statements -- A Canadian auditor is a person or company that is authorized to sign an auditor's report by the laws, and that meets the professional standards, of a jurisdiction of Canada. We would normally expect issuers and registrants incorporated or organized under the laws of Canada or a jurisdiction of Canada, and any other issuer or registrant that is not a foreign issuer nor a foreign registrant, to engage a Canadian auditor to audit the issuer's or registrant's financial statements if those statements are prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and will be audited in accordance with Canadian GAAS unless a valid business reason exists to use a non-Canadian auditor. A valid business reason would include a situation where the principal operations of the company and the essential books and records required for the audit are located outside of Canada.
3.3 Auditor Oversight -- In addition to the requirements in sections 3.4 and 4.4 of the Instrument, National Instrument 52-108 Auditor Oversight also contains certain requirements related to auditors and auditor reports.
3.4 Modification of opinion -- Part 5 of the Instrument permits the regulator or securities regulatory authority to grant exemptive relief from the Instrument, including the requirement that an auditor's report express an unmodified opinion. A modification of opinion includes a qualification of opinion, an adverse opinion, and a disclaimer of opinion. However, staff will generally recommend that relief not be granted if the modification of opinion or other similar communication is:
(a) due to a departure from accounting principles permitted by the Instrument, or
(b) due to a limitation in the scope of the auditor's examination that
(i) results in the auditor being unable to form an opinion on the financial statements as a whole,
(ii) is imposed or could reasonably be eliminated by management, or
(iii) could reasonably be expected to be recurring.
3.5 Identification of the financial reporting framework used to prepare an operating statement
or carve-out financial statements--Paragraph- Paragraphs 3.12(2)(e)requiresand 3.18(2)(e) require an auditor's report to identify the financial reporting framework used to prepare an operating statementor carve-out financial statementsas addressed insubsectionssubsection 3.11(5) and(6).section 3.17. To comply with this requirement, the auditor's report may identify the applicable requirement in the Instrument, and refer the reader's attention to the note in the operating statementor carve-out financial statementsthat describes the financial reporting framework.
Proposed Amendments to National Instrument 51-102 Continuous Disclosure Obligations
APPENDIX J
Amendments to
National Instrument 51-102 Continuous Disclosure Obligations
1. National Instrument 51-102 Continuous Disclosure Obligations is amended by this Instrument.
2. Section 1.1 is amended in the definition of "executive officer", by inserting "(a.1) a chief executive officer or chief financial officer;" after "(a) a chair, vice-chair or president;".
3. Paragraph 8.10(1)(b) is amended by adding the following after "that is not of securities of another issuer":
", unless the vendor transferred the business referenced in paragraph (1)(a) to such other issuer which
(i) was created for the sole purpose of facilitating the acquisition; and
(ii) other than assets or operations relating to the transferred business, has no
(A) substantial assets; or
(B) operating history"
4. This Instrument comes into force on •, 2012.
Proposed Amendments to National Instrument 13-101 System for Electronic Document and Analysis Retrieval
APPENDIX K
Amendments to National Instrument 13-101
System for Electronic Document Analysis and Retrieval (SEDAR)
1. National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR) is amended by this Instrument.
2. Division A of Part II of Appendix A is amended by
(a) in section (a) "General Filings",
(i) repealing items 1, 2 and 3,
(i) deleting" -- POP System" wherever it appears,
(iii) repealing item 6,
(iv) inserting the following items:
6.1 Base Short Form PREP Prospectus
6.2 Base Long Form PREP Prospectus,
(v) in items 7 and 8 by replacing "Short Form Prospectus" with "Base Shelf Prospectus",
(vi) deleting "- Shelf" wherever it appears,
(vii) in item 9, adding "Shelf" before "Prospectus Supplement", and
(viii) adding the following item after item 16:
16.1 Supplemented Short Form PREP Prospectus,
(b) repealing section (b) "British Columbia Filings",
(c) in section (c) "Quebec Filings", repealing item 2, and
(d) repealing section (d) "Alberta Filings".
4. This Instrument comes into force on •, 2012.
Information required by local securities legislation
APPENDIX L
Information required by local securities legislation
In Ontario, the following provisions of the Securities Act (the Act) provide the Ontario Securities Commission (the OSC) with the authority to make the amendments:
• Paragraph 143(1)15 of the Act, which authorizes the OSC to make rules prescribing categories or subcategories of issuers for purposes of the prospectus requirements under the Act, the regulations and the rules and classifying issuers into categories or subcategories.
• Paragraph 143(1)16 of the Act, which authorizes the OSC to make rules regulating in respect of, or varying the Act to facilitate, expedite or regulate in respect of, the distribution of securities, or the issuing of receipts.
• Paragraph 143(1)16.1 of the Act, which authorizes the OSC to make rules prescribing specified requirements for the certification of prospectuses by persons and companies.
• Paragraph 143(1)22 of the Act, which authorizes the OSC to make rules prescribing requirements in respect of the preparation and dissemination and other use, by reporting issuers, of documents providing for continuous disclosure that are in addition to the requirements under the Act.
• Paragraph 143(1)24 of the Act, which authorizes the OSC to make rules requiring issuers or others to comply, in whole or in part, with Part XVIII (Continuous Disclosure), or rules made under paragraph 22.
• Paragraph 143(1)25 of the Act, which authorizes the Commission to prescribe requirements in respect of financial accounting, reporting and auditing for the purposes of the Act, the regulations and the rules.
• Paragraph 143(1)31 of the Act, which authorizes the OSC to make rules regulating investment funds and the distribution and trading of the securities of investment funds.
• Paragraph 143(1)39 of the Act, which authorizes the OSC to make rules requiring or respecting the media, format, preparation, form, content, execution, certification, dissemination and other use, filing and review of all documents required under or governed by the Act, the regulations or the rules and all documents determined by the regulations or the rules to be ancillary to the documents.
• Paragraph 143(1)44 of the Act, which authorizes the OSC to vary the Act to permit or require the use of an electronic or computer-based system for filing, delivery or deposit of specified documents or information.
• Paragraph 143(1)45 of the Act, which authorizes the OSC to establish requirements for and procedures in respect of the use of an electronic or computer-based system for the filing, delivery or deposit of documents or information.
• Paragraph 143(1)53 of the Act, which authorizes the OSC to provide for exemptions from or varying the requirements of section 62, 65 or 71 of the Act.
• Paragraph 143(1)56 of the Act, which authorizes the OSC to make rules providing for exemptions from or varying any or all time periods in the Act.