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Q: Threshold for early warning reporting in Canada?

A: In Canada, the threshold for early warning reporting is when an acquirer gains beneficial ownership of, or control or direction over, voting or equity securities of any class of a reporting issuer that, together with the acquirer's securities of that class, constitute 10% or more of the outstanding securities of that class. This is according to National Instrument 62-104 Takeover Bids and Issuer Bids, Part 5 Reports and Announcements Of Acquisitions, Section 5.2. The acquirer must issue and file a news release containing the required information no later than the opening of trading on the business day following the acquisition, and file a report containing the required information no later than 2 business days from the date of the acquisition. Further disclosure is required each time the acquirer acquires or disposes beneficial ownership of securities in an amount equal to 2% or more of the outstanding securities of the class of securities that was the subject of the most recent report.

National Instrument 62-104 Takeover Bids and Issuer Bids
Part 5 Reports and Announcements Of Acquisitions
Section 5.2

Early warning

(1) An acquiror who acquires beneficial ownership of, or control or direction over, voting or equity securities of any class of a reporting issuer, or securities convertible into voting or equity securities of any class of a reporting issuer, that, together with the acquiror’s securities of that class, constitute 10% or more of the outstanding securities of that class, must

(a) promptly, and, in any event, no later than the opening of trading on the business day following the acquisition, issue and file a news release containing the information required by section 3.1 of National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, and

(b) promptly, and, in any event, no later than 2 business days from the date of the acquisition, file a report containing the information required by section 3.1 of National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues.

(2) An acquiror who is required to make disclosure under subsection (1) must make further disclosure, in accordance with subsection (1), each time any of the following events occur:

(a) the acquiror or any person acting jointly or in concert with the acquiror, acquires or disposes beneficial ownership of, or acquires or ceases to have control or direction over, either of the following:

(i) securities in an amount equal to 2% or more of the outstanding securities of the class of securities that was the subject of the most recent report required to be filed by the acquiror under subsection (1) or under this subsection;

(ii) securities convertible into 2% or more of the outstanding securities referred to in subparagraph (i);

(b) there is a change in a material fact contained in the most recent report required to be filed under paragraph (1)(b) or under paragraph (a) of this subsection.

(3) An acquiror must issue and file a news release and file a report in accordance with subsection (1) if beneficial ownership of, or control or direction over, the outstanding securities of the class of securities that was the subject of the most recent report required to be filed by the acquiror under this section decreases to less than 10%.

(4) If an acquiror issues and files a news release and files a report under subsection (3), the requirements under subsection (2) do not apply unless subsection (1) applies in respect of a subsequent acquisition of beneficial ownership of, or control or direction over, voting or equity securities of any class of a reporting issuer, or securities convertible into voting or equity securities of any class of a reporting issuer, that, together with the acquiror’s securities of that class, constitute 10% or more of the outstanding securities of that class.


Exemptive Relief Orders
National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.5

Filing Obligations under this Part

In order to rely on the exemption provided by section 4.1, an eligible institutional investor shall file a report

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

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

(c) within 10 days after the end of the month in which the securityholding percentage of the eligible institutional investor in a class of voting or equity securities of the reporting issuer, as at the end of the month, increased or decreased past thresholds that are products of whole numbers multiplied by 2.5 percent of the outstanding securities of the class and that are in excess of 10 percent of the outstanding securities of the class; and

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


Exemptive Relief Orders
National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.4

Restrictions on Acquisitions

An eligible institutional investor that has become disqualified under section 4.2 from filing reports under this Part for a reporting issuer, if the securityholding percentage of the eligible institutional investor in a class of voting or equity securities of the reporting issuer is 10 percent or more, shall not acquire ownership of, or control over, any additional securities of the reporting issuer for the period

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

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 6 Issuer Actions
Section 6.1

Issuer Actions

(1) An entity is exempt from the early warning requirements and the obligation to report under Part 4 in connection with an increase in the securityholding percentage of the entity in a class of securities of a reporting issuer that arises without any action being taken by the entity and solely from a reduction in outstanding securities that occurs as a result of redemptions, retractions or other repurchases by the reporting issuer, that affect or are offered to all security holders of the relevant class.

(2) An entity is exempt from the early warning requirements and the obligation to report under Part 4 in connection with a decrease in the securityholding percentage of the entity in a class of securities of a reporting issuer that arises without any action being taken by the entity and solely from an increase in outstanding securities that occurs as a result of treasury issuances of securities by the reporting issuer.

