Proposed National Instrument: NI - 62-103 - The Early Warning System and Related Take-Over Bid and Insider Reporting Issues

The 1996 Ontario Staff Notice made a number of recommendations concerning relief to be provided in respect of inadvertent take-over bids. This relief has not been carried forward into the proposed National Instrument.

The British Columbia Proposal for Relief from Insider Reporting and Early Warning Reporting

Although the British Columbia Securities Commission ("B.C. Commission") supported most of the elements of the Ontario DraftRule, it proposed to adopt a different approach to relief from insider reporting and early warning requirements.⁽⁵⁾ Similar to theapproach of the Ontario Draft Rule, under the B.C. Commission's proposed approach, institutional investors meeting certain criteriawould have been exempt from both the insider reporting and early warning requirements. The difference is that the institutionalinvestors would have had to comply with the British Columbia version of the alternative monthly reporting system.

The major difference between the British Columbia approach to the alternative monthly reporting system and the approachdescribed in the 1996 Ontario Staff Notice lay in how frequently a follow-up filing was required, once the initial report was filed.According to the British Columbia approach, a filing was required 10 days after the end of each month in which the eligibleinstitutional investor held 10 percent or more of a reporting issuer's securities, regardless of changes in the ownership or controllevels of the investor in the month. Under the 1996 Ontario Staff Notice, follow-up filings would have occurred only when certaindefined changes in the ownership or control levels had occurred in the month. In addition, insider reporting relief would havecontinued to be available in British Columbia even if an eligible institutional investor choose to comply with the normal earlywarning system.

Purpose of the Proposed National Instrument

The primary purpose of the proposed National Instrument is to provide exemptions from the early warning requirements, the insiderreporting requirement, and related provisions to certain institutional investors that have a "passive intent" with respect to theirownership or control of securities of reporting issuers and to permit those persons to disaggregate securities that they own or controlfor purposes of those requirements in certain circumstances. This relief is designed to facilitate compliance by financial institutions,pension funds, certain mutual funds, portfolio managers, portfolio clients, underwriters in the course of a distribution, and pledgees.

Summary of Proposed National Instrument

This summary outlines the proposed National Instrument and notes the major changes that have been made in the proposed NationalInstrument from the Ontario Draft Rule and, in some cases, the proposals contained in the 1996 Ontario Staff Notice.

Part 1. DEFINITIONS AND INTERPRETATION

Part 1 sets out several key definitions used in the proposed National Instrument, and it provides guidance on the interpretation ofcertain take-over provisions.

Section 1.1. Definitions

Section 1.1 defines several key terms used in the proposed National Instrument.

Changes from the Ontario Draft Rule

A number of definitions contained in section 1.1 have been amended or dropped from the Ontario Draft Rule. Other definitionshave been added to improve the clarity of the operative sections of the proposed National Instrument; some of these definitions havebeen moved from the operative provisions of the Ontario Draft Rule to the definition section of the proposed National Instrument.

In addition, a number of definitions have been added to replace the references to specific sections of the Ontario Act contained inthe Ontario Draft Rule. These provisions, being "acquisition announcement provisions", "control block distribution definition","early warning requirements", "insider reporting requirement", "moratorium provisions" and "take-over bid provisions", all referto provisions of Canadian securities legislation that are either described in the applicable definition or listed in an appendix to theproposed National Instrument.

The term "effective control" is new and has been added to describe the control in fact of the issuer by a person or company throughthe ownership of, or control over, voting securities of the issuer, other than securities held by way of security only. This conceptis analogous to the concept of "control in fact" contained in clause 3(1)(d) of the Bank Act (Canada), although the Bank Actdefinition relates to influence other than through securities. The concept of "effective control" was designed as a compromise tocomments relating to eligibility for the alternative monthly reporting system under the Ontario Draft Rule⁽⁶⁾ and should be read inconjunction with Section 1.2, which deems a person or company to possess effective control over an issuer, if that person orcompany beneficially owns or controls voting securities carrying more than 30 percent of the votes attached to all of the outstandingvoting securities of the issuer. The term "effective control" is used in paragraph 4.2(b) to disqualify an eligible institutional investorfrom using the alternative monthly reporting system, if the investor proposes or intends to propose a transaction that would likelyresult in the investor's possession of effective control over a reporting issuer or a successor. In addition, the relief from the insiderreporting requirement provided by section 9.1 is available to an eligible institutional investor in respect of a reporting issuer onlyif, among other things, it does not possess "effective control" of the reporting issuer.

The term "eligible institutional investor" has been added to reflect the policy decision of the CSA that certain of the relief providedby the proposed National Instrument, including the availability of the alternative monthly reporting system and aggregation relief,is available only to "eligible institutional investors" instead of all passive investors. The CSA wish to limit the opportunity forabuse and note that institutional investors, more than any others, have expressed great difficulty in complying with the existing earlywarning system.⁽⁷⁾

The term "securityholding percentage" is new, and has been added to refer, in relation to a person or company and a class ofsecurities, to the percentage of the outstanding securities of the class of securities owned or controlled by the person or company,determined in accordance with the provisions of securities legislation listed in Appendix D to the proposed National Instrument.The effect of this determination is to ensure that the "securityholding percentage" of a person or company under the proposedNational Instrument will be determined under the provisions of securities legislation that apply to the early warning requirementsof securities legislation. This approach replaces the approach used in the 1995 Ontario Draft Rule in which those provisions wererepeated in the rule.

Section 1.2. Deemed Effective Control

Section 1.2 states that, for the purposes of the definition of "effective control", a person or company that beneficially owns, controls,or directs voting securities that have attached to them more than 30 percent of the votes attached to all outstanding securities of anissuer is deemed to possess effective control of the issuer. This provision creates a rebuttable presumption of effective control atthe 30 percent level, based on votes rather than voting securities.

Changes from the Ontario Draft Rule

Section 1.2 is new.

Part 2. GENERAL REPORTING PROVISIONS

Part 2 contains three provisions that relate generally to reporting requirements under the early warning requirements and thealternative monthly reporting system contained in Part 4.

Section 2.1. Reliance on Reported Outstanding Shares

Section 2.1 permits a person or company to rely upon information from two sources in determining the number or principal amountof outstanding securities of a class of a reporting issuer, for purposes of the early warning requirements or Part 4. The two sourcesof information are the financial statements of the reporting issuer, and any material change reports of the reporting issuer, whichevercontains the most recently relevant information. A person or company that has knowledge that the information reported or providedis inaccurate or has changed, and that also has knowledge of the correct information, is not entitled to rely on the reportedinformation.

Changes from the Ontario Draft Rule

Section 2.1 of the proposed National Instrument was published as subsection 1.2(3) of the Ontario Draft Rule and is substantivelyunchanged.

Section 2.2. Copies of News Release and Report

Section 2.2 requires a person or company filing a news release or report under the early warning requirements or a report underPart 4 to immediately send a copy of each filing to the reporting issuer.

Changes from the Ontario Draft Rule

Section 2.2 of the proposed National Instrument was published as section 1.4 of the Ontario Draft Rule, and is substantivelyunchanged.

Section 2.3. No Duplication of News Releases or Reports

Subsection 2.3(1) provides an exemption from the requirement to issue a news release under both the early warning requirementsand the acquisition announcement provisions if a news release has already been filed under the subsection with the earlier reportingrequirement, and the facts required to be contained in the releases are identical.

Subsection 2.3(2) provides an exemption from the requirement to file a report under both the acquisition announcement provisions,and either the early warning requirements or Part 4. This provision is designed to eliminate duplicative reports and is analogousto provisions of Canadian securities legislation of various jurisdictions that provide reporting relief for reports required to be filedunder both the local early warning provisions and the acquisition announcement provisions.

Part 3. REPORTING REQUIREMENTS UNDER THE EARLY WARNING REQUIREMENTS

Part 3 sets out the required contents of news releases issued under the early warning requirements and provides relief from theobligation to make separate reports under both the early warning requirements and the acquisition announcement provisions.

Section 3.1. Contents of News Releases and Reports

Subsection 3.1(1) states that a news release required under the early warning requirements must contain the information describedin Appendix E of the proposed National Instrument. Subsection 3.1(2) permits a news release required under the early warningrequirements to omit some of the information required by Appendix E, if the omitted information is included in the report that mustbe filed under the early warning requirements, and if the news release indicates the name and telephone number of the individualto contact in order to obtain a copy of the report. Subsection 3.1(3) requires the offeror to provide a copy of the report referred toin subsection 3.1(2) promptly on request.

Changes from the Ontario Draft Rule

The detailed disclosure requirements for the early warning system that were published in subsection 1.3(1) of the Ontario DraftRule have been moved to Appendix E to improve readability, but have not been substantively changed.

Section 3.2. Filing Relief for Joint Actors

Section 3.2 relieves a joint actor from filing a news release or report under the early warning requirements and the acquisitionannouncement provisions if two conditions are satisfied. First, the offeror must file a news release or report at the time that thejoint actor would be required to file, and second, the news release or report must disclose the information concerning the joint actorthat is required by securities legislation.

Changes from the Ontario Draft Rule

Section 3.2 is new and is designed to eliminate duplicative reporting.

Part 4. ALTERNATIVE MONTHLY REPORTING SYSTEM

Part 4 establishes the alternative monthly reporting system. It sets out the eligibility, reporting, and filing obligations of eligibleinstitutional investors, as well as exemptions from filing requirements for joint actors in certain circumstances.

Section 4.1. Exemption from the Early Warning Requirements

Section 4.1 provides that the early warning requirements do not apply to an eligible institutional investor if the investor is notdisqualified by section 4.2 from filing reports under the alternative monthly reporting system for the reporting issuer and eitherintends to file reports for the reporting issuer, if no reports are yet required to be filed, or is not in arrears of filing reports, if a reporthas been required to be filed. The effect of section 4.1 is that the moratorium provisions also will not apply to eligible institutionalinvestors using the alternative monthly reporting system.

Changes from the Ontario Draft Rule

Section 4.1 limits use of the alternative monthly reporting system to eligible institutional investors. The Ontario Draft Rule wouldhave permitted any person or company to use the alternative monthly reporting system upon the conditions contained in that rule.⁽⁸⁾

This section also clarifies that the exemption from the early warning requirements provided by the section commences as soon asthe eligible institutional investor intends to file reports under the alternative monthly reporting system, so long as it is eligible todo so. The exemption from the early warning requirements is not available if the eligible institutional investor is in arrears of filingunder Part 4.

Section 4.2. Disqualification of Eligibility

Section 4.2 provides that eligible institutional investors shall not file reports under the alternative monthly reporting system for areporting issuer if the eligible institution, or a joint actor with the eligible institutional investor, makes or intends to make a formalbid for securities of the reporting issuer. The alternative monthly reporting system is also unavailable if the eligible institutionalinvestor, or a joint actor, proposes or intends to propose a reorganization, amalgamation, merger, arrangement, or similar businesscombination with a reporting issuer that would reasonably be expected to result in the eligible institutional investor, either aloneor with its joint actors, possessing effective control over the reporting issuer or a successor. This section reflects the basic policyrationale of the alternative monthly reporting system, namely that relaxation of the early warning requirements is available onlyto those with passive investment intent.

