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4th Annual Disclosure and Governance Seminar

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4th Annual Disclosure and Governance Seminar Powered By Docstoc
					4 Annual Disclosure and
  th

Governance Seminar
January 11th, 2007
4:00 p.m. ET
TABLE OF CONTENTS
4th Annual Disclosure and Governance Seminar
January 11, 2007


Tab                                     Materials

1.    Introduction                      Presenter profiles

      Lorna Telfer

2.    Annual Meetings Back in Fashion   PowerPoint: Annual Meetings Back in Fashion

      Shea Small                        •   2007 Proxy Circular Checklist

                                        •   Blacklined version of Form 51-102 F5
                                            Information Circular published October 13, 2006

                                        •   Blacklined version of Form 51-102 F6 Statement
                                            of Executive Compensation published October
                                            13, 2006

                                        •   Suggested Majority Voting Policy Statement
                                            from the Canadian Coalition of Good
                                            Governance

                                        •   Canadian Coalition for Good Governance
                                            Summary of the Majority Voting Policies and
                                            Procedures Implemented by the Major Canadian
                                            Banks

                                        •   General Overview of Reporting Obligations of
                                            Insiders including proposed amendments to NI
                                            55-101
Tab

3.    Certification Procedures                 PowerPoint: Certification Procedures

      Michael Urbani
                                               •   Form 52-109F1 - "Full" Annual Certificate

                                               •   Form 52-109F2 - "Full" Interim Certificate

                                               •   CSA Staff Notice 52-313

                                               •   CSA Staff Notice 52-316

                                               •   SEC Press Release (December 13, 2006)
                                                   (Proposed Guidance on Internal Controls over
                                                   Financial Reporting)

                                               •   SEC Press Release (December 15, 2006)
                                                   (Extension of SOX 404 Compliance Dates)

                                               •   PCAOB Press Release (December 19, 2006)
                                                   Proposed new Auditing Standard No. 2

                                               •   Examples of current MD&A disclosure

4.    Bullet Proof Your Disclosure Practices   PowerPoint: Bullet Proof Your Disclosure Practices

      Roger Chouinard & James Farley           •   Paper: Bullet Proof your Disclosure Practices



5.    Trends in Executive Compensation         PowerPoint: Trends in Executive Compensation

      Ken Hugesson (HCI Consulting) &          •   HCI Firm Overview
      Phil Moore


6.    Governance Performance in the            PowerPoint: What do the Institutions Think?
      Public Eye
                                               PowerPoint: The Globe and Mail: Board Games 2006

      Mark Eade & Clemens Mayr
McCarthy Tétrault LLP




                                                                                  Lawyer Profile
                                                                                           LORNA J. TELFER


                                       TITLE                     OFFICE                    LAW SCHOOL
                                       Partner                   Montréal                  McGill University,
                                                                                           BCL, 1977

                                                                 DIRECT LINE               BAR ADMISSIONS
                                                                 514-397-4184              Québec, 1978


                                                                 E-MAIL
                                                                 ljtelfer@mccarthy.ca




  Biography
  Lorna J. Telfer is a partner in our Business Law Group in Montréal.

  Ms. Telfer joined the firm in 1978 and practises in the areas of international and domestic corporate finance,
  mergers and acquisitions and securities law, including corporate governance matters, corporate reorganizations
  and privatizations.

  Ms. Telfer’s recent experience includes:

             counsel to Molson Inc. in connection with the merger of Molson Inc. and Adolph Coors Company
             (US$6 billion);

             counsel to LoJack Corporation in connection with its acquisition of Boomerang Inc. ($65 million);

             counsel to the Independent Committee of the Board of Bombardier Inc. in the sale of Bombardier
             Recreational Products Division ($1.1 billion);

             counsel to the Special Committee of the Board of Directors of B2B Trust in connection with its
             privatization ($59 million);

             acted for Cartier Partners Financial Group Inc. in the sale of its common shares to Dundee Wealth
             Management Inc. ($121.5 million);

             acted for Mega Bloks in its IPO as well as in the secondary offerings of common shares by The
             Blackstone Group ($372.6 million);

             acted for BCE in connection with a series of transactions completed by Bell Canada International
             ($670 million);

             acted for Tembec Inc. and Tembec Industries Inc. in connection with cross border debt offerings
             (US$950 million);
                                                                                 Lawyer Profile
                                                                                           LORNA J. TELFER


         acted for IFPT Management in connection with the launch of International Finance Participation
         Trust ($575.2M);

         acted for the underwriter in connection with the class A subordinate voting share offering of G.T.C.
         Transcontinental ($138 million); and

         acted for the underwriting syndicate in connection with the secondary offering of Rogers Sugar
         Income Fund ($111.7 million).

Ms. Telfer has spoken at various conferences on public company related matters including for the American Bar
Association, the Barreau du Québec, the University of Western Ontario, the University of Windsor and Dalhousie
University and lectures at the Conference Board of Canada and DeGroote School of Business’ Directors College. She
is a member of the Committee on Negotiated Acquisitions of the American Bar Association. She co-authored an
article entitled Controlled Auctions: Strategy and Managing the Process with Neil H. Brockmeyer and Thomas W.
VanDyke for the Committee Forum held in Seattle, Washington in April 2004.

Ms. Telfer appears in all editions of the Canadian Legal Lexpert Directory, a guide to the leading law firms and
practitioners in Canada, as a leading lawyer in the areas of corporate finance, mergers and acquisitions, corporate
and commercial law and investment management. She is listed in the 2006 Lexpert/American Lawyer Guide to the
Leading 500 lawyers in Canada. In 2005, she was a finalist in the Réseau des femmes d’affaires du Québec (Quebec
business women’s network) awards.

A graduate of McGill University (BA in 1974 and BCL in 1977), Ms. Telfer was called to the Québec bar in 1978. In
1982, she was seconded to the Québec Securities Commission.




Page 2


Lawyer Profile
McCarthy Tétrault LLP




                                                                                     Lawyer Profile
                                                                                                  SHEA T. SMALL

                                      TITLE                      OFFICE                       LAW SCHOOL
                                      Partner                    Toronto                      University of British
                                                                                              Columbia, LLB,
                                                                                              1996

                                                                 DIRECT LINE                  BAR ADMISSIONS
                                                                 416-601-8425                 Ontario, 1998


                                                                 E-MAIL
                                                                 ssmall@mccarthy.ca




  Biography
  Shea Small is a partner in our Corporate Finance and Mergers and Acquisitions Group in Toronto. He has a
  corporate and securities practice that focuses on public, private and cross-border corporate finance, commercial
  transactions, mergers and acquisitions and securities regulation.

  Mr. Small acts for a broad range of clients, including public companies, financial institutions and investment
  dealers and advisers. His recent experience includes:

  •    acting for GE Capital and Wells Fargo in establishing, renewing and maintaining their medium term note
       programs in Canada and offering over $13.7 billion of notes;

  •    acting for GE Capital in updating and maintaining its commercial paper program in Canada;

  •    acting for a syndicate of investment dealers in Goldman Sachs’ private placement of $1.25 billion of
       maple bonds;

  •    acting for syndicates of investment dealers in establishing a medium term note program for Brookfield
       Power and offering $800 million of notes and debentures;

  •    acting for Rio Tinto in its US1.5 billion investment in Ivanhoe Mines;

  •    acting for Smithfield Foods in its US$378 million sale of Schneider to Maple Leaf Foods;

  •    acting for Outokumpu in its $102 million sale of mining assets to Inmet Mining;

  •    acting for Creststreet in completing four initial public offerings totalling more than $180 million of flow-
       through limited partnership units;

  •    acting for Creststreet Power & Income Fund LP in completing three public offerings totalling $100 million
       of units and $30 million of convertible debentures;
                                                                                  Lawyer Profile
                                                                                               SHEA T. SMALL


•   acting for Creststreet in several wind power joint ventures;

•   acting for Diageo in the sale of Pillsbury to General Mills, the sale of the Gibson whisky brand to William
    Grant, the sale of several other alcohol beverage brands to White Rock and the entering into of co-pack
    and distribution agreements with Pernod-Ricard and Sleeman; and

•   acting for FP Newspapers Income Fund in its initial public offering of $65.7 million of units.

Mr. Small received his BA (Economics) from Wilfred Laurier University in 1993. He received an LLB from the
University of British Columbia in 1996 and was called to the Ontario bar in 1998. Mr. Small is a member of the
Canadian Bar Association, the Law Society of Upper Canada and the OBA Securities Law Subcommittee.




Page 2


Lawyer Profile
McCarthy Tétrault LLP
An Ontario Limited Liability Partnership




                                                                                       Lawyer Profile
                                                                                                 MICHAEL URBANI


                                           TITLE         OFFICE                       LAW SCHOOL
                                           Partner       Vancouver                    University of Victoria,
                                                                                      LLB, 1996
                                                         DIRECT LINE
                                                         604-643-7189                 BAR ADMISSIONS
                                                                                      British Columbia, 1997
                                                         E-MAIL
                                                         murbani@mccarthy.ca




Biography
Michael G. Urbani is a partner in the Business Law Group. His practice is focussed in the areas of corporate
finance, securities and mergers and acquisitions and involves acting for private and public entities and investment
dealers in public financings and private placements in Canada and the United States and take-over bids, mergers
and acquisitions involving public corporations.

Mr. Urbani acts for investment banks and clients in various industries including hospitality, communications,
biotech, high tech, petrochemicals and forest products.

His recent experience includes:

        advising on initial public offerings by companies and income funds in the financial services, marine
        transportation, gaming, agriculture, distribution, food services, consumer products, forest products and
        communications industries;

        advising on cross-border, U.S. and domestic public and private offerings of debt and equity, including bought
        deal financings, secondary offerings, high yield note and structured finance issues, by companies in the forest
        products, petrochemicals, wireless communications, hospitality, fuel cell and alternative energy and financial
        services industries;

        advising acquirors, targets and special committees in respect of take-over bids, issuer bids, insider bids,
        related party and going private transactions; and

        advising on issuer bids and merger and acquisition transactions in the high tech, real estate, forest products
        and hospitality industries.

He joined the firm in 1995. He received a BA in Political Science from the University of British Columbia in 1992
and his LLB from the University of Victoria in 1996. Mr. Urbani was called to the British Columbia bar in 1997.

Mr. Urbani is a member of the Canadian Bar Association, the Vancouver Bar Association and the Vancouver Board
of Trade.
McCarthy Tétrault LLP




                                                                                      Lawyer Profile
                                                                                          ROGER J. CHOUINARD

                                      TITLE                       OFFICE                        LAW SCHOOL
                                      Partner                     Toronto                       Osgoode Law
                                                                                                School, LMM, 2004
                                                                                                University of
                                                                                                Victoria, LLB
                                                                                                (Common Law),
                                                                                                1999
                                                                                                Laval University,
                                                                                                LLB (Civil Law),
                                                                                                1998

                                                                  DIRECT LINE                   BAR ADMISSIONS
                                                                  416-601-7782                  Ontario, 2002
                                                                                                Alberta, 2000

                                                                  E-MAIL
                                                                  rchouinard@mccarthy.ca


  Biography
  Roger J. Chouinard is a partner in the firm’s Business Law Group in Toronto with a corporate and securities
  practice focused on corporate finance and mergers and acquisitions. Mr. Chouinard advises public and private
  corporations and other entities, including income trusts, in a variety of industries in connection with securities,
  business law, corporate governance and compliance matters.

  Mr. Chouinard’s recent transactional experience includes acting for:

  •    InStorage Real Estate Investment Trust in connection with over $100 million in private placement
       securities offerings and over $120 million in asset acquisitions;

  •    SCOSS Capital Corp. on its conversion to become InStorage Real Estate Investment Trust;

  •    Noranda Inc. and Falconbridge Limited in connection with the successful completion their US$12 billion
       merger;

  •    Noranda Inc. in the context of (i) its issuer bid to exchange US$1.25 billion in outstanding common shares
       for junior preference shares, and (ii) its $3.0 billion take-over bid to acquire the outstanding minority
       interest in Falconbridge Limited;

  •    People’s Communications Inc. in connection with its $26 million acquisition by Amtelecom Income Fund;

  •    SCOSS Capital Corp. in connection with its qualifying transaction to graduate from the capital pool
       company (CPC) program of the TSX Venture Exchange and become a Tier 1 issuer on that Exchange;

  •    Molson Canada in connection with the reorganization of its Canadian brewing business and its $8 billion
       merger of equals with Adolph Coors Company;
                                                                                  Lawyer Profile
                                                                                     ROGER J. CHOUINARD


•   Arriscraft International Income Fund on its $67 million initial public offering and its private placement of
    $16 million in convertible debentures;

•   The underwriters in the cross-border US$252 million initial public offering of Income Deposit Securities
    (IDS) by Centerplate, Inc. (formerly Volume Services America Holdings, Inc.); and

•   The underwriters on the $135 million initial public offering of Sleep Country Canada Income Fund.

Mr. Chouinard speaks English and French and is educated in the common and civil law judicial systems in Canada.
He received his B.Comm. from McGill University in 1995, his LLB (Civil Law) from Université Laval in 1998, his LLB
(Common Law) from the University of Victoria in 1999 and his LLM from Osgoode Hall Law School in 2004. He was
called to the Alberta bar in 2000 and the Ontario bar in 2002.




Page 2


Lawyer Profile
McCarthy Tétrault LLP




                                                                                      Lawyer Profile
                                                                                                   JAMES FARLEY

                                      TITLE                      OFFICE                        LAW SCHOOL
                                      Senior Counsel             Toronto                       University of
                                                                                               Toronto, LLB, 1966
                                                                                               Oxford University,
                                                                                               BA (Jurisprudence),
                                                                                               MA, 1964, 1968

                                                                 DIRECT LINE
                                                                 416-601-7840


                                                                 E-MAIL
                                                                 jfarley@mccarthy.ca


  Biography
  The Honourable James Farley, Q.C. was appointed to the Superior Court, then named the Supreme Court of
  Ontario, in 1989. Since its inception in 1991 and until his retirement on May 1, 2006, he acted as supervising judge
  of the Commercial List in Toronto. The Commercial List deals with complex corporate / commercial litigation in
  addition to its insolvency foundation. He also took a periodic rotation in the Criminal List. He is a graduate of the
  University of Western Ontario (B.A. 1962), University of Oxford (Rhodes Scholar; B.A. 1964; M.A. 1968) and the
  University of Toronto (LL.B. 1966). He was called to the Ontario bar in 1968 and practised as a corporate /
  commercial solicitor.

  He has returned to the bar in August 2006 as Senior Counsel to McCarthy Tétrault LLP. He will work with our
  business law, bankruptcy and restructuring and litigation groups on a firm-wide basis, including work on our cross-
  border initiatives, and will provide our clients with strategic business, litigation and insolvency-related advice.

  He is a member of the International Insolvency Institute, Insolvency Institute of Canada, Insol International,
  American Law Institute, American College of Bankruptcy, American Bankruptcy Institute, International Bar
  Association and International Law Association. He has participated in the American Law Institute NAFTA
  transnational insolvency project, the INSOL / UNCITRAL judicial colloquia and the World Bank insolvency practices
  project. As well he has delivered papers on various topics including insolvency, corporate law, commercial courts,
  ADR, WTO and law practice management in Canada, the USA, England, China, Nigeria, Bermuda, Germany, France,
  the Bahamas, Jamaica, Brazil, Austria, Tanzania, New Zealand, Argentina and Australia.
               Ken is a recognized expert in consulting to Compensation Committees,
               Boards and top management on executive compensation and related
               corporate governance. Based in Toronto, he has over 30 years
               experience consulting in Canada, the US and the UK. Ken's work is
               predominantly for Compensation Committees (Remuneration
               Committees). He is at the leading edge of change in the governance of
               executive compensation, and has written and spoken extensively on the
               role of the Board, and the Compensation Committee and its Chair in
Ken Hugessen   executive compensation.

               Experience

               Extensive experience consulting to the Compensation (Remuneration)
               Committee and management.

               Employment

               Prior to founding Hugessen Consulting Inc in June 2006 Ken was a
               worldwide partner with Mercer. He joined Mercer in 1974. In 1981, he
               was appointed leader of the firm's Executive Compensation Practice in
               Canada, and became Director of the Canadian Company in 1983. He
               became a Managing Director of Mercer Inc. (New York) in October
               1985. In the mid '90s Ken established Mercer's Executive Compensation
               practice in Chicago.

               Education

               Ken holds an Honours BSc from Sir George Williams University, a MA
               from Dalhousie University, and an MSc from the University of Chicago.
               He is a Killam and National Research Council Scholar, and is a fellow
               of the Society of Actuaries and of the Canadian Institute of Actuaries.
McCarthy Tétrault LLP




                                                                                     Lawyer Profile
                                                                                               PHILIP C. MOORE

                                      TITLE                      OFFICE                       LAW SCHOOL
                                      Partner                    Toronto                      Queen's University,
                                                                                              LLB, 1981

                                                                 DIRECT LINE                  BAR ADMISSIONS
                                                                 416-601-7916                 Ontario, 1983

                                                                 E-MAIL
                                                                 pmoore@mccarthy.ca




  Biography
  Philip Moore is a partner in our Business Law Group in Toronto. He joined the firm in 1988 after practising with
  firms in Sydney, Australia and in Toronto.

  Mr. Moore advises on a broad range of corporate and securities matters. He regularly acts on mergers and
  acquisitions, corporate finance and corporate reorganizations. Mr. Moore provides ongoing corporate and
  commercial advice to a number of public and private corporations and their boards of directors, and in that
  role is actively involved in advising on strategic issues.

  His recent transactional experience includes representing The Toronto-Dominion Bank on its acquisition of VFC
  Inc., advising Fairmont Hotels on its takeover by private investors, and numerous Canadian and cross-border public
  debt and equity securities offerings.

  He is a member of the board of directors of Neenah Paper Inc., a NYSE-listed Company, and is a member of the
  audit committee and chairs the compensation committee of that board.