(3) An entity may rely upon an exemption provided by this section in connection with a class of securities only until the entity undertakes any transaction that changes the securityholding percentage of the entity in that class of securities.

(4) An entity that undertakes a transaction described in subsection (3) shall comply with the early warning requirements or Part 4 in connection with the class of securities referred to in that subsection in a manner that reflects the changes in the securityholding percentage of the entity in that class of securities since the last news release or report made or filed under the early warning requirements or Part 4.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.3

Reporting and Filing Requirements

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

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

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

(2) The news release and report required by subsection (1) shall contain the information required by Form 62-103F2 Required Disclosure by an Eligible Institutional Investor under Section 4.3.

(3) An eligible institutional investor that is required to file a report under subsection (1) for a reporting issuer is not exempt from the early warning requirements for that reporting issuer as of the date on which the news release required by subsection (1) is required to be filed.

(4) An eligible institutional investor that files reports under this Part for a reporting issuer and that controls securities of the reporting issuer that are owned by another entity shall

(a) on request by the entity, promptly advise the entity of the number of securities held on its behalf; and

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.1

Exemption from the Early Warning Requirements

The early warning requirements do not apply to an eligible institutional investor for a reporting issuer if the eligible institutional investor

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

(b) either

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

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


Exemptive Relief Orders
National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 9 Insider Reporting Exemption
Section 9.1

Insider Reporting Exemption; Early Warning Decrease Reports

(1) Subject to subsections (3.1) and (4), an eligible institutional investor is exempt from the insider reporting requirement for a reporting issuer if

(a) the eligible institutional investor has filed the report required under the early warning requirements or Part 4 for the reporting issuer in connection with the current securityholding percentage of the eligible institutional investor in the classes of voting and equity securities of the reporting issuer;

(a.1) the report referred to in paragraph (a) discloses, in addition to any other required disclosure,

(i) the eligible institutional investor’s interest in any related financial instrument involving a security of the reporting issuer that is not otherwise reflected in the current securityholding percentage of the eligible institutional investor; and

(ii) the material terms of the related financial instrument;

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

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

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

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

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

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

(3.1) Despite subsection (1), an eligible institutional investor that is filing reports under the early warning requirements or Part 4 for a reporting issuer may rely upon the exemption contained in subsection (1) only if the eligible institutional investor treats a significant change in a related financial instrument position as a change in a material fact for the purposes of securities legislation pertaining to the early warning requirements or section 4.6 of this Instrument.

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

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

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

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 3 Early Warning Requirements
Section 3.1

Contents of News Releases and Reports

(1) A news release and report required under the early warning requirements shall contain the information required by Form 62-103F1 Required Disclosure under the Early Warning Requirements.

(2) Despite subsection (1), a news release required under the early warning requirements may omit the information otherwise required by Items 2.3, 3.3, 3.5 through 3.8, 4.2, 4.3, 6 and 9, and Item 7 to the extent that the information relates to those sections and items, of Form 62-103F1 Required Disclosure under the Early Warning Requirements, if

(a) the omitted information is included in the corresponding report required by the early warning requirements, and

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

(3) The acquiror shall send a copy of the report referred to in paragraph (2)(a) promptly to any entity requesting it.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 2 General Reliance and Reporting Provisions
Section 2.1

Reliance on Reported Outstanding Shares

(1) Subject to subsection (2), in determining its securityholding percentage in a class of securities for the purposes of the early warning requirements or Part 4, an entity may rely upon information most recently provided by the issuer of the securities in a material change report or under section 5.4 of National Instrument 51-102 Continuous Disclosure Obligations, whichever contains the most recent relevant information.

(2) Subsection (1) does not apply if the entity has knowledge both

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

(b) of the correct information.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 5 Aggregation Relief
Section 5.3

Reporting and Record Keeping

(1) In addition to the requirements of sections 5.1 and 5.2, in order to rely on section 5.1 or 5.2, an eligible institutional investor or an affiliate or associate shall indicate in any document released or filed under the applicable provisions or securities legislation related to the applicable definitions

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

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

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

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

(a) business units of the entity that are treated separately, by reason of section 5.1, for the purposes of compliance with the applicable provisions and securities legislation related to the applicable definitions; and

(b) investment funds whose ownership of, or control over, securities are treated separately, by reason of section 5.2, for the purposes of compliance with the applicable provisions and securities legislation related to the applicable definitions.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 8 Relief For Pledgees
Section 8.2

