Securities Law & Instruments



NOTICE OF PROPOSED NATIONAL INSTRUMENT 54-101,
ORMS 54-101F1, 54-101F2, 54-101F3, 54-101F4, 54-101F5,54-101F6, 54-101F7 AND 54-101F8,
COMPANION POLICY 54-101CP AND RULE 54-801

AND RESCISSION OF
NATIONAL POLICY STATEMENT NO. 41
COMMUNICATION WITH BENEFICIAL OWNERS
OF SECURITIES OF A REPORTING ISSUER

Substance and Purpose of Proposed National Instrument, Forms, Companion Policy and Implementing Rule

Introduction

The proposed National Instrument, Forms 54-101F1, 54-101F2, 54-101F3, 54-101F4, 54-101F5, 54-101F6, 54-101F7 and 54-101F8 (the "Forms"), theproposed Companion Policy and, in Ontario, the proposed Implementing Rule, collectively are a reformulation of most of the provisions of National PolicyStatement No. 41 ("NP41"), which they will replace. Through these proposed instruments, the Canadian Securities Administrators (the "CSA") seek tocontinue, with some changes, the regulatory regime concerning communication with beneficial owners of securities of a reporting issuer currently embodied inNP41. The CSA are publishing, concurrently with this Notice, proposed National Instrument 54-102 Supplemental Mailing List and Interim Financial StatementExemption, which replaces the provisions of NP41 and associated rules and blanket orders pertaining to supplemental mailing lists.

The proposed National Instrument and Companion Policy are initiatives of the CSA. The proposed National Instrument is expected to be adopted or made as arule in each of British Columbia, Alberta, Ontario and Nova Scotia, as a Commission regulation in Saskatchewan, and as a policy in all the other jurisdictionsrepresented by the CSA. The proposed Forms will be adopted as rules in Ontario. The proposed Companion Policy is expected to be implemented as a policy inall of the jurisdictions of the CSA.

The proposed Rule 54-801 Implementing The Forms to National Instrument 54-101 is the local Ontario rule formally prescribing the forms to be used inconnection with the proposed National Instrument.

The substance and purpose of the proposed National Instrument, Forms and Companion Policy are to provide a procedure to enable a reporting issuer to sendsecurityholder materials, including proxy-related materials and annual reports, to beneficial owners of its securities who are not registered holders of itssecurities, and to impose obligations on various parties in the securityholder communication process.

Background

Approval of NP41

The CSA approved NP41 on October 28, 1987 based upon the recommendations of the Joint Regulatory Task Force on Shareholder Communication, a taskforce consisting of securities regulators, corporate law administrators and representatives of stock exchanges, depositaries, transfer agents and other interestedgroups. The CSA were motivated in developing and approving NP41 by the rapid growth at the time in the number of securityholders of reporting issuers whowere not registered holders. The stated purpose of NP41 was to provide a framework to ensure that materials relating to meetings of securityholders, includingproxies and audited annual financial statements, were provided to such non-registered holders of securities of reporting issuers. The CSA stated in NP41, thatthe goal of the Task Force and of NP41 was to ensure that non-registered holders have the same access to corporate information and voting rights as registeredholders, to ensure that the obligations of each participant in the communication chain were equitable and clearly defined, and to ensure that regulation andprocedure was uniform nationwide.

NP41 provided a procedure to enable a reporting issuer to send proxy-related materials and audited annual financial statements or annual reports tonon-registered holders of its voting securities, and imposed obligations on various parties within the securityholder communication process.

For most reporting issuers, NP41 became effective for meetings of securityholders held after March 1, 1988. Implementation of NP41 was delayed until 1989 inAlberta and British Columbia for all issuers listed only on the Alberta Stock Exchange and all exchange issuers listed only on the Vancouver Stock Exchange andall issuers listed only on these two exchanges.

NP41 was amended in 1988 to add Parts XII and XIII to deal with certain matters, including applications for waivers and exemptions.

Industry Implementation and Monitoring Committee and Draft Amended National Policy Statement No. 41

The CSA formed, in 1988, an Industry Implementation and Monitoring Committee ("IIMC") to assess the implementation of NP41. The IIMC includedrepresentatives of different industry associations representing groups with different roles and interests in the operation of NP41. The IIMC undertook a numberof activities to assess the effectiveness of NP41, including canvassing in 1991 a large number of intermediaries and non-registered holders.

In 1992, the CSA published a notice that included the results of the IIMC questionnaires and requested comment on NP41. Reporting issuers, non-registeredholders, intermediaries, depositaries and other interested parties were asked to provide specific comments as to deficiencies with NP41, together with proposedsolutions. The notice set out a number of issues that had generated greater discussion at the IIMC than others and described the potential for the creation of asingle list of beneficial shareholders of a reporting issuer as being of particular interest to the CSA.

In April 1994, the IIMC reported to the CSA with a list of ten recommended changes to NP41. The CSA conditionally adopted most of the recommendations.The IIMC report also set out five issues on which the IIMC had been unable to reach consensus, and presented alternative solutions. The CSA conditionallyadopted a position on each of these issues.

After discussion with the IIMC on these issues, the CSA published1 a Draft Amended National Policy Statement No. 41 ("Draft Amended NP41"). In publishingDraft Amended NP41, the CSA noted, and requested comment on, at least five major issues which represented changes or potential changes from NP41:

. Draft Amended NP41 provided an express right for a reporting issuer, subject to certain restrictions, to obtain from an intermediary a list of the names,addresses, holdings and preferred language of communication of the non-registered holders of the issuer's securities, so long as the holders did not object todisclosure of such information;

. The right of a reporting issuer to receive information from an intermediary about the intermediary's clients was made subject to any confidentiality obligationsimposed on the issuer by law, and on any contrary instructions received by the intermediary from the client;

. The fees and costs set out in Draft Amended NP41 reflected the view of the CSA that a reporting issuer should generally bear the basic cost of communicatingwith non-registered holders of its securities, including costs incurred by an intermediary, except for costs associated with protecting the confidentiality of theclient-intermediary relationship;

. Draft Amended NP41 contemplated that a non-registered holder could elect to receive or not to receive securityholder materials from reporting issuers, andthat if no instructions were received, the non-registered holder was considered to have declined to receive securityholder materials; and

. The CSA noted the over-voting problem, particularly in the context of securities lending; the CSA did not take a position in Draft Amended NP41 on whether alender or borrower should vote loaned securities; the CSA did recommend, however, that all parties strive to ensure that proxies or voting instructions not beissued for more than the total number of shares registered on the record date and evidenced by any omnibus proxy.