  Mr. Moore received his BA from McMaster University in 1978 and his LLB from Queen’s University in 1981. He was
  called to the Ontario bar in 1983.
McCarthy Tétrault LLP




                                                                                   Lawyer Profile
                                                                                                    MARK EADE

                                     TITLE                     OFFICE                       LAW SCHOOL
                                     Partner                   Calgary                      University of
                                                                                            Saskatchewan, LLB,
                                                                                            1993

                                                               DIRECT LINE                  BAR ADMISSIONS
                                                               403-260-3524                 Alberta, 1994

                                                               E-MAIL
                                                               meade@mccarthy.ca




  Biography
  Mark Eade is a partner in our Calgary Corporate, Securities and Finance Department. His practice is broadly based,
  with an emphasis on corporate financings, commercial transactions and other general corporate matters.

  Mr. Eade earned a B.Comm (Hons) degree and his LLB from the University of Saskatchewan. He was called to the
  Alberta bar in 1994.
McCarthy Tétrault LLP




                                                                                    Lawyer Profile
                                                                                                CLEMENS MAYR


                                      TITLE                      OFFICE                       LAW SCHOOL
                                      Partner                    Montréal                     University of
                                                                                              Montreal, LLB, 1990

                                                                 DIRECT LINE                  BAR ADMISSIONS
                                                                 514-397-4258                 Québec, 1991


                                                                 E-MAIL
                                                                 cmayr@mccarthy.ca




  Biography
  Clemens Mayr is a partner in our Business Law Group in Montréal. His practice focuses on corporate finance,
  international financings and mergers and acquisitions.

  Mr. Mayr has substantial visibility in the Québec market and legal community. Since his call to the Québec bar in
  1991, he has practiced in the areas of securities and corporate law, more particularly in mergers and acquisitions,
  take-over bids, public financings and corporate governance.

  He has also been involved in numerous Canadian and cross-border public financings (including initial public
  offerings) acting for both issuers and underwriters, in various industry segments including high technology,
  biotechnology and communications.

  Mr. Mayr was named one of Canada’s Top 40 Lawyers Under 40 in the September 2002 issue of Lexpert magazine.
  He is rated by Martindale-Hubbell and is listed in the Canadian Legal Lexpert Directory.

  Mr. Mayr received his LLB from the University of Montréal in 1990 and was called to the Québec bar in 1991.
Annual Meetings Back In
Fashion
Shea T. Small
                                                      2.1-2

Proxy Rule Update – What’s New?

No major changes this year – amendments to National
 Instrument 51-102 in force December 29, 2006


• Delivery of Financial Statements
• New Disclosure Item – Director Penalties and
  Sanctions
• New Disclosure Item – External Management
  Companies
• Disclosure Exemptions for Special Meetings
                                                       2.1-3

Proxy Rule Update – Delivery of Financial Statements



Issuers are now expressly permitted to send their
financial statements with their proxy materials.
If they do so, they are exempt from the
requirement to send a request form and their
financial statements on request
                                                                    2.1-4

Proxy Rule Update – Director Penalties and Sanctions

Issuers must now describe any penalties or sanctions imposed and
the grounds on which they were imposed, or the terms of the
settlement agreement and the circumstances that gave rise to the
settlement agreement, if a proposed director has been subject to:
•any penalties or sanctions imposed by a court relating to securities
legislation or by a securities regulatory authority or has entered into
a settlement agreement with a securities regulatory authority; or
•any other penalties or sanctions imposed by a court or regulatory
body that would likely be considered important to a reasonable
securityholder in deciding whether to vote for a proposed director.
                                                                      2.1-5

Proxy Rule Update – External Management Companies

If an issuer’s executive management is employed or retained by an
external management company and the issuer has entered into an
understanding, arrangement or agreement of any kind for the
provision of executive management services by the external
management company to the issuer directly or indirectly, the issuer
must disclose:
•compensation payable by the issuer to executive management
•compensation payable by the external management company to
executive management that can be attributed to services rendered
to the issuer
•the entire compensation paid by the external management company
to executive management
                                                                 2.1-6

Proxy Rule Update – Exemptions for Special Meetings


• Items 8 and 10 (Executive Compensation and Indebtedness of
  Directors and Executive Officers) of Form 51-102F5 do not
  apply if the meeting is not an annual general meeting, there
  is no vote on executive compensation and directors are not
  being elected.

• Item 9 (Securities Authorized for Issuance under Equity
  Compensation Plans) of Form 51-102F5 does not apply in the
  same circumstances, provided there is no matter being voted
  on that involves the issuer issuing securities.
                                                    2.1-7

Proxy Rule Update – Materials



• Proxy Checklist

• Blackline of Form 51-102F5 Information Circular

• Blackline of Form 51-102F6 Statement of Executive
  Compensation
                                                                2.1-8

Majority Voting for Directors – Background

• Voting of directors for most issuers is still based on a
  plurality voting standard
• Canadian corporate law provides for shareholders to vote or
  withhold from voting for shareholders
• Absent competing nominees, management slate is elected
  no matter how many votes withheld for any directors
• As a result of institutional shareholder action, momentum in
  US and Canada has been gathering for issuers to change to
  majority voting standard in their articles/by-laws and/or to
  adopt director resignation policies
                                                               2.1-9

Majority Voting for Directors – Proposed Solutions



• Provide access to company proxy solicitation materials to
  have other nominees proposed alongside the management
  slate
• Require any director who does not receive majority support
  to resign
• Change corporate law to require majority voting standard
                                                                     2.1-10

Majority Voting for Directors – CCGG Proposal

Canadian Coalition for Good Governance has proposed that
  issuers adopt a director resignation policy as follows:
• All votes to elect directors taken by ballot and separate
  votes tallied for each director
• If more votes are withheld than voted for a director, that
  director must tender his or her resignation
• Board must accept the resignation within 90 days or explain
  why it has not done so
• Board may leave the vacancy unfilled or appoint a new
  director in its discretion or call a special meeting to fill the
  vacancy
• Policy will not apply in contested elections
                                                               2.1-11

Majority Voting for Directors – Implementation


• Banks
• BCE
• Nortel
• Expect that most major issuers will adopt this measure
  eventually
• Issuers who have not given consideration to the concept
  should be prepared to answer questions related to it from
  shareholders at upcoming annual meetings this proxy season
                                                        2.1-12

Majority Voting for Directors – Materials


• CCGG Suggested Form of Policy Statement

• CCGG Summary of Policies and Procedures Implemented
                                                                                               (Updated - December 29, 2006)



2007 PROXY CIRCULAR CHECKLIST
Proxy Circular Disclosure (and related matters)1

I.       Primary Sources

1.       NI 51-102

     •   general disclosure rules (including for the form of proxy): Part 9 of the Instrument, Part 9 of
         the related Companion Policy, Form 51-102 F5 (Information Circular) and Form 51-102 F6
         (Statement of Executive Compensation)2 3 4 5.

     •   for specific disclosure on “retirement benefits”: see CSA Staff Notice 51-314 (January 14,
         2005).

     •   for OSC releases on executive compensation disclosure: see OSC Staff Notice 51-304
         (November, 2002) and OSC Staff Report on Executive Compensation and Indebtedness
         Disclosure (February 17, 1995); see also OSC Staff Notice 51-706 – Corporate finance Report




1         For reporting issuers governed by the Canada Business Corporations Act (“CBCA”) and listed on the Toronto Stock Exchange
          (“TSX”) (but not on the TSX Venture Exchange for which different rules may apply).


2         The CSA instituted a “harmonized” continuous disclosure review program in 2004 pursuant to which regulators review and
          comment on the continuous disclosure documents (including proxy circulars) of reporting issuers on a regular basis; the
          largest issuers, with a market capitalization in excess of $750 million, will be reviewed on average once every three years:
          see CSA Staff Notice 51-312.


3         Pursuant to recent amendments to Form 51-102F5 effective as of December 29, 2006, disclosure on executive compensation,
          equity compensation plan information and indebtedness of directors and executive officers will only be required in
          information circulars for annual general meetings, meetings where directors are to be elected or meetings where
          securityholders will be asked to vote on a matter relating to executive compensation or a transaction involving the issue of
          securities.


4         Form 51-102F6, as amended effective December 29, 2006, now requires specific disclosure in circumstances where the issuer’s
          executive management is employed by an external management company.


5         New sections 7.2.1 and 7.2.2 of Form 51-102F5, effective as of December 29, 2006, now require in the information circular
          disclosure regarding certain regulatory sanctions and penalties imposed on the issuer. This is the same information presently
          required under section 10.2(2) of Form 51-102F2 (AIF).




                                                                                                                                 Page 1


2007 Proxy Circular Checklist
         (2005) (Paragraphs H and I of Part 2) and OSC Staff Notice 51-706 – Corporate Finance Report
         (2006) (Paragraph K of Part 11).

     •   if the issuer has or is changing its auditor, s. 4.11(5)(c) requires that the “reporting package”
         be annexed to the information circular, with a summary thereof in the circular itself.

     •   note that proxy circulars must use “plain language”, may incorporate by reference any other
         document (provided such document is filed concurrently with the proxy circular if it has not
         already been filed) and must be dated; the information in the proxy circular must be given as
         of a date not more than 30 days prior to the date of circular is first mailed.

     •   reporting issuers (other than “venture issuers”) must “promptly” following a meeting of
         securityholders file a report disclosing the voting results: s. 11.3 of the instrument.

2.       CBCA and CBCA Regulations (“CBCA Regs”)

     •   general disclosure rules (including for the form of proxy and dissident’s proxy circular): ss. 54
         to 66 CBCA Regs; note in particular the following disclosure items:

          •       indemnification payments made to officers and directors and disclosure re D&O
                  insurance: ss. 57(h) and (i) CBCA Regs;

          •       disclosure re material financial assistance given to certain persons: s. 57(z.7) CBCA Regs;

          •       proxy circular must contain a statement indicating the final date by which the
                  corporation must receive a proposal for any matter that a person entitled to vote at an
                  annual meeting proposes to raise at the next meeting: s. 57(z.9) CBCA Regs;

          •       proxy circular must contain a statement, signed by a director or an officer of the
                  corporation, that the contents and the sending of the circular have been approved by
                  the directors: s. 57(z.8) CBCA Regs.

     •   proxy circular must set out any proposal validly submitted under s. 137(1) CBCA and, if so
         requested by the person who submitted the proposal, a statement in support thereof not
         exceeding 500 words: s. 137(2) and (3) CBCA, ss. 46 to 53 CBCA Regs.

     •   proxy materials may specify a time, not exceeding 48 hours preceding the meeting or any
         adjournment, before which proxies must be deposited: s. 148(5) CBCA.

     •   related matters:




                                                                                                      Page 2


2007 Proxy Circular Checklist
          •       the notice of meeting and proxy circular must be sent not less than 21 days and not more
                  than 60 days before the meeting: s. 135(1) CBCA and s. 44 CBCA Regs; for notice of an
                  adjourned meeting, see s. 135(3) and (4) CBCA;

          •       annual meeting must be “called” not later than 15 months after the previous meeting
                  and not than 6 months after the corporation’s preceding financial year; the directors
                  must place before shareholders at every annual meeting, financial statements for the
                  last completed financial year ended not more than 6 months before the meeting:
                  s. 133(1)(b) CBCA, s. 155(1)(a) CBCA;

          •       the record date to receive notice of the meeting must be not less than 21 days and not
                  more than 60 days before the date of the meeting: s. 134(1) CBCA, s. 43 CBCA Regs;

          •       since under the CBCA a record date may be fixed for entitlement to vote at a meeting
                  (s. 134(1(d) CBCA), reporting issuers governed by the CBCA must establish such a record
                  date pursuant to NI 54-101: see below under “Other Sources – NI 54-101”;

          •       notice of the record date must be published in the newspaper and given to the relevant
                  stock exchange at least 7 days before the record date: s. 134(3) CBCA, s. 43(3) CBCA
                  Regs.

II.       Other sources

1.        TSX

          (a)      TSX Company Manual

      •   general requirements: ss. 455 to 465.

      •   A listed issuer must disclose annually in its proxy circular the terms of its security based
          compensation arrangements (with reference to the items in 613(d)) and the nature of any
          amendments that were adopted in the last fiscal year: s. 613(g); Staff Notice #2005-0001.

      •   Issuers have until June 30, 2007 to adopt proper amendment procedures in their security based
          compensation arrangements pursuant to 613(d) and submit it for securityholder approval; after
          such date, issuers with “general amendment” provisions in their plans will no longer be able to
          make any amendments to their plans without securityholder approval, even amendments of a
          “housekeeping nature”. See Staff Notices #2006-0001 and #2004-0002.




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2007 Proxy Circular Checklist
     •   if a meeting is held to approve a security based compensation arrangement or any amendment
         thereto, the proxy circular must disclose the items in 613(d)6: s. 613(d); Staff Notice #2005-
         0001.

     •   A listed issuer that has filed a notice for a normal course issuer bid must include a summary
         thereof in its next annual report, annual proxy circular, quarterly report or other document
         mailed to shareholders: s. 6-501(6)(e) of Appendix F.

     •   A listed issuer must describe the voting rights of listed “restricted securities” in its proxy
         circulars: s.624(i).

     •   A listed issuer must “hold” its annual meeting within 6 months of the end of its fiscal year:
         ss. 464 and 465.

         (b)       Other

     •   See the “TSX Guide to Good Disclosure” (as of January 2006)

2.       NI 54-101 (Communication with Beneficial Owners)

     •   disclosure requirements:

          •       reporting issuers that use NOBO lists to send proxy materials directly to NOBOs must
                  include certain prescribed disclosure: s. 2.11(1) and (2);

          •       proxy circulars sent to beneficial owners must explain, in plain language, how the
                  beneficial owner may exercise voting rights attached to the securities, including the
                  right to attend and vote directly at the meeting: s. 2.16.

     •   other relevant provisions:

          •       a reporting issuer must fix a date for the meeting, a record date for the notice of the
                  meeting which is no less than 30 days7 and no more than 60 days before the meeting date
                  and, if required or permitted by corporate law, a record date for voting at the meeting:
                  s. 2.1;

          •       At least 25 days7 before the record date for a notice of a meeting, the reporting issuer
                  must send a notification of the meeting and a record date to various entities: s. 2.2;




6        Such disclosure must be pre-cleared by the TSX.




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2007 Proxy Circular Checklist
          •          A reporting issuer that sends a notice of adjournment or other change in respect of a
                     meeting must concurrently send that notice to various parties: s. 2.15; s. 3.2 of the
                     related Companion Policy;

          •          A reporting issuer must send proxy materials either directly to NOBOs at least 21 days
                     before the meeting date, or indirectly to beneficial owners by sending proxy materials to
                     each intermediary at least 3 business days before the 21st day before the meeting day
                     (or at least 4 business days before the 21st day before the meeting date if the materials
                     are sent other than by 1st class mail): ss. 2.9 and 2.12.

3.       MI 52-110 (Audit Committees)

     •   Proxy circulars must contain a cross-reference to the sections in the issuer’s AIF that contains
         the audit committee disclosure required by form 52-110 F1: s. 5.2.

4.       NI 58-101 (Disclosure of Corporate Governance Practices)

     •   This instrument requires issuers to disclose their corporate governance practices as set forth in
         Form 58-101F1 in proxy circulars for any meeting called for the purposes of electing directors.

5.       Canadian Coalition for Good Governance8

     •   see “Best Practices in Shareholder Communication 2006”9 and “Good Governance for Principled
         Executive Compensation”, Working Paper June 2006, on the Coalition’s website
         (www.ccgg.ca).

6.       By-laws of the Issuer




7         This time period may be abridged provided that the proxy materials are sent in compliance with the instrument to beneficial
          owners at least 21 days before the meeting date and the reporting issuer files a certificate containing prescribed disclosure:
          s. 2:20.


8         The Canadian Coalition for Good Governance is made up of 50 of Canada’s leading institutional investors with combined
          assets under management in excess of $975 billion, with the mission of representing Canadian institutional shareholders
          through the promotion of best corporate governance practices.


9         This includes “best practices” (with examples) on voting for directors (with an appropriate proxy form and voting instruction
          form) and disclosure in proxy circulars of director information including director selection and orientation, director
          background, director share ownership, director compensation and director performance assessment.




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2007 Proxy Circular Checklist
       •   these should be reviewed to ensure compliance (in particular, the delays for notice of meeting,
           etc.).

III.       Special Disclosure for “Business Combinations”

       •   NI 51-102: see item 14 (and in particular 14.2)10 of Form 51-102F5.

       •   CBCA: see ss. 57(z.1) to (z.6) CBCA Regs.

       •   OSC Rule 61-501: see:

           •       s. 4.2 (general disclosure); ss. 4.2 and 6.1 of the related Companion Policy;

           •       ss. 6.2, 6.5, 6.7 and 6.8 (disclosure of formal valuation and prior valuations); s. 5.1 of
                   the related Companion Policy;

           •       ss. 4.4(5)(d) and 8.2(f) re disclosure in the case of “second-step business combinations”;

           •       s. 1.1, definition of “collateral benefit”, para. c(iii) and c(iv)(B)(III);

           •       see also s. 16 of OSC Staff Notice 51-715 (October, 2004).

       •   Staff Notice of L’Autorité des marchés financiers (“AMF”) dated June 29, 200111.

       •   TSX Company Manual: see ss. 462 and 463.




10         Section 14.2 of Form 51-102F5 requires prospectus level disclosure in certain circumstances, including in particular in share-
           exchange transactions. As amended effective December 29, 2006, this section will require prospectus level disclosure of the
           acquiror which is issuing securities, but will not generally require prospectus level disclosure of the “target” issuer which is
           not issuing securities (but the securities of which are being “exchanged” for those of the acquiror). Recent discussions we
           have had with staff at the AMF has confirmed this interpretation.


11         Staff of the AMF stated therein that, as regards the language of proxy circulars in business combinations, it would like issuers
           to consider the number of beneficial holders in Quebec and its degree of attachment to Quebec; it also stated that it was of
           the opinion that a proxy circular would be “deemed to contain sufficient details to permit holders to form a reasoned
           judgment” concerning a business combination if it contained, in addition to the disclosure prescribed for proxy circulars, the
           disclosure required for take-over bids, to the extent applicable and with the necessary modifications.