Changes from the Ontario Draft Rule

The eligibility criteria of the alternative monthly reporting system have been amended from those contained in the Ontario DraftRule in the following manner.

First, the condition that an alternative reporter not intend to propose a take-over bid under the private exemption provisions ofsecurities legislation, contained in subparagraph 2.1(2)(a)(ii) of the Ontario Draft Rule, has been deleted on the basis that thegeneral prohibition against intending to take an action to acquire effective control would be sufficient to encompass such atransaction.

Second, paragraph 2.1(2)(c) of the Ontario Draft Rule imposed a condition that an alternative reporter not receive knowledge ofmaterial facts or changes concerning the reporting issuer in the ordinary course of its business. This condition has been deletedin order to relieve the alternative reporter from the requirement to assess the materiality of information received concerning theissuer.⁽⁹⁾

Third, the condition that an alternative reporter not intend any transactions that would reasonably be expected to result in controlof the reporting issuer is now based on the "effective control" standard, rather than the legal control standard used in the OntarioDraft Rule. This change is proposed on the basis that an effective control standard is less susceptible to abuse than a legal controlstandard, and may be an appropriate threshold for take-over bid matters generally.⁽¹⁰⁾

Section 4.3 Reporting and Filing Requirements

Subsection 4.3(1) requires an eligible institutional investor that has been relying on the exemption in section 4.1 and becomesdisqualified from using the alternative monthly reporting system, or no longer intends to file under the alternative monthly reportingsystem, to issue and file a news release immediately, and,within three days after filing the news release, file a report.

Subsection 4.3(2) provides that the news release and report referred to in subsection (1) shall contain the information required byAppendix F.

Subsection 4.3(3) provides that an eligible institutional investor ceases to be exempt from the early warning requirements for areporting issuer as of the date on which the press release required by subsection (1) is required to be filed.

Subsection 4.3(4) requires an alternative reporter that controls any securities of the reporting issuer that are owned by anotherperson or company to advise the owner of the extent of its holdings, upon a request made by the owner. If the alternative reporterhas reason to believe that the securityholding percentage of the person or company in a class of voting or equity securities of thereporting issuer equals 10 percent or more, the alternative reporter is also required to advise the person or company promptly ofthe number of securities held on its behalf.

Changes from the Ontario Draft Rule

Subsection 4.3(1) of the proposed National Instrument was published as subsection 2.1(4) and is substantially the same as thatsection. The time limit for filing a report under the early warning requirements has been changed from two business days to threedays.

Subsection 4.3(2) of the proposed National Instrument refers to Appendix F; part of Appendix F was published as the last part ofsubsection 2.1(4) of the Ontario Draft Rule. The disclosure requirements have been moved to an Appendix of the proposed NationalInstrument to increase clarity.

Subsection 4.3(3) is new.

Subsection 4.3(4) of the proposed National Instrument was published as subsection 2.1(3) of the Ontario Draft Rule and issubstantially unchanged, although the obligation to report "wherever practicable", contained in the Ontario Draft Rule, has beendeleted. It should be noted that paragraph 4.3(3)(b) is not designed to require reporting by entities such as mutual funds to theirunit holders, as unit holders are not generally considered to beneficially hold the securities held by the fund. The provision,contained in subsection 2.1(5) of the Ontario Draft Rule, which provided that that subsection did not require a person or companyto provide a report more than once in a calendar month has been deleted. The CSA consider it unnecessary.

Section 4.4. Restrictions on Acquisitions

Section 4.4 prevents a person or company from acquiring ownership of or control over any additional securities of a reporting issuerfor the period starting on the date that a person or company is required to file a news release under subsection 4.3(1) and ending10 days after the news release is filed.

Changes from the Ontario Draft Rule

Section 4.4 is new. This moratorium is similar to, and based on, the moratorium provided by Rule 13d-1(b)(3)(ii) under the U.S.Securities Exchange Act of 1934. It should be noted that voting of the shares held has not been proscribed.

Section 4.5. Filing Obligations under Part 4

Section 4.5 sets out the filing obligations of Part 4. An eligible institutional investor is required to file under Part 4 if one of thefollowing events happens in respect of the ownership or control of the eligible institutional investor in a relevant class of securitiesin a month:

(a) when an eligible institutional investor elects to begin using the system, and the eligible institutional investor owns orcontrols more than 10 percent of shares of a relevant class;

(b) when the ownership or control increases to 10 percent or more;

(c) when the ownership or control increases or decreases past whole number multiples of 2.5 percent in excess of 10 percent;that is, if the level increases or decreases past 12.5 percent, 15 percent, 17.5 percent and so on; and

(d) when the ownership or control decreases below 10 percent.

In each circumstance, the relevant determination is made at the end of the month; changes in a level of ownership or controlthroughout a month do not themselves trigger reporting obligations. The eligible institutional investor is required to file within10 days after the end of the month in which the relevant event occurred.

Changes from the Ontario Draft Rule

Section 4.5 represents a departure from the proposed monthly reporting schedule contained in paragraph 2.2(2)(a) of the OntarioDraft Rule, which required reporting when an alternative reporter's holding increased or decreased by 5 percent or more, comparedto the holding previously reported holding of the reporter. The CSA, after consultation with market participants and consideringa number of alternatives are proposing the fixed 2.5 percentage increments in order to achieve as straight forward a reporting systemas possible.⁽¹¹⁾

Section 4.6. Change Reports

Section 4.6 requires an alternative reporter to file a report within 10 days after the end of a month in which there has been a changein a material fact in the report most recently filed under Part 4 of the proposed National Instrument.

Changes from the Ontario Draft Rule

Section 4.6 was published as paragraph 2.2(2)(b) of the Ontario Draft Rule and is substantially changed.

Section 4.7. Contents of Reports

Subsection 4.7(1) requires a report filed under the alternative monthly reporting system to contain the information required byAppendix G of the proposed National Instrument.

Subsection 4.7(2) permits a report filed under paragraph 4.5(b) that reflects an eligible institutional investor's securityholdingpercentage of less than 10 percent to be limited to the name and address of the eligible institutional investor, the designation andnumber or principal amount of securities and the percentage of outstanding securities of a class of the reporting issuer owned orcontrolled by the eligible institutional investor, as well as a statement that the eligible institutional investor is eligible to use thealternative monthly reporting system.

Changes from the Ontario Draft Rule

The disclosure requirements referred to in subsection 4.7(1) and contained in Appendix G of the proposed National Instrument werepublished in subsection 2.2(3) of the Ontario Draft Rule. The disclosure requirements have been moved to an Appendix of theproposed National Instrument to increase clarity.

Section 4.8. Exemptions

Section 4.8 provides an exemption for a joint actor with a person or company from the requirement to file a report under thealternative monthly reporting system in order to eliminate the filing of duplicative reports. The exemption is available if the personor company files a report under the alternative monthly reporting system at the time that the joint actor would be required to file,and the report discloses the information concerning the joint actor required by the proposed National Instrument.

Changes from the Ontario Draft Rule

Section 4.8 is new. In Ontario, it is equivalent to section 199 of the Ontario Regulation; the Ontario Commission will revokesection 199 in connection with the coming into force of the proposed National Instrument.

Part 5. AGGREGATION RELIEF

Part 5 provides relief from aggregation to eligible institutional investors.

Section 5.1. Separate Business Units

Section 5.1 applies to eligible institutional investors, or their affiliates or associates, that conduct business or investment activitiesthrough business units. They are permitted, for the purposes of the applicable provisions and applicable definitions, to treatsecurities that are owned or controlled through a business unit separately from securities owned or controlled through any otherof its business units, if six conditions are satisfied.

Paragraph (a) requires that decisions on the acquisition, disposition, holding, and voting of the securities owned or controlled bya business unit be made in all circumstances by that business unit.

Paragraph (b) requires that the business unit not be a joint actor with any other business unit in respect of the securities.

Paragraph (c) requires that no business unit or company that is part of the investment decision-making process on behalf of abusiness unit that relies on the exemption can be part of that process for another business unit. There is, however, an exceptionfrom paragraph (c) in the case of preparing research reports or monitoring or ensuring compliance with regulatory requirementsor general investment policies, guidelines, objectives, or restrictions.

Paragraph (d) requires that the eligible institutional investor or affiliate or associate has reasonable grounds for believing that eachbusiness unit complies with the applicable provisions and securities legislation related to the applicable definitions in connectionwith the securities that it owns or controls.

Paragraph (e) requires that the eligible institutional investor or affiliate or associate has taken reasonable steps to ensure that eachbusiness unit complies with the requirements of Part 5 of the proposed National Instrument.

Paragraph (f) requires that the eligible institutional investor or affiliate or associate complies with the reporting and record keepingrequirements contained in section 5.3 of the proposed National Instrument.

Changes from the Ontario Draft Rule

The basic structure of the aggregation relief contained in the proposed National Instrument is similar to that contained in subsection3.1(1) of the Ontario Draft Rule. The substance of the relief has been changed, however, in several ways.

First, the relief proposed to be available under section 5.1 would be available only to eligible institutional investors or their affiliatesor associates. The relief proposed in the Ontario Draft Rule would have been available to any person or company carrying onbusiness through separate business units.

In addition, a number of changes have been made to the conditions for aggregation relief contained in the proposed NationalInstrument. Paragraph 5.1(a) of the proposed National Instrument, published as the first part of paragraph 3.1(a) of the OntarioDraft Rule, now requires that independent decision-making must be present in "all circumstances" before relief is available, notjust in connection with the specific transaction under consideration.

Paragraph 5.1(c) contains an exception, based on paragraph 3.1(5)(b) of the Ontario Draft Rule, that is now available in the caseof preparing research reports or monitoring or ensuring compliance with regulatory requirements or general investment policies,among others. This change has been made in response to comments suggesting that participating in decision-making be permittedto the extent necessary to supervise compliance with regulatory requirements or investment guidelines or restrictions.⁽¹²⁾

Subsection 5.1(d) is new, and has been added to require that the eligible institutional investor has reasonable grounds for believingthat each business unit complies with its obligations under the applicable provisions and securities legislation related to theapplicable definitions.

Paragraph 5.1(f) is new.

Section 5.2. Securities held by An Investment Fund

Section 5.2 applies to eligible institutional investors, or their affiliates or associates. They are permitted, for the purposes of theapplicable provisions and applicable definitions, to treat securities that are owned or controlled by an investment fund over whichthe eligible institutional investor or affiliate or associate exercises or shares control, or securities into which those securities areconvertible, exercisable or exchangeable, separately from other securities owned or controlled by the eligible institutional investoror affiliate or associate, if seven conditions are satisfied.

Paragraph (a) provides that the investment fund not be a private mutual fund.

Paragraph (b) requires the eligible institutional investor, affiliate, or associate to have retained, under written agreement, a personor company that acts at arm's length to it, as portfolio manager of the investment fund.