Further Relief for de minimis Pledgees

Despite subsection 8.1(2), for securities that are controlled by a person or company as a pledgee, and any securities into which those securities are convertible, exercisable or exchangeable, in either case that are or were pledged, mortgaged or otherwise encumbered as collateral for a debt, under a written pledge agreement and in the ordinary course of the business of the person or company, the person or company is exempt from the applicable provisions, and those securities are not required to be taken into account for the purposes of securities legislation related to the applicable definitions, even if the person or company is legally entitled to dispose of the securities as pledgee for the purpose of applying proceeds of realization in repayment of the secured debt, if

(a) the principal amount of the debt, together with the principal amount of all other debts of or guaranteed by the same borrower to the person or company, does not exceed $2,000,000; and

(b) the pledged securities, and securities into which the pledged securities are convertible, exercisable or exchangeable, constitute less than 10 percent of a class of voting or equity securities.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 7 Underwriting Exemption
Section 7.1

Underwriting Exemption

An entity is exempt from the early warning requirements and the obligation to report under Part 4 in respect of securities owned by the entity in its capacity as underwriter or securities into which those securities are convertible, or exerciseable or exchangeable, during the underwriting period, if

(a) the entity is engaged in the business of an underwriter of securities; and

(b) the entity or the issuer of the securities has issued and filed a news release that

(i) announces the proposed underwriting, and

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 3 Early Warning Requirements
Section 3.2

Filing Relief for Joint Actors

The early warning requirements and the acquisition announcement provisions do not apply to a joint actor of an acquiror in connection with the obligation to make a specific filing of a news release or report if

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

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.2

Deemed Effective Control

For the purposes of the definition of “effective control”, an entity that, either alone or together with one or more joint actors, owns or controls voting securities carrying more than 30 percent of the votes attached to all of the outstanding voting securities of a reporting issuer shall, in the absence of evidence to the contrary, be deemed to possess effective control over the reporting issuer.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 2 General Reliance and Reporting Provisions
Section 2.3

No Duplication of News Releases or Reports

(1) An entity that is required to issue a news release under both the early warning requirements and the acquisition announcement provisions is exempt from the requirement to issue the news release contained in the provision requiring the later release if

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

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

(2) An entity that is required to file a report under the acquisition announcement provisions and either the early warning requirements or Part 4 is exempt from the requirement to file the report under the provision requiring the later report if

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

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.1 Definitions

significant change in a related financial instrument position

“significant change in a related financial instrument position” means, in relation to an entity and a related financial instrument that involves, directly or indirectly, a security of a reporting issuer, any change in the entity’s interest in, or rights or obligations associated with, the related financial instrument if the change has a similar economic effect to an increase or decrease in the entity’s securityholding percentage in a class of voting or equity securities of the reporting issuer by 2.5 percent or more;

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 5 Aggregation Relief
Section 5.4

No Requirement to Satisfy Insider Reporting Requirement

If an eligible institutional investor, or an affiliate or associate of an eligible institutional investor, is relying on this Part so that it is not subject to the insider reporting requirement for a reporting issuer, then every director or senior officer of the eligible institutional investor, or of the affiliate or associate of an eligible institutional investor, who is an insider of the reporting issuer solely as a result of being a director or senior officer of the eligible institutional investor, or the affiliate or associate of an eligible institutional investor, is not subject to the insider reporting requirement for the reporting issuer.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.8

Exemptions

The requirement to file a report under this Part does not apply to a joint actor with an eligible institutional investor in connection with a specific filing if

(a) the eligible institutional investor files a report under this Part at the time that the joint actor is required to file; and

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.7

Contents of Reports

(1) A report filed under this Part shall contain the information required by Form 62-103F3 Required Disclosure by an Eligible Institutional Investor under Part 4.

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

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

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

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.1 Definitions

financial institution

“financial institution” means

(a) a Canadian financial institution,

(b) an entity that is engaged in financial services activities and that is supervised and regulated under the banking, insurance, trust or similar laws of, and incorporated in, the United States of America or Japan, or

(c) a credit institution, within the meaning of European Union Directive 77/780/EEC, whose home member state for purposes of that European Union Directive is France, Germany, Italy or the United Kingdom of Great Britain and Northern Ireland;

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.2

Disqualification

(1) An eligible institutional investor shall not file reports under this Part for a reporting issuer if the eligible institutional investor, or a joint actor

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

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

(c) solicits proxies from securityholders of the reporting issuer in any of the following circumstances:

(i) in support of the election of one or more persons as directors of the reporting issuer other than the persons proposed to be nominated by management of the reporting issuer;

(ii) in support for a reorganization, amalgamation, merger, arrangement or other similar corporate action involving the securities of the reporting issuer if that action is not supported by management of the reporting issuer;

(iii) in opposition to a reorganization, amalgamation, merger, arrangement or other similar corporate action involving the securities of the reporting issuer if that action is proposed by management of the reporting issuer.

