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INTRODUCTION

Over the past year many changes have been introduced by the Canadian regulators, and other changes will become effective in the near future which will affect issuers this proxy season. New filing requirements and deadlines, new audit committee requirements, and enhanced disclosure for AIFs, circulars and MD&A are applicable this season. New corporate governance disclosure will be introduced shortly, but issuers may choose to voluntarily comply this proxy season.

We have prepared this checklist to assist issuers who will feel the impact of these changes for the first time this proxy season. The checklist assumes that the issuer is a Canadian, TSX-listed issuer (other than a venture issuer) with a December 31 financial year-end. The requirements for venture issuers are generally less onerous.

NEW FILING REQUIREMENTS AND DEADLINES

National Instrument 51-102 Continuous Disclosure Obligations (the CD Instrument) introduced several new filing requirements and shortened filing deadlines. Issuers should be aware of the following:

• Annual financial statements and MD&A (including new disclosure) must be filed by March 31, 2005 (or earlier foreign filing date).
• All issuers (other than venture issuers) must file an AIF (including new disclosure) by March 31, 2005 (or earlier date of filing Form 10-K or Form 20-F with the SEC).
• Material contracts made outside the ordinary course of business and other documents materially affecting the rights of shareholders (e.g., articles of incorporation, by-laws, voting trust agreements) are required to be filed with the AIF. Information contained in material contracts that would seriously prejudice the issuer's interests or violate confidentiality provisions may be omitted.
• Issuers must file a report promptly after their shareholders' meeting describing the matters voted on and the voting results.

TWO OPTIONS FOR DELIVERY OF MATERIALS TO SHAREHOLDERS

The CD Instrument introduced a new regime under which shareholders could choose to receive financial statements by responding to an issuer's request form or by otherwise requesting them. The issuer would then be required to deliver annual financial statements and MD&A to such shareholders by March 31, 2005.

This requirement raised timing concerns for issuers who wished to do a combined mailing of their Annual Report (which included their annual financial statements and MD&A) and their annual meeting circular, as all materials would need to be prepared, printed and mailed by March 31, 2005. The earlier mailing would also advance the date by which the annual meeting would be required to be held. These requirements created some confusion and are currently being reviewed by CSA staff. In the interim, issuers who wish to make only one mailing to shareholders have two options for delivery of materials this proxy season:

• Deliver the annual financial statements and MD&A to all registered and beneficial shareholders (other than those who have declined to receive such materials under National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer) within 140 days of year-end. This will allow issuers additional time to prepare their Annual Report and meeting materials and make one mailing. Under this option the meeting could be held on a similar timetable to last year.
• If an issuer wishes to send annual financial statements and MD&A only to those beneficial shareholders who have requested them, the financial statements and MD&A must be sent by March 31, 2005. Under this option, issuers who want to combine the mailing of their Annual Report (which includes the financial statements and MD&A) and their information circular must complete the mailing by March 31, 2005. This will have the effect of moving up the date by which the annual meeting is required to be held. For CBCA issuers, the meeting would need to be held by May 30, 2005.

Issuers who wish to do two mailings can mail the annual financial statements and MD&A to requesting shareholders by March 31, 2005 and subsequently mail the information circular to shareholders. Please note that the CBCA also requires delivery of annual financial statements to all registered shareholders, other than those shareholders who have informed the issuer that they do not wish to receive such statements.

CERTIFICATION OF ANNUAL FILINGS

The CEO and CFO of each issuer which is subject to Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings will be required to certify that the annual filings of the issuer for the year ended December 31, 2004 do not contain a misrepresentation and fairly represent the financial condition of the issuer. Annual filings include an issuer's AIF (and any documents incorporated by reference), annual financial statements and MD&A. Certification of disclosure controls will not be required until next year. As at the date of this bulletin, the CSA have not yet published the final requirements and implementation schedule regarding certification of internal controls. It is anticipated that there will be a significant period before such certification is required.