Paragraph (c) requires the portfolio manager to be identified as managing the investment fund in a prospectus or offering materialsused in the private placement of securities of the investment fund.

Paragraph (d) requires that none of the eligible institutional investor, an affiliate or associate, or a director, officer, partner,employee, or agent of any of them makes, or is involved in decisions in respect of, the acquisition, disposition, holding, or votingof securities of specific issuers made by the portfolio manager. There is an exception available for a number of activities, such asinvestment reports and monitoring or ensuring compliance with regulatory requirements.

Paragraph (e) requires the eligible institutional investor, or an affiliate or associate, to have reasonable grounds for believing thatthose securities are included by the portfolio manager in its compliance with the applicable provisions and applicable definitions.

Paragraph (f) requires the portfolio manager to neither control, nor be controlled by, the eligible institutional investor or an affiliateor associate.

Paragraph (g) requires that the eligible institutional investor or affiliate or associate complies with the reporting and record keepingrequirements contained in section 5.3 of the proposed National Instrument.

Changes from the Ontario Draft Rule

Section 5.2 was published as subsection 3.1(2) of the Ontario Draft Rule. As with section 5.1, section 5.2 has been amended toprovide relief only to eligible institutional investors or their affiliates or associates, rather than any person or company.

Paragraph 3.1(2)(b) of the Ontario Draft Rule, which required that the constating documents of the fund require securityholderapproval for change of portfolio manager, has not been carried forward.

Paragraph 5.2(e), formerly subparagraph 3.1(2)(c)(ii) of the Ontario Draft Rule, now refers to "reasonable grounds" in respect ofcompliance.

Paragraph 5.2(f) is new, and has been designed to ensure that the portfolio manager must be independent of the eligible institutionalinvestor.

Paragraph 5.2(g) is new.

Section 5.3. Reporting and Record Keeping

Subsection 5.3(1) requires an eligible institutional investor relying on the exemptions contained in sections 5.1 or 5.2 to indicatecertain matters in any document released or filed by it under the applicable provisions or as the result of the application of theapplicable definitions. These documents must indicate the eligible institutional investor's reliance on the relevant section, theidentity of the business units or investment funds for which ownership and control of the securities have been disclosed, as wellas the fact that securities owned or controlled by other business units or investment funds have not been, or may not have been,disclosed.

In addition, an eligible institutional investor or affiliate or associate relying on sections 5.1 or 5.2 is required by subsection 5.3(2)to maintain records of the details concerning business units, under section 5.1, and investment funds, under section 5.2, that aretreated separately for the purposes of compliance with the applicable provisions and securities legislation related to the applicabledefinitions.

Changes from the Ontario Draft Rule

The requirement contained in subsection 3.1(3) of the Ontario Draft Rule to list excluded business units in filings has been replacedwith the requirement of subsection 5.3(2), whereby records of such matters must be maintained.

Section 5.4. No Requirement to Satisfy Insider Reporting Requirement

Section 5.4 applies to every director or senior officer of an eligible institutional investor who is an insider of the reporting issuersolely as a result of being a director or senior officer of the eligible institutional investor. If an eligible institutional investor relieson any provision in Part 5 of the proposed National Instrument so that it is not required to satisfy the insider reporting requirementfor a reporting issuer, section 5.4 provides that the eligible directors and officers are similarly not required to satisfy those filingrequirements.

Changes from the Ontario Draft Rule

Section 5.4 is new.

Part 6. ISSUER ACTIONS

Subsection 6.1(1) provides an exemption from the early warning system requirements and the obligation to report under Part 4 inrespect of an increase in the percentage of securities held or controlled arising solely from a reduction in outstanding securities thatoccurs as a result of redemptions, retractions, or other repurchases by a reporting issuer. The redemptions, retractions, or otherrepurchases must affect, or be offered to, all securityholders of a class or series.

Subsection 6.1(2) provides an exemption from the early warning requirements in respect of a decrease in the percentage of securitiesheld or controlled, arising solely from an increase in outstanding securities occurring because of treasury issuances of securitiesby a reporting issuer.

Subsection 6.1(3) notes that a person or company may rely upon an exemption provided by this section with respect to a class ofsecurities only until it undertakes a transaction that changes its securityholding percentage.

Subsection 6.1(4) requires a person or company undertaking a transaction as described in subsection (3) to comply with the earlywarning requirements, Part 4 or the insider reporting requirement, as applicable. The compliance should reflect the changes in thesecurityholding percentage of the person or company since the last news release or report.

Changes from the Ontario Draft Rule

Section 6.1 of the proposed National Instrument was published as section 4.1 of the Ontario Draft Rule. This section now appliesto securities that are controlled, as well as those that are held. The exemption contained in subsection 6.1(1) is now available onlyif the redemption, retraction, or other repurchase for cancellation is offered to all securityholders of a class or series of securities.Subsections (3) and (4) have been added to clarify that the exemptions provided by subsections (1) and (2) expire when the personor company relying on those exemptions undertakes transactions in respect of the relevant securities.

Part 7. UNDERWRITING EXEMPTION

Section 7.1 provides that the early warning requirements do not apply to a person or company, and the obligation to report underPart 4 does not apply, in respect of securities owned in its capacity as underwriter, during an underwriting period. Application ofthis section is dependent upon the person or company having issued and filed a news release announcing the proposed underwritingand identifying the issuer, the designation, and the number or amount of securities underwritten.

Changes from the Ontario Draft Rule

Section 7.1 of the proposed National Instrument was published as section 6.1 of the Ontario Draft Rule and is substantiallyunchanged.

Part 8. RELIEF FOR PLEDGEES

Part 8 sets out the relief from the applicable provisions and securities legislation related to the applicable definitions that isavailable to pledgees.

Section 8.1. Relief for Pledgees

For securities that are controlled by a financial institution as a pledgee, and any securities into which those securities areconvertible, exercisable or exchangeable, in either case, that are pledged, mortgaged, or otherwise encumbered as collateral for adebt, under a written pledge agreement and in the ordinary course of the pledgee's business, subsection 8.1(1) exempts the financialinstitution from the applicable provisions, and those securities are not required to be taken into account for the purposes of theapplicable definitions. Subsection (1) ceases to be available when the financial institution is legally entitled to dispose of thesecurities as pledgee for the purpose of applying proceeds of realization in repayment of the secured debt. The phrase "legallyentitled to dispose" means that the pledgee has satisfied all requirements, under both the pledge agreement and the statute, to permitit to sell.

Changes from the Ontario Draft Rule

Section 8.1 is new, although much of the substance of this provision originated in subsection 8.1(3) of the Ontario Draft Rule.Section 8.1 now provides relief for all pledged securities, not just control block pledged securities. Relief is available from theapplicable provisions and applicable definitions, instead of being restricted to the early warning requirements. Relief under section8.1 is now only restricted to financial institutions acting as pledgee. Section 8.1 now applies to securities that can be converted,exchanged, or exercised into securities over which the financial institution has the power to control. This last change has been madein recognition of the fact that these securities may be deemed to be outstanding under securities legislation, thereby creating theneed for relief for pledgees.

The requirement that the relevant pledge agreement not be entered into with the purpose of effecting a change of control, containedin paragraph 8.1(3)(c) of the Ontario Draft Rule, has been deleted.

Section 8.2. Further Relief for de minimis Pledgees

For securities that are controlled by a financial institution as a pledgee, and any securities into which those securities areconvertible, exercisable or exchangeable, in either case that are pledged, mortgaged, or otherwise encumbered as collateral for adebt, under a written pledge agreement and in the ordinary course of the pledgee's business, the financial institution is exempt fromthe applicable provisions, and those securities are not required to be taken into account for the purposes of the applicabledefinitions, if three conditions are satisfied. First, the principal amount of the debt and the principal amount of all other debts, ofor guaranteed by the same borrower to the same pledgee, must not exceed $2 million. Second, the pledged securities must not bevoting or equity securities. Third, the pledged securities, and securities into which those securities are convertible, exercisable orexchangeable, must not constitute 10 percent or more of the voting or equity securities.

Changes from the Ontario Draft Rule

Section 8.2 is new, and has been designed to reduce compliance costs by making relief from the applicable provisions availablefor pledged securities, in the context of loans below certain amounts or percentages.⁽¹³⁾

Section 8.3. Corresponding Insider Reporting Relief

Where a financial institution is exempt under section 8.1 or 8.2 from the insider reporting requirement, section 8.3 exemptsdirectors and officers of that financial institution from the insider reporting requirement as well. The exemption is available to eachdirector or senior officer who is an insider of the reporting issuer solely as a result of being a director or senior officer of thefinancial institution referred to above that is an insider of the reporting issuer.

Changes from the Ontario Draft Rule

Section 8.3 is new.

Part 9. INSIDER REPORTING EXEMPTION; EARLY WARNING DECREASE REPORTS

Part 9 is designed to exempt eligible institutional investors that are passive investors from the insider reporting requirement uponcertain conditions.

Section 9.1 Insider Reporting Exemption; Early Warning Decrease Reports

Section 9.1 exempts an eligible institutional investor from the insider reporting requirement for a reporting issuer if six conditionsare satisfied. Paragraph 9.1(1)(a) requires that the eligible institutional investor has fulfilled its obligations to issue news releasesand file reports under the early warning requirements or Part 4. Paragraph 9.1(1)(b) requires that the eligible institutional investoris not disqualified under section 4.2 from filing reports under Part 4. Paragraph 9.1(1)(c) requires that the eligible institutionalinvestor does not have knowledge of any material fact or material change in respect of the reporting issuer that has not beengenerally disclosed, and paragraph 9.1(1)(d) requires that the eligible institutional investor does not ordinarily receive knowledgeof any material fact or material change with respect to the reporting issuer that has not been generally disclosed. Paragraph9.1(1)(e) requires that there are no directors or officers of the reporting issuer who were, or appear to have been, selected,nominated, or designated by the eligible institutional investor or any joint actor. Paragraph 9.1(1)(f) requires that the eligibleinstitutional investor, either alone or with any joint actors, does not possess effective control of the reporting issuer.

Subsection 9.1(2) requires an eligible institutional investor relying on subsection 9.1(1) to maintain records including informationthat, absent this section, would have been required to be included in a report filed under the insider reporting requirement.

Subsection 9.1(3) applies to an eligible institutional investor that is filing reports under the early warning requirements for areporting issuer, and whose securityholding percentage in a class of voting or equity securities of the reporting issuer decreases bytwo percent or more. Such an eligible institutional investor may rely upon the exemption contained in subsection 9.1(1) only if oneof two conditions are satisfied. The eligible institutional investor must have treated the decrease as a change in a material fact, orif the decrease arose through no action by the eligible institutional investor, which must not have undertaken any transaction inrespect of the class of securities since the decrease.

Subsection 9.1(4) sets out an exemption from subsection 9.1(3). It prevents an eligible institutional investor from relying on theexemption contained in subsection 9.1(1) if the eligible institutional investor, or any joint actor, has either purchased or sold, inthe previous month, 50 percent or more of all of the securities of a class that were reported sold on stock exchanges or over-the-counter markets in the previous month.