(2) For the purposes of this section, “solicit” has the meaning ascribed to that term in National Instrument 51-102 Continuous Disclosure Obligations.

Form 62-103F1 Required Disclosure under the Early Warning Requirements
Item 4

Consideration Paid

4.1 State the value, in Canadian dollars, of any consideration paid or received per security and in total.

4.2 In the case of a transaction or other occurrence that did not take place on a stock exchange or other market that represents a published market for the securities, including an issuance from treasury, disclose the nature and value, in Canadian dollars, of the consideration paid or received by the acquiror.

4.3 If the securities were acquired or disposed of other than by purchase or sale, describe the method of acquisition or disposition.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 5 Aggregation Relief
Section 5.1

Separate Business Units

An eligible institutional investor, or an affiliate or associate of an eligible institutional investor, that conducts business or investment activities through business units may, for the purposes of the applicable provisions and securities legislation related to the applicable definitions, treat securities that are owned or controlled through a business unit, or securities into which those securities are convertible, exerciseable or exchangeable, separately from securities owned or controlled through any other of its business units if

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

(b) the business unit is not a joint actor with any other business unit with respect to the securities, determined without regard to the provisions of securities legislation that deem an affiliate, and presume an associate, to be acting jointly or in concert with an acquiror;

(c) no entity that makes, advises on, participates in the formulation of, or exercises influence over, decisions on the acquisition, disposition, holding or voting of securities owned or controlled by or on behalf of a business unit also makes, advises on, participates in the formulation of or exercises influence over, decisions on the acquisition, disposition, holding or voting of securities owned or controlled by or on behalf of any other business unit, except for the purposes of

(i) preparing research reports,

(ii) monitoring or ensuring compliance with regulatory requirements, or

(iii) setting, monitoring or ensuring compliance with general investment policies, guidelines, objectives or restrictions;

(d) the eligible institutional investor or affiliate or associate has reasonable grounds for believing that each business unit complies with the applicable provisions and securities legislation related to the applicable definitions in connection with the securities owned or controlled by the business unit;

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

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 8 Relief For Pledgees
Section 8.3

Corresponding Insider Reporting Relief

If a person or company is exempt under section 8.1 or 8.2 from the insider reporting requirement for those securities of a reporting issuer that it controls as pledgee, every director or senior officer of the person or company who is an insider of the reporting issuer solely as a result of being a director or senior officer of the person or company that is an insider of the reporting issuer is exempt from the insider reporting requirement for those securities.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.1 Definitions

acquisition announcement provisions

“acquisition announcement provisions” means the requirement in securities legislation for an acquiror to issue a news release if, during a formal bid for voting or equity securities of a reporting issuer by an entity other than the acquiror, the acquiror acquires ownership of, or control over, securities of the class subject to the bid that, together with the acquiror’s securities of the class, constitute an amount equal to or greater than the amount specified in securities legislation;

Form 62-103F1 Required Disclosure under the Early Warning Requirements
Item 2

Identity of the Acquiror

2.1 State the name and address of the acquiror.

2.2 State the date of the transaction or other occurrence that triggered the requirement to file this report and briefly describe the transaction or other occurrence.

2.3 State the names of any joint actors.

INSTRUCTION

If the acquiror is a corporation, general partnership, limited partnership, syndicate or other group of persons, provide its name, the address of its head office, its jurisdiction of incorporation or organization, and its principal business.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 5 Aggregation Relief
Section 5.2

Securities Held by an Investment Fund

An eligible institutional investor, or an affiliate or associate of an eligible institutional investor, may, for the purposes of the applicable provisions and securities legislation related to the applicable definitions, treat securities owned or controlled by an investment fund over which the eligible institutional investor, affiliate or associate exercises or shares control, or securities into which those securities are convertible, exercisable or exchangeable, separately from other securities owned or controlled by the eligible institutional investor or affiliate or associate if

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

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

(c) the portfolio adviser has been identified as managing the investment fund in a document provided to an investor;

(d) none of the eligible institutional investor, its affiliates or associates, or a director, officer, partner, employee or agent of the eligible institutional investor or its affiliates or associates, makes, advises on, participates in the formulation of, or exercises influence over, decisions made by the portfolio adviser on the acquisition, disposition, holding or voting of securities, except for the purposes of