Reformulation of NP41

Following receipt of a large number of comments on Draft Amended NP41, the National Policy 41 Committee of the CSA prepared revisions to that proposal.However, prior to its implementation, the new legislative requirements for rule-making in Ontario and other Canadian jurisdictions required further revision tothat proposal. The proposed National Instrument, Forms, Companion Policy and Implementing Rule represent the CSA's proposals for a replacement for NP41,superseding the Draft Amended NP41.

The proposed National Instrument, Forms, Companion Policy and Implementing Rule replace NP41 in its entirety, other than matters relating to supplementalmailing lists and interim financial statements, which are now the subject of proposed National Instrument 54-102. The CSA continue to affirm the intent ofNP41, which is to provide a procedure to enable a reporting issuer to send securityholder materials, such as proxy-related materials and annual reports, tobeneficial owners who are not registered holders of its securities and to impose obligations on various parties in the securityholder communication process. Theproposed Instruments are designed to continue to provide that procedure, with the changes contained in the Instruments.

Major Changes of a Substantive Nature

The proposed National Instrument differs from NP41 in a number of significant ways. The principal conceptual changes incorporated in the proposed NationalInstrument from NP41 are:

. Procedures have been included to permit reporting issuers to obtain a list of beneficial owners of their securities who do not object to the disclosure of theirnames and other information to issuers (called "non-objecting beneficial owners" or "NOBOs" in the proposed National Instrument); this will permit issuers tosend securityholder materials directly to NOBOs. Reporting issuers may also choose to continue to distribute materials to NOBOs indirectly throughintermediaries.

. The scope of materials that a beneficial owner may decline to receive has been narrowed from NP41. Under the proposed National Instrument, a beneficialowner can decline to receive proxy-related materials for meetings at which only routine business is to be conducted or non-proxy-related materials not requiredby law to be sent to registered holders.

. Unlike NP41, reporting issuers will no longer be able to override the election of beneficial owners who decline to receive certain materials.

. The proposed National Instrument recognizes that securities may be held through a multi-layered structure, in which there may be several layers ofintermediaries between a share register and a beneficial owner; the proposed National Instrument allows a reporting issuer to deal only with the intermediary thatis shown on the register or that is a participant in a depositary.

. A specific electronic format is mandated for intermediaries to use in sending NOBO lists to reporting issuers based upon a current common industry format.

. NOBO lists can be used by reporting issuers and other persons or companies for any matter relating to the affairs of the reporting issuer, subject to specifiedterms and conditions similar to those imposed by Canadian corporate law for the use of shareholder lists.

. Beneficial owners who object to disclosure of their name to reporting issuers (called "objecting beneficial owners" or "OBOs" in the proposed NationalInstrument) will be responsible for costs incurred by intermediaries in sending securityholder materials to them, unless the issuer is also sending such materialsindirectly to NOBOs through intermediaries, in which case the reporting issuer and not the OBOs will be responsible for such costs.

. The search fee payable by reporting issuers to intermediaries for responding to requests for beneficial ownership information and for delivery of materials tobeneficial owners is not specified. The fees in both cases are required to be reasonable.

. The time periods specified in NP41 for a reporting issuer to provide a notification of meeting and records dates to depositaries, securities regulatory authoritiesand stock exchanges, and to commence an intermediary search (which were each subject to an automatic waiver) have been reduced. Notification of meetingand record dates must be sent, and an intermediary search commenced, a minimum of 8 and 5 business days, respectively, before the record date for notice of themeeting. However, the proposed Companion Policy cautions issuers that they must plan the timing of these preliminary steps to ensure intermediaries actuallycan provide the required information in time to send materials. Longer time periods will be normal.

. The deadline for a reporting issuer to delivery proxy materials in bulk to intermediaries has been reduced from 33 days in NP41 (subject to an automaticwaiver) to a minimum of 21 calendar days plus 3 business days before the meeting.

. The supplemental mailing list requirement for exemption from sending interim financial statements to securityholders is continued but has been moved to aseparate National Instrument (54-102).

Certain of these changes are the subject of specific requests for comments made in this notice.

Summary of Proposed National Instrument

The proposed National Instrument has 10 parts.

Part 1. Part 1 contains the definitions and interpretation of terms and phrases used in the proposed National Instrument.

Section 1.1 contains the definitions of terms used in the proposed National Instrument that are not defined in National Instrument 14-101 Definitions. NationalInstrument 14-101 sets out definitions for commonly used terms used in more than one national instrument and should be read together with the proposedNational Instrument.

For the most part, the definitions contained in section 1.1 are based on, and are very close to, the definitions contained in NP41. The following definitions arenew or are substantially changed from the corresponding definition in NP41.

"affairs" - used in the definition of "corporate law" and in section 7.1 in connection with restrictions on the use of a NOBO list;

"beneficial owner" - defined to mean, in relation to a security held by an intermediary, the person or company that is identified as providing the instructionscontained in a client response card or, if no instructions are provided, the person or company that has the authority to provide those instructions.