Section 9.1(5) exempts directors and officers of an insider that qualifies for insider reporting relief under section 9.1 from theinsider reporting requirement for the reporting issuer.

Changes from the Ontario Draft Rule

To reduce the opportunity for abuse, the relief in subsection 9.1(1) is now limited to eligible institutional investors, rather than anyinsiders as in the Ontario Draft Rule. The exemption under subsection 9.1(1) is available independently of actual reliance on Part4, to avoid discouraging institutional investors from reporting under the traditional early warning regime.

Paragraph 9.1(1)(c) of the proposed National Instrument was published as paragraph 10.1(1)(c) of the Ontario Draft Rule; it nolonger refers to future-oriented financial information, as the general concept of inside information should suffice in this regard.⁽¹⁴⁾

Paragraphs 9.1(e) and (f) of the proposed National Instrument were published as paragraphs 10.1(1)(d) and (e), respectively, ofthe Ontario Draft Rule. As with the eligibility requirements for Part 4, the legal control standard contained in the Ontario DraftRule has been replaced with an "effective control" standard in paragraph 9.1(1)(d) of the proposed National Instrument.⁽¹⁵⁾

Paragraph 9.1(2) is new.

Subsection 9.1(3) has been amended to lower the threshold of five percent or more of the outstanding securities of the class to twopercent.

Subsection 9.1(4) of the proposed National Instrument now ensures that insider reporting will be required in cases of "marketdomination", in an effort to limit the opportunity for abuse, especially in the context of thinly-traded securities.

Part 10. MORATORIUM RELIEF

Subsection 10.1(1) permits relief for a person or company, other than an investment manager, from the moratorium provisions.It applies to acquisitions of, or offers to acquire, securities, if those acquisitions or offers are made by an investment managerwithout the direction or prior knowledge of the person or company.

Under subsection 10.1(3), the moratorium provisions do not apply to a person or company in respect of any acquisitions of, or offersto acquire, securities, made solely in its capacity as an approved specialist or market maker, recognized by a stock exchange or anover-the-counter market that represents a published market for the securities.

Changes from the Ontario Draft Rule

Section 10.1(1) has been amended to clarify that the exemption is available only to the client, and not to the manager.

Part 11. EXEMPTIONS

Section 11.1 permits the regulator or, in the case of Ontario, the securities regulatory authority, to provide exemptions from theproposed National Instrument.

Changes from the Ontario Draft Rule

Section 11.1 of the Ontario Draft Rule contained an inadvertent take-over bid provision that has not been carried forward into theproposed National Instrument. The CSA have recognized that an inadvertent take-over bid provision would lead to a circumventionof the equal treatment of all shareholders and could provide the opportunity for abuse. As a result, the CSA have determined thatrelief will be granted on a case-by-case basis, and have noted the possible issue regarding providing retroactive relief from statutoryprovisions.

Appendix A CONTROL BLOCK DISTRIBUTION DEFINITION

Appendix A sets out the control block distribution provisions contained in the securities legislation of seven jurisdictions.

Appendix B EARLY WARNING REQUIREMENTS

Appendix B sets out the early warning requirements provisions contained in the securities legislation of six jurisdictions.

Appendix C MORATORIUM PROVISIONS

Appendix C sets out the moratorium provisions contained in the securities legislation of six jurisdictions.

Appendix D SECURITY OWNERSHIP AND CONTROL PROVISIONS

Appendix D is part of the definition of the term "securityholding percentage", and contains the provisions of securities legislationthat determine beneficial ownership and deemed beneficial ownership of securities, the calculation of holdings and joint offers,unissued securities that are deemed outstanding, as well as when a person or company is acting jointly or in concert with anotherperson or company.

Changes from the Ontario Draft Rule

Appendices A, B, C and D are new.

Appendix E SECURITY OWNERSHIP AND CONTROL PROVISIONS

The first part of Appendix E sets out the disclosure required to be included in a news release that is filed under the early warningrequirements. Clause 2 of Appendix E permits an offeror to omit the securityholding percentage from a news release if it isincluded in the corresponding report filed under the early warning requirements, and the change in percentage is less than onepercent of the class. This exception enables omission of percentage information in cases of minor acquisitions, such as thosepursuant to a normal course purchase programme. Finally, clause 3 of Appendix E permits a news release to include informationin addition to that required by the proposed National Instrument, as well as a declaration that the issuance of the news release isnot an admission that a person or company named in the news release owns or controls any described securities or is a joint actor.

Changes from the Ontario Draft Rule

The disclosure requirements referred to in subsection 3.1(1) and contained in the first part of Appendix E of the proposed NationalInstrument were published in subsection 1.3(1) of the Ontario Draft Rule. The content of the requirements has not been changedsubstantially, although a few amendments have been made. The news release is no longer required to be authorized by a seniorofficer of the offeror, or by the offeror in the case of an individual. Clause 1(b) of Appendix E, published as paragraph 1.3(1)(b)of the Ontario Draft Rule, now requires additional information about whether the offeror acquired ownership or control in thecircumstances set out in that paragraph. The requirement for information concerning security interests contained in paragraph1.3(1)(f) of the Ontario Draft Rule has not been carried forward, and paragraph 1.3(1)(h) of the Ontario Draft Rule, now clause1(g) of Appendix D of the proposed National Instrument, has been revised by adding the words "other than lending arrangements",to protect the confidentiality of lending relationships. Paragraph 1.3(1)(l) of the Ontario Draft Rule, which would have requireddisclosure of the fact that one was not relying on the alternative monthly reporting exemption, has been deleted, as has subsection1.3(2).

Clause 2 of Appendix E is new.

Clause 3 of Appendix E was published as subsection 1.3(3) of the Ontario Draft Rule. It no longer requires that the informationincluded be relevant.

Appendix F REQUIRED DISCLOSURE IN NEWS RELEASE AND REPORT FILED BY AN ELIGIBLEINSTITUTIONAL INVESTOR UNDER SECTION 4.3

The required disclosure in Appendix F is based on the disclosure required by Appendix E, but is limited to disclosure that doesnot involve a transaction.

Changes from the Ontario Draft Rule

Appendix F is new.

Appendix G REQUIRED DISCLOSURE IN REPORT FILED BY AN ELIGIBLE INSTITUTIONAL INVESTORUNDER PART 4

Appendix G sets out the disclosure required to be included in a report filed under Part 4. Clauses 2 and 3 of Appendix G are similarto clauses 2 and 3 of Appendix E.

Changes from the Ontario Draft Rule

The disclosure requirements referred to in subsection 4.8(1) and contained in the first part of Appendix G of the proposed NationalInstrument were published in subsections 1.1(3) and 2.2(3) of the Ontario Draft Rule, and have been moved to the Appendix forclarity. The information to be disclosed has not been changed substantially from the Ontario Draft Rule, although a fewamendments have been made; a number of requirements have not been carried forward. For example, the report is no longerrequired to be signed by or on behalf of the alternative reporter.

Clause 2 of Appendix G is new.

Clause 3 of Appendix G was published as subsection 1.3(3) of the Ontario Draft Rule. It no longer requires that the informationincluded be relevant.

Authority for Proposed National Instrument

In those jurisdictions in which the proposed National Instrument is to be adopted or made as a rule or regulation, the securitieslegislation in each of those jurisdictions provides the securities regulatory authority with rule-making or regulation-making authorityin respect to the subject matter of the proposed National Instrument.

In Ontario, the following provisions of the Ontario Act provide the Ontario Commission with the authority to make the proposedNational Instrument. Paragraph 143(1)20 of the Ontario Act authorizes the Ontario Commission to make rules in respect ofexemptions from the prospectus requirements, as well as for the removal of exemptions from those requirements. Paragraphs143(1)22 and 24 of the Ontario Act authorize the Ontario Commission to make rules in respect of additional continuous disclosureobligations and their preparation and dissemination. Paragraph 143(1)28 of the Ontario Act provides authority to the OntarioCommission to make rules regulating take-over bids and insider bids. Paragraph 143(1)30 of the Ontario Act authorizes the OntarioCommission to make rules providing for exemptions from any requirement of Part XXI (Insider Trading and Self-Dealing).Paragraph 143(1)39 of the Ontario Act authorizes the Ontario Commission 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 underor governed by the Ontario Act.

Alternatives Considered

In the October 1995 Notice accompanying the publication of the Ontario Draft Rule for comment, the Ontario Commission outlinedthe alternatives to the Ontario Draft Rule, being the 1993 and 1994 Ontario Proposals, that it had considered. The availablealternatives have not changed.

Unpublished Materials

In proposing the proposed National Instrument, the CSA have not relied on any significant unpublished study, report or other writtenmaterials, other than certain of the comments made in the comment letters received by the Ontario Commission in connection withthe 1993 and 1994 Ontario Proposals, and the Ontario Draft Rule.

Anticipated Costs and Benefits

The proposed Rule will facilitate compliance by persons who have generally represented that they have not been able to complywith the early warning and related requirements. It will also ensure the dissemination of important information concerningsignificant holdings to the marketplace. In so doing, it will enable the marketplace to operate more efficiently, but it will entailcertain compliance costs and other costs, including potential dissemination of investment strategies.

In permitting a monthly reporting alternative, the CSA have attempted to minimize these costs, as well as any possible impact ontrading patterns. In addition, the CSA have attempted to design an alternative early warning system similar to, although somewhatbroader than, the one in the United States. It is broader in the sense that its use is not limited to certain classes of passiveinstitutional investors. It is also less demanding than its American counterpart, in that the CSA at this time are not proposingdisclosure similar to that required of major passive investors in the United States in connection with Schedule 13F.

In permitting aggregation relief, the CSA have tried to respond to the increasing diversity and integration of the Canadian financialservices industry, and has attempted to minimize unnecessary costs, while seeking to ensure the dissemination of information thatthe market requires to operate efficiently.

Other elements of the proposed National Instrument allow exemptions from a number of filing and reporting requirements, whichshould serve to reduce compliance costs.

Amendment of Regulation - Ontario

In Ontario, the Ontario Commission proposes to revoke sections 197 and 199 of the Ontario Regulation.

Specific Requests for Comment

The Commission des valeurs mobilières du Québec ("CVMQ") requests comment on the two following issues relating to theproposed National Instrument.

First, the definition of "financial institution" contained in the proposed National Instrument includes entities engaged in financialservices activities that are supervised and regulated under the insurance laws of the United Kingdom of Great Britain and NorthernIreland. An insurance company is one type of "eligible institutional investor" under the proposed National Instrument, and thereforemay be entitled to the various types of relief provided. The CVMQ requests comment on whether the definition of "financialinstitution" should be expanded to include entities engaged in financial services activities that are entitled to carry on business inCanada and that are supervised and regulated under the insurance laws of any country.

Second, the CVMQ requests comment on whether the structure of the relief provided by section 5.1 is appropriate in that it enablesthe creation of a large number of business units which will be automatically entitled to aggregation relief without the securitiesregulators' discretionary evaluation.