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2007 Proxy Circular Checklist
                                                                               McCarthy Tétrault LLP
                                                                               Suite 2500
                                                                               1000 De La Gauchetière Street West

McCarthy Tétrault                                                              Montréal (Québec) H3B 0A2
                                                                               CANADA
                                                                               Telephone : 514 397-4100
    Memorandum
    December 4, 2006 (updated January 4, 2007)




Re: General Overview of Reporting Obligations of Insiders in Québec and Proposed
    Amendments to National Instrument 55-101 – Insider Reporting Exemptions (“NI 55-101”)
    and Companion Policy 55-101CP – Insider Reporting Exemptions (“55-101CP”).

    A.      REPORTING OBLIGATION OF INSIDERS IN QUÉBEC – GENERAL
            OVERVIEW

    1.      Relevant Statutory Provisions, Instruments, Policies and Notices

            Relevant Statutory Provisions in Québec 1 :

                     Chapter IV, Sections 89-103 of the Securities Act (Québec) (the “QSA”).


                       NOTE: When in force, Sections 36 to 38 of An Act to amend the Securities Act
                       and other legislative provisions (S.Q. 2006, chapter 50) (“Bill 29”), which was
                       assented to on December 14, 2006, will amend certain of the aforementioned
                       provisions of the QSA. Sections 36 to 38 of Bill 29 are not yet in force. Section
                       143 of Bill 29 provides that Sections 36 to 38 of Bill 29 will come into force on
                       the date to be set by the Government. Relevant extracts of Bill 29 are
                       reproduced in Schedule A hereto.



                     Chapter IV, Sections 171-174 of the Regulation Respecting Securities (Québec)
                     (the “QSR”).

            Relevant Instruments, Policies and Notices:

                     National Instrument 55-101 – Insider Reporting Exemptions (“NI 55-101”);
                     Companion Policy 55-101CP – Insider Reporting Exemptions (“55-101CP”);
                     CSA Notice 55-308 – Questions on Insider Reporting, dated November 15, 2002
                     (“CSA Notice 55-308”).


    1
      For Ontario, corresponding provisions are found in Part XXI, Sections 106-121.1 of the Securities Act
    (Ontario) (the “OSA”).
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                                                  -2-


                 National Instrument 55-102 – System for Electronic Disclosure by Insiders
                 (SEDI) (“NI 55-102”); Companion Policy 55-102CP - System for Electronic
                 Disclosure by Insiders (SEDI) (“55-102CP”); Revised CSA Notice 55-310 –
                 Questions and Answers on the System for Electronic Disclosure by Insiders
                 (SEDI), dated April 25, 2003, revised August 19, 2005.

                 Multilateral Instrument 55-103 – Insider Reporting for Certain Derivative
                 Transactions (Equity Monetization); Companion Policy 55-103CP to Multilateral
                 Instrument 55-103 – Insider Reporting for Certain Derivative Transactions
                 (Equity Monetization); CSA Notice 55-312 – Insider Reporting Guidelines for
                 Certain Derivative Transactions (Equity Monetization).

                 See also OSC Staff Notice 55-701 – Automatic Securities Disposition Plans and
                 Automatic Securities Purchase Plans, June 2, 2006.

                 See also Part 5 (Section 5.4) and Part 9 of National Instrument 62-103 – The
                 Early Warning System and Related Take-Over Bid and Insider Reporting Issues.

   2.    Who is an “insider”?

         Definition of “insider (s. 89 QSA).

         89. The insiders of a reporting issuer that are subject to the disclosure requirements established in
         this chapter are

         1) the issuer itself, its subsidiaries, its senior executives and the senior executives of its
         subsidiaries;

         2) any person who exercises control over more than 10% of a class of shares of a reporting issuer
         to which are attached voting rights or an unlimited right to a share of the profits and in its assets
         in case of winding-up, other than securities that were the object of a firm underwriting and are in
         the course of distribution;

         3) the senior executives of a person contemplated in paragraph 2.
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                                                 -3-



          NOTE: When in force, Section 36 of Bill 29 will amend the definition of “insider” at
          Section 89 QSA by replacing Section 89 QSA by the following:

                  “89. “Insider” means

                  (1) every director or officer of an issuer;

                  (2) every director or officer of a subsidiary of an issuer;

                  (3) a person that exercises control over more than 10% of the voting rights attached to
                  all outstanding voting securities of an issuer other than securities underwritten in the
                  course of a distribution;

                  (4) an issuer that holds any of its securities; or

                  (5) a person prescribed by regulation or designated as an insider under section 272.2.

                  “Insider” also means a director or officer of an insider of an issuer.

          Section 36 of Bill 29 is not yet in force and, according to Section 143 of Bill 29, Section
          36 of Bill 29 will come into force on the date to be set by the Government. Relevant
          extracts of Bill 29 are reproduced in Schedule A hereto.



         Ownership of Securities, Exercise of Control and Presumption of Exercise of Control (s.
         10, s. 90 and s. 91 QSA).

         10. Whenever the question of the ownership of securities arises, any agreement by the effect of
         which the ownership of the securities is ascribed to a holder other than their true owner is
         disregarded.

         90. The person who is the owner of securities or has direction over them is the person who
         exercises control over them.

         91. Every person who may exercise as he sees fit voting rights attaching to securities he does not
         own is deemed to exercise control over those securities.

         Definition of “senior executive” (s. 5 QSA)

         5. “senior executive” means any person exercising the functions of a director, or of a president,
         vice-president, secretary, treasurer, controller or general manager, or similar functions.
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                                                -4-



          NOTE: Section 3(2) of Bill 29 amends Section 5 QSA by replacing the definition of
          “senior executive” (reproduced above) by the following definition:

                 “officer” means the chair or vice-chair of the board of directors, the chief executive
                 officer, the chief operating officer, the chief financial officer, the president, the vice-
                 president, the secretary, the assistant secretary, the treasurer, the assistant treasurer or
                 the general manager of an issuer or of a registrant, or any natural person designated as
                 such by the issuer or the registrant or acting in a similar capacity;

          Section 3(2) of Bill 29 came into force on December 14, 2006. However, Section 142 of
          Bill 29 contains the following transitional provision:

                 Unless the context indicates otherwise, the definition of “senior executive” as it read
                 before 14 December 2006 continues to apply, despite paragraphs 1 and 2 of section 3,
                 to any statutory instrument under the Securities Act and any document under such an
                 instrument, until the statutory instrument is amended by a decision or regulation of the
                 Autorité des marchés financiers.

          Relevant extracts of Bill 29 are reproduced in Schedule A hereto.



   3.    Reporting Obligations of Insiders

         Reporting obligations of insiders are in addition to the provisions of the QSA prohibiting
         an insider of a reporting issuer having privileged information relating to the securities of
         the issuer from the trading in the securities of such reporting issuer and from disclosing
         such information (s. 187 QSA and s. 188 QSA).

         A person who becomes an insider of a reporting issuer must disclose his control over the
         securities of such reporting issuer, by filing an initial insider report via SEDI (using
         Form 55-102F2) within 10 days of becoming an insider (s. 96 QSA and s. 171 QSR).

         An insider of a reporting issuer must disclose any change in his control over the
         securities of such reporting issuer, by filing an insider report via SEDI (using Form 55-
         102F2) within 10 days of such change (s. 97 QSA and s. 174 QSR).

                An insider of a reporting issuer who acquires or disposes of a derivative financial
                instrument in respect of a security of that issuer is deemed to effect a change in
                his control of the security (s. 92 QSA).
McCarthy Tétrault
                                                -5-



                  NOTE: When in force, Section 37 of Bill 29 will amend Section 92 QSA by
                  replacing “derivative” in the first line of the first paragraph by “related”. Section
                  37 of Bill 29 is not yet in force and, according to Section 143 of Bill 29, Section
                  37 of Bill 29 will come into force on the date to be set by the Government.
                  Relevant extracts of Bill 29 are reproduced in Schedule A hereto.



         An insider who registers or causes to be registered any securities in the name of a third
         party must file a report in paper format in accordance with Form 55-102F6 within 10
         days following the date of registration of the securities in the name of the third party (s.
         102 QSA, s. 172 QSR and s. 3.2 of NI 55-102). If the insider fails to file such a report,
         the third party must file the report himself on becoming aware of the failure (s. 103
         QSA).

                Relevant provisions of QSA:

                102. An insider of a reporting issuer who registers or causes to be registered any
                securities of that issuer in the name of a third person shall file a report prepared in the
                form prescribed by regulation, except in the case of a bona fide transfer in guarantee.

                103. Where an insider fails to file the report provided for in section 102, the third person
                shall file the report himself on becoming aware of the failure.

                Relevant provisions of QSR:

                172. The report prescribed by section 102 of the Act must be filed not later than the tenth
                day following the date of the registration of the securities in the name of a third party.

         National Instrument 55-102 – System for Electronic Disclosure by Insiders (SEDI) (“NI
         55-102”).

                Pursuant to NI 55-102, insiders of all reporting issuers in Canada are required to
                file electronically:

                        an insider profile using Form 55-102F1; and

                        insiders reports using Form 55-102F2.

                Insider profiles and insider reports must contain the information outlined in Form
                55-102F1 and in Form 55-102F2, respectively.

         A senior executive deemed to be an insider under Section 94 QSA or under Section 95
         QSA must file the report that Section 96 QSA or Section 97 QSA would have required
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                                                 -6-


         for the period contemplated by the presumption, within the first 10 days of the month
         following the start of the presumption (s. 98 QSA and s. 171.1 QSR).

                94. When an issuer, reporting or not, becomes an insider of a reporting issuer, a senior
                executive of the former issuer is deemed to have been an insider of the other reporting
                issuer for the previous 6 months or for such shorter period as he has been a senior
                executive of the former issuer.

                If the former issuer is a reporting issuer, the senior executives of the latter issuer are also
                deemed to be insiders of the former issuer, and the same conditions apply.

                95. The amalgamation of issuers or the purchase by an issuer of all or substantially all of
                the assets of another issuer or of a subsidiary thereof, gives rise, in respect of senior
                executives, to the presumptions set forth in section 94.

                Section 94 applies only when at least one reporting issuer was a party to the
                amalgamation or reorganization.

         No insider report is required to be filed under Sections 96 and 97 QSA when disclosure
         has already been made under Sections 147.11 to 147.17 QSA (s. 99 QSA). This includes
         an increase of interest in voting securities of any class of a reporting issuer to 10% or
         more (s. 147.11 QSA) and any subsequent increase of interest of 2% of more (s. 147.12
         QSA). The exemption in Section 99 QSA only applies in Québec; therefore, the
         analogous requirements of other provincial securities legislation would need to be
         complied with.

                99. A report under sections 96 and 97 is not required where the facts to be reported have
                already been disclosed in a report under sections 147.11 to 147.16.

         Specific penalty for failure to file insider reports : 100$ for each day during which such
         failure to report occurs, up to a maximum amount of $5,000 (s. 271.14 QSR).

                271.14. Any insider or senior executive deemed to be an insider who contravenes a
                provision of any of sections 96 to 98 or 102 of the Act for failure to disclose control or a
                change in control over securities is liable to an administrative monetary penalty of $100
                for each day during which such failure to report occurs, to a maximum amount of
                $5,000.

         See also AMF Notice entitled Avis du personnel – Les sanctions administratives
         pécuniaires imposées aux initiés – Motifs de révision irrecevables, in Bulletin de
         l’Autorité des marchés financiers: section Valeurs mobilières (2006-09-29 Vol. 3 n° 39),
         in which the AMF indicates certain reasons as being inadmissible grounds for revision of
         penalties for failure to file insider reports.
McCarthy Tétrault
                                                   -7-



   NOTE: When in force, Section 38 of Bill 29 will repeal Sections 94 to 100, 102 and 103 of the
   QSA and the following Section 89.3 will be added by Section 36 of Bill 29:

          89.3. An insider of a reporting issuer other than a mutual fund shall, in accordance with the
          conditions determined by regulation, file a report disclosing, in particular, any control exercised
          by the insider over the reporting issuer’s securities, any interest in, or right or obligation
          associated with, a related financial instrument of the issuer’s securities and make other disclosure
          prescribed by regulation.

   Sections 36 and 38 of Bill 29 are not yet in force and, according to Section 143 of Bill 29,
   Sections 36 and 38 of Bill 29 will come into force on the date to be set by the Government.
   Relevant extracts of Bill 29 are reproduced in Schedule A hereto.



          Multilateral Instrument 55-103 – Insider Reporting for Certain Derivative Transactions
          (Equity Monetization) (“MI 55-103”).

                  Section 2.1 of MI 55-103 provides that if an insider of a reporting issuer:
                  (a) enters into, materially amends or terminates an agreement, arrangement or
                  understanding of any nature or kind, the effect of which is to alter, directly or
                  indirectly, i) the insider’s economic interest in a security of the reporting issuer,
                  or ii) the insider’s economic exposure to the reporting issuer; and (b) the insider
                  is not otherwise required to file an insider report in respect of such event under
                  any provision of Canadian securities legislation, then the insider shall, subject to
                  certain exemptions contained in Section 2.2 of MI 55-103, file a report in
                  accordance with Section 3.1 of MI 55-103 disclosing the existence and material
                  terms of the agreement, arrangement or understanding. Section 2.4 of MI 55-103
                  provides for a similar reporting obligation in respect of agreements, arrangements
                  and understandings to which Section 2.1 of MI 55-103 apply and which existed
                  before, and remain in effect when, an insider becomes an insider.

                  Definition of “economic interest in a security” (s. 1.1 of MI 55-103).

                  “economic interest in a security” means (a) a right to receive or the opportunity to
                  participate in a reward, benefit or return from the security, or (b) exposure to a loss or a
                  risk of loss in respect to the security;

                  Definition of “economic exposure” (s. 1.1 of MI 55-103).

                  “economic exposure” in relation to a reporting issuer means the extent to which the
                  economic or financial interests of a person or company are aligned with the trading price
                  of securities of the reporting issuer or the economic or financial interests of the reporting
                  issuer;
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                                                       -8-


                     Definition of “security of a reporting issuer” (s. 1.1 of MI 55-103).

                     “security of a reporting issuer” is deemed to include (a) a put, call, option or other
                     right or obligation to purchase or sell securities of the reporting issuer; and (b) a security,
                     the value or market price of which are derived from, referenced to or based on the value,
                     market price or payment obligations of a security of the reporting issuer;

   4.       National Instrument 55-101 – Insider Reporting Exemptions

            Part 2 – Exemptions for Certain Directors and Senior Officers.

                     The insider reporting requirement does not apply to:

                              a director of a subsidiary of a reporting issuer;

                              a senior officer of a reporting issuer or of a subsidiary of the reporting
                              issuer;

                              a director or senior officer of an insider issuer 2 or of a subsidiary of the
                              insider issuer

                     if such person:

                              does not in the ordinary course receive or have access to information as
                              to material facts or material changes concerning the reporting issuer
                              before the material facts or material changes are generally disclosed; and

                              is not an “ineligible insider” in relation to the reporting issuer.

                     Definition of “ineligible insider” (s. 1.1 of NI 55-101):

                     “ineligible insider” in relation to a reporting issuer means

                     (a) an individual performing the functions of the chief executive officer, the chief
                     operating officer or the chief financial officer for the reporting issuer;

                     (b) a director of the reporting issuer;

                     (c) a director of a major subsidiary of the reporting issuer;

                     (d) a senior officer in charge of a principal business unit, division or function of
                     the i) the reporting issuer or ii) a major subsidiary of the reporting issuer;




   2
     According to Section 1.1 of NI 55-101, “insider issuer” in relation to a reporting issuer means an issuer that is
   an insider of the reporting issuer.
McCarthy Tétrault
                                               -9-


               (e) other than in Québec, a person that has direct or indirect beneficial ownership of,
               control or direction over, or a combination of direct or indirect beneficial ownership of,
               and control or direction over, securities of the reporting issuer carrying more than 10
               percent of the voting rights attached to all the reporting issuer's outstanding voting
               securities; or

               (f) in Québec, a person who exercises control over more than 10 percent of a class of
               shares of the reporting issuer to which are attached voting rights or an unlimited right to
               a share of the profits of the reporting issuer and in its assets in case of winding-up;

               Definition of major subsidiary:

               “major subsidiary” means a subsidiary of a reporting issuer if

               (a) the assets of the subsidiary, on a consolidated basis with its subsidiaries, as included
               in the most recent annual audited balance sheet of the reporting issuer, are 10 percent or
               more of the consolidated assets of the reporting issuer reported on that balance sheet, or

               (b) the revenues of the subsidiary, on a consolidated basis with its subsidiaries, as
               included in the most recent annual audited income statement of the reporting issuer, are
               10 percent or more of the consolidated revenues of the reporting issuer reported on that
               statement;


                NOTE: If and when the proposed amendments to NI 55-101 come into force,
                the definition of “major subsidiary” will be changed to increase the relevant
                percentages from 10% to 20%. See Section 2 of Part B of this memorandum for
                more details.



               The availability exemptions under Part 2 of NI 55-101 is currently subject to
               “Part 4 – Insider Lists and Policies” of NI 55-101, which requires:

                       an insider to notify the reporting issuer that the insider intends to rely on
                       an exemption in Part 2 or 3;

                       the reporting issuer to maintain a list of insiders who are relying on
                       exemptions from the insider reporting requirements and a list of insiders
                       who are not relying on the exemptions or file an undertaking with the
                       securities regulatory authorities that it will make those lists available to
                       the regulatory authorities on request; and

                       the reporting issuer to advise its insiders that the reporting issuer has
                       established policies and procedures relating to insider trading and that, as
                       part of those policies and procedures, the issuer is required to maintain
                       the lists of insiders referred to above.
McCarthy Tétrault
                                             - 10 -



                 NOTE: If and when the proposed amendments to NI 55-101 come into force,
                 “Part 4 – Insider Lists and Policies” will be repealed. See Section 2 of Part B of
                 this memorandum for more details.



         Part 3 – Exemption for Directors and Senior Officers of Affiliates of Insiders of a
         Reporting Issuer.

                Because of differences in the current insider reporting requirements, Part 3 of NI
                55-101 does not apply in Québec (s. 3.1 of NI 55-101).

                Subject to certain limitations similar to those found in Part 2 of NI 55-101,
                Section 3.2 of NI 55-101 provides that the insider reporting requirement does not
                apply to a director or senior officer of an affiliate of an insider of a reporting
                issuer in respect of the securities of the reporting issuer.