"beneficial owner determination date" - defined as the record date for voting, or in the absence of such record date, the record date for notice, of a meeting; thisis the date as at which intermediaries seek beneficial owner information in connection with a meeting and, under Part 4, this is the date as at which theintermediary is required to provide a reporting issuer with beneficial owner information in connection with a meeting;

"client" - defined as the person or company on whose behalf an intermediary holds a security; section 2.4 of the proposed Companion Policy contains adiscussion of the distinction between "beneficial owner" and "client";

"NOBO" and "OBO" and the related definitions of "non-objecting beneficial owner", "non-objecting beneficial owner list" and "objecting beneficial owner" -used in connection with the changes in NP41 to permit direct sending of securityholder materials to NOBOs by reporting issuers;

"ownership information" - used to define the basic information concerning a beneficial owner to be obtained by intermediaries under the proposed NationalInstrument; and

"proximate intermediary" - defined as the intermediary for a security that is a participant in a depositary or a registered holder of the security; this definition isused in setting out the obligations of various parties in a multi-tiered intermediary structure in which there may be several levels of intermediaries between thesecurity register and the beneficial owner;

"routine business" - used in connection with the provisions that permit beneficial owners to elect not to receive proxy-related materials for meetings at whichonly routine business is to be conducted.

Section 1.2 provides that a reference in the proposed National Instrument to a depositary, intermediary or reporting issuer includes a nominee or agent of thatperson or company, and that a person or company that uses an agent remains fully responsible for its compliance with the Instrument. In creating this section,the CSA recognize that intermediaries and reporting issuers retain third party service providers to satisfy many of the requirements under NP41, and willcontinue to do so under the proposed National Instrument.

Section 1.3 states that an intermediary is considered to hold a security if the security is held by the intermediary directly, or indirectly through another person orcompany on behalf of the intermediary. This provision recognizes that intermediaries may "hold" securities on behalf of clients even if another person orcompany holds the securities on behalf of the intermediary and may therefore be shown on the register of the reporting issuer or the records of anotherintermediary as holder of the securities.

Section 1.4 allows a person or company to use alternative forms to those required by the proposed National Instrument so long as the alternative forms containor request the same information as the form contemplated by the proposed National Instrument. This provision does not apply to the required electronic formfor a NOBO list.

Part 2. Part 2 contains the obligations of reporting issuers under the proposed National Instrument.

Section 2.1 requires a reporting issuer that is required to give notice of a meeting to registered holders of its securities to fix a date for the meeting, a record datefor notice of the meeting and, if required or permitted by corporate law, a record date for voting at the meeting.

Section 2.2 requires the reporting issuer to provide a notification of meeting and record dates to all depositaries, securities regulatory authorities and stockexchanges on which securities of the reporting issuer are listed, at least eight business days before the record date for notice of the meeting. That notificationwill contain particulars about the meeting.

Section 2.3 requires the reporting issuer to request, at the same time as it provides the notification of meeting referred to in section 2.2, each depositary toprovide information concerning the identity of participants in the depositary and a list of intermediaries and their nominees from the intermediary master listmaintained under section 5.1 by the depositary. The intermediary master list contains the names of all intermediaries that have provided their names to thedepositary under section 3.1 of the proposed National Instrument; the list is not tied to securities of the reporting issuer, and it is the responsibility of thereporting issuer to identify the intermediaries on the list that will be the "proximate intermediaries" of securities of the reporting issuer to whom the reportingissuer will send requests for beneficial ownership information under section 2.5 of the proposed National Instrument. The reporting issuer is also required torequest an omnibus proxy from the depositary appointing each participant of the depositary as proxy for the depositary.

Section 2.3 also provides that a reporting issuer may make an intermediary search request to a depositary at any time not in connection with a meeting.

Section 2.4 provides that the reporting issuer shall not request from the depositary the information referred to in section 2.3 if the reporting issuer has access tothat information on an electronic file maintained by the depositary.

Section 2.5 provides that, using the information requested in section 2.3, the reporting issuer is required to send, at least five business days before the record datefor notice of a meeting, Part 1 of the request for beneficial ownership information form to proximate intermediaries of securities carrying the right to receivenotice of or to vote at the meeting. The request for beneficial ownership information is in Form 54-101F2, and among other things, requires the reporting issuerto specify whether it will send securityholder materials relating to the meeting directly to NOBOs.

Section 2.5 also provides that requests for beneficial ownership information may be made by a reporting issuer at any time not in connection with a meeting.

Section 2.6 provides that a reporting issuer is not subject to the requirements of sections 2.3, 2.5 or 2.7 if none of the registered holders of its securities aredepositaries or intermediaries identified on the intermediary master register.

Section 2.7 contains the fundamental obligation of the proposed National Instrument, namely that a reporting issuer is required to send proxy-related material fora meeting to the beneficial owners of its securities, either directly in the case of NOBOs, or indirectly through intermediaries. This requirement pertains toproxy-related materials, which are defined in section 1.1 as material required by securities legislation or corporate law to be sent to registered securityholders inconnection with a meeting.

Section 2.8 permits, but does not require, a reporting issuer to send securityholder materials other than proxy-related materials to beneficial securityholders underthe procedures set out in the proposed National Instrument.

Sections 2.9, 2.10 and 2.11 pertain to the direct sending of materials to NOBOs by reporting issuers. Section 2.9 requires a reporting issuer that has indicated inits request for beneficial owner information that it will send materials to NOBOs directly shall do so at least 21 days before the date fixed for the meeting.Section 2.10 prohibits a reporting issuer from sending securityholder materials to NOBOs that are identified on NOBO lists as having chosen not to receive thesecurityholder materials. Section 2.11 requires a reporting issuer to include disclosure in securityholder materials sent to NOBOs that discloses that the materialsare sent to NOBOs whose names were obtained from intermediaries.

Sections 2.12, 2.13 and 2.14 pertain to the indirect sending of materials to OBOs and NOBOs by a reporting issuer. Section 2.12 requires a reporting issuer tosend to each proximate intermediary that responded to the request for beneficial ownership information the number of sets of materials specified by theintermediary. Those materials are to be sent to the proximate intermediary at least three business days before the twenty-first day before the day fixed for themeeting, in the case of proxy-related materials, and on the day specified in the relevant request for beneficial ownership information, in the case of othersecurityholder materials. Those materials will be sent by the proximate intermediary, through other intermediaries if required, to all OBOs and to NOBOs if thereporting issuer has elected not to sent to NOBOs directly.