For example, within a trust company, the company funds and the guaranteed funds would be considered separate business unitsas long as the criteria set out in section 5.1 are respected. It appears important to the CVMQ that securities regulators be able toexercise their judgment regarding the application of the criteria in section 5.1 in such cases.

Therefore, the CVMQ would propose to provide aggregation relief only to:

general accounts and segregated funds of a life insurance enterprise,

a Canadian portfolio of an insurance enterprise, and

for a trust company, the securities portfolio in which the estate, trust and agency funds invested would betreated separately from the securities portfolio in which the company and the guaranteed funds were invested.

Other eligible institutional investors would be entitled to obtain aggregation relief upon request to the authorities who wouldexercise their discretionary powers. Consequently, the CVMQ requests comment on the proposal which is presented in order toobtain insight as to its practicability and to find out if other institutional investors should benefit from automatic aggregation relief.

Comments

Interested parties are invited to make written submissions with respect to the proposed National Instrument. Submissions receivedby December 7, 1998 will be considered.

Submissions should be sent to all of the Canadian securities regulatory authorities listed below in care of the Ontario Commission,in duplicate, as indicated below:British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Securities Commission
The Manitoba Securities Commission
Ontario Securities Commission
Office of the Administrator, New Brunswick
Registrar of Securities, Prince Edward Island
Nova Scotia Securities Commission
Department of Government Services and Lands, Newfoundland and Labrador
Registrar of Securities, Northwest Territories
Registrar of Securities, Government of the Yukon Territory

c/o Daniel P. Iggers, Secretary
Ontario Securities Commission
20 Queen Street West
Suite 800, Box 55
Toronto, Ontario M5H 3S8

Submissions should also be addressed to the Commission des valeurs mobilières du Québec as follows:Claude St Pierre, Secretary
Commission des valeurs mobilières du Québec
800 Victoria Square
Stock Exchange Tower
P.O. Box 246, 17th Floor
Montréal, Québec H4Z 1G3

A diskette containing the submissions (in DOS or Windows format, preferably WordPerfect) should also be submitted. As securitieslegislation in certain provinces requires that a summary of written comments received during the comment period be published,confidentiality of submissions cannot be maintained.

Questions may be referred to any of:
Brenda Leong
British Columbia Securities Commission
(604) 899-6647

David Sheridan
Alberta Securities Commission
(403) 297-2630

Barbara Shourounis
Saskatchewan Securities Commission
(306) 787-5645

Douglas Brown
Manitoba Securities Commission
(204) 945-0605

Tanis J. MacLaren
Ontario Securities Commission
(416) 593-8259
Fernand Lavigne
Commission des valeurs mobilières du Québec
(514) 873-5326

Bill Slattery
Nova Scotia Securities Commission
(902) 424-7355

Proposed National Instrument

The text of the proposed National Instrument follows, together with footnotes that are not part of the National Instrument, but havebeen included to provide background and explanation.
DATED: September 4, 1998.

TABLE OF CONTENTS

PART TITLE

PART 1 DEFINITIONS AND INTERPRETATION
1.1 Definitions
1.2 Deemed Effective Control

PART 2 GENERAL RELIANCE AND REPORTING PROVISIONS
2.1 Reliance on Reported Outstanding Shares
2.2 Copies of News Release and Report
2.3 No Duplication of News Releases or Reports

PART 3 REPORTING REQUIREMENTS UNDER THE EARLY WARNING REQUIREMENTS
3.1 Contents of News Releases and Reports
3.2 Filing Relief for Joint Actors

PART 4 ALTERNATIVE MONTHLY REPORTING SYSTEM
4.1 Exemption from the Early Warning Requirements
4.2 Disqualification
4.3 Reporting and Filing Requirements
4.4 Restrictions on Acquisitions
4.5 Filing Obligations under this Part
4.6 Change Reports
4.7 Contents of Reports
4.8 Exemptions

PART 5 AGGREGATION RELIEF
5.1 Separate Business Units
5.2 Securities Held by an Investment Fund
5.3 Reporting and Record Keeping
5.4 No Requirement to Satisfy Insider Reporting Requirement

PART 6 ISSUER ACTIONS
6.1 Issuer Actions

PART 7 UNDERWRITING EXEMPTION
7.1 Underwriting Exemption

PART 8 RELIEF FOR PLEDGEES
8.1 Relief for Pledgees
8.2 Further Relief for de minimis Pledgees
8.3 Corresponding Insider Reporting Relief

PART 9 INSIDER REPORTING EXEMPTION; EARLY WARNING DECREASE REPORTS
9.1 Insider Reporting Exemption; Early Warning Decrease Reports

PART 10 MORATORIUM RELIEF
10.1 Moratorium Relief

PART 11 EXEMPTIONS
11.1 Exemptions

APPENDIX A CONTROL BLOCK DISTRIBUTION DEFINITION

APPENDIX B EARLY WARNING REQUIREMENTS

APPENDIX C MORATORIUM PROVISIONS

APPENDIX D SECURITY OWNERSHIP AND CONTROL PROVISIONS

APPENDIX E REQUIRED DISCLOSURE IN NEWS RELEASE FILED UNDER EARLY WARNING REQUIREMENTS

APPENDIX F REQUIRED DISCLOSURE IN NEWS RELEASE AND REPORT FILED BY AN ELIGIBLE INSTITUTIONALINVESTOR UNDER SECTION 4.3

APPENDIX G REQUIRED DISCLOSURE IN REPORT FILED BY AN ELIGIBLE INSTITUTIONAL INVESTOR UNDERPART 4

PART 1 DEFINITIONS AND INTERPRETATION⁽¹⁷⁾

1.1 Definitions

(1) In this Instrument

"acquisition announcement provisions" means the requirement in securities legislation⁽¹⁸⁾ for an offeror to issue a newsrelease if, during a formal bid for voting or equity securities of a reporting issuer by a person or company other thanthe offeror, the offeror acquires ownership of, or control over, securities of the class subject to the bid that, togetherwith the offeror's securities of the class, constitute an amount equal to or greater than the amount specified insecurities legislation;⁽¹⁹⁾

"acting jointly or in concert" has the meaning ascribed to that phrase in securities legislation;

"applicable definitions" means

(a) the definitions of "take-over bid"⁽²⁰⁾ and "offeror's securities" in the take-over provisions, and

(b) the control block distribution definition;

"applicable provisions" means

(a) the early warning requirements,

(b) Part 4,

(c) the moratorium provisions,

(d) the insider reporting requirement,⁽²¹⁾

(e) subsection 9.1(4), and

(f) subsection 2.1(2) of National Instrument 62-101 Control Block Distribution Issues;⁽²²⁾

"business unit" means a legal entity or part of a legal entity, or a combination of legal entities or parts of legalentities, that engage in a distinct business or investment activity separately from other businesses and investmentactivities of the relevant entities;

"class" means, in relation to a security, a class or series of a class of the security;

"control" means, in relation to a security, the right to exercise control or direction over the security, and "controls","controlled" and similar words have corresponding meanings;

"control block distribution definition" means the provisions of securities legislation listed in Appendix A;

"early warning requirements" means the provisions of securities legislation listed in Appendix B;

"effective control" means, for a reporting issuer, the control in fact of the reporting issuer by a person or companythrough the ownership of, or control over, voting securities of the reporting issuer, other than securities held by wayof security only;⁽²³⁾

"eligible institutional investor" means

(a) a financial institution,

(b) a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada),a pension commission of a jurisdiction⁽²⁴⁾, or similar regulatory authority,

(c) a mutual fund that is not a reporting issuer,

(d) an investment manager exercising full discretionary authority over securities, subject to general investmentpolicies, guidelines, objectives or restrictions and to legal requirements, or

(e) a person or company referred to in clauses (D) or (F) of Rule 13d-1(b)(1)(ii) under the 1934 Act;⁽²⁵⁾

"equity security" has the meaning ascribed to that term in securities legislation;

"financial institution" means

(a) a Canadian financial institution,⁽²⁶⁾

(b) a bank or insurance company referred to in clauses (B) or (C) of Rule 13d-1(b)(1)(ii) under the 1934 Act, or

(c) an entity engaged in financial services activities that is supervised and regulated under the banking, insurance,trust or similar laws of the United Kingdom of Great Britain and Northern Ireland;

"formal bid" has the meaning ascribed to that term in securities legislation;

"investment manager" means a person or company that

(a) is registered or licensed to provide investment counselling, portfolio management or similar advisory servicesin respect of securities, or is exempt from the requirement to be so registered or licensed, under the securitieslaws of a jurisdiction, the Investment Advisers Act of 1940 of the United States of America, as amended, or theFinancial Services Act, 1986 of the United Kingdom of Great Britain and Northern Ireland, as amended, and

(b) provides the services referred to in paragraph (a) for valuable consideration under a contractual arrangement;

"joint actor" means, in relation to a person or company and a security, another person or company acting jointly orin concert with the person or company in connection with the ownership of, or control over, the security;

"moratorium provisions" means the provisions of securities legislation listed in Appendix C;

"news release" includes a press release;

"offeror" and "offeror's securities" have the respective meanings ascribed to those terms in securities legislation;

"ownership" means, in relation to a security, the beneficial ownership of the security, and "owns", "owned" andsimilar words have corresponding meanings;

"pledgee" includes a holder of any type of security interest;

"portfolio adviser" means a person or company that provides investment advice or portfolio management servicesto, or for, an investment fund;

"securityholding percentage" means, in relation to a person or company and a class of securities, the percentage ofthe outstanding securities of the class owned or controlled by the person or company, determined in accordance withthe provisions of securities legislation listed in Appendix D;⁽²⁷⁾

"take-over provisions" means the provisions in securities legislation that regulate take-over bids⁽²⁸⁾ and issuer bids;⁽²⁹⁾and

"underwriting period" means, for a person or company acting as an underwriter of securities, the period commencingfrom the date of execution of an underwriting agreement or commitment until the earlier of

(a) the expiration of 40 days after the date of the closing of the purchase of the securities, and

(b) the date of the completion of the distribution by the underwriter of the securities.

1.2 Deemed Effective Control - For the purposes of the definition of "effective control", a person or company that, eitheralone or together with one or more joint actors, owns or controls voting securities carrying more than 30 percent of thevotes attached to all of the outstanding voting securities of a reporting issuer shall, in the absence of evidence to thecontrary, be deemed to possess effective control over the reporting issuer.⁽³⁰⁾

PART 2 GENERAL RELIANCE AND REPORTING PROVISIONS

2.1 Reliance on Reported Outstanding Shares⁽³¹⁾

(1) Subject to subsection (2), in determining its securityholding percentage in a class of securities for the purposes ofthe early warning requirements or Part 4, a person or company may rely upon information most recently providedby the issuer of the securities in a material change report or under section 2.1 of National Instrument 62-102Disclosure of Outstanding Share Data, whichever contains the most recent relevant information.

(2) Subsection (1) does not apply if the person or company has knowledge both

(a) that the information filed is inaccurate or has changed; and

(b) of the correct information.

2.2 Copies of News Release and Report - A person or company that files a news release and report under the early warningrequirements, or a report under Part 4, in relation to a reporting issuer shall immediately send a copy of each filing to thereporting issuer.