         Part 5 – Reporting of Acquisitions Under Automatic Securities Purchase Plans.

                The exemption in Section 5.1 of NI 55-101 allows to defer the reporting, in
                certain specific circumstances, of:

                        acquisitions of securities made under an “automatic securities purchase
                        plan”; or

                        dispositions of securities is a “specified disposition of securities” under
                        an “automatic securities purchase plan”.

                The exemption in Section 5.1 of NI 55-101 does not apply to a person who
                exercises control over more than 10 percent of a class of shares of the reporting
                issuer to which are attached voting rights or an unlimited right to a share of the
                profits of the reporting issuer and in its assets in case of winding-up (s. 5.2 of
                NI 55-101).

                Pursuant to Section 5.1 of NI 55-101, the insider reporting requirement does not
                apply to a director or senior officer of a reporting issuer or of a subsidiary of the
                reporting issuer for :

                        the acquisition of securities of the reporting issuer under an “automatic
                        securities purchase plan”, other than the acquisition of securities under a
                        “lump-sum provision” of the plan; or

                        a “specified disposition of securities” of the reporting issuer under an
                        “automatic securities purchase plan”.
McCarthy Tétrault
                                               - 11 -


               Pursuant to Section 5.3(1) of NI 55-101, an insider must file a report disclosing,
               on a transaction-by-transaction basis or in acceptable summary form, each
               acquisition of securities under the automatic securities purchase plan, and each
               specified disposition of securities under the automatic securities purchase plan:

                        for any securities acquired under the automatic securities purchase plan
                        that have been disposed of or transferred (other than securities that have
                        been disposed of or transferred as part of a specified disposition of
                        securities), within the time required by securities legislation for filing a
                        report disclosing the disposition or transfer; and

                        for any securities acquired under the automatic securities purchase plan
                        during a calendar year that have not been disposed of or transferred, and
                        any securities that have been disposed of or transferred as part of a
                        specified disposition of securities, within 90 days of the end of the
                        calendar year.

               Relevant definitions (s. 1.1 of NI 55-101):

               “automatic securities purchase plan” means a dividend or interest reinvestment plan, a
               stock dividend plan or any other plan of a reporting issuer or of a subsidiary of a
               reporting issuer to facilitate the acquisition of securities of the reporting issuer if the
               timing of acquisitions of securities, the number of securities which may be acquired
               under the plan by a director or senior officer of the reporting issuer or of the subsidiary
               of the reporting issuer and the price payable for the securities are established by written
               formula or criteria set out in a plan document;

               “dividend or interest reinvestment plan” means an arrangement under which a holder
               of securities of an issuer is permitted to direct that the dividends, interest or distributions
               paid on the securities be applied to the purchase, from the issuer or an administrator of
               the issuer, of securities of the issuer's own issue;

               “stock dividend plan” means an arrangement under which securities of an issuer are
               issued by the issuer to holders of securities of the issuer as a stock dividend or other
               distribution out of earnings or surplus.

               “lump-sum provision” means a provision of an automatic securities purchase plan that
               allows a director or senior officer to acquire securities in consideration of an additional
               lump-sum payment, including, in the case of a dividend or interest reinvestment plan that
               is an automatic securities purchase plan, a cash payment option;

               “cash payment option” means a provision in a dividend or interest reinvestment plan
               under which a participant is permitted to make cash payments to purchase from the
               issuer, or from an administrator of the issuer, securities of the issuer's own issue, in
               addition to the securities
McCarthy Tétrault
                                               - 12 -


                (a) purchased using the amount of the dividend, interest or distribution payable to or for
                the account of the participant; or

                (b) acquired as a stock dividend or other distribution out of earnings or surplus;

                A disposition or transfer of securities acquired under an automatic securities purchase
                plan is a “specified disposition of securities” if

                (a) the disposition or transfer is incidental to the operation of the automatic securities
                purchase plan and does not involve a discrete investment decision by the director or
                senior officer; or

                (b) the disposition or transfer is made to satisfy a tax withholding obligation arising from
                the distribution of securities under the automatic securities purchase plan and either

                (i) the director or senior officer has elected that the tax withholding obligation will be
                satisfied through a disposition of securities, has communicated this election to the
                reporting issuer or the plan administrator not less than 30 days prior to the disposition
                and this election is irrevocable as of the 30th day before the disposition; or

                (ii) the director or senior officer has not communicated an election to the reporting issuer
                or the plan administrator and, in accordance with the terms of the plan, the reporting
                issuer or the plan administrator is required to sell securities automatically to satisfy the
                tax withholding obligation. (s. 5.4 of NI 55-101)

                “acceptable summary form”, in relation to the alternative form of insider report
                described in section 5.3, means an insider report that discloses as a single transaction,
                using December 31 of the relevant year as the date of the transaction, and providing an
                average unit price,

                (a) the total number of securities of the same type acquired under an automatic securities
                purchase plan, or under all such plans, for the calendar year, and

                (b) the total number of securities of the same type disposed of under all specified
                dispositions of securities under an automatic securities purchase plan, or under all such
                plans, for the calendar year;

         Part 6 – Reporting for Normal Course Issuer Bids.

                Modifies the insider reporting obligations of an issuer for acquisitions of
                securities of its own issue under a “normal course issuer bid”.

                Definition of “normal course issuer bid” (s. 1.1 of NI 55-101)

                “normal course issuer bid” means

                (a) an issuer bid that is made in reliance on the exemption contained in securities
                legislation from certain requirements relating to issuer bids that is available if the
                number of securities acquired by the issuer within a period of twelve months does not
McCarthy Tétrault
                                              - 13 -


                exceed 5 percent of the securities of that class issued and outstanding at the
                commencement of the period, or

                (b) a normal course issuer bid as defined in the policies of The Montreal Exchange, The
                TSX Venture Exchange or The Toronto Stock Exchange, conducted in accordance with
                the policies of that exchange;

                An issuer must file a report disclosing each acquisition of securities by it under a
                normal course issuer bid within 10 days of the end of the month in which the
                acquisition occurs (s. 6.2 of NI 55-101).

         Part 7 – Reporting for Certain Issuer Events.

                Modifies the insider reporting obligations of an insider of a reporting issuer
                whose control over securities of the reporting issuer changes as a result of an
                “issuer event” of the issuer.

                Definition of “issuer event” (s. 1.1 of NI 55-101):

                “issuer event” means a stock dividend, stock split, consolidation, amalgamation,
                reorganization, merger or other similar event that affects all holdings of a class of
                securities of an issuer in the same manner, on a per share basis (s. 1.1 of NI 55-101)

                An insider must report changes resulting from an “issuer event” only at the time
                when such insider is required to file an insider report for a subsequent change in
                his control over securities of the reporting issuer (s. 7.2 of NI 55-101; see also
                Section 1.26 of CSA Notice 55-308).

   B.    PROPOSED AMENDMENTS TO NATIONAL INSTRUMENT 55-101 AND
         COMPANION POLICY 55-101CP

   1.    General Overview

         NI 55-101 came into force on April 30, 2005.

         “Request for Comment – Proposed Amendments to NI 55-101 Insider Reporting
         Exemptions and Companion Policy 55-101CP Insider Reporting Exemptions”

                Published for comment by the Canadian Securities Administrators (the “CSA”)
                on October 27, 2006.

                Comments need to be submitted on or before January 25, 2007.

         Since recent amendments, CSA has received comments from issuers:
McCarthy Tétrault
                                              - 14 -


                 indicating that the present record-keeping requirements (in Part 4 of NI 55-101)
                 are unduly onerous, particularly for larger issuers that have a large number of
                 subsidiaries; and

                 expressing the concern that Canadian securities legislation continues to require
                 too many persons to file insider reports, particularly when compared to the
                 requirements of various foreign jurisdictions.

          In view of these comments and further consideration of these requirements, CSA
          proposes to delete the record-keeping requirements in Part 4 of NI 55-101 and instead
          include these record-keeping functions as an example of a best practice in 55-101CP. By
          doing so, the CSA recognizes that issuers may choose to adopt different record-keeping
          practices that are tailored to their particular circumstances.

   2.     Proposed Amendments to NI 55-101 and 55-101CP

   Three substantive changes are proposed to NI-55-101 and 55-101CP:

          Changes to the definition of “major subsidiary” in Section 1.1 of NI 55-101:

                 The definition of “major subsidiary” in Section 1.1 of NI 55-101 will be changed
                 to increase the relevant percentages from 10 to 20%.

                 This change means that a subsidiary would be a major subsidiary of a reporting
                 issuer only if its assets are 20% or more of the consolidated assets of the
                 reporting issuer or its revenues are 20% or more of the consolidated revenues of
                 the reporting issuer.

                 This change may increase the number of insiders able to rely on the exemptions
                 in Parts 2 and 3 of NI 55-101 because directors or senior officers of a subsidiary
                 that represents more than 10% but less than 20% of the assets or revenues of the
                 reporting issuer will no longer be “ineligible insiders” as defined in section 1.1.

          Repeal of “Part 4 – Insider Lists and Policies”:

                 “Part 4 – Insider Lists and Policies” will be repealed. This change is expected to
                 make it easier for eligible insiders to rely on the exemptions in Parts 2 and 3 of
                 NI 55-101.

                 “Part 4 – Insider Lists and Policies” currently requires:

                         an insider to notify the reporting issuer that the insider intends to rely on
                         an exemption in Part 2 or 3;
McCarthy Tétrault
                                              - 15 -


                         the reporting issuer to maintain a list of insiders who are relying on
                         exemptions from the insider reporting requirements and a list of insiders
                         who are not relying on the exemptions or file an undertaking with the
                         securities regulatory authorities that it will make those lists available to
                         the regulatory authorities on request; and

                         the reporting issuer to advise its insiders that the reporting issuer has
                         established policies and procedures relating to insider trading and that, as
                         part of those policies and procedures, the issuer is required to maintain
                         the lists of insiders referred to above.

          Automatic Securities Purchase Plans Exemption for Stock Option Grants:

                 CSA proposes to add to “Part 5 – Automatic Securities Purchase Plans” of NI-
                 55-101 a new Subsection 5.2(3) to make it clear that certain insiders can rely on
                 the automatic securities purchase plan (ASPP) exemption for grants of stock
                 options and similar securities only if the reporting issuer has publicly previously
                 disclosed in a news release filed on SEDAR the existence and material terms of
                 the grant, including without limitation:

                         the date the options or other securities were issued or granted;

                         the number of options or other securities issued or granted to each insider
                         who is an executive officer or director referred to above;

                         the price at which the options or other securities were issued or granted
                         and the exercise price; and

                         the number and type of securities issuable on the exercise of the options
                         or other securities.

                 This will allow those insiders to defer filing insider reports about these
                 transactions, while still ensuring that the information is available to the market on
                 a timely basis.

   3.     Proposed Changes to 55-101CP

   55-101CP will be revised in two ways:

          “Part 4 Insider Lists and Policies” will recommend the following best practices for
          reporting issuers relating to insider lists and trading policies.

                 CSA recommends that issuers adopt the best practices for disclosure and
                 information containment articulated in National Policy 51-201 Disclosure
                 Standards. CSA believes that adopting the CSA best practices as a standard for
McCarthy Tétrault
                                             - 16 -


                issuers would assist issuers to ensure that they take all reasonable steps to contain
                inside information.

                CSA recommends that issuers adopt written disclosure policies in order to:

                        assist directors, officers and employees and other representatives in
                        discharging timely disclosure obligations; and

                        provide guidance on how to maintain the confidentiality of corporate
                        information and to prevent improper trading on inside information.

                List of persons who have access to material facts or material changes.

                        Reporting issuers should also consider preparing and periodically
                        updating a list of the persons working for them or their affiliates who
                        have access to material facts or material changes concerning the reporting
                        issuer before those facts or changes are generally disclosed.

                        This type of list may allow reporting issuers to control the flow of
                        undisclosed information and help them to ensure that insiders are not
                        violating insider trading prohibitions.

                        Alternatively, the issuer could undertake to provide these lists promptly
                        after receiving a request for them from a securities regulatory authority.

         Subsection 5.1(4) will be added to “Part 5 Automatic Securities Purchase Plans” in order
         to provide additional guidance on the ASPP exemption.
                                         SCHEDULE A

                                   EXTRACTS OF BILL 29

“BILL 29

AN ACT TO AMEND THE SECURITIES ACT AND OTHER LEGISLATIVE
PROVISIONS.

THE PARLIAMENT OF QUÉBEC ENACTS AS FOLLOWS:

[…]

3.      Section 5 of the Act, amended by section 5 of chapter 38 of the statutes of 2001 and by
section 3 of chapter 37 of the statutes of 2004, is again amended

        (1)     by inserting the following definition in alphabetical order:

       ““director” means a director of a legal person, or a natural person acting in a similar
capacity for another person;”;

        (2)     by replacing the definition of “senior executive” by the following definition:

        ““officer” means the chair or vice-chair of the board of directors, the chief executive
officer, the chief operating officer, the chief financial officer, the president, the vice-president,
the secretary, the assistant secretary, the treasurer, the assistant treasurer or the general manager
of an issuer or of a registrant, or any natural person designated as such by the issuer or the
registrant or acting in a similar capacity;”;

[…]

        (5)     by inserting the following definitions in alphabetical order:

        […]

        ““insider” means an insider within the meaning of section 89;”;

[…]

36.     Section 89 of the Act is replaced by the following sections:

        “89.    “Insider” means

        (1)     every director or officer of an issuer;

        (2)     every director or officer of a subsidiary of an issuer;

         (3)    a person that exercises control over more than 10% of the voting rights attached
to all outstanding voting securities of an issuer other than securities underwritten in the course of
a distribution;

        (4)     an issuer that holds any of its securities; or
McCarthy Tétrault
                                                 -2-


           (5)     a person prescribed by regulation or designated as an insider under section 272.2.

           “Insider” also means a director or officer of an insider of an issuer.

           “89.1. “Economic interest” means a right to receive or the opportunity to participate in a
   reward, benefit or return from a security, or exposure to a risk of a financial loss in respect of a
   security.

           “89.2. “Related financial instrument” means

           (1)    any instrument, agreement or security whose value, market price or payment
   obligations are based on the value, market price or payment obligations of a security; and

           (2)     any other instrument, agreement or understanding that affects, directly or
   indirectly, a person’s economic interest in a security

           “89.3. An insider of a reporting issuer other than a mutual fund shall, in accordance with
   the conditions determined by regulation, file a report disclosing, in particular, any control
   exercised by the insider over the reporting issuer’s securities, any interest in, or right or
   obligation associated with, a related financial instrument of the issuer’s securities and make other
   disclosure prescribed by regulation.”

   37.    Section 92 of the Act is amended by replacing “derivative” in the first line of the first
   paragraph by “related”.

   38.     Sections 94 to 100, 102 and 103 of the Act are repealed.

   […]

   86. The Act is amended by inserting the following section after section 272.1:

           “272.2. Of its own initiative or on application by an interested person, the Authority may
   designate a person to be a non-redeemable investment fund, a mutual fund, an insider or a
   reporting issuer for the purposes of this Act or decide that a person does not have such a status, if
   it considers it to be in the public interest to do so.”

   […]

   108. Section 331.1 of the Act, amended by section 38 of chapter 37 of the statutes of 2004, is
   again amended

   […]

           (11)    by replacing paragraph 20.1 by the following paragraph:
McCarthy Tétrault
                                                -3-


            “(20.1) determine the rules applicable to insiders for the purposes of Chapter IV of Title
   III;”;

   […]

   142. Unless the context indicates otherwise, in any Act, statutory instrument or other
   document, “management company”, “investment fund management company” and “manager”,
   when pertaining to an investment fund within the meaning of this Act, mean an investment fund
   manager.

           Unless the context indicates otherwise, the definition of “senior executive” as it read
   before 14 December 2006 continues to apply, despite paragraphs 1 and 2 of section 3, to any
   statutory instrument under the Securities Act and any document under such an instrument, until
   the statutory instrument is amended by a decision or regulation of the Autorité des marchés
   financiers.

   […]

   143. This Act comes into force on 14 December 2006, except sections 2, 11, 16 to 24 and 26,
   paragraph 3 of section 28, paragraph 2 of section 30, sections 33 and 34, section 35 to the extent
   that it repeals sections 84 and 85 of the Securities Act (R.S.Q., chapter V-1.1), sections 36 to 39,
   41, 56 and 58, paragraphs 2, 3 and 4 of section 61, paragraph 1 of section 62, section 65,
   paragraph 2 of section 66, paragraphs 1 and 3 of section 67, section 68, paragraph 3 of section
   70, section 71, paragraph 2 of section 72, sections 73 and 74, paragraphs 1 and 2 of section 78,
   sections 80, 88 and 89 and paragraphs 4, 5, 9, 10, 13 and 14 of section 108, which come into
   force on the date or dates to be set by the Government.”