REQUIREMENTS FOR AUDIT COMMITTEES

Multilateral Instrument 52-110 Audit Committees (the Audit Committee Instrument) was introduced to minimize conflicts of interest between management and an issuer's external auditor by requiring that an issuer (other than a venture issuer or certain exempt issuers) have an independent audit committee with oversight responsibility for the external auditor. Upon the earlier of the first annual meeting of the issuer after July 1, 2004 and July 1, 2005, all issuers (other than venture issuers) must have an audit committee consisting of three independent directors, all of whom are financially literate. Issuers should consider the following issues:

• Is each member of the audit committee independent and financially literate as provided for in the Audit Committee Instrument?
• If all members are not financially literate and independent, is there a replacement member available or is an exemption available under the Audit Committee Instrument?
• Does the issuer have a charter which meets the Audit Committee Instrument requirements and, in particular, outlines the responsibilities which the audit committee is required to assume under the Audit Committee Instrument?
• Has the issuer established appropriate controls for the disclosure of the issuer's financial information, a confidential complaints procedure, a hiring policy for the issuer regarding current and former employees of the external auditor and a policy regarding the pre-approval of non-audit services provided by the external auditor?

NEW DISCLOSURE REQUIREMENTS

New MD&A Disclosure

The CD Instrument introduces new requirements for MD&A. Issuers have already been required to provide interim MD&A in the new form for interim periods in financial years beginning on or after January 1, 2004. Issuers may also have filed last year's annual MD&A in accordance with the new form. Annual MD&A must be approved by the issuer's board of directors. The enhanced disclosure requirements include:

• a separate section describing any off-balance sheet arrangements that have or are likely to have a current or future effect on the results of operations or financial condition of the issuer;
• three-year selected annual financial information (previously required in the AIF);
• a description of related party transactions;
• a discussion of any forward-looking information disclosed in prior MD&A if it could now be considered misleading in the absence of such further discussion;
• disclosure of an issuer's outstanding share capital;
• an analysis of an issuer's critical accounting estimates; and
• a summary in tabular form of contractual obligations of the issuer.

AIF Disclosure

The disclosure required for this year's AIF is substantially similar to prior years. The CD Instrument does, however, introduce prospectus-type disclosure of certain items. These requirements include:

• separate risk factor disclosure;
• disclosure of monthly trading prices and volumes of the issuer's securities;
• a description of the issuer's capital structure;
• disclosure of prior sales of unlisted securities; and
• disclosure of legal proceedings, material contracts, promoters, interest of management and others in material transactions, any interests of experts and details of an issuer's transfer agents and registrars.

The AIF will now also require:

• disclosure of any social and environmental policies fundamental to business contracts upon which the business is dependent; and
• enhanced disclosure regarding bankruptcies and insolvencies of an issuer's directors, executive officers and material shareholders and any sanctions or penalties imposed on such directors and executive officers.

Audit Committee Disclosure

The Audit Committee Instrument provides for enhanced disclosure regarding the members of the audit committee and that committee's responsibilities. These disclosure requirements are applicable to issuers commencing on the earlier of an issuer's first annual meeting after July 1, 2004 and July 1, 2005. While they are not technically applicable to most issuers this proxy season, issuers may wish to consider making the necessary disclosure in this year's AIF (cross-referenced to the information circular). This disclosure includes:

• the text of the audit committee's charter;
• a discussion of whether each member is independent and financially literate and the relevant education and experience of each member;
• the reliance of the issuer on any of the exemptions available in the Audit Committee Instrument from the independence or financial literacy requirement;
• disclosure of any situation where a recommendation of the audit committee regarding the nomination or appointment of the external auditor has not been followed; and
• disclosure of the amount of the external auditor's audit and non-audit fees and a description of the services provided.