Subsection 2.12(2) permits a reporting issuer to satisfy its obligations to send securityholder materials to an intermediary by sending the materials to a person orcompany designated by the intermediary as a person or company that will attend to the sending of the materials to the appropriate beneficial owners within thetime periods required by the proposed National Instrument. This provision is designed to facilitate the continued use of third party service providers in sendingsecurityholder materials under the proposed National Instrument, as they now do under NP41.

Subsection 2.12(3) provides that a reporting issuer is not required to send materials to NOBO's in foreign jurisdictions that would prohibit such deliveries; inthose circumstances, the reporting issuer may deliver the materials to the relevant intermediary.

Sections 2.13 and 2.14 require reporting issuers to pay a search fee to proximate intermediaries for responding to requests for beneficial ownership informationand another fee, plus cost of postage, for delivery of materials by the proximate intermediaries to beneficial owners. The fees in both cases are required to bereasonable.

Section 2.15 requires reporting issuers that are required to give notices of adjournment or changes of meeting to give such notices to the same persons thatreceived the original notice of meeting under the proposed National Instrument.

Sections 2.16, 2.17 and 2.18 pertain to the giving and exercise of voting instructions. Section 2.16 requires proxy-related materials to explain, in plain language,how a beneficial owner may exercise voting rights attached to securities. Section 2.17 requires a reporting issuer to provide to NOBOs to whom it is sendingproxy-related materials directly a request for voting instructions instead of a form of proxy. Section 2.18 requires a reporting issuer to tabulate completed votinginstructions and vote in accordance with those instructions at the meeting, to the extent that the formal proxy for those securities has been given. In thosecircumstances, the formal proxy should be held by management of the reporting issuer under an omnibus proxy required to have been provided by the relevantintermediary under section 4.1 of the proposed National Instrument.

Part 3. Part 3 prescribes a number of ongoing obligations for intermediaries.

Section 3.1 requires intermediaries to send, and continually update, a notice, to all depositaries concerning its name and address, the name and address of anynominees through which it holds securities and the mailing address, telephone number, fax number and any electronic mail address of a representative of theintermediary.

Sections 3.2 through 3.8 set out the procedure by which the intermediary obtains instructions from its clients concerning the choice of those clients on thedelivery of securityholder materials. These sections require intermediaries to deliver an explanation to clients and a client response card (Form 54-101F1) to allclients on whose behalf the intermediary holds securities. Under the arrangements prescribed in Part 3, clients are entitled to be able to reply at no cost to theclient, and the responses provided by the client apply to all securities held by the client in the account of the intermediary.

The explanation to clients contained in Form 54-101F1 summarizes the rights of clients under the proposed National Instrument, and explains the choicesavailable to them under the Form. The client response card allows a beneficial owner to indicate whether it objects to having its name, address, securitiesholdings and preferred language of communication disclosed to issuers and others of securities held with the intermediary. A client who does not object is aNOBO. The card also allows a beneficial owner to decline to receive proxy- related materials for meetings at which only routine business is to be conducted andsecurityholder materials not required under securities or corporate law to be sent to registered holders. The card also allows the beneficial owner to specifypreferred language of communication.

Section 3.4 provides that a client that is itself an intermediary is not required to return any client response card received by it. In those circumstances, that clientwould obtain information about its clients and would pass the information on to the proximate intermediary under section 4.1.

Subsection 3.7(1) provides that a beneficial owner that does not provide instructions for disclosure of ownership information is considered to have consented tothe disclosure of ownership information; that is, the beneficial owner becomes a NOBO for purposes of the proposed National Instrument. Subsection 3.7(2)provides that a client that does not provide instructions concerning receipt of materials is considered to have declined to receive proxy-related materials for ameeting at which only routine business will be conducted and securityholder materials not required by law to be sent to registered holders.

Section 3.8 provides that a client that is an OBO is required to bear the cost of the intermediary sending materials to it, except to the extent that the reportingissuer is required to bear such costs. A reporting issuer will bear the cost of indirect distribution of materials to OBOs and NOBOs, pursuant to section 2.14, ifthe reporting issuer chooses to distribute indirectly to NOBOs.

Part 4. Part 4 outlines the obligations of intermediaries in connection with meetings.

Sections 4.1 and 4.2 impose the requirement on a proximate intermediary to provide a reporting issuer with a response to the request for beneficial ownershipinformation not pertaining to a meeting within three business days of receipt of the request for that information. In the case of a request sent in connection with ameeting, the proximate intermediary is to respond within three business days of the request in respect of the number of sets of materials, and if the requestcontains a request for a NOBO list, to provide the NOBO list in electronic format within three business days after the record date for notice of the meeting. Theproximate intermediary is also required to provide an omnibus proxy appointing management of the reporting issuer proxy for NOBOs.

Section 4.1 also provides that the proximate intermediary shall give a consolidated response to the request, on behalf of all intermediaries holding through theproximate intermediary, and that all intermediaries are to take all necessary steps to ensure that the proximate intermediary is able to provide that information.Section 4.1 makes it clear that intermediaries are not required to provide ownership information concerning OBOs to any person or company.

Sections 4.2 and 4.3 pertain to the sending of materials to securityholders by intermediaries. Section 4.2 requires the proximate intermediaries to send thosematerials, within three business days of receipt of them, to the beneficial owner or to other intermediaries, who will in turn send them to their beneficial owners.Section 4.3 provides that materials shall not be sent to beneficial owners that have elected not to receive them.

Subsection 4.2(3) provides that the persons or companies to whom securityholder materials are sent shall be determined as at the beneficial owner determinationdate, in the case of proxy-related materials, and as at the date specified in the relevant request for beneficial ownership information, in the case of securityholdermaterials not sent in connection with a meeting.

Subsection 4.2(4) provides that an intermediary may satisfy its obligations to send materials to an intermediary by sending the materials to a person or companydesignated by the intermediary as a person or company that will attend to the sending of the materials to appropriate beneficial owners within the time periodsrequired by the proposed National Instrument. As with subsection 2.12(2), this provision is designed to facilitate the continued use of third party serviceproviders in sending securityholder materials under the proposed National Instrument, as they now do under NP41.