2.3 No Duplication of News Releases or Reports

(1) A person or company that is required to issue a news release under both the early warning requirements and theacquisition announcement provisions is exempt from the requirement to issue the news release contained in theprovision requiring the later release if

(a) the news release is filed under the provision with the earlier reporting requirement; and

(b) the facts required to be contained in the two news releases are identical.

(2) A person or company that is required to file a report under the acquisition announcement provisions and either theearly warning requirements or Part 4 is exempt from the requirement to file the report under the provision requiringthe later report if

(a) the report is filed under the provision requiring the earlier report; and

(b) the facts required to be contained in the two reports are identical.⁽³²⁾

PART 3 REPORTING REQUIREMENTS UNDER THE EARLY WARNING REQUIREMENTS

3.1 Contents of News Releases and Reports

(1) A news release required under the early warning requirements shall contain the information required by AppendixE.

(2) Despite subsection (1), a news release required under the early warning requirements may omit the informationotherwise required by paragraphs 1(d), (g), (h) and (i) of Appendix E, and paragraph (j) of Appendix E to the extentthat the information relates to paragraphs 1(d), (g), (h) and (i), if

(a) the omitted information is included in the corresponding report required by securities legislation; and

(b) the news release indicates the name and telephone number of an individual to contact in order to obtain a copyof the report.

(3) The offeror shall send a copy of the report referred to in paragraph (2)(a) promptly to any person or companyrequesting it.

3.2 Filing Relief for Joint Actors - The early warning requirements and the acquisition announcement provisions do notapply to a joint actor of an offeror in connection with the obligation to make a specific filing of a news release or reportif

(a) the offeror files a news release or report at the time that the joint actor would be required to file; and

(b) the news release or report filed discloses the information concerning the joint actor required by securities legislation.

PART 4 ALTERNATIVE MONTHLY REPORTING SYSTEM

4.1 Exemption from the Early Warning Requirements - The early warning requirements do not apply to an eligibleinstitutional investor for a reporting issuer if the eligible institutional investor

(a) is not disqualified by section 4.2 from filing reports under this Part for the reporting issuer; and

(b) either

(i) intends to file reports under this Part for the reporting issuer, if no reports are yet required to be filed; or

(ii) is not in arrears of filing reports under this Part for the reporting issuer, if a report has been required by thisPart to be filed.

4.2 Disqualification - An eligible institutional investor shall not file reports under this Part for a reporting issuer if theeligible institutional investor, or a joint actor

(a) makes or intends to make a formal bid for securities of the reporting issuer; or

(b) proposes or intends to propose a reorganization, amalgamation, merger, arrangement or similar business combinationwith a reporting issuer that if completed would reasonably be expected to result in the eligible institutional investor,either alone or together with any joint actors, possessing effective control over the reporting issuer or a successorto all or a part of the business of the reporting issuer.

4.3 Reporting and Filing Requirements

(1) If an eligible institutional investor is relying on the exemption in section 4.1 for a reporting issuer and becomesdisqualified under section 4.2 from filing, or no longer intends to file, reports under this Part for the reporting issuer,the eligible institutional investor shall

(a) immediately issue and file a news release; and

(b) within three days after filing the news release, file a report.

(2) The news release and report required by subsection (1) shall contain the information required by Appendix F.

(3) An eligible institutional investor that is required to file a report under subsection (1) for a reporting issuer is notexempt from the early warning requirements for that reporting issuer as of the date on which the news releaserequired by subsection (1) is required to be filed.

(4) An eligible institutional investor that files reports under this Part for a reporting issuer and that controls securitiesof the reporting issuer that are owned by another person or company shall

(a) on request by the person or company, promptly advise the person or company of the number of securities heldon its behalf; and

(b) if the eligible institutional investor has reason to believe that the securityholding percentage of the person orcompany in a class of voting or equity securities of the reporting issuer equals 10 percent or more, promptlyadvise the person or company of the number of securities held on its behalf.

4.4 Restrictions on Acquisitions - A person or company that has become disqualified under section 4.2 from filing reportsunder this Part for a reporting issuer shall not acquire ownership of, or control over, any additional securities of thereporting issuer for the period

(a) starting at the time that the news release referred to in paragraph 4.3(1)(a) is required to be filed; and

(b) ending 10 days after the news release is filed.⁽³³⁾

4.5 Filing Obligations under this Part - In order to rely on the exemption provided by section 4.1, an eligible institutionalinvestor shall file a report

(a) within 10 days after the end of the month in which the eligible institutional investor elected to begin to file reportsfor the reporting issuer under this Part, if the securityholding percentage of the eligible institutional investor in aclass of voting or equity securities of the reporting issuer at the end of the month is 10 percent or more;

(b) within 10 days after the end of the month in which the securityholding percentage of the eligible institutionalinvestor in a class of voting or equity securities of the reporting issuer, as at the end of the month, increased to 10percent or more;

(c) within 10 days after the end of the month in which the securityholding percentage of the eligible institutionalinvestor in a class of voting or equity securities of the reporting issuer, as at the end of the month, increased ordecreased past thresholds represented by whole number multiples of 2.5 percent of the outstanding securities of theclass in excess of 10 percent of the outstanding securities of the class; and

(d) within 10 days after the end of the month in which the securityholding percentage of the eligible institutionalinvestor in a class of voting or equity securities of the reporting issuer, as at the end of the month, decreased to lessthan 10 percent.

4.6 Change Reports - In addition to the filing requirements of section 4.5, an eligible institutional investor shall file a reportwithin 10 days after the end of the month in which there has been a change in a material fact contained in the report ofthe eligible institutional investor most recently filed under this Part.

4.7 Contents of Reports

(1) A report filed under this Part shall contain the information required by Appendix G.

(2) Despite subsection (1), a report filed under paragraph 4.5(d) may be limited to

(a) the name and address of the eligible institutional investor;

(b) the designation and number or principal amount of voting or equity securities of the reporting issuer in respectof which the report is being filed and the securityholding percentage of the eligible institutional investor in theclass of securities; and

(c) a statement that the eligible institutional investor is eligible to file reports under this Part.

4.8 Exemptions - The requirement to file a report under this Part does not apply to a joint actor with a person or companyin connection with a specific filing if

(a) the person or company files a report under this Part at the time that the joint actor is required to file; and

(b) the report discloses the information concerning the joint actor required by this Instrument.

PART 5 AGGREGATION RELIEF

5.1 Separate Business Units - An eligible institutional investor, or an affiliate or associate of an eligible institutionalinvestor, that conducts business or investment activities through business units may, for the purposes of the applicableprovisions and applicable definitions, treat securities that are owned or controlled through a business unit separately fromsecurities owned or controlled through any other of its business units if

(a) decisions on the acquisition, disposition, holding and voting of the securities owned or controlled by a business unitare made in all circumstances by that business unit;

(b) the business unit is not a joint actor with any other business unit with respect to the securities, determined withoutregard to the presumption in securities legislation that an associate or affiliate of an offeror is presumed to be actingjointly or in concert with the offeror;

(c) no business unit, person or company, that makes, advises on, participates in the formulation of or exercises influenceover, decisions for the acquisition, disposition, holding or voting of securities of specific reporting issuers for, byor on behalf of a business unit also makes, advises on, participates in the formulation of or exercises influence over,decisions with respect to the acquisition, disposition, holding or voting of securities of specific reporting issuers for,by or on behalf of any other business unit, except for the purposes of preparing research reports or monitoring orensuring compliance with regulatory requirements or general investment policies, guidelines, objectives orrestrictions;

(d) the eligible institutional investor or affiliate or associate has reasonable grounds for believing that each business unitcomplies with the applicable provisions and securities legislation related to the applicable definitions in connectionwith the securities that the business unit owns or controls;

(e) the eligible institutional investor or affiliate or associate has taken reasonable steps to ensure that each business unitcomplies with the requirements of this Part; and

(f) the eligible institutional investor or affiliate or associate complies with section 5.3.

5.2 Securities Held by an Investment Fund - An eligible institutional investor, or an affiliate or associate of an eligibleinstitutional investor, may, for the purposes of the applicable provisions and applicable definitions, treat securities ownedor controlled by an investment fund over which the eligible institutional investor, affiliate or associate exercises or sharescontrol, or securities into which those securities are convertible, exercisable or exchangeable, separately from othersecurities owned or controlled by the eligible institutional investor or affiliate or associate if

(a) the investment fund is not a private mutual fund;

(b) a portfolio adviser manages the investment fund on behalf of the eligible institutional investor under a writtenagreement;

(c) the portfolio adviser has been identified as managing the investment fund in a prospectus, or in offering materialsused in the private placement of securities, of the investment fund;

(d) none of the eligible institutional investor, its affiliates or associates, or a director, officer, partner, employee or agentof the eligible institutional investor or its affiliates or associates, makes, advises on, participates in the formulationof, or exercises influence over, decisions with respect to the acquisition, disposition, holding or voting of securitiesof specific reporting issuers made by the portfolio adviser, except for the purposes of preparing research reports ormonitoring or ensuring compliance with regulatory requirements or general investment policies, guidelines,objectives or restrictions;

(e) the eligible institutional investor or affiliate or associate has reasonable grounds for believing that those securitiesare included by the portfolio adviser in its compliance with the applicable provisions and applicable definitions;

(f) the portfolio adviser neither controls nor is controlled by the eligible institutional investor or an affiliate or associateof the eligible institutional investor; and

(g) the eligible institutional investor or affiliate or associate complies with section 5.3.

5.3 Reporting and Record Keeping

(1) In addition to the requirements of sections 5.1 and 5.2, in order to rely on section 5.1 or 5.2, an eligible institutionalinvestor or an affiliate or associate shall indicate in any document released or filed under the applicable provisionsor as the result of the application of the applicable definitions

(a) its reliance on either section 5.1 or 5.2;

(b) the identity of the business units or investment funds for which ownership and control of the securities has beendisclosed; and

(c) the fact that securities owned or controlled by other business units or investment funds have not been, or maynot have been, disclosed.

(2) An eligible institutional investor or affiliate or associate shall maintain records of the details concerning

(a) business units of the person or company that are treated separately, by reason of section 5.1, for the purposesof compliance with the applicable provisions and applicable definitions; and

(b) investment funds whose ownership of, or control over, securities are treated separately, by reason of section5.2, for the purposes of compliance with the applicable provisions and securities legislation related to theapplicable definitions.

5.4 No Requirement to Satisfy Insider Reporting Requirement - If an eligible institutional investor is relying on this Partso that it is not required to satisfy the insider reporting requirement for a reporting issuer, then every director or seniorofficer of the eligible institutional investor who is an insider of the reporting issuer solely as a result of being a directoror senior officer of the eligible institutional investor is not required to satisfy the insider reporting requirement for thereporting issuer.