                                              *******
Certification Procedures
Michael Urbani
                                             3.1-2

CEO/CFO Certifications - Update
• Status of Certifications under MI 52-109
• Internal control certifications
  • Canada
  • US (for foreign private issuers)
• Auditor reports on internal controls
  • Canada
  • US (for foreign private issuers)
• MD&A Disclosure – Recent Examples
                                                         3.1-3

CEO/CFO Certifications - Update
• Canadian rules on CEO & CFO certifications
  first came into effect in 2004
  • Patterned off of the SOX 302 certifications
  • Specific matters to be certified have come into
    effect on a staggered basis
• Last certification matter to come into effect –
  resulting in the so-called “full” certificate
  requirements – are now in effect
  • Apply for FYE on or after June 30, 2006
  • Issuers must now deal with “internal controls over
    financial reporting” (“ICFR”)
                                                                         3.1-4

CEO/CFO Certifications - Update
• “Full” certificates (Forms 52-109F1 and 52-109F2) deal
  with:
   •   Review of the filing
   •   No untrue statement of, or omission of, a material fact
   •   Fair presentation of financial condition
   •   Statement of responsibility for establishing and maintaining
       disclosure controls and procedures and ICFR
        • Design of controls (both disclosure & ICFR)
        • Disclosure of conclusions in MD&A regarding effectiveness of
          disclosure controls
   • Have caused disclosure in MD&A of any material changes in
     ICFR
                                                   3.1-5

CEO/CFO Certifications - Update
• Canadian certifications with respect to
  ICFR are now more onerous than US
  certifications for small issuers
  • SOX 302 certificates do not require
    statements regarding internal controls until
    FYE on or after December 15, 2007, for
    “non-accelerated” issuers
                                                              3.1-6

CEO/CFO Certifications - Update
• Guidance from Canadian regulators on internal
  control certifications:
  • CSA Staff Notice 52-316
  • CSA Staff Notice 52-313
• 52-316 ~ What CEO/CFO can say when they are
  aware of a weakness in the design of internal
  controls
  • Design certification can still be given if the issuer’s
    disclosure about the weakness presents an accurate
    and complete description of the state of ICFR
                                                        3.1-7

CEO/CFO Certifications - Update
• 52-313 ~ CSA not proceeding with MI 52-111
  (Canadian answer to SOX 404 rules)
  • Annual management report evaluating effectiveness
    of ICFR and auditor attestation to management’s
    assessment
  • Rule withdrawn, but stay tuned
  • CSA plans to publish revised MI 52-109 to provide for
    certification and MD&A disclosure on effectiveness
    of ICFR, BUT no auditor attestation
  • Earliest might apply is for FYE on or after
    December 31, 2007
  • Will apply to all issuers (including venture issuers)
                                                                      3.1-8

CEO/CFO Certifications - Update
• SOX 404 disclosure requirements apply to foreign
  private issuers
• On December 15, 2006, SEC established new
  compliance dates for certifications of ICFR
• “Non-accelerated filers” will not be required to
  provide:
   • Management’s report on effectiveness of ICFR until annual
     report for first FYE on or after December 15, 2007
   • Auditor’s attestation until annual report for first FYE on or
     after December 15, 2008
   • Certifications as to changes in ICFR and design of ICFR may be
     omitted until annual report containing management’s report is
     filed
                                                                       3.1-9

CEO/CFO Certifications - Update
• “Non-accelerated filers” are those that are neither
  “accelerated filers” nor “large accelerated filers”
   • World-wide market value < US$75 million
• “Accelerated filers” filing on Form 20-F or 40-F will
  “furnish” management’s report, rather than “file”
   • Management’s report requirement in effect now
   • No auditor attestation report required until a year after first
     complying with the management report requirement (FYE on
     or after July 15, 2007)
• “Large accelerated filers” must now fully comply with
  SOX 404 requirements, including auditor attestation
  (FYE on or after July 15, 2006)
                                                        3.1-10

CEO/CFO Certifications - Update
• SEC proposed guidance on internal control
  evaluation (December 13, 2006)
  • Identification of risks to reliable reporting and the
    related controls which address those risks
  • Evaluation of the operating effectiveness of controls
  • Reporting the overall results of management’s
    evaluation
  • Documentation
• PCAOB proposed new Auditing Standard No. 2
  (December 19, 2006) ― done in coordination
  with SEC
                                          3.1-11

CEO/CFO Certifications - Update
• MD&A disclosure – see recent examples
  in the materials
                             Form 52-109F1 Certification of Annual Filings

I, ‹identify the certifying officer, the issuer, and his or her position at the issuer›, certify that:

1.        I have reviewed the annual filings (as this term is defined in Multilateral Instrument 52-
          109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of ‹identify
          issuer› (the issuer) for the period ending ‹state the relevant date›;

2.        Based on my knowledge, the annual filings do not contain any untrue statement of a
          material fact or omit to state a material fact required to be stated or that is necessary to
          make a statement not misleading in light of the circumstances under which it was made,
          with respect to the period covered by the annual filings;

3.        Based on my knowledge, the annual financial statements together with the other financial
          information included in the annual filings fairly present in all material respects the
          financial condition, results of operations and cash flows of the issuer, as of the date and
          for the periods presented in the annual filings;

4.        The issuer’s other certifying officers and I are responsible for establishing and
          maintaining disclosure controls and procedures and internal control over financial
          reporting for the issuer, and we have:

          (a)       designed such disclosure controls and procedures, or caused them to be designed
                    under our supervision, to provide reasonable assurance that material information
                    relating to the issuer, including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the period in which the annual
                    filings are being prepared;

          (b)       designed such internal control over financial reporting, or caused it to be designed
                    under our supervision, to provide reasonable assurance regarding the reliability of
                    financial reporting and the preparation of financial statements for external
                    purposes in accordance with the issuer’s GAAP; and

          (c)       evaluated the effectiveness of the issuer’s disclosure controls and procedures as of
                    the end of the period covered by the annual filings and have caused the issuer to
                    disclose in the annual MD&A our conclusions about the effectiveness of the
                    disclosure controls and procedures as of the end of the period covered by the
                    annual filings based on such evaluation; and

5.        I have caused the issuer to disclose in the annual MD&A any change in the issuer’s
          internal control over financial reporting that occurred during the issuer’s most recent
          interim period that has materially affected, or is reasonably likely to materially affect, the
          issuer’s internal control over financial reporting.

Date: ...............

_______________________
[Signature]
[Title]
                             Form 52-109F2 Certification of Interim Filings

I ‹identify the certifying officer, the issuer, and his or her position at the issuer›, certify that:

1.        I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-
          109 Certification of Disclosure in Issuers’ Annual and Interim Filings) of ‹identify the
          issuer›, (the issuer) for the interim period ending ‹state the relevant date›;

2.        Based on my knowledge, the interim filings do not contain any untrue statement of a
          material fact or omit to state a material fact required to be stated or that is necessary to
          make a statement not misleading in light of the circumstances under which it was made,
          with respect to the period covered by the interim filings;

3.        Based on my knowledge, the interim financial statements together with the other
          financial information included in the interim filings fairly present in all material respects
          the financial condition, results of operations and cash flows of the issuer, as of the date
          and for the periods presented in the interim filings;

4.        The issuer's other certifying officers and I are responsible for establishing and
          maintaining disclosure controls and procedures and internal control over financial
          reporting for the issuer, and we have:

          (a)       designed such disclosure controls and procedures, or caused them to be designed
                    under our supervision, to provide reasonable assurance that material information
                    relating to the issuer, including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the period in which the interim
                    filings are being prepared; and

          (b)       designed such internal control over financial reporting, or caused it to be designed
                    under our supervision, to provide reasonable assurance regarding the reliability of
                    financial reporting and the preparation of financial statements for external
                    purposes in accordance with the issuer’s GAAP; and

5.        I have caused the issuer to disclose in the interim MD&A any change in the issuer’s
          internal control over financial reporting that occurred during the issuer’s most recent
          interim period that has materially affected, or is reasonably likely to materially affect, the
          issuer’s internal control over financial reporting.

Date: ...............

_______________________
[Signature]
[Title]
Press Release: SEC Votes to Propose Interpretive Guidance for Management to Improve Sarbanes-Oxley ... Page 1 of 3

                                                                                                                   Home | Previous Page




                    SEC Votes to Propose Interpretive Guidance for
                    Management to Improve Sarbanes-Oxley 404
                    Implementation

                    FOR IMMEDIATE RELEASE
                    2006-206

                    Washington, D.C., Dec. 13, 2006 - The Securities and Exchange Commission today voted to
                    propose for public comment interpretive guidance for managements regarding their
                    evaluations of internal control over financial reporting. The Commission also proposed
                    amendments to Rules 13a-15 and 15d-15 that would make it clear that a company choosing to
                    perform an evaluation of internal control in accordance with the interpretive guidance would
                    satisfy the annual evaluation required by those rules. Finally, the Commission proposed
                    amendments to Regulation S-X to clarify the auditor's reporting requirement pursuant to
                    Section 404(b) of the Sarbanes-Oxley Act.


                    "We are proposing this interpretative guidance to help management make their evaluation
                    process more efficient and cost-effective," said SEC Chairman Christopher Cox. "In the
                    absence of guidance, management has looked to the PCAOB's auditing standard to conduct
                    their evaluations, which is not what was intended. With this guidance, management will be
                    able to scale and tailor their evaluation procedures to fit their facts and circumstances, and
                    investors will benefit from reduced compliance costs. While the guidance is intended to help
                    public companies of all sizes, smaller companies should particularly benefit from its scalability
                    and flexibility. We believe that today's proposed guidance, along with the Public Company
                    Accounting Oversight Board's new auditing standard to be proposed next week, will result in
                    significant improvements in the implementation of Sox 404."

                    "The guidance proposed today is an important step in the roadmap the Commission laid out in
                    May for improving the implementation of Section 404 for all issuers," said John W. White,
                    Director of the SEC's Division of Corporation Finance. "The proposed interpretive guidance
                    should reduce uncertainty about what constitutes a reasonable approach to management's
                    evaluation while maintaining flexibility for companies that have already developed their own
                    assessment procedures and tools that serve the company and its investors well. Companies
                    will be able to continue using their existing procedures if they choose, provided of course that
                    those meet the standards of Section 404 and our rules. At the same time, the guidance
                    maintains the important investor protection objectives of bringing information about material
                    weaknesses into public view and fostering the preparation of reliable financial statements in an
                    effective and efficient manner."

                    "Our proposed guidance is focused on risk and materiality. We have worked hard to ensure
                    that the proposed guidance will not disrupt best practices already in place, or that may be
                    evolving, while at the same time ensuring that it would be scalable to companies of all sizes,"
                    said Conrad Hewitt, Chief Accountant. "In particular, the top-down, risk-based guidance would
                    allow for effective, and, importantly, efficient, methods and procedures for conducting
                    evaluations at smaller companies. It is also intended to rebalance control over the process by
                    providing management with its own guidance — without the need to look to auditing standards
                    — for evaluating internal control over financial reporting. Although our guidance is directed to
                    management and the expected proposal from the PCAOB is directed to auditors, we encourage
                    respondents to take advantage of the proposals' overlapping comment periods to consider
                    whether the proposals, if adopted, will ensure an appropriate balance between management's
                    evaluation process and the audit process. We encourage feedback on all aspects of our
                    proposal."


                    Introduction

                    Section 404(a) of the Sarbanes-Oxley Act directed the Commission to adopt rules requiring
                    each annual report of a company, other than a registered investment company, to contain (1)
                    a statement of management's responsibility for establishing and maintaining an adequate
                    internal control structure and procedures for financial reporting; and (2) management's
                    assessment, as of the end of the company's most recent fiscal year, of the effectiveness of the
                    company's internal controls structure and procedures for financial reporting.


http://www.sec.gov/news/press/2006/2006-206.htm                                                                                12/13/2006
Press Release: SEC Votes to Propose Interpretive Guidance for Management to Improve Sarbanes-Oxley ... Page 2 of 3
                    On June 5, 2003, the Commission adopted such rules implementing Section 404(a) with
                    regard to management's obligations to report on its internal control over financial reporting.
                    The final rules did not prescribe any specific method or set of procedures for management to
                    follow in performing its evaluation.


                    Today's proposal would amend the Commission's rules adopted in 2003 to state that an
                    evaluation conducted in accordance with the interpretive guidance would satisfy the
                    Commission's rules. However, in order to retain the flexibility that was desired by the 2003
                    rules, the amendments proposed today would afford management the latitude to either follow
                    the interpretive guidance or to develop and use other methods that achieve the objectives of
                    the Commission's 2003 rules.


                    Proposed Interpretive Guidance for Evaluating Effectiveness of
                    Internal Control over Financial Reporting

                    The proposed guidance is principles-based guidance that is organized around two important
                    principles:


                            First, management should evaluate the design of the controls that it has implemented
                            to determine whether there is a reasonable possibility that a material misstatement in
                            the financial statements would not be prevented or detected in a timely manner. This
                            principle promotes efficiency by allowing management to focus on those controls that
                            are needed to prevent or detect material misstatement in the financial statements.

                            Second, management should gather and analyze evidence about the operation of the
                            controls being evaluated based on its assessment of the risk associated with those
                            control. The principle allows management to align the nature and extent of its
                            evaluation procedures with those areas of financial reporting that pose the greatest
                            risks to reliable financial reporting.


                    By following these two principles, we believe that companies of all sizes and complexities will
                    be able to implement our rules more effectively and efficiently. As smaller public companies
                    often have less complex internal control systems than larger public companies, this proposed
                    approach would enable smaller public companies in particular to scale and tailor their
                    evaluation methods and procedures to fit their own facts and circumstances.


                    The proposed guidance describes a risk-based approach and addresses many of the concerns
                    that have been raised to the Commission including: excessive testing of controls generally;
                    excessive documentation of processes, controls, and testing; and the ability to scale the
                    evaluation to smaller companies. The guidance addresses four specific areas including:

                       1.   Identification of risks to reliable financial reporting and the related controls
                            that management has implemented to address those risks. The proposed
                            guidance describes a risk-based approach that would require the use of judgment to
                            determine those areas that are both material and which pose a risk to reliable financial
                            reporting. Management then would identify the controls that address those risks,
                            including the risk of material misstatement due to fraud. The guidance would not
                            require that every control in a process be identified. Once those controls are identified
                            that adequately address the risk of material misstatement in the financial statements,
                            it would be unnecessary to include additional controls within management's evaluation.

                       2.   Evaluation of the operating effectiveness of controls. Once management has
                            determined the controls within the scope of its evaluation, management would then
                            gather and analyze evidence about the operation of those controls. The proposed
                            guidance provides for a risk-based approach that would require the use of judgment to
                            direct management's evaluation efforts towards those areas that pose greatest risk to
                            reliable financial reporting based on the company's unique facts and circumstances.
                            The proposed guidance would allow management to support its evaluation in a variety
                            of ways and illustrates how management can consider and utilize its existing daily
                            interaction with its business, self-assessment, and other ongoing monitoring activities
                            to support its evaluation.

                       3.   Reporting the overall results of management's evaluation. Once management
                            has completed its evaluation, management must decide if any identified control
                            deficiencies are material weaknesses. The proposed guidance provides management
                            with a framework, outside of the auditing literature, for making these judgments and
                            includes situations that are considered strong indicators that a material weakness
                            exists. The guidance describes the factors that management should consider to
                            evaluate the severity of a deficiency. If the deficiency is a material weakness,
                            consistent with the Commission's existing rules, management must conclude that
                            internal control over financial reporting is not effective and management has reporting
                            responsibilities surrounding that material weakness. In addition, the guidance


http://www.sec.gov/news/press/2006/2006-206.htm                                                                         12/13/2006
Press Release: SEC Votes to Propose Interpretive Guidance for Management to Improve Sarbanes-Oxley ... Page 3 of 3
                            addresses the disclosure requirements for internal control reports in situations such as
                            scope limitations and restatements.

                       4.   Documentation. The proposed guidance explains the nature and extent of evidential
                            matter that management must maintain in support of its assessment including how
                            management has flexibility in approaches to documentation. The proposed guidance
                            indicates that such documentation can take many forms, can be presented in a number
                            of ways, and does not need to include all controls within a process that impacts
                            financial reporting. The proposed guidance provides that the evidential matter
                            maintained in support of the assessment would also include the methods and
                            procedures it utilizes to gather and evaluate evidence and the basis for its conclusions
                            about the controls related to individual financial reporting elements. The proposed
                            guidance indicates that in those situations in which management is able to rely on its
                            daily interaction with its controls as a basis for its assessment, management may have
                            limited documentation created specifically for the evaluation beyond documentation
                            regarding how its interaction provided it with sufficient evidence.


                    Coordination with the Public Company Accounting Oversight Board

                    Although today's issuance of the proposed interpretive release is a major milestone in the
                    improvement of the implementation of Section 404, the Commission remains committed to all
                    of the steps set forth in the roadmap that was released entitled "Next Steps for Sarbanes-
                    Oxley Implementation" (SEC Press Release 2006-75, May 17, 2006). In that regard, the
                    Commission and its staff have also been working closely with the Public Company Accounting
                    Oversight Board over the past few months in their work to develop a new auditing standard
                    that would supersede Auditing Standard No. 2, the Board's existing auditing standard on
                    internal control over financial reporting. The proposed standard is expected to provide for
                    more efficient, risk-based, scalable audits of internal control over financial reporting while
                    retaining the important investor protection benefits. Today's proposed amendments to
                    Regulation S-X are intended to clarify the auditor reporting requirement in a consistent
                    manner with the anticipated proposed new auditing standard. The Board has announced that it
                    intends to consider proposing the new auditing standard at the Board's open meeting to be
                    held next week on Tuesday, Dec. 19, 2006.

                    Comments on the proposed interpretive guidance and rule amendments should be received by
                    the Commission within 60 days of their publication in the Federal Register.

                                                                  ***


                    The full text of the proposed interpretive guidance and rules will be posted to the SEC Web site
                    as soon as possible.




                    http://www.sec.gov/news/press/2006/2006-206.htm


                    Home | Previous Page                                                      Modified: 12/13/2006




http://www.sec.gov/news/press/2006/2006-206.htm                                                                        12/13/2006
                                                                          Home | Previous Page




Further Relief From the Section 404 Requirements for
Smaller Companies and Newly Public Companies

FOR IMMEDIATE RELEASE
2006-210

Washington, D.C., Dec. 15, 2006 - The Commission is adopting an
extension proposed in August to further postpone the date by which smaller
public companies must comply with the internal control reporting
requirements mandated by Section 404 of the Sarbanes-Oxley Act of 2002.
Previously, non-accelerated filers (companies that do not meet the
Exchange Act definition of either an accelerated filer or a large accelerated
filer) were scheduled to begin including both management's assessment
and an auditor's attestation to management's assessment on the
effectiveness of the filers' internal control over financial reporting in their
annual reports for fiscal years ending on or after July 15, 2007. The
Commission is extending the date so that a non-accelerated filer will
provide management's assessment regarding internal control over financial
reporting in its annual reports for fiscal years ending on or after December
15, 2007.

The Commission also is extending the date by which a non-accelerated filer
must begin to comply with the auditor attestation requirement. Due to the
extension, non-accelerated filers must begin to comply in their annual
reports filed for fiscal years ending on or after Dec. 15, 2008. Deferred
implementation of the auditor's attestation report requirement will provide
smaller public companies and their auditors with additional time to consider
the anticipated revisions to Auditing Standard No. 2, as well as any
implementation guidance that the PCAOB plans to issue for auditors of
smaller companies. The extension also should enable management of
smaller public companies to focus on the internal assessment process
during the first year of compliance with the internal control reporting
provisions.