Sections 4.4 and 4.5 pertain to the giving and exercise of voting instructions. Section 4.4 requires an intermediary to include with proxy- related materials that itwill send to beneficial owners a request for voting instruments for matters to which the materials relate. Section 4.5 requires an intermediary to tabulatecompleted voting instructions and vote in accordance with those instructions at the meeting.

Part 5. Part 5 outlines the obligations of depositaries under the proposed National Instrument.

Sections 5.1 and 5.2 require depositaries to maintain and publish an index of meeting of securityholders of reporting issuers and maintain a register ofintermediaries and their nominees.2

Section 5.3 requires the depositary to send to a reporting issuer, within two business days of its receipt from the reporting issuer of an intermediary searchrequest, information concerning securities of the reporting issuer registered in the name of the depositary together with names of nominees and intermediaries.Section 5.5 requires the depositary to provide an omnibus proxy for a meeting to the reporting issuer appointing each participant on whose behalf the depositaryholds securities of the issuer as the depositary's proxy in respect of the corresponding number of securities.

Section 5.4 pertains to requests for intermediary search information from persons or companies other than reporting issuers. Section 5.4 requires depositaries tofurnish the same information to persons making that request as it is required to furnish to reporting issuers. It is noted that such other persons or companiesmake the intermediary search request directly to intermediaries, unlike requests for NOBO lists, which may be made only to reporting issuers.

Part 6. Part 6 deals with the ability of persons or companies other than reporting issuers to obtain NOBO lists.

Section 6.1 permits any person or company to request a NOBO list from a reporting issuer, by payment of a reasonable search fee and upon undertaking that itwill use the information in accordance with the proposed National Instrument.

Section 6.2 requires the reporting issuer to deliver a request for beneficial ownership information to depositaries and intermediaries within three business days ofreceiving a request under section 6.1, and to deliver to the person or company making that request the information within three business days of receiving theinformation from intermediaries and depositaries.

Section 6.3 provides that a person or company that has obtained a NOBO list is subject to the same restrictions as a reporting issuer under sections 2.10 and 2.11of the proposed National Instrument.

Section 6.4 allows any person or company to send materials indirectly to beneficial owners in the same manner as a reporting issuer.

Part 7. Part 7 provides for limitations in the use of a NOBO list and prohibits trafficking in information received under the proposed National Instrument, on abasis similar to the way most Canadian corporate statutes restrict the use of shareholder lists.

Part 8. Part 8 contains a number of miscellaneous provisions.

Section 8.1 provides an exemption for persons or companies from the timing obligations of the proposed National Instrument if those persons or companies areunable to meet their timing obligations under the proposed National Instrument because of the failure to perform of another person or company. The exemptionis provided to the extent that a timing delay is caused by another person or company.

Section 8.2 clarifies that nothing in the proposed National Instrument is to be interpreted to restrict a beneficial owner's right to demand and to receive from anintermediary a proxy entitling the beneficial owner to vote securities, or the right of a depositary or intermediary to vary an omnibus proxy to reflect a change inthe registered or beneficial ownership of securities.

Section 8.3 requires that there shall be no cost to beneficial owners for returning voting instructions.

Part 9. Part 9 contains two exemption provisions.

Section 9.1 provides that the time periods prescribed in the proposed National Instrument for sending financial statements or annual reports do not apply if thosematerials are sent within the times required by applicable corporate law or securities legislation for sending to registered holders of securities.

Section 9.2 permits the regulator or, except in Ontario, the securities regulatory authority to provide exemptions from the proposed National Instrument.

Part 10. Part 10 sets out the implementation dates of the proposed National Instrument. The CSA expect that the proposed National Instrument will come intoforce on January 1, 1999. Section 10.1 provides that the proposed National Instrument will apply in respect of proxy-related materials for a meeting held on orafter March 1, 1999, and for meetings held on or after January 1, 1999 and before March 1, 1999 unless the materials are sent in accordance with NP41 as ifNP41 were still in force. Section 10.2 provides that the proposed National Instrument applies to the sending of securityholder material other than proxy-relatedmaterial on or after January 1, 1999.

Summary of Proposed Forms

Form 54-101F1. Proposed Form 54-101F1 contains the forms of explanation to clients and client response card referred to in Part 3 of the proposed NationalInstrument. The explanation to client form is delivered to all beneficial owners, and is designed to explain to beneficial owners their rights to elect to consent ornot consent to disclosure of beneficial owner information concerning them and their right to decline to receive certain securityholder materials.

The client response card is the form to be completed by the beneficial owner and returned to the intermediary directly holding securities on behalf of thebeneficial owner. This form allows the beneficial owner to consent or not consent on whether the beneficial owner will permit beneficial owner informationconcerning it to be provided to the reporting issuer and others (i.e. whether the client wishes to be a NOBO or OBO), and to elect whether the beneficial ownerwishes to decline to receive proxy-related material for meetings dealing only with routine business or securityholder material not required by law to be sent. Thecard also allows the beneficial owner to specify preferred language of communication.

Form 54-101F2. Proposed Form 54-101F2 contains the form of request for beneficial ownership information referred to in section 2.5 and Part 4 of theproposed National Instrument. Under section 2.5, a reporting issuer uses this form in connection with a meeting to request proximate intermediaries to provideinformation concerning beneficial owners of securities. Under Part 4 of the proposed National Instrument, proximate intermediaries use the form to furnish thatinformation.

Part 1 of the form contains the information to be provided by the reporting issuer, and includes basic information concerning the reporting issuer, the purpose ofthe request and details concerning a meeting or the sending of materials, if applicable, to be distributed to securityholders, and the date on which the materialswill be received by the intermediaries. Part 1 of the form also requires the reporting issuer to specify whether a NOBO list is requested. Part 1 also contains areminder of the form of undertaking to be provided by a person or company that requests a NOBO list.