PART 6 ISSUER ACTIONS

6.1 Issuer Actions

(1) A person or company is exempt from the early warning requirements and the obligation to report under Part 4 withrespect to an increase in the securityholding percentage of the person or company in a class of securities of areporting issuer that arises without any action being taken by the person or company and solely from a reduction inoutstanding securities that occurs as a result of redemptions, retractions or other repurchases by the reporting issuer,that affect or are offered to all securityholders of the relevant class.

(2) A person or company is exempt from the early warning requirements with respect to a decrease in thesecurityholding percentage of the person or company in a class of securities of a reporting issuer that arises withoutany action being taken by the person or company and solely from an increase in outstanding securities that occursas a result of treasury issuances of securities by the reporting issuer.

(3) A person or company may rely upon an exemption provided by this section with respect to a class of securities onlyuntil the person or company undertakes any transaction that changes the securityholding percentage of the personor company in that class of securities.

(4) A person or company that undertakes a transaction described in subsection (3) shall comply with the early warningrequirements or Part 4 in respect of the class of securities referred to in that subsection in a manner that reflects thechanges in the securityholding percentage of the person or company in that class of securities since the last newsrelease or report made or filed under the early warning requirements or Part 4.

PART 7 UNDERWRITING EXEMPTION

7.1 Underwriting Exemption - A person or company is exempt from the early warning requirements and the obligation toreport under Part 4 in respect of securities owned by the person or company in its capacity as underwriter, during theunderwriting period, if

(a) the person or company is engaged in the business of an underwriter of securities; and

(b) the person or company has issued and filed a news release that

(i) announces the proposed underwriting, and

(ii) identifies the reporting issuer and the designation and number or principal amount of the securitiesunderwritten.

PART 8 RELIEF FOR PLEDGEES

8.1 Relief for Pledgees

(1) For securities that are controlled by a financial institution as a pledgee, and any securities into which those securitiesare convertible, exercisable or exchangeable, in either case that are pledged, mortgaged or otherwise encumberedas collateral for a debt under a written pledge agreement and in the ordinary course of the financial institution'sbusiness, the financial institution is exempt from the applicable provisions, and those securities are not required tobe taken into account for the purposes of the applicable definitions.

(2) Subsection (1) does not apply if the financial institution is legally entitled to dispose of the securities as pledgee forthe purpose of applying proceeds of realization in repayment of the secured debt.⁽³⁴⁾

8.2 Further Relief for de minimis Pledgees - For securities that are controlled by a financial institution as a pledgee, andany securities into which those securities are convertible, exercisable or exchangeable, in either case that are pledged,mortgaged or otherwise encumbered as collateral for a debt, under a written pledge agreement and in the ordinary courseof the business of the financial institution, the financial institution is exempt from the applicable provisions, and thosesecurities are not required to be taken into account for the purposes of the applicable definitions, if

(a) the principal amount of the debt, together with the principal amount of all other debts of or guaranteed by the sameborrower to the financial institution, does not exceed $2,000,000;

(b) the pledged securities are not voting or equity securities; and

(c) the pledged securities, and securities into which the pledged securities are convertible, exercisable or exchangeable,do not constitute 10 percent or more of a class of voting or equity securities.

8.3 Corresponding Insider Reporting Relief - If a financial institution is exempt under section 8.1 or 8.2 from the insiderreporting requirement for those securities of a reporting issuer that it controls as pledgee, every director or senior officerof the financial institution who is an insider of the reporting issuer solely as a result of being a director or senior officerof the financial institution that is an insider of the reporting issuer is exempt from the insider reporting requirement forthose securities.⁽³⁵⁾

PART 9 INSIDER REPORTING EXEMPTION; EARLY WARNING DECREASE REPORTS

9.1 Insider Reporting Exemption; Early Warning Decrease Reports

(1) Subject to subsections (3) and (4), an eligible institutional investor is exempt from the insider reporting requirementfor a reporting issuer if

(a) the eligible institutional investor has issued and filed the news releases and filed reports under the earlywarning requirements or Part 4 for the reporting issuer reflecting the current securityholding percentage of theeligible institutional investor in the classes of voting and equity securities of the reporting issuer;

(b) the eligible institutional investor is not disqualified under section 4.2 from filing reports under Part 4;

(c) the eligible institutional investor does not have knowledge of any material fact or material change with respectto the reporting issuer that has not been generally disclosed;⁽³⁶⁾

(d) the eligible institutional investor does not receive in the ordinary course of its business and investment activitiesknowledge of any material fact or material change with respect to the reporting issuer that has not beengenerally disclosed;

(e) there are no directors or officers of the reporting issuer who were, or could reasonably be seen to have been,selected, nominated or designated by the eligible institutional investor or any joint actor; and

(f) the eligible institutional investor, either alone or together with any joint actors, does not possess effectivecontrol⁽³⁷⁾ of the reporting issuer.

(2) An eligible institutional investor relying on the exemption in subsection (1) shall maintain records that include theinformation that, absent this section, would have been required to be included in a report filed under the insiderreporting requirement.

(3) Despite subsection (1), an eligible institutional investor that is filing reports under the early warning requirementsfor a reporting issuer, and whose securityholding percentage in a class of voting or equity securities of the reportingissuer decreases by two percent or more, may rely upon the exemption contained in subsection (1) for the reportingissuer only if

(a) the eligible institutional investor treats the decrease as a change in a material fact for the purposes of securitieslegislation pertaining to the early warning requirements; or

(b) the decrease arose without any action being taken by the eligible institutional investor and solely from anincrease in outstanding securities that occurred as a result of treasury issuances of securities by the reportingissuer, and the eligible institutional investor has not undertaken any transaction in respect of the class ofsecurities since the decrease.

(4) Despite subsection (1), an eligible institutional investor that is an insider of a reporting issuer may not rely upon theexemption contained in subsection (1) if

(a) the eligible institutional investor, either alone or with a joint actor or joint actors, purchased in the previousmonth, directly or indirectly, 50 percent or more of all of the securities of a class that were reported sold onstock exchanges or over-the-counter markets in the previous month; or

(b) the eligible institutional investor, either alone or with a joint actor or joint actors, sold in the previous month,directly or indirectly, 50 percent or more of all of the securities of a class that were reported sold on stockexchanges or over-the-counter markets in the previous month.

(5) If an eligible institutional investor is exempt under subsection (1) from the insider reporting requirement for areporting issuer, every director or senior officer of the eligible institutional investor who is an insider of the reportingissuer solely as a result of being director or senior officer of the eligible institutional investor is exempt from theinsider reporting requirement for the reporting issuer.⁽³⁸⁾

PART 10 MORATORIUM RELIEF

10.1 Moratorium Relief

(1) A person or company is exempt from the moratorium provisions in respect of the acquisition of, or offers to acquire,securities, if those acquisitions or offers are made by an investment manager acting on behalf of the person orcompany without the direction or prior knowledge of the person or company.

(2) Subsection (1) does not apply to an investment manager.

(3) A person or company is exempt from the moratorium provisions in respect of any acquisitions of, or offers to acquire,securities made solely in its capacity as an approved specialist, or market maker, recognized by a stock exchangeor an over-the-counter market that represents a published market for the securities.

PART 11 EXEMPTIONS

11.1 Exemptions

(1) The regulator⁽³⁹⁾ or the securities regulatory authority⁽⁴⁰⁾ may grant an exemption to 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.

NATIONAL INSTRUMENT 62-103

1. For each class of securities involved in a transaction or occurrence giving rise to an obligation to file a news release underthe early warning requirements and, if applicable, for each class of voting or equity securities into which the securities ofthe class are convertible, exercisable or exchangeable, the news release shall include:

(a) the name and address of the offeror;

(b) the designation and number or principal amount of securities and the offeror's securityholding percentage in the classof securities of which the offeror acquired ownership or control in the transaction or occurrence giving rise to theobligation to file the news release, and whether it was ownership or control that was acquired in those circumstances;

(c) the designation and number or principal amount of securities and the offeror's securityholding percentage in the classof securities immediately after the transaction or occurrence giving rise to obligation to file the news release;

(d) the designation and number or principal amount of securities and the percentage of outstanding securities of the classof securities referred to in paragraph (c) over which

(i) the offeror, either alone or together with any joint actors, has ownership and control,

(ii) the offeror, either alone or together with any joint actors, has ownership but control is held by other personsor companies other than the offeror or any joint actor, and

(iii) the offeror, either alone or together with any joint actors, has exclusive or shared control but does not haveownership;

(e) the name of the market in which the transaction or occurrence that gave rise to the news release took place;⁽⁴¹⁾

(f) the purpose of the offeror and any joint actors in effecting the transaction or occurrence that gave rise to the newsrelease, including any future intention to acquire ownership of, or control over, additional securities of the reportingissuer;

(g) the general nature and the material terms of any agreement, other than lending arrangements⁽⁴²⁾, with respect tosecurities of the reporting issuer entered into by the offeror, or any joint actor, and the issuer of the securities or anyother person or company in connection with the transaction or occurrence giving rise to the news release, includingagreements with respect to the acquisition, holding, disposition or voting of any of the securities;

(h) the names of any joint actors in connection with the disclosure required by this Appendix;

(i) in the case of a transaction or occurrence that did not take place on a stock exchange or other market that representsa published market for the securities, including an issuance from treasury, the nature and value of the considerationpaid by the offeror; and

(j) if applicable, a description of any change in any material fact set out in a previous report by the person or companyunder the early warning requirements or Part 4 in respect of the reporting issuer's securities.

2. Despite paragraph (1)(b), an offeror may omit the securityholding percentage from a news release if it is included in thecorresponding report filed under the early warning requirements and the change in percentage would represent less than1 percent of the class.⁽⁴³⁾

3. A news release may also include

(a) information in addition to that required by this Instrument; and

(b) a declaration that the issuance of the news release is not an admission that a person or company named in the newsrelease owns or controls any described securities or is a joint actor with another named person or company.

1. For each class of securities involved in an occurrence giving rise to an obligation to file a news release under section 4.3and, if applicable, for each class of voting or equity securities into which the securities of the class are convertible,exercisable or exchangeable, the news release shall include:

(a) a statement that the eligible institutional investor is ceasing to file reports under Part 4 for the reporting issuer;

(b) the reasons for doing so;

(c) the name and address of the eligible institutional investor;

(d) the designation and number or principal amount of securities and the eligible institutional investor's securityholdingpercentage in the class of securities immediately after the occurrence giving rise to obligation to file the newsrelease;

(e) the designation and number or principal amount of securities and the percentage of outstanding securities of the classof securities referred to in paragraph (d) over which

(i) the eligible institutional investor, either alone or together with any joint actors, has ownership and control,

(ii) the eligible institutional investor, either alone or together with any joint actors, has ownership but controlis held by other persons or companies other than the eligible institutional investor or any joint actor, and

(iii) the eligible institutional investor, either alone or together with any joint actors, has exclusive or sharedcontrol but does not have ownership;

(f) the purpose of the eligible institutional investor and any joint actors in effecting the occurrence that gave rise to thenews release, including any future intention to acquire ownership of, or control over, additional securities of thereporting issuer;

(g) the general nature and the material terms of any agreement, other than lending arrangements, with respect tosecurities of the reporting issuer entered into by the eligible institutional investor, or any joint actor, and the issuerof the securities or any other person or company in connection with the occurrence giving rise to the news release,including agreements with respect to the acquisition, holding, disposition or voting of any of the securities;

(h) the names of any joint actors in connection with the disclosure required by this Appendix;

(i) in the case of an occurrence that did not take place on a stock exchange or other market that represents a publishedmarket for the securities, including an issuance from treasury, the nature and value of the consideration paid by theeligible institutional investor; and

(j) if applicable, a description of any change in any material fact set out in a previous report by the eligible institutionalinvestor under the early warning requirements or Part 4 in respect of the reporting issuer's securities.