The extension for smaller public companies is consistent with the "next
steps for Sarbanes-Oxley implementation" (SEC Press Release 2006-75)
announced on May 17, 2006.

As part of the same release, the Commission is granting relief from the
Section 404 requirements for companies that are new to Exchange Act
reporting. The final rules provide all newly public companies with a
transition period that prevents them from having to comply with the
Section 404 requirements in the first annual report that they file after
becoming an Exchange Act reporting company. The transition period applies
to a company that has become public through an initial public offering
(equity or debt) or a registered exchange offer or that otherwise has
become subject to the Exchange Act reporting requirements. It also
includes a foreign private issuer that is listing on a U.S. exchange for the
first time. The transition period is intended to permit newly public
companies to concentrate on their initial securities offerings, in cases where
they become subject to Exchange Act reporting as a result of such an
offering, and to prepare for their first annual report without the additional
burden of having to comply with the Section 404 requirements at the same
time.
                                    ###

"Smaller public companies, both foreign and domestic, along with newly
public companies are all vital participants in the U.S. capital markets. The
extensions and transition relief announced today reflect the Commission's
understanding of the special burdens that Section 404 may pose for these
issuers," said John W. White, Director of the Division of Corporation Finance
at the SEC. "Section 404 plays a critical role for investors and our markets
by enhancing the reliability of financial reporting but its implementation
needs to be more efficient and cost-effective for the companies that must
comply with it. The measures the Commission has adopted, along with
other efforts underway at the Commission and at the Public Company
Accounting Oversight Board, will advance those goals and should therefore
also reduce the costs and increase the attractiveness of participating in our
capital markets for a variety of companies."

Below is a chart which summarizes the revised compliance dates and final
rules that will be in place after the effective date (dollar amounts refer to
the worldwide market value of outstanding voting and non-voting common
equity held by non-affiliates):


                                 Revised Compliance Dates and Final
                                 Rules Regarding the Internal Control
                                Over Financial Reporting Requirements
              Accelerated          Management's                   Auditor's
              Filer Status            Report                     Attestation
                                                               Already complying
           Large Accelerated       Already complying
                                                               (Annual reports for
                Filer OR        (Annual reports for fiscal
                                                             fiscal years ending on
            Accelerated Filer   years ending on or after
                                                               or after November
   U.S.    ($75MM or more)        November 15, 2004)
                                                                    15, 2004)
  Issuer
                                                                Annual reports for
            Non-accelerated     Annual reports for fiscal
                                                             fiscal years ending on
            Filer (less than    years ending on or after
                                                               or after December
                $75MM)            December 15, 2007
                                                                     15, 2008
           Large Accelerated    Annual reports for fiscal       Annual reports for
           Filer ($700MM or     years ending on or after     fiscal years ending on
                 more)               July 15, 2006           or after July 15, 2006
            Accelerated Filer
                                Annual reports for fiscal       Annual reports for
            ($75MM or more
 Foreign                        years ending on or after     fiscal years ending on
              and less than
 Issuer                              July 15, 2006           or after July 15, 2007
                $700MM)
                                                                Annual reports for
            Non-accelerated     Annual reports for fiscal
                                                             fiscal years ending on
            Filer (less than    years ending on or after
                                                               or after December
                $75MM)            December 15, 2007
                                                                     15, 2008
 U.S. or
              Newly Public
 Foreign                         Second Annual Report        Second Annual Report
               Company
 Issuer


                                    ###

  Additional materials: Final Rule Release No. 33-8760




http://www.sec.gov/news/press/2006/2006-210.htm

                                                                Modified: 12/15/2006
Board Proposes Revised Auditing Standard on Internal Control over Financial
Reporting
Washington, DC, December 19, 2006 – The Public Company Accounting Oversight Board today voted unanimously to propose for public
comment a new standard on auditing internal control over financial reporting and other related proposals. The proposed standard would
replace the Board’s existing internal control standard, Auditing Standard No. 2.

The proposed new standard on internal control is a principles-based standard designed to focus the auditor on the most important matters,
increasing the likelihood that material weaknesses will be found before they cause material misstatement of the financial statements. The
proposed standard also eliminates audit requirements that are unnecessary to achieve the intended benefits, provides direction on how to
scale the audit for a smaller and less complex company, and simplifies and significantly shortens the text of the standard.

“Today’s proposal is the result of the PCAOB’s experience with the first two years of auditors’ implementation of the internal control
provisions of the Sarbanes-Oxley Act,” said PCAOB Chairman Mark Olson. “The Board’s goal has been to apply the feedback we’ve
received and our observations of implementation to create an auditing standard that preserves the intended benefits without resulting in
unnecessary effort and costs. We believe the new standard will result in audits that are more efficient, risk-based and scaled to the size and
complexity of each company. We look forward to comments on the proposal.”

In addition to the proposed internal control standard, the Board also proposed for public comment a new auditing standard on considering
and using the work performed by internal auditors, management and others in an integrated audit of financial statements and internal
control, or in an audit of financial statements only. This proposed standard is intended to further clarify how and to what extent an
independent auditor may use that work to reduce the work the auditor otherwise would have to perform. In addition, the Board proposed to
revise the independence requirement that currently is embedded in the text of AS No. 2, which requires the auditor to seek specific pre-
approval by the audit committee of any internal control related service. Finally, the Board also proposed certain changes to its other
standards to conform to the changes being brought about by this rulemaking.

 “A principal focus in developing this proposal was to retain and strengthen the substantial benefits investors have received from improved
internal control over financial reporting," said Tom Ray, PCAOB Chief Auditor and Director of Professional Standards. "I believe we have
proposed a standard that will achieve that objective while reducing audit effort, especially for smaller companies."

The proposed standard and related documents are available on the Board’s Web site under Rulemaking Docket 21.

The Board will seek comments on the proposed standard and other proposals for 70 days and will carefully consider all comments received.
Comments will be posted on the Board’s Web site under Rulemaking. Following the close of the comment period on February 26, 2007, the
Board will determine whether to adopt a final standard. Any final standard adopted will be submitted to the Securities and Exchange
Commission for approval.

A more detailed discussion of the matters proposed for public comment follows.

At today’s meeting the Board also adopted a rule temporarily adjusting the minimum frequency with which the Board inspects
registered public accounting firms that have 100 or fewer issuer audit clients. Public comment is also being sought on the question of
whether to make this temporary adjustment permanent. Following the close of this comment period on February 16, 2007, the Board will
determine whether to make this rule permanent. Any final rule adopted will be submitted to the Securities and Exchange Commission for
approval. The Board also adopted technical amendments to correct non-substantive points in other Board inspections rules. The adopted
rule and related documents are available on the Board’s Web site under Rulemaking Docket 22.

Webcast Archive

Background
In June 2003, the Securities and Exchange Commission ("SEC") implemented Section 404 of the Sarbanes-Oxley Act of 2002 (the "Act") by
adopting rules requiring issuers to include in their annual reports an assessment of the company's internal control over financial reporting as
well as an auditor's report on that assessment. Soon after, as required by Sections 404(b) and 103 of the Act, the Board adopted Auditing
Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements ("AS
No. 2"), to apply to the newly required audits. The SEC approved AS No. 2 on June 17, 2004.

Two annual financial reporting cycles have been completed since public company auditors began applying AS No. 2 to audits of the largest
public companies. During this time, the PCAOB has closely monitored implementation of the standard and the progress auditors have made
in complying with its requirements. The PCAOB's monitoring has included gathering information during inspections of registered public
accounting firms; participating, along with the SEC, in two roundtable discussions with representatives of issuers, auditors, investor groups,
and others; meeting with its Standing Advisory Group; receiving feedback from participants in the Board’s Forums on Auditing on the Small
Business Environment; and reviewing academic, government, and other reports and studies.

From all of these sources of information, two basic propositions have emerged. First, the audit of internal control over financial reporting
has produced significant benefits. Issuers and auditors have described a focus on corporate governance that had not existed in the past and
improvements in the quality and efficiency of important corporate processes and controls. Corporate board members have noted an
improvement in audit committee oversight, while investors have found public company financial reporting to be of higher quality and
enhanced transparency.

Second, these benefits have come with significant cost. Over the last two years, the Board has heard a consistent message that compliance
with the internal control provisions of the Act has required greater effort and resulted in higher costs than expected. The Board agrees that
report on internal control. With this in mind, the Board has evaluated every significant aspect of the audit of internal control to determine
whether the existing standard encourages auditors to perform procedures that are not necessary in order to achieve the intended benefits.
The proposals result from that evaluation.

Proposed Auditing Standard - An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial
Statements. The proposed standard would supersede AS No. 2 and is designed to focus the auditor on the matters most important to
internal control; eliminate unnecessary procedures; simplify and shorten the standard by reducing detail and specificity; and make the audit
more scalable for smaller and less complex companies. Among other things, the proposed standard would:

       Direct the auditor to the most important controls and emphasize the importance of risk assessment;
       Revise the definitions of significant deficiency and material weakness, as well as the "strong indicators" of a material weakness;
       Clarify the role of materiality, including interim materiality, in the audit;
       Remove the requirement to evaluate management's process;
       Permit consideration of knowledge obtained during previous audits;
       Direct the auditor to tailor the audit to reflect the attributes of smaller and less complex companies;
       Refocus the multi-location testing requirements on risk rather than coverage; and
       Recalibrate the walkthrough requirement.

The Board is also seeking comment on certain related proposals that would facilitate the Board’s efforts to make audits of internal control
more effective and efficient. These related proposals are described below.
Proposed Auditing Standard - Considering and Using the Work of Others. The proposed standard would supersede AU sec. 322 and
the direction currently contained in AS No. 2 regarding using the work of others. Among other things, the proposed standard would:

       Allow the auditor to appropriately use the work of others, and not just internal auditors, for both the internal control audit and the
       financial statement audit, eliminating a barrier to integration of the two audits;
       Encourage greater use of the work of these others by requiring auditors to evaluate whether and how to use their work to reduce
       auditor testing;
       Require the auditor to understand the relevant activities of these others and determine how the results of that work may affect the
       audit;
       Provide a single framework for using the work of others based on the auditor's evaluation of the combined competence and
       objectivity of others and the subject matter being tested; and
       Eliminate the explicit principal evidence provision previously included in AS No. 2.

Proposed Rule 3525 – Audit Committee Pre-approval of Services Related to Internal Control – The proposed new independence rule
would replace direction currently contained in AS No. 2 regarding independence and internal control-related services. The proposed rule is
intended to ensure that audit committees are provided relevant information for them to make an informed decision on how the performance
of internal control-related services may affect independence. The new rule would also recognize that audit committees may pre-approve the
provision by their independent auditor of internal control-related services on an ad hoc (i.e., specific to each request) basis, or pursuant to
committee-approved policies and procedures.

Proposed Amendments to the Board's Interim Standards – The Board is proposing amendments that, among other things, would:

       Simplify the internal control standard by moving certain information currently contained in AS No. 2 to other existing interim
       standards. For example, the proposed amendments would move the auditor's responsibilities for management's internal control
       certifications under Section 302 of the Act into AU sec. 722, Interim Financial Information; and
       Change the existing requirement that "generally, the date of completion of the field work should be used as the date of the
       independent auditor's report" to "the auditor should date the audit report no earlier than the date on which the auditor has obtained
       sufficient competent evidence to support the auditor's opinion."



Media Inquiries: Public Affairs, 202-207-9227


The PCAOB is a private-sector, non-profit corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the auditors of public
companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent
audit reports.
Bullet Proof Your
Disclosure Practices
Roger Chouinard & James Farley
                                                           4.1-2
Secondary Market Civil Liability Regime –
General Overview
• Private statutory civil right of action for purchasers
  and sellers of securities who buy or sell securities
  during a period that an uncorrected misrepresentation
  is included in various categories of publicly filed
  documents or public oral statements

• Private statutory civil right of action for purchasers
  and sellers of securities who buy or sell securities
  during a period that a responsible issuer fails to
  disclose a material change that should have been
  disclosed under securities laws
                                                                                4.1-3
Secondary Market Civil Liability Regime –
General Overview (Continued)
• Action for misrepresentation in publicly filed document - potential
  defendants include responsible issuer, directors, officers involved in a
  decision to release document and influential persons who knowingly
  influenced release of document

• Action for misrepresentation in public oral statement - potential
  defendants include responsible issuer, person making statement,
  directors and officers involved in decision to release statement and
  influential persons who knowingly influenced release of statement

• Action for failure to disclose material change - potential defendants
  include responsible issuer and officers, directors and influential persons
  who knowingly influenced non-disclosure

• The relevant period of liability starts on the date that disclosure is made
  containing a misrepresentation or responsible issuer should have
  disclosed a material change and ends when proper disclosure is made
  correcting the misrepresentation or omission
                                                             4.1-4
Secondary Market Civil Liability Regime –
Application of Regime
• Secondary market liability applies in respect of
  “responsible issuers”, i.e. reporting issuers in Ontario
  or issuers with a real and substantial connection to
  Ontario and publicly traded securities

• Shareholders of non-Canadian issuers may pursue
  actions in Ontario courts
                                                                        4.1-5
Secondary Market Civil Liability Regime –
Application of Regime (Continued)
• U.S. issuers should be aware that secondary market
  liability differs from a Rule 10b-5 action for
  misrepresentation in several respects:
   i. Secondary market liability does not require proof of
        “Scienter” (i.e. mental state embracing intent to deceive,
        manipulate or defraud including recklessness)
   ii. Canadian securities laws impose a general obligation to make
        timely disclosure of all material changes
   iii. Secondary market liability does not require proof of a causal
        connection between misrepresentation or failure to disclose
        and damages
   iv. Liability caps exist under secondary market liability regime
                                                          4.1-6
Secondary Market Civil Liability Regime -
Core Documents v. Non-Core Documents
•   “Core documents” for all potential defendants
    include prospectuses, all types of circulars, MD&A,
    AIFs and annual and interim financial statements

•   Material change reports are only “core documents”
    for responsible issuer and officers

•   “Non-core documents” include press releases and, in
    the case of potential defendants other than
    responsible issuer and officers, material change
    reports
                                                            4.1-7
Secondary Market Civil Liability Regime –
Burdens of Proof
•   For “core documents”, plaintiff need not prove that
    there was fraud or negligence in making
    misrepresentation/failure to disclose – onus is on
    defendant to establish due diligence (i.e. reasonable
    investigation) or other defence

•   For “non-core documents”, plaintiff must show that
    misrepresentation/failure to disclose was made
    knowingly or recklessly or otherwise as a result of
    “gross misconduct”
                                                            4.1-8
Recommendations - Written Disclosure
Policy and Disclosure Procedures
• Policies and procedures will assist in avoiding
  misrepresentations and failures to make timely
  disclosure

• Policies and procedures will assist in establishing due
  diligence defence: person or company conducted or
  caused to be conducted a reasonable investigation and
  no reasonable grounds to believe that the document
  contained the misrepresentation

• Important for Multi-lateral Instrument 52-109
                                                          4.1-9
Recommendations - Presentations and
Public Oral Statements
• Calls and other presentations should be scripted and
  reviewed after delivery and any misrepresentations or
  selective disclosure should be corrected

• Keep records of presentations and oral statements

• For forward-looking information, must have a
  reasonable basis for making a forecast or projection
                                                             4.1-10
Recommendations - Forward-looking
information
•        In addition to having a reasonable basis:

    i.     include reasonable cautionary language

    ii. identify information as forward-looking and
        identify material factors which could cause actual
        results to differ materially from forecast or
        projection

    iii. state material factors or assumptions applied in
         drawing conclusion or making a forecast or
         projection
                                                         4.1-11
Recommendations – Reviewing New
Developments and Competitors’ Disclosure
• Policies and procedures should assign responsibility to
  person(s) for keeping informed regarding
  developments in case law and securities commission
  enforcement proceedings affecting disclosure practices
  as well as reviewing disclosure of competitors

• Responsible person(s) should report to disclosure
  committee (or in the absence of such a committee, to
  CEO and CFO) periodically and promptly in event of
  any major development in the law or practices
                                                           4.1-12
Recommendations – Documenting
Document Preparation Process
• In order to establish reasonable investigation,
  procedures establishing steps to be taken should be in
  place and there should be some record that they were
  followed, and the process conducted in connection
  with preparation of disclosure documents should be
  documented

• Consider having documents reviewed, prior to
  release, by someone uninvolved with preparation who
  can look at it the way it will be looked at by the
  public
                                                                        4.1-13
Recommendations – Role of External
Advisors
• Some but not all existing disclosure polices and procedures
  require external counsel review and approval of disclosure
  documents
• Issuers should clarify role of external counsel as part of their
  disclosure controls and procedures
• External counsel may take on a greater role in due diligence,
  review and signoff on disclosure documents as this expanded role
  may assist in establishing reasonable investigation
• Existing disclosure policies and procedures provide that
  independent auditors of issuer review disclosure documents such
  as information circulars and annual information forms prior to
  publishing
• Issuers should clarify role of external auditors in the preparation
  of core documents and describe this role in the written disclosure
  procedures
Bullet Proof Your Disclosure Practices1
Introduction and Overview
The provisions of the Securities Act (Ontario) (the “Securities Act”) in respect of liability for
continuous disclosure (Part XXIII.1 of the Securities Act) came into force on December 31, 2005. These
amendments are complex and created new causes of action for secondary market investors against a
wide range of potential defendants with respect to misleading continuous disclosure filings and other
documents, public oral statements and omitted material disclosure in Ontario. They facilitate class
action lawsuits by investors who buy or sell securities of a public issuer that is a reporting issuer in
Ontario or has a real and substantial connection to Ontario (a “responsible issuer”) during the period
beginning when a misrepresentation about the issuer is made by persons associated with the issuer in
public documents or orally, or when the issuer fails to make timely disclosure of a material change,
and ending when the disclosure is corrected or made. The legislation includes caps on potential
liability, unless it can be shown that the defendant authorized, permitted or acquiesced in the making
of a misrepresentation or failure to make timely disclosure while knowing it was a misrepresentation or
failure.