Part 2 of the form contains the information to be provided by proximate intermediaries in response to requests for beneficial ownership information. The formrequires proximate intermediaries to provide certain basic information concerning the proximate intermediary, including the names of all nominees in whose namesecurities of clients of the proximate intermediary are registered, and the address to which materials to be distributed through the proximate intermediary are tobe delivered. The form also requires intermediaries to state the number of copies of materials that they will require for delivery to OBO's and, if applicable,NOBOs.

Form 54-101F3. Proposed Form 54-101F3 is the form of omnibus proxy to be provided by a depositary to a reporting issuer. This proxy is requested by thereporting issuer under section 2.3 of the proposed National Instrument and provided under section 5.5.

In the form, the depositary appoints each of its participants as proxy holder for the depositary for a meeting in respect of securities held by the depositary onbehalf of those participants.

Form 54-101F4. Proposed Form 54-101F4 is the form of omnibus proxy to be provided by an intermediary to a reporting issuer under section 4.1 of theproposed National Instrument if the reporting issuer requested a NOBO list in its request for beneficial ownership information.

In the form, the intermediary provides a proxy to management of the reporting issuer for each of the securities held by NOBO's. Those proxies are voted inaccordance with voting instruments received from the NOBOs under sections 2.17 and 2.18 of the proposed National Instrument.

Form 54-101F5. Proposed Form 54-101F5 prescribes the format for the electronic transmission of NOBO lists from intermediaries to reporting issuers. Thisform is contemplated by section 4.1 of the proposed National Instrument.

Form 54-101F6. Proposed Form 54-101F6 is the form of request for voting instructions delivered by a reporting issuer to NOBOs under section 2.17 of theproposed National Instrument. This form is provided before a meeting, instead of a form of proxy, to request the NOBOs to instruct the reporting issuer how tovote the NOBO securities at the meeting. The reporting issuer is required by section 2.18 of the proposed National Instrument to vote the securities inaccordance with those instructions.

Form 54-101F7. Proposed Form 54-101F7 is the form of request for voting instructions delivered by an intermediary to beneficial owners under section 4.4 ofthe proposed National Instrument. This form is provided before a meeting, instead of a form of proxy, to request the beneficial owners who receive theirmaterials for the intermediary to instruct the intermediary how the securities will be voted at the meeting. The intermediary is required by section 4.5 of theproposed National Instrument to vote the securities in accordance with those instructions.

Form 54-101F8. Proposed Form 54-101F8 is the form of undertaking to be used by a person or company sending materials directly to NOBOs, as contemplatedby section 2.5 for reporting issuers and section 6.1 for other persons or companies.

Summary of Proposed Companion Policy

The purpose of the proposed Companion Policy is to provide guidance and interpretation in the practical application of the proposed National Instrument. Theproposed Companion Policy has 7 parts.

Part 1. Part 1 provides general information and background concerning the proposed National Instrument and the fundamental principles that have guided thepreparation of that Instrument.

Part 2. Part 2 pertains to the general application of the proposed National Instrument and provides a discussion of two of the terms used in the proposedNational Instrument.

Section 2.1 clarifies that use of the procedures set out in the proposed National Instrument is mandatory for proxy-related materials sent by reporting issuers, butoptional for other securityholder materials.

Section 2.2 discusses the application of the proposed National Instrument to foreign securityholders, and U.S. issuers. With respect to U.S. issuers, the sectionnotes that National Instrument 71-101 The Multi-Jurisdictional Disclosure System provides an exemption for a U.S. issuer sending materials to Canadiansecurityholder if the issuer complies with certain prescribed provisions of the 1934 Act.

Section 2.3 discusses the interaction of the Instrument and National Instrument 54-102 in respect of the sending of interim financial statements under thatInstrument.

Section 2.4 provides a discussion of the distinction between the terms "client" and "beneficial owner" as used in the proposed National Instrument.

Section 2.5 provides a discussion of the term "corporate law" as used in the proposed National Instrument.

Part 3. Part 3 contains a discussion of a number of issuers relating to obligations of reporting issuers.

Section 3.1 notes that the timing requirements of the proposed National Instrument are minimum time periods only, and that the CSA recommend the use oflonger time periods, when possible, to ensure compliance with the proposed National Instrument.

Section 3.2 sets out the views of the CSA as to what fees it would consider "reasonable" within the meaning of sections 2.13 and 2.14 of the proposed NationalInstrument.

Section 3.3 discusses the application of the procedures contained in the proposed National Instrument related to adjournments or changes in meetings.

Section 3.4 clarifies that a person or company other than a reporting issuer may request a NOBO list only from a reporting issuer, and will not deal withintermediaries directly in obtaining that information. However, that person or company will deal with intermediaries in arranging for delivery of materials.

Section 3.5 discusses the relationship between voting instructions received by a reporting issuer from NOBOs and the omnibus proxy relating to those securitiesreceived from intermediary.

Section 3.6 describes the newspapers in which the index of meeting of a depositary contemplated by section 5.2 of the proposed National Instrument arecurrently published and references where a summary of the record and meeting date services of CDS may be located.

Part 4. Part 4 contains a discussion of a number of issues relating to obligations of intermediaries.

Section 4.1 notes that a beneficial owner may, by written notice to an intermediary, revoke any prior instructions given to the intermediary in a client responsecard.

Section 4.2 states that a beneficial owner that wishes to receive proxy-related materials and to vote in respect of some securities but not others, should holdsecurities in separate accounts.

Section 4.3 emphasizes the importance of an intermediary reconciling the securityholdings of persons or companies holding through the intermediary with thesecurityholdings of the intermediary itself as shown on the securities register of a reporting issuer or on the records of another intermediary.

Section 4.4 notes that in providing NOBO lists, an intermediary must specify the intermediaries through which the NOBOs hold securities, in order to permit thereporting issuer to reconcile voting instructions from NOBOs to the corresponding intermediary positions.

Section 4.5 notes that intermediaries should advise the reporting issuer of incomplete or late deliveries and seek instructions.

Part 5. Part 5 deals with the sending of materials.

Section 5.1 emphasizes that materials should be sent by the most efficient means, including, where practical, in bulk.

Section 5.2 suggests that materials sent to intermediaries should be sent in uncollated bulk form, with all documents forming part of a package to be deliveredtogether.