New Circular Disclosure

The CD Instrument introduced new disclosure requirements for information circulars. The principal new requirements are the following:

• identification of all members of an issuer's committees;
• disclosure of indebtedness now required to be in tabular form and disclosure exception for employee loans increased from $25,000 to $50,000;
• disclosure of all indebtedness of directors and executive officers that has been forgiven by the issuer;
• executive compensation disclosure must now include the compensation of the chief financial officer regardless of that individual's salary. Previously, disclosure was required of the compensation of the CEO and the four most highly compensated officers. That has been amended to require compensation disclosure on the CEO, CFO and the three most highly compensated officers whose total compensation exceeds $150,000 (previously $100,000);
• reorganized executive compensation table;
• the executive compensation report, in comparing corporate performance to executive compensation, should disclose the performance measures used and the weight attributed to each measure;
• equity compensation plan disclosure, including disclosure of material features of each plan and the number of securities issuable and remaining to be issued under any plan and the weighted average exercise price of outstanding options, warrants and rights. In addition, any individual equity compensation arrangements must be disclosed. Effective January 1, 2005, the TSX has amended the Company Manual to require prescribed annual disclosure regarding all stock compensation arrangements. While many of the items delineated will constitute material features of a plan and be required disclosure under the CD Instrument, issuers should also review the TSX items of disclosure to ensure they are included. If a new plan is being instituted or an existing plan amended, issuers should also be aware of new TSX rules requiring shareholder approval of compensation plans upon institution and before certain material amendments are made. Issuers may also wish to consider the amending sections of existing plans in light of the new rules;
• enhanced restricted share disclosure;
• enhanced disclosure on bankruptcies, insolvencies and/or cease trade orders relating to proposed directors or companies with which they have been involved; and
• the inclusion of a statement indicating the availability of company information on SEDAR and how security holders may request copies of financial statements and MD&A.

Given the trend to complete and transparent disclosure of all forms of executive compensation, executive retirement plans have recently attracted attention. On January 14, 2005, the CSA issued Staff Notice 51-314 on Retirement Benefits Disclosure for those issuers who are considering providing enhanced disclosure of executive retirement benefits. These non-mandatory guidelines provide guidance on disclosure of the actual value of such benefits.

CORPORATE GOVERNANCE DISCLOSURE FOR THIS SEASON

Currently issuers are required to disclose their corporate governance practices in their circular in response to 14 governance guidelines of the TSX which were initially introduced in 1995. In November 2004, the CSA published for comment a governance policy supported by all its members. Proposed National Policy 58-201 Corporate Governance Guidelines (the Governance Policy) and National Instrument 58-101 Disclosure of Corporate Governance Practices (the Disclosure Instrument) are expected to be finalized over the next few months. OSC staff have advised that it is likely that transitional arrangements will be included in the final instrument such that it will not be effective with respect to calendar year-end issuers this proxy season.

The Governance Policy, which outlines certain governance practices which issuers should consider in establishing their practices, and the Disclosure Instrument, which requires disclosure of how the directors ensure the objectives of such governance practices have been met and introduces other prescribed disclosure, will replace the TSX governance regime. Issuers should monitor the implementation of these initiatives as their introduction will affect the required disclosure in the future. In any event, issuers may wish to consider such practices now in assessing their own governance practices and the disclosure they make in respect of such practices. Further details of these initiatives are available in our November 2004 newsletter. See Additional Information below.

ADDITIONAL INFORMATION

The foregoing information is a summary of certain requirements that may be relevant in preparing for this year's proxy season. For more information regarding the above changes, please see our earlier publications: The CSA Propose a Unified Approach to Corporate Governance (November 2004), What You Need to Know About Changes to the Canadian Continuous Disclosure Regime (March 2004), The CSA Venture Further into the Corporate Governance Arena (February 2004) and The CSA Propose Reforms to Enhance Investor Confidence (July 2003).

This checklist contains general information only. Specific advice should be taken on the issues raised and their applicability to particular issuers. We would be pleased to provide further information upon request.

The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault or any member of the Firm on the points of law discussed.

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