2. A news release may also include

(a) information in addition to that required by this Instrument; and

(b) a declaration that the issuance of the news release is not an admission that a person or company named in the newsrelease owns or controls any described securities or is a joint actor with another named person or company.

1. For each class of securities required to be reported upon under Part 4, a report shall include:

(a) the name and address of the eligible institutional investor;

(b) the net increase or decrease in the number or principal amount of securities, and in the eligible institutional investor'ssecurityholding percentage in the class of securities, since the last report filed by the eligible institutional investorunder Part 4 or the early warning requirements;

(c) the designation and number or principal amount of securities and the eligible institutional investor's securityholdingpercentage in the class of securities at the end of the month for which the report is made;

(d) the designation and number or principal amount of securities and the percentage of outstanding securities referredto in paragraph (c) over which

(i) the eligible institutional investor, either alone or together with any joint actors, has ownership and control,

(ii) the eligible institutional investor, either alone or together with any joint actors, has ownership but controlis held by other persons or companies other than the eligible institutional investor or any joint actor⁽⁴⁴⁾, and

(iii) the eligible institutional investor, either alone or together with any joint actors, has exclusive or sharedcontrol but does not have ownership;

(e) the purpose of the eligible institutional investor and any joint actors in acquiring or disposing of ownership of, orcontrol over, the securities, including any future intention to acquire ownership of, or control over, additionalsecurities of the reporting issuer;

(f) the general nature and the material terms of any agreement, other than lending arrangements, with respect tosecurities of the reporting issuer entered into by the eligible institutional investor, or any joint actor, and the issuerof the securities or any other person or company in connection with any transaction or occurrence resulting in thechange in ownership or control giving rise to the report, including agreements with respect to the acquisition,holding, disposition or voting of any of the securities;

(g) the names of any joint actors in connection with the disclosure required by this Appendix;

(h) if applicable, a description of any change in any material fact set out in a previous report by the person or companyunder the early warning requirements or Part 4 in respect of the reporting issuer's securities; and

(i) a statement that the person or company is eligible to file reports under Part 4 in respect of the reporting issuer.

2. Despite paragraph (1)(b), an eligible institutional investor may omit the securityholding percentage from a report if thechange in percentage is less than 1 percent of the class.

3. A report may also include

(a) information in addition to that required by this Instrument; and

(b) a declaration that the filing of the report is not an admission that a person or company named in the report owns orcontrols any described securities or is a joint actor with another named person or company.

Footnotes

1. (1995), 18 OSCB 4893.

2. (1996), 19 OSCB 4221.

3. In Ontario, subsections 1(5) and 1(6) of the Securities Act (Ontario).

4. (1996), 19 OSCB 4221.

5. B.C. Notice NIN#96/25, dated August 1, 1996, published in the B.C. Weekly Summary of August 2, 1996.

6. For further discussion on this point, reference should be made to page 4224 of the 1996 Ontario Staff Notice.

7. For further discussion on this point, reference should be made to pages 4223-4 of the 1996 Ontario Staff Notice.

8. For further discussion on this point, reference should be made to pages 4223-4 of the 1996 Ontario Staff Notice.

9. Further discussion on this point is contained on page 4224 of the 1996 Ontario Staff Notice.

10. Further discussion of this issue is contained on page 4224 of the 1996 Ontario Staff Notice.

11. A discussion of this issue is contained on page 4223 of the 1996 Ontario Staff Notice.

12. For further discussion on this point, reference should be made to page 4224 of the Staff Notice.

13. For further discussion on this point, reference should be made to page 4226 of the 1996 Ontario Staff Notice.

14. For further policy discussion on this point, reference should be made to page 4226 of the 1996 Ontario Staff Notice.

15. For further policy discussion on this point, reference should be made to page 4226 of the 1996 Ontario Staff Notice.

16. This National Instrument is expected to be adopted as a rule in each of British Columbia, Alberta, Manitoba, Ontario and NovaScotia, as a Commission regulation in Saskatchewan, and as a policy in all other jurisdictions represented by the CanadianSecurities Administrators.

17. A national definition instrument has been adopted as National Instrument 14-101 Definitions. It contains definitions of termsused in more than one national instrument. National Instrument 14-101 also provides that a term used in a national instrumentand defined in the statute relating to securities of the applicable jurisdiction, the definition of which is not restricted to a specificportion of the statute, will have the meaning given to it in that statute, unless the context otherwise requires. NationalInstrument 14-101 also provides that a provision or a reference within a provision in a national instrument that specificallyrefers by name to a jurisdiction, other than the local jurisdiction, shall not have any effect in the local jurisdiction, unlessotherwise stated in the provision.

18. The term "securities legislation" is defined in National Instrument 14-101 Definitions as meaning the particular statute andother instruments of the local jurisdiction set out in an appendix to that instrument and will generally include the statute,regulations and, in some cases, the rules, forms, rulings and orders relating to securities in the local jurisdiction.

19. This definition includes section 142 of the Alberta Act, section 112 of the B.C. Act, section 103 of the Newfoundland Act,section 108 of the Nova Scotia Act, section 102 of the Ontario Act, and section 111 of the Saskatchewan Act.

20. The term "take-over bid" is proposed to be defined in National Instrument 14-101 Definitions as having the meaning ascribedto that term in securities legislation.

21. The term "insider reporting requirement" is proposed to be defined in National Instrument 14-101 Definitions as "therequirement in securities legislation for an insider of a reporting issuer to file reports disclosing the insider's direct or indirectbeneficial ownership of, or control or direction over, securities of the reporting issuer".

22. This definition, together with the definition of "applicable definitions", lists the provisions of securities legislation for whichrelief is provided under Part 5 (aggregation relief) and Part 8 (relief for pledgees) under this Instrument.

23. The concept of "effective control" is analogous to the concept of "control in fact" contained in clause 3(1)(d) of the Bank Act(Canada), although the Bank Act definition relates to influence other than through securities. Although undefined, the conceptof effective control is also provided for in s. 190(4)3.iii of the Business Corporations Act (Ontario). The definition is used inthis Instrument as part of the test for eligibility to use the alternative monthly reporting system contained in Part 4 of thisInstrument.

24. The term "jurisdiction" is defined in National Instrument 14-101 Definitions as meaning "a province or territory of Canadaexcept when used in the term foreign jurisdiction".

25. The term "1934 Act" is defined in the National Instrument 14-101 Definitions as "the Securities Exchange Act of 1934 of theUnited States of America". The references to Rule 13d-1 include U.S. registered investment companies and to pension fundssubject to ERISA. U.S. banks and insurance companies are included within the definition of "financial institution", and an"investment manager" would include a registered investment adviser in the U.S., among other persons and companies.

26. The term "Canadian financial institution" is defined in the National Instrument 14-101 Definitions as "a bank, loancorporation, trust company, insurance company, treasury branch, credit union or caisse populaire that, in each case, isauthorized to carry on business in Canada or a jurisdiction, or the Confédération des caisses populaires et d'économieDesjardins du Québec".

27. The provisions of securities legislation listed in the Appendix operate to ensure that a "securityholding percentage" of a personor company includes securities owned or controlled by a joint actor with the person or company, and assuming that allsecurities convertible into or exercisable or exchangeable for securities of the class that are owned or controlled by the person orcompany or the joint actor have been converted, exercised or exchanged. They also provide that a person is deemed to ownbeneficially securities beneficially owned by a company controlled by the person or an affiliate of that company, and that acompany is deemed to own beneficially securities beneficially owned by its affiliates.

The effect of this definition is that the method of calculating ownership of a class of securities for purposes of the take-over bid provisionsof securities legislation are imported into this Instrument for purposes of the alternative monthly reporting system and other relief providedby this Instrument.

28. This definition includes sections 135 to 140 of the Alberta Act, sections 105 to 110 of the B.C. Act, sections 96 to 101 of theNewfoundland Act, sections 101 to 106 of the Nova Scotia Act, sections 95 to 100 of the Ontario Act, and sections 104 to 109of the Saskatchewan Act.

29. The term "issuer bid" is proposed to be defined in National Instrument 14-101 Definitions having the meaning ascribed to thatterm in securities legislation.

30. This provision creates a rebuttable presumption of effective control at the 30 percent level, based on votes (not votingsecurities) and is used to described the conditions for access to the alternative monthly reporting system contained in Part 4 andto the relief from the insider reporting requirements provided by Part 9.

31. The requirements for issuers to provide outstanding share information are contained in National Instrument 61-102 Disclosureof Outstanding Share Data.

32. This provision is analogous to provisions now contained in the securities legislation of a number of jurisdictions that aredesigned to eliminate duplicative filings for the early warning requirements and the acquisition announcement provisions. Thisprovision adds a reference to filings under Part 4 of this Instrument.

33. This moratorium is similar to and based on the moratorium provided by Rule 13d-1(b)(3)(ii) under the U.S. SecuritiesExchange Act of 1934. The voting of the shares held has not been proscribed, however. This moratorium is supplemented insome jurisdictions by the provisions of securities legislation that prohibit offerors from buying securities during a take-over bidexcept pursuant to the bid.

34. The phrase "legally entitled to dispose" is designed to indicate that the pledgee has satisfied all requirements under both thepledge agreement and relevant statutory provisions to permit it to sell.

35. This provision is designed to ensure that, where a financial institution is exempt from the insider reporting requirement byvirtue of the relief for pledgees provided by sections 8.1 and 8.2, its directors and senior officers are similarly exempt.

36. This provisions has been amended from the 1995 Rule to delete the explicit reference to future-oriented financial information.

37. This provision has been amended from the 1995 rule to provide for a de facto control standard.

38. This provision is designed to provide directors and officers of an insider qualifying for insider reporting relief with equivalenttreatment.

39. The term "regulator" is defined in National Instrument 14-101 Definitions as meaning, in a local jurisdiction, the person set outin an appendix to that instrument opposite the name of the local jurisdiction.

40. The term "securities regulatory authority" is defined in National Instrument 14-101 Definitions as meaning, in a localjurisdiction, the securities commission or similar regulatory authority set out in an appendix to that instrument opposite thename of the local jurisdiction.

41. The former requirement for information concerning security interests has been deleted to protect the confidentiality of lendingrelationships.

42. This provision has been revised to protect the confidentiality of lending relationships.

43. This provision enables omission of percentage information in cases of minor acquisitions, such as pursuant to a normal coursepurchase programme.

44. Clarification has been added regarding the nature of the other person or company.