Section 5.3 clarifies that an intermediary should not count in its specification of number of sets of materials, materials that will be sent to NOBOs directly by thereporting issuer.

Section 5.4 contains the recognition of the CSA that much of the communication under the proposed National Instrument will be by electronic means. Thesection also notes that written voting instructions, rather than electronic instructions, are contemplated in the proposed National Instrument in order to ensurecompliance with securities legislation requirements.

Part 6. Part 6 pertains to a number of miscellaneous matters relating to exemptions under the proposed National Instrument.

Section 6.1 notes that the Canadian securities regulatory authorities will generally not considering shortening the 21-day period referred to in section 2.12 of theproposed National Instrument for the sending of proxy-related materials to beneficial owners of securities in the absence of extraordinary circumstances.

Section 6.2 notes that reporting issuers are encouraged to send audited annual financial statements or their annual report at the same time as proxy-relatedmaterials. Those financial statements or reports may not be required to be sent at that time under applicable corporate or securities law.

Section 6.3 notes that reporting issuers and intermediaries may make arrangements that permit the proximate intermediaries to recover costs incurred inpreparing securityholder materials for forwarding to beneficial owners faster than required by section 4.2 of the proposed National Instrument.

Section 6.4 describes the recommended procedure for making application for exemption from the proposed National Instrument.

Part 7. Part 7 references an appendix to the Companion Policy consisting of a flow chart that outlines the procedures prescribed by the proposed NationalInstrument that relate to proxy-related materials.

Terms used in the proposed Companion Policy that are defined or interpreted in the proposed National Instrument, the proposed Forms or a definitioninstrument in force in the jurisdiction and not otherwise defined in the proposed Companion Policy should be read in accordance with the proposed NationalInstrument, the proposed Forms or that definition instrument, unless the context otherwise requires.

Summary of Proposed Implementing Rule

The proposed Implementing Rule has one section, and prescribes that Forms 54-101F1 through 54-101F8 are the forms referred to in the proposed NationalInstrument.

Alternatives Considered

The only alternative method of implementing the requirements of the proposed National Instrument, Forms, Companion Policy and Implementing Rule would beto amend the securities legislation of the various jurisdictions. The CSA determined that continuing the system established by NP41, with the proposedamendments, by national instrument was the most harmonious and efficient method of carrying forward NP41.

Authority for Proposed National Instrument, Forms and Implementing Rule

In those jurisdictions in which the National Instrument and Forms are to be adopted or made as a rule or regulation, the securities legislation in each of thosejurisdictions provides the securities regulatory authority with rule-making or regulation-making authority in respect of the subject matter of the proposedNational Instrument and Forms.

In Ontario, the following sections of the Securities Act (Ontario) (the "Ontario Act") provide the Ontario Securities Commission (the "Ontario Commission")with authority to make the proposed National Instrument, Forms and Implementing Rule. Paragraph 143(1)26 of the Ontario Act authorizes the OntarioCommission to make rules prescribing requirements for the validity and solicitation of proxies. Paragraph 143(1)27 of the Ontario Act authorizes the OntarioCommission to make rules providing for the application of Part XVIII (Continuous Disclosure) and Part XIX (Proxies and Proxy Solicitation) of the Ontario Actin respect of registered holders or beneficial owners of voting securities or equity securities of reporting issuers or other persons or companies on behalf of whomthe securities are held, including requirements for reporting issuers, recognized clearing agencies, registered holders, registrants and other persons or companieswho hold securities on behalf of persons or companies but who are not the registered holders. Paragraph 143(1)39 of the Ontario Act authorizes the OntarioCommission to make rules requiring or respecting the media, format, preparation, form, content, execution, certification, dissemination and other use, filing andreview of all documents required under or governed by the Ontario Act or the regulations or the rules made thereunder, and all documents determined by theregulations or the rules made under the Ontario Act to be ancillary to the documents, including interim financial statements and financial statements, proxies andinformation circulars, take-over bid circulars, issuer bid circulars and directors' circulars.

Regulations to be Amended or Revoked - Ontario

The implementation of the proposed National Instrument, Forms, Companion Policy and Implementing Rule will not require the amendment or revocation of anyRegulation.

Related Instruments

The proposed National Instrument, Forms, Companion Policy and Implementing Rule are related to each other and to Part XIX of the Ontario Act.

Unpublished Materials

In proposing the National Instrument and Companion Policy, the CSA have not relied on any significant unpublished study, report, decision or other writtenmaterials, other than a report to the CSA dated October 5, 1995 by the Overvoting Subcommittee of the NP41 Industry Implementation and MonitoringCommittee. A copy of this IIMC report is available upon request from the Secretary of the Ontario Securities Commission.

Anticipated Costs and Benefits

The CSA believe that a reporting issuer will benefit from being able to elect direct communication with NOBOs and thereby achieve greater control overcommunication. Reporting issuers may elect which method to use to communicate with NOBOs, and will have the ability to chose potentially less expensivemeans of communication with their securityholders. The ability of reporting issuers and others to obtain NOBO lists should provide greater transparency ofsecurityholder ownership and improve the ability to identify the ultimate beneficial owner of the securities. The ability of beneficial owners to choose to beOBOs will maintain any desired confidentiality. By being identified, a NOBO will have a better ability to change a vote and to attend or vote in person atmeetings. The ability of beneficial owners to choose to receive either all securityholder materials, or all but "routine" proxy-related materials and materials notrequired by law to be sent to registered holders balances the beneficial owners' need to keep informed with their desire not to receive unwanted communications.The requirements for reconciliation of NOBO lists, OBO lists and omnibus proxies will assist in reducing unintentional over-voting. Intermediaries will berelieved of responsibility for sending securityholder materials to NOBOs if the reporting issuer elects to send them directly, with the associated reduction inadministrative burden for intermediaries.

If a reporting issuer chooses to communicate indirectly to NOBOs, the reporting issuer will bear the cost of communicating with both NOBOs and OBOs.Reporting issuers have the option of communicating with NOBOs directly, at the issuer's expense, but in that case, the proposed National Instrument requiresOBOs to bear the cost of their confidentiality.