Virtually identical provisions have been enacted in Manitoba (in effect as of January 1, 2007) and
Alberta (not yet proclaimed), and have been put forward in Saskatchewan (first reading on November
6, 2006). British Columbia previously enacted a similar regime, with certain key differences, as part of
its Securities Act, 2004, but that act has not been proclaimed, and there is some question about
whether British Columbia will instead adopt a regime that is more uniform with the regime adopted in
the other provinces.

The key to avoiding liability is to provide timely and accurate continuous disclosure. In addition, issuers
should have in place disclosure and document preparation procedures to ensure that defences in the
legislation that are based on reasonable investigation by defendants are available in case
misrepresentations are made or there is a failure to make timely disclosure of a material change.

Summary Checklist
          (a)           Written disclosure policies and procedures: All responsible issuers should have
                        written disclosure policies and procedures that are in line with the specifics of the
                        regime.

          (b)           Procedures for verification: Issuers should have disclosure policies that stress the
                        importance of accurate public disclosures and processes to verify accuracy. Issuers


1 By James Farley, Roger J. Chouinard and Alasdair Federico




                                                                                                                Page 1




Bullet Proof Your Disclosure Practices
                    should consider internal certification procedures for all “core” documents which
                    expose potential defendants to the greatest possibility of litigation.

        (c)         Spokespersons and public oral statements: Strict controls should be placed on who
                    may speak for the issuer.

        (d)         Influence of control persons, insiders and promoters: “Influential” persons such as
                    control persons, insiders and promoters of a responsible issuer should be informed that
                    they are exposed to liability, along with others, for: (i) misrepresentations in disclosure
                    documents and public oral statements and failures to make timely disclosure of
                    material changes that they seek to influence; and (ii) misrepresentations in disclosure
                    documents and public oral statements relating to a responsible issuer that they
                    themselves release or make. Issuers should include in their disclosure policies: (i) a
                    statement as to the role that such persons play in document preparation and release
                    and materiality assessments; and (ii) further to the discussion under (c) above, a
                    statement that such persons should not speak or release disclosure on behalf or in
                    relation to the issuer other than through the issuer’s authorised spokespersons or after
                    vetting by the issuer. In addition, issuers should specify in their disclosure procedures:
                    (i) how influential persons participate in the disclosure preparation and release and
                    materiality assessment processes and to what extent; and (ii) methods for monitoring
                    “influential” persons generally as well as during disclosure preparation and release and
                    materiality assessment processes.

        (e)         Expert review of procedures: There may be utility to issuers in being able to
                    demonstrate that a review of the adequacy of steps taken to implement and/or
                    enhance disclosure procedures and policies was completed with the assistance of
                    external legal counsel.

        (f)         Forward-looking information: Issuers should consider whether they want to continue
                    to provide earnings guidance and, if so, whether guidance will be given with respect to
                    annual or quarterly performance. There is a safe harbour for forward-looking
                    information but it requires that the basis for any forward-looking information be
                    reasonable. To rely on the safe harbour, it will not be sufficient to use familiar
                    boilerplate cautionary language. In order to determine whether the basis for any
                    forward-looking information is “reasonable”, consideration must be given to who
                    internally or externally is needed to make credible judgments about what is reasonable
                    and will require a reconsideration of how the assumptions and “material factors”
                    underlying such information are arrived at and expressed.




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Bullet Proof Your Disclosure Practices
Written disclosure policy and disclosure procedures
In the secondary civil liability context, written disclosure policies and procedures are critical for two
reasons: (i) they will assist in avoiding the incidence of misrepresentations or failures to make timely
disclosure; and (ii) they will assist defendants in establishing the due diligence defence provided in
subsection 138.4(6) of the Securities Act.

A person or company may avoid liability for a misrepresentation in disclosure documents or oral
statements if, before the release of the document or making of the oral statement, the person or
company conducted or caused to be conducted a reasonable investigation and at the time of the
release of the public document or the making of the oral statement, the person or company had no
reasonable grounds to believe that the document or statement contained the misrepresentation.
Similarly, in the case of a failure to make timely disclosure, a person or company may have a defence
if before the failure to make timely disclosure first occurred, the person or company conducted or
caused to be conducted a reasonable investigation and the person or company had no reasonable
grounds to believe that the failure to make timely disclosure would occur.

Factors to be considered by a judge in determining whether an investigation was reasonable are set out
explicitly in subsection 138.4(7) of the Securities Act. One of the factors is “the existence, if any, and
the nature of any system designed to ensure that the responsible issuer meets its continuous disclosure
obligations.” A separate factor is whether the reliance on the compliance disclosure policy and on the
persons responsible for knowing relevant facts was reasonable. The judge will have to consider not just
what is written down in the policy but how the system actually works in practice. Defendants’ conduct
will be assessed with reference to their specific responsibility for disclosure as well as their position
within the organization. Managers will likely be held to a higher standard of due diligence investigation
than outside directors.

Core documents
The Securities Act distinguishes between “core documents” and other documents (“non-core
documents”). Public oral statements are treated the same way as non-core documents. Core
documents are, generally speaking, more comprehensive filings that are submitted to the board of
directors for review and approval. It is more difficult to sue for misrepresentations in non-core
documents and public oral statements than in core documents. Failures to make timely material
disclosure also benefit from this more defendant-friendly regime.

For misrepresentations in non-core documents and public oral statements and failures to make timely
disclosure of material changes in an issuer’s affairs, a plaintiff must show that the misrepresentation or
failure to make timely disclosure of a material change was made knowingly or recklessly, or otherwise
as a result of “gross misconduct.”




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Bullet Proof Your Disclosure Practices
In the case of core documents, a plaintiff need not prove that there was fraud or negligence on the
part of the defendant in making the misrepresentation or failure to make timely disclosure of a
material change. The onus will be on the defendant to establish a due diligence or other defence.

When used in relation to a responsible issuer or an officer of such an issuer, “core documents” are:
prospectuses, take-over bid circulars, issuer bid circulars, directors’ circulars, rights offering circulars,
management’s discussion and analysis, annual information forms, information circulars, annual
financial statements, interim financial statements, material change reports and other documents as
may be prescribed by the regulation. When used in relation to a non-management director, the list is
the same except that material change reports and other documents as may be prescribed by the
regulations are not included.

          a)        Responsible issuer and officers

MI 52-109 requires CEOs and CFOs of public issuers to file interim and annual certificates confirming
that disclosure controls and procedures are in place and that the effectiveness of such controls has
been evaluated. CEOs and CFOs should in turn request certificates from managers with similar
statements with respect to their areas and expertise, if necessary, in order for the CEO and CFO to
make their public certifications. If this process is established appropriately, it should form the basis for
the due diligence defence under Part XXIII.1 of the Securities Act with respect to the above
documents. Public issuers should examine the feasibility of extending these procedures, with
appropriate modifications, to all core documents.

In evaluating disclosure controls and procedures, issuers and their officers should consider the
following:

     •    Accuracy: Typically, disclosure policies and procedures emphasize techniques for evaluating
          the materiality of developments but take the accuracy of disclosures for granted. Verification
          of facts is critical in the context of the secondary market civil liability regime and policies and
          procedures should be implemented or amended, as the case may be, to cover the accuracy of
          disclosure specifically and explicitly.

     •    Effectiveness: Before disclosure procedures are memorialized in a written document, their
          effectiveness should be evaluated. The procedures must both capture all material information
          and make sure that it is accurate. Are there “checks and balances” in the procedures to
          validate information? Is the same information checked by different persons with different
          functions? If information is included in disclosure which is not derived from the issuer’s internal
          controls for financial reporting, procedures to substantiate the information should be
          considered. For example, if an issuer asserts that it is has become the second largest supplier
          of widgets, can it point to adequate back-up? If the information is technical, for example,
          related to a subject that is normally the subject of expert knowledge, have the appropriate
          internal or external subject matter experts signed off on it?



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Bullet Proof Your Disclosure Practices
     •    Interactive process: Is the process interactive, involving sufficient dialogues regarding
          material information and events within the issuer, and are rounds of revisions considered by
          the persons involved?

     •    Reliable and timely information: Do the issuer’s systems gather information in a reliable and
          timely manner? Has the disclosure process worked to date?

MI 52-109 does not require responsible issuers and their officers to file certificates with respect to
material change reports. However, establishing procedures to ensure their accurate and timely
preparation and filing are key to establishing a due diligence defence under secondary market civil
liability in respect of any misrepresentations that they may contain. While a particular material change
report may be drafted and filed by investor relations persons or internal or external counsel, it should,
in all cases, receive sign off from a business person with first hand knowledge of the material change.

          b)        Non-management directors

Non-management directors must establish a due diligence defence with respect to the core documents
listed above other than material change reports. However, what a non-management director must do
to establish such a defence is likely different from what an officer, who is directly involved in
document preparation, must do. The decided corporate law cases on the role of non-management
directors and the list of factors in Part XXIII.1 of the Securities Act direct a judge to consider both the
role and responsibility of any particular defendant in determining how the defendant may establish a
due diligence defence. Directors would be expected to ensure appropriate and effective procedures
are in place but would not necessarily be expected to have any involvement with disclosure
preparation.

The Danier Leather case, decided in the context of primary market prospectus civil liability, contains
an important and relevant discussion on the role of management versus non-management directors in
the due diligence process. The Danier Leather decision recognizes that senior management of an issuer
is pivotal in the information gathering process and in ensuring adequate disclosure. Members of senior
management are obliged to know or obtain knowledge of all significant information about the issuer,
and obliged to disclose it to other participants in the process (in this case the prospectus preparation
process) including non-management directors. This discussion suggests that in the secondary market
civil liability context, it may also be reasonable for non-management directors of an issuer to rely on
senior management to bring significant information about the issuer to their attention. It would be
useful to memorialize the foregoing principles about information gathering and sharing in the policies
and procedures.

In determining whether the “reasonable investigation” element of the due diligence defence has been
satisfied, a judge must consider the role and responsibility of the person in the preparation and release
of the disclosure document, or in ascertaining the facts contained therein. Accordingly, non-
management directors may not want to get “too close” to the preparation of disclosure documents. If



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Bullet Proof Your Disclosure Practices
they get involved in the preparation and release of disclosure, they are likely to be held to a higher
standard in determining whether they conducted a reasonable investigation.

Non-management directors are specifically allowed to rely on others in certain contexts; that is,
directors are not liable for breach of their statutory duty of care under corporate law if they rely in
good faith upon financial statements of a corporation represented to them by an officer or in a written
report of the auditor to present fairly the financial position of the corporation in accordance with
GAAP, or a report of a lawyer, accountant, engineer, appraiser or other person whose profession lends
credibility to a statement made by any such person.2 Non-management directors may be able support a
due diligence defence for secondary market civil liability by showing that they have discharged their
duties under corporate law and that the procedures that are in place are appropriate ones.

Directors should consider the pros and cons of taking notes of meetings or decisions in which they
participate. Taking notes may be a useful way for a director to establish that a director made a
reasonable investigation. In that respect, the notes should focus on the process involved, but note-
takers should take care that note-taking does not become a matter of formality replacing actual
diligence. On the other hand, having notes could open up the director to greater scrutiny in the event
of a lawsuit. Note-takers should be particularly cautious of the information they capture in notes and
the implications of that information. A judge considering notes taken by a director could decide, by
inference based on information recorded in notes, that the director did not have reasonable grounds
for a belief that there were no misrepresentations, or potentially that the director had knowledge of a
misrepresentation, which could remove the director’s liability cap.

Non-core documents
A plaintiff must establish overt misconduct on the part of the defendant or prove that the defendant
was aware of or reckless as to the existence of the misrepresentation or the failure to make timely
disclosure in order to succeed in an action under Part XXIII.1 of the Securities Act regarding non-core
documents such as press releases.

As with material change reports, while a particular press release may be prepared by investor relations
persons or internal or external counsel, it should in all cases receive sign off from a business person
with first hand knowledge of the subject matter of the press release.

Presentations and oral statements
Presentations and oral statements, such as speeches at annual meetings, earnings calls and quarterly
calls should be scripted (to the extent possible) and reviewed after delivery to identify and correct any
misrepresentations or selective disclosure. Records of presentations and oral statements should be
kept.

2 See Business Corporations Act (Ontario), subsection 135(4).




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Bullet Proof Your Disclosure Practices
To the extent that forward-looking information is included, there must be a reasonable basis for
making a forecast or projection and it will be important to: (i) include reasonable cautionary language;
(ii) identify the forward-looking information as such and identify material factors which could cause
actual results to differ materially from the forecast or projection; and (iii) state material factors or
assumptions that were applied in drawing a conclusion or making a forecast or projection.

In light of recent Ontario Securities Commission (“OSC”) settlements, including ATI Technologies, some
issuers are re-evaluating the use of earnings guidance. If an issuer decides to continue to provide
guidance, it will be necessary to consider how the “material factors” and “assumptions” will be
expressed. “Material factors” and “assumptions” are not synonymous and both must be set out.
Material factors will include “risk factors” but may go beyond conventional risk factors. For example,
an issuer’s results could be affected by a material acquisition or disposition and these could occur
without any of the risks to the business coming to pass. The safe harbour depends on setting out
information about factors and assumptions proximate to the forward-looking information. Incorporation
by reference does not appear to be permitted to satisfy this requirement.

Assigning specific responsibility for portions of disclosure on the basis
of expertise
An issuer should establish definitive personal responsibility for verifying the accuracy and completeness
of the various portions of disclosure documents based on subject matter expertise. For example,
officers in charge of specific areas such as litigation, environmental matters, regulatory matters,
intellectual property, insurance and risk management, and finance should be sent their portions of the
document for review and should also be encouraged to prepare disclosure as issues arise in their areas
of expertise. The heads of business units should be assigned to review the descriptions of their specific
units.

An issuer should assign specific responsibility for reviewing boilerplate language, risk factor disclosure
and forward-looking statement disclosure in disclosure documents. Risk factor disclosure and forward-
looking statement disclosure should be assigned to a senior officer who will likely have the best feel for
the true risks in the business taken as a whole. Any risk factor section and forward-looking statements
warning should be reviewed and updated, where appropriate, regularly (i.e. quarterly).

Assigning responsibility for reviewing developments in case law,
securities commission settlements and disclosures of competitors
Issuers should assign responsibility to a person or a small group of persons for keeping informed
regarding developments in case law and securities commission enforcement proceedings affecting
disclosure practices. Such person(s) should also review relevant notices, reports and policies/rules
issued by the OSC. Reviewing the disclosure of competitors will likely be of interest as well, as it will
assist in arriving at materiality judgments. The person(s) assigned this responsibility should report to




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Bullet Proof Your Disclosure Practices
the issuer’s disclosure committee (or in the absence of such a committee, to the CEO and CFO)
periodically and promptly in the event of any major development in the law or practices.

Documenting the process conducted in connection with the
preparation of disclosure documents to establish reasonable
investigation defence
Issuers should consider appointing a person responsible for documenting the review process for each
filing. This could be in the form of a chronology specifying the names of individuals and dates they
reviewed draft reports as well as a record of meetings of the committees involved in the preparation of
the report, but as a practical matter, producing a chronology and summaries takes company resources
and could become an unwieldy process if it is too detailed or covers too many documents.
Alternatively, the appointed person could be responsible for maintaining the disclosure policy and
ensuring that the policy is always followed, so that the person could verify that it would have been
followed in the case of the document in question (even though he/she potentially had no recollection
or notes of the precise actions taken).

Issuers may also consider implementing a practice of having a person uninvolved in the preparation of a
document review it as a proxy for the average reader. The role of this person would be to identify
areas of confusion or ambiguity and to ask questions to ensure that those responsible for preparing the
document have not overlooked something obvious because of their familiarity with the material.

Foreign/international issuers
The secondary market civil liability regime in Part XXIII.1 of the Securities Act applies not only to
reporting issuers in Ontario, but also to “any other issuer with a real and substantial connection to
Ontario, the securities of which are publicly traded.” The definition of “document” includes documents
that are available and filed in foreign jurisdictions. It also includes “any communication the content of
which would reasonably be expected to affect the market price or value of a security.” It is possible
that shareholders of non-Canadian companies will pursue actions in Ontario courts under Part XXIII.1 of
the Securities Act once it is in force.

U.S. issuers may feel that they are adequately prepared for the implementation of the secondary
market civil liability regime as they are already complying with disclosure procedure requirements
under the Sarbanes-Oxley Act of 2002 and are subject to U.S. Rule 10b-5. U.S. issuers should be
advised that Part XXIII.1 of the Securities Act differs from Rule 10b-5 in several respects. First, in a
Rule 10b-5 action for a misrepresentation, a plaintiff is required to prove “scienter” which is defined
by the U.S. Supreme Court as a “mental state embracing intent to deceive, manipulate or defraud.”
Recklessness has also been found to constitute “scienter.” In the case of core documents, Part XXIII.1
creates a presumption of liability in the case of a misrepresentation. No mental state such as
“scienter” is required to be proved. Second, there is no general obligation to make timely disclosure of
all material changes under U.S. securities laws. Third, there is no requirement in Canadian law to



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Bullet Proof Your Disclosure Practices
prove a causal connection between the misrepresentation and the damage, whereas this is required
under U.S. law. Fourth, there are liability caps imposed under Part XXIII.1 of the Securities Act. These
differences should be considered by international issuers with a real and substantial connection to
Ontario.

Forward-Looking Information
On December 1, 2006 the Canadian Securities Administrators published for comment proposed
amendments to several national instruments and forms to implement requirements for forward-looking
information, including future-oriented financial information and financial outlooks such as earnings
guidance.

          a.        Preparation and disclosure required upon initial publication.

Under the proposed requirements disclosure requirements will mirror the safe-harbour provisions for
forward looking information: issuers will be required to have a reasonable basis for forward-looking
information and must include broad disclosure; specifically, an issuer should:

   •      identify forward-looking information as such,

   •      caution users that actual results will vary,

   •      disclose the material factors or assumptions used to develop the information, and

   •    disclose the issuer's policy for updating the information if it includes procedures in addition to
   those described below.

          b.        Updating

An issuer will be required to discuss in its MD&A events and circumstances that occurred during the
MD&A period that are reasonably likely to cause actual results to differ materially from previously
released material forward-looking information, including earnings guidance.

An issuer should consider whether the events and circumstances that are reasonably likely to cause
actual results to differ materially from previously released forward-looking information trigger the
material change reporting requirements.

          c.        Comparing to actual

An issuer will be required to disclose in its MD&A material differences between actual results and
previously released FOFI or financial outlooks for the period to which the MD&A relates.

          d.        Withdrawal



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Bullet Proof Your Disclosure Practices
An issuer will be required to discuss in its MD&A a decision made during the MD&A period to withdraw
previously released material forward-looking information. This would include a discussion of the
assumptions underlying the forward-looking information that are no longer valid.

An issuer should consider whether the events and circumstances relating to a withdrawal decision
trigger the material change reporting requirements. As well, in order to properly effect a withdrawal,
an issuer should promptly communicate its withdrawal decision.




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Bullet Proof Your Disclosure Practices
Executive Compensation Disclosure
What’s New for 2007?

Ken Hugessen, Hugessen Consulting
Philip Moore, McCarthy Tétrault
                                                                        5.1-2

Executive Compensation Disclosure – What’s New for 2007


• Few regulatory changes; great expectation changes
• Changes in Canadian regulation reflect and reinforce changes in
  expectations:
   • Statement of Executive Compensation to be interpreted with
     regard to the purpose of disclosure, to give priority to
     substance over form
   • Clarifications to a couple of other areas of limited application
   • Changes effective December 29, 2006, announced October 13,
     2006
                                                                   5.1-3

Executive Compensation Disclosure – What’s New for 2007


• Changes in expectations for disclosure of:
   • All amounts of compensation, including pension entitlements
   • Basis for compensation paid
   • Independence of compensation committee members
   • Compensation committee processes
• Clarity of disclosure expected to be better
                                                                        5.1-4

Executive Compensation Disclosure – What’s New for 2007


• Expectations for disclosure of amount and basis for compensation:
   • All amounts of compensation to be clearly stated, including
     perks
   • Increased interest in disclosure of ‘single number’ of
     compensation of the CEO
   • Pension entitlements, changes in liabilities, to be more clearly
     disclosed
   • Basis for incentive compensation to be clearly outlined; tie to
     performance metrics, strategy of company to be clear
   • Comparator group disclosure to be clearer, indicating who in
     group, why chosen, how information used
                                                                  5.1-5

Executive Compensation Disclosure – What’s New for 2007?


• Expectations for disclosure of compensation committee processes:
   • Independence of committee members very important
   • Ability of committee to act independently stressed
   • Use of compensation consultants to committee, separate from
     consultants to issuer, increasingly common
   • Expanded disclosure wanted of selection and use of
     consultants, basis for independence from issuer, fees for work
     done for the committee and separately fees, if any, for work
     done by the committee’s consultants for management of the
     company
                                                                     5.1-6

Executive Compensation Disclosure – What’s New for 2007?


• CCGG taking lead in changing expectations with two publications:
   • “Good Governance Guidelines for Principal Executive
     Compensation” (June, 2006)
   • “Best Practices in Compensation Disclosure 2006” (December,
     2006)
• CCGG assesses executive compensation disclosure in light of five
  recommendations:
   • Build an independent compensation committee
   • Develop an independent point of view
   • Test pay to performance linkages
   • Establish share ownership guidelines
   • Disclose all facets of the compensation regime
                                                                     5.1-7

Executive Compensation Disclosure – What’s New for 2007?

• Looking ahead:
   • Options backdating thus far appears to be a U.S. issue
   • OSC/CSA review expected to result in working paper and
     proposed amendments in 2007 – watch to see if the U.S. rules
     will come to Canada?
   • U.S. changes in disclosure requirements will have significant
     impacts on Canadian disclosure, but few are expected to
     adopt U.S.-style ‘Compensation Disclosure and Analysis’ in
     2007
   • U.S. rules and practices still in flux. For example, in late
     December, 2006, further changes announced to disclosure
     requirements for the value of equity grants to align with
     accounting requirements – these changes will affect various
     compensation disclosures
                                                                        5.1-8

Executive Compensation Disclosure – What’s New for 2007?


    • Review U.S. disclosures, especially of CD&A, to prepare for
      2008 (Florida Rock Industries, Inc. an early filer in December,
      2006; see its disclosure on www.flarock.com)
    • Monitor CCGG web site for further articulation of expectations
      by institutional investors
    • Follow Globe and Mail’s “Board Games” for further
      commentary
                                  Firm Overview

Introduction

HCI was created by Ken Hugessen in June 2006 to provide compensation committees
and executive teams with independent advice on executive compensation and related
matters. Ken has since been joined by two founding partners Georges Soaré and Ruth
Woods, both of whom bring relevant senior experience.

Our leadership team here at HCI has unequalled depth and scope of executive
compensation, pay-for-performance, Board/Committee and general management and
financial experience to service the needs of our client base. We have deliberately built a
team of senior professionals who are uniquely qualified to provide the most relevant and
practical advice to clients in the increasingly demanding field of executive compensation,
and related governance.

Mission

Hugessen Consulting (HCI) is an independent consulting firm dedicated to meeting the
executive compensation consulting requirements of boards, compensation committees
and senior management.

The firm's mission is to be the leading provider of advice on executive compensation,
performance measurement and assessment, and related governance to the compensation
committees and top management of medium and large companies in Canada, the US, and
the UK. We advise our clients on compensation policy, appropriate levels and forms of
compensation, related performance conditions and requirements, and on associated
governance and shareholder issues. For the firm as a whole, and for the majority of its
clients and projects, the compensation committee of the company will be the client. The
firm is primarily a provider of advice and counsel, and will typically work with the client
in the selection of third-party providers to conduct technical, performance and proxy
analysis, and to provide survey data as required.

Our clients, company directors and senior management, have the difficult task of
balancing the interests and expectations of executives and institutional investors. The
need to attract talented executives and maintain their natural motivation, while
responding to increasing shareholder demands for a moderation in levels of executive
pay, and closer alignment of pay with performance. We support directors and their
executive team working together to get this job done. Our services support good
governance in executive compensation by bringing unconflicted, independent expertise
directly to the compensation committee, the board, and the executive team.


                                             1
Approach to Executive Compensation Consulting

Empowering the Client Through Unbiased Information and Independent Advice

The goal of executive compensation is to provide fair remuneration that will attract and
retain the best leadership talent available-this is one goal all stakeholders can agree on.
Yet this is not an easy task for compensation committees. The recent book Pay Without
Performance (Harvard, 2004) by Lucien Bebchuk and Jesse Fried shows how power and
social relationships have undermined the independence of the compensation committee.

HCI's raison d'etre is to empower compensation committees so they can fulfill their
mandate. We do this through:

       Advice on governance to increase the independence of the committee
       Education to increase the competence of the committee
       Research to inform the committee
       Counsel on disclosure to enhance communication with shareholders

Empowerment breaks the damaging social dynamic identified in Bebchuk and Fried's
book. HCI facilitates independent thinking by the compensation committee so they can
make wise judgments on complex compensation matters, while recognizing the
committee's need to keep management engaged and supportive of committee decisions.

Our approach to consulting is characterized by:

       A broad and carefully researched understanding of each client's business situation.
       A thorough understanding of board / top management dynamics and the ability to
       work effectively with board members and senior executives under the
       increasingly intense light of shareholder scrutiny.
       Recognition that in the final analysis, it is the directors who must decide on
       executive compensation and that formulas and "best practices" are no substitute
       for good and independently informed judgment.
       A "clients first" approach to everything the firm does.




                                             2
History of Hugessen Consulting Inc.

The issues in executive compensation are driving a change in how executive
compensation consulting is done. That is the reason why Hugessen Consulting Inc. (HCI)
was launched. While the firm is new, the forces that led to its creation arose over the past
two decades. Ken Hugessen has been a leading voice over that time in assisting
compensation committees understand and respond to the issues they face.

Ken has had a long career as a leader of one of North America's premier compensation
practices with Mercer. He began his career in pension consulting, but in the early 1980's
did increasing amounts of executive compensation consulting. Since the late 80's, when
executive pay came into the shareholder and public arena in a big way, Ken devoted all
his time to executive compensation consulting.

In 1995 Ken worked in Chicago, and wrote on the role of the board in executive
compensation; the ideas were relatively gentle by today's standards, but it marked the
beginning of the belief that the board, not management, was the client that compensation
consultants should be serving.

Throughout, there continues to be the same two issues of concern to the board: getting the
right talent and paying the right amount. With the boom in the stock market in the late
90's, and the 'war for talent', the focus shifted dramatically from worrying about
excessive pay to worrying about how to attract and retain the best leadership. With the
subsequent market melt down, the emphasis swung sharply back to a concern about
appropriate pay levels, with compensation committees being accused of being asleep at
the switch-which in some cases appears to have been true.

By 2005 the consultants advising the board on executive pay had become very common,
but under serious scrutiny. The question was: were they really working for the board or
were they working for management? Did they provide unbiased advice or were they
hampered by conflicts of interest? Ken Hugessen's seminal 2002 article Raising the Bar
was shown to be prescient in identifying these important issues. By 2006 the market was
demanding that executive compensation consultants be completely and visibly free of
conflicts of interest. The situation parallels what happened to auditing firms who had to
part with their consulting functions to avoid any appearance of conflict of interest.

Recognizing these issues Hugessen Consulting Inc. was set up as a new and independent
business.




                                             3
Contact Information:

Hugessen Consulting Inc.
161 Bay Street, 27th Floor, BCE Place
Toronto, ON M5J 2S1

Phone: 416-868-1288
Fax: 416-572-4074

Web Address: www.hugessenconsulting.com




Partners:

Ken Hugessen             email: ken.hugessen@hugessenconsulting.com

Georges Soaré            email: georges.soare@hugessenconsulting.com

Ruth Woods               email: ruth.woods@hugessenconsulting.com




                                        4
Governance Performance
in the Public Eye
What do the Institutions think?
Mark G. Eade
Clemens Mayr
                                                           6.1-2

Background
• ISS is considered to be the world’s authority on proxy
  issues and corporate governance
• ISS 2007 Canadian Proxy Voting Guidelines recently
  published: effective for meetings Feb. 1, 2007
• Guidelines are widely read and followed by
  institutional investors
• Provide Guidance on shareholder votes in respect of a
  variety of matters, including boards of directors,
  shareholder rights, proxy contests and executive and
  director compensation
• Can be viewed at www.issproxy.com
                                                                               6.1-3

Board of Directors

•   ISS continues to promote the independence of the board as a whole
•   No significant changes from 2006 Guidelines
•   The continuing prevalence (between 40% and 50% of TSX issuers) of
    slate ballots is considered by ISS as providing a significant impediment
    to the evolution of a more meaningful director election process
•   Votes on director nominees on a case-by-case basis considering various
    factors including independence, attendance, executive compensation
    levels, corporate governance provisions
•   Generally WITHHOLD votes from any insider on the audit,
    compensation or nominating committee / If directors are presented as
    a slate, ISS will recommend that shareholders withhold votes from
    entire slate
•   May WITHHOLD support from director nominees who have attended
    less than 75% of the board and committee meetings held during the
    last year without a valid reason
                                                                       6.1-4

Board of Directors (cont’d)


•   Generally WITHHOLD votes from any director on the audit or
    compensation committee who has ever been CEO or has been CFO
    within the past three years
•   View of best practice is that CEOs sit on no more than 2 outside
    public company boards in addition to their own
•   Support the separation of the Chair and CEO positions
•   Generally vote FOR binding resolutions seeking a majority vote
    requirement
•   Generally vote FOR shareholder proposals that a majority or up
    to 2/3 of directors be independent and for proposals asking that
    board, audit, compensation and/or nominating committees be
    entirely independent
                                                                         6.1-5

Shareholder Rights Issues

•   No significant changes from 2006 Guidelines
•   Generally vote AGAINST proposals requiring a supermajority
    shareholder vote at a level above that required by statute
•   On balance, support cumulative voting, however, circumstances may
    warrant otherwise
•   Generally vote FOR resolutions to appoint additional directors between
    annual meetings provided that governing law permits removal of
    directors by simple majority vote, no more than 1/3 of additional
    directors may be appointed and such appointments must be approved
    at the next AGM
                                                                         6.1-6

Share-Based Compensation Plans

•   ISS has revised its policy in response to recent TSX rule changes
•   New TSX rules (see Staff Notices #2004-0002 and # 2006-0001) remove
    the requirements for shareholder approval for certain types of
    amendments to share-based compensation plans
•   Issuers have until June 30, 2007 to adopt new amendment procedures
•   After such date, issuers who have only old style “general amendment”
    provisions in their plans will no longer be able to make any amendments
    without shareholder approval (including simple “housekeeping” changes)
                                                                                  6.1-7

Share-Based Compensation Plans                                (cont’d)


•       Only the following types of amendments will continue to be subject to
        shareholder approval under the new TSX rules:

    •      Any increase in the number of shares reserved
    •      Any reduction in the exercise price which benefits an insider
    •      Any amendment that extends the term of an award beyond its original term
           and which benefits an insider
                                                                                    6.1-8

Share-Based Compensation Plans                                 (cont’d)


•       ISS will generally recommend AGAINST the approval of proposed
        amendment procedures that do not require shareholder approval for
        the following types of amendments:

    •      Any increase in the number of shares reserved
    •      Any reduction in the exercise price or cancellation and reissue of options
           (not just those which benefit insiders)
    •      Any amendment that extends the term of an award beyond its original term
           (whether or not it benefits an insider)
    •      Amendments to eligible participants that may permit the introduction or
           increased participation of non-employee directors
    •      Amendments that permit transfers other than for normal estate settlement
           purposes
                                                                             6.1-9

Summary
•   No major new trends or changes expected for 2007 proxy season
•   Issuers who choose to update the amendment procedures of share-
    based compensation plans to benefit from the greater flexibility
    afforded by the new TSX rules should carefully consider the additional
    ISS requirements
Governance Performance
in the Public Eye
The Globe and Mail: Board Games 2006

Mark G. Eade
Clemens Mayr
                                                                        6.2-2

Background
• Continuing focus on objective, publicized standards and criteria
  for ‘best practices’ of good governance continues interest in
  public measurement of achievement against those standards and
  criteria
• Toronto’s Globe and Mail newspaper continued with its major
  effort to rank publicly governance performance against its criteria
  for good governance; “Board Games 2006” is the Globe’s fifth
  annual ranking
• Widely read by market participants, regulators, other media and
  board members
• Demanding criteria designed to go far beyond mandatory
  regulatory requirements
• Recent reforms reflect past promotion of best practices, e.g.,
  greater emphasis on the quality of compensation disclosure for
  executives and directors based on Canadian Coalition for Good
  Governance “best practice” guides
                                                           6.2-3

Good Governance According to the Globe


   Globe report reviews corporate governance
   disclosures and measures performance of
   corporations and internally and externally
   managed income trusts in 4 key areas:
   • Board Composition – 37 out of 100 marks
   • Shareholding and Compensation – 25 out of 100 marks
   • Shareholder Rights – 28 out of 100 marks
   • Disclosure Issues – 10 out of 100 marks
                                                                   6.2-4

Board Composition

•   Independence the most important criterion, with points given
    for independence from both management and a controlling
    shareholder
•   Board meeting without management at every meeting
    important
•   Continued importance to splitting the role of CEO and Chair,
    particularly if the Chair is fully independent
•   Gender a criterion, but not as important to the Globe as others;
    inclusion of minorities is not a criterion
•   Having a board performance evaluation system in place has
    increased in importance
                                                                       6.2-5

Shareholding and Compensation


•   Shareholdings by directors and CEO measured; to see how
    aligned their economic interests are with the shareholders’
    interests
•   Stock option holdings do not count as shareholdings
•   Marks given if no loans are given to senior executives (or, if a
    bank, the loans are at consumer rates)
•   Disclosure of CEO bonus calculation criteria, with more points
    given if details of criteria are disclosed; drives CEO bonus
    calculation to objective, measurable, criteria
•   Increased emphasis on public disclosure of CEO and top
    executive compensation, including total compensation, annual
    pension liability and total value of CEO’s accumulated shares,
    DSUs or other equity holdings
                                                                      6.2-6

Shareholder Rights Issues

•   Rights measured are voting rights and ‘right’ not to be diluted
    excessively under stock option plan
•   Ability to vote for individual directors and not just a slate
    continues to be important, with zero marks if a slate is
    nominated
•   10 marks given (the largest single point category) if the
    corporation has no subordinate voting shares
•   Focus on stock option plan reflects concern about potential for
    dilution, and interest in seeing option holders ‘earn’
    compensation under objective, performance-based criteria
•   Introduction of majority voting policies into criteria, asking
    directors to resign if they do not receive a majority of votes
                                                                   6.2-7

Disclosure Issues

•   Criteria measure director qualification and background; to enable
    shareholders to vote for directors with experience thought to be
    relevant to role
•   Detailed biographies showing relevant experience applauded
•   Basis for determining if directors are related or unrelated to be
    disclosed in detail
•   Removal of directors with poor attendance now important (zero
    points if any director misses more than one-quarter of meetings
    and is put up for re-election)
•   Increased emphasis on disclosing director compensation
•   Disclosure of audit and non-audit services of auditors also
    important
                                                                      6.2-8

Ways to Improve Rankings

•   Ensure board is comprised of at least 2/3 independent members
    as this is worth four marks more than having over 50%
    independent
•   Ensure independent board members meet without management
    at every board meeting
•   Require directors to own at least 3x their annual retainer in
    stock or units (options excluded)
•   Improve compensation disclosure for CEOs and directors in light
    of increased standards imposed by Globe
                                                                          6.2-9

Summary
•   Globe report continues to focus on status of directors (independence
    and relation to corporation and management)
•   Some attention paid to processes followed by board, but more points
    given to attendance records than to whether a system is in effect to
    measure performance of boards or individual directors
•   Report reflects difficulty of measuring the impact of objective criteria
    of good governance on actual corporate governance practices and
    corporate performance
•   5 year return to shareholders noted, but little correlation of good
    performance and adherence to governance best practices; there may be
    a correlation of poor governance and risk of poor performance or, at
    least, unpleasant surprises
•   Most boards are more independent from management than ever before
•   One-third of income trusts entered into significant deals with related
    parties during the last year. Trusts also criticized for outdated
    corporate governance practices and lack of legislative governance

				
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