Based on experience to date under NP41, the CSA believe that the benefits of the proposed National Instrument justify the costs.

Specific Request for Comments

In addition to welcoming submissions on any provision proposed in the proposed National Instrument, Forms, Companion Policy or Implementing Rule, theCSA seek comment on the specific matters referred to below.

Timing Requirements

The timing requirements of NP41 have been amended in the proposed National Instrument to reflect a requirement that materials be sent to beneficial owners nolater than 21 days before a meeting and to reduce the minimum time periods for conducting intermediary searches before the record date. The CSA requestcomment on the appropriateness of the timing requirements.

Use of Procedures for Non-proxy-related Materials

Section 2.7 of the proposed National Instrument provide that a reporting issuer must use the procedures contained in the proposed National Instrument for thesending of proxy-related materials to beneficial owners. Section 2.8 of the proposed National Instrument provides that a reporting issuer may, but is not requiredto, use those procedures for securityholder materials other than proxy-related materials. The CSA request comment on whether the use of the procedures setout in the proposed National Instrument should be mandatory for reporting issuers in respect of non-proxy-related materials and if so, in what circumstances.

Use of Procedures by Persons or Companies other than Reporting Issuers

The proposed National Instrument permits other persons or companies to obtain NOBO lists and to use the procedures contained in the proposed NationalInstrument to distribute securityholder materials to beneficial owners. However, the proposed National Instrument does not require persons or companies otherthan reporting issuers to use those procedures to deliver securityholder materials. Such materials could include proxy solicitations or take-over bids. The CSArequest comment on whether the use of the procedures set out in the proposed National Instrument by parties other than reporting issuers should be mandatoryand if so, for what distributions of materials and in what circumstances.

Sending of Materials to All NOBOs

NP41 permits a reporting issuer to request an intermediary to deliver materials to beneficial owners who have waived the right to receive those materials.Sections 2.10 and 4.3 of the proposed National Instrument would prohibit the deliver of routine proxy-related materials to beneficial owners who have chosen,or been considered to have elected, not to receive such materials. The CSA request comment on whether the existing ability of a reporting issuer to override abeneficial owner's waiver is appropriate.

Decline of Receipt of Routine Materials

The proposed National Instrument permits beneficial owners to waive the receipt of proxy-related materials for meetings at which only routine business isconducted. The CSA request comment on whether beneficial owners should have this ability to waive receipt, and whether the definition of "routine business"contained in the proposed National Instrument should be expanded or reduced.

Third Party NOBO Lists

The proposed National Instrument provides that when a reporting issuer receives a request from another person or company for a NOBO list, the reportingissuer must perform an intermediary search to request a new NOBO list. The CSA request comment on whether this obligation should be placed on thereporting issuer and whether the reporting issuer should be allowed to provide the most recent NOBO list in its possession, rather than initiate the procedures toprepare a new list.

Form of Omnibus Proxy

The forms under the proposed National Instrument prescribe forms of omnibus proxy. The CSA request comment on whether there are any possible conflictsbetween the specified forms of omnibus proxy and any form of proxy that may be required pursuant to an issuer's governing legislation or constating documents.

Electronic Transfer of Funds

The CSA have received suggestions that it would be appropriate, at some time in the future, to mandate in the instrument that replaces NP41 the electronictransfers of funds between reporting issuers, depositaries and intermediaries to facilitate the payments of fees provided for under the instrument. The CSAconsider that this is premature at this time, but invite comment on these suggestions.

Transition Period

The proposed National Instrument requires that the procedures contained in the Instrument apply for meeting held on or after March 1, 1999, and that NP41 willcontinue to apply for meetings held before that time. The CSA seek comment on the appropriateness of this transition period.

Comments

Interested parties are invited to make written submissions with respect to the proposed National Instrument and Companion Policy. Submissions received byMay 29, 1998 will be considered.

Submissions should be sent to all of the Canadian securities regulatory authorities listed below in care of the Ontario Securities Commission, in duplicate, asindicated below:

British Columbia Securities CommissionAlberta Securities CommissionSaskatchewan Securities CommissionThe Manitoba Securities CommissionOntario Securities CommissionOffice of the Administrator, New BrunswickRegistrar of Securities, Prince Edward IslandNova Scotia Securities CommissionSecurities Commission of NewfoundlandRegistrar of Securities, Northwest TerritoriesRegistrar of Securities, Government of the Yukon Territoryc/o Daniel P. Iggers, SecretaryOntario Securities Commission20 Queen Street WestSuite 800, Box 55Toronto, Ontario M5H 3S8Submissions should also be addressed to the Commission desvaleurs mobilières du Québec as follows:Claude St Pierre, SecretaryCommission des valeurs mobilières du Québec800 Victoria SquareStock Exchange TowerP.O. Box 246, 17th FloorMontréal, Québec H4Z 1G3A diskette containing the submissions(in DOS or Windows format, preferablyWordPerfect) should also be submitted.As securities legislation in certainprovinces requires that a summary of writtencomments received during the comment periodbe published, confidentiality of submissionscannot be maintained.Questions may be referred to any of:Diane JolyCommission des valeurs mobilières du Québec(514) 873-5326Glenda A. CampbellAlberta Securities Commission(403) 297-6454Robert HudsonBritish Columbia Securities Commission(604) 899-6691or 1-800-373-6393 (in B.C.)Robert F. KohlOntario Securities Commission(416) 593-8233

Rescission of National Policy Statement No. 41

NP41 is replaced by the proposed National Instrument. The text of the proposed rescission is:

"National Policy Statement No. 41 Shareholder Communication is rescinded effective upon the date proposed National Instrument 54-101 comes into force."

Text of Proposed National Instrument, Forms, Companion Policy and Implementing Rule

The text of the proposed National Instrument, Forms, Companion Policy and Implementing Rule follow, together with footnotes that are not part of the NationalInstrument, Forms, Companion Policy or Implementing Rule, as applicable, but have been included to provide background and explanation.

DATED: February 27, 1998