(i) preparing research reports,

(ii) monitoring or ensuring compliance with regulatory requirements, or

(iii) setting, monitoring or ensuring compliance with general investment policies, guidelines, objectives or restrictions;

(e) the eligible institutional investor or affiliate or associate has reasonable grounds for believing that the portfolio adviser complies with the applicable provisions and securities legislation related to the applicable definitions in connection with securities owned or controlled by the investment fund;

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

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

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.1 Definitions

securityholding percentage

“securityholding percentage” means, in relation to an entity and a class of securities, the percentage of the outstanding securities of the class owned, together with the percentage controlled by the entity, determined in accordance with the provisions of applicable securities legislation listed in Appendix D and after application of any aggregation relief available under Part 5 that is relied on by the entity;

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 10 Moratorium Relief
Section 10.1

Moratorium Relief

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

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

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

(4) An eligible institutional investor is exempt from the moratorium provisions in respect of securities of a reporting issuer at any time in which

(a) the eligible institutional investor is using the exemption in section 4.1 in connection with filings relating to securities of that reporting issuer; or

(b) the eligible institutional investor is subject to the restrictions contained in section 4.4.

Companion Policy 51-102CP Continuous Disclosure Obligations
Part 8 Business Acquisition Reports
Section 8.2

Significance Tests

(1) Application of Significance Tests – Subsection 8.3(2) of the Instrument sets out the required significance tests for determining whether an acquisition of a business by a reporting issuer is a “significant acquisition”. The application of the significance tests depends on the status of the reporting issuer such that:

(a) if the reporting issuer is not a venture issuer, an acquisition is significant if it satisfies two or more of the significance tests at a 30% threshold; or

(b) if the reporting issuer is a venture issuer, an acquisition is significant if it satisfies either of the asset or investment test at a 100% threshold.

The test must be applied as at the acquisition date using the most recent audited annual financial statements of the reporting issuer and the business.

(2) Business Using Accounting Principles Other Than Those Used by the Reporting Issuer – Subsection 8.3(13) of the Instrument provides that, for the purposes of calculating the significance tests, the amounts used for the business or related businesses must, subject to subsection 8.3(13.1) of the Instrument, be based on the issuer’s GAAP, and translated into the same presentation currency as that used in the reporting issuer’s financial statements. This means that in some cases the amounts must be converted to the issuer’s GAAP and translated into the same presentation currency as that used in the reporting issuer’s financial statements.

Subsection 8.3(13.1) of the Instrument exempts venture issuers from the requirement in paragraph 8.3(13)(a) that, for the purposes of calculating the significance tests, the amounts used for the business or related businesses must be based on the issuer’s GAAP, but only where the financial statements for the business or related businesses were prepared in accordance with Canadian GAAP applicable to private enterprises and certain other conditions are met.

National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards permits financial statements for a business or related businesses to be prepared in accordance with U.S. GAAP without reconciliation to the issuer’s GAAP. This does not impact the application of paragraph 8.3(13)(a) of the Instrument. Thus, if the issuer’s GAAP is not U.S. GAAP, paragraph 8.3(13)(a) of the Instrument requires, for the purposes of calculating the significance tests, that the amounts used for the business or related businesses be based on the issuer’s GAAP.

Paragraph 8.3(13)(b) of the Instrument applies to all issuers and requires, for the purpose of calculating the significance tests, that the amounts used for the business or related businesses be translated into the same presentation currency as that used in the reporting issuer’s financial statements.

(3) Acquisition of a Previously Unaudited Business – Subsections 8.3(2) and 8.3(4) of the Instrument require the significance of an acquisition to be determined using the most recent audited annual financial statements of the reporting issuer and the business acquired. However, if the annual financial statements of the business or related businesses for the most recently completed financial year were not audited, subsection 8.3(14) of the Instrument permits use of the unaudited annual financial statements for the purpose of applying the significance tests. If the acquisition is determined to be significant, then the annual financial statements required by subsection 8.4(1) of the Instrument must be audited.

(3.1) Application of Significance Tests for Business Combinations Achieved in Stages – IFRS 3 Business Combinations, requires that when a business combination is achieved in stages the acquirer’s previously held equity interest in the acquiree is remeasured at its acquisition date fair value with any resulting gain or loss recognized in profit or loss. The remeasurement of the previously held equity interest should not be included in the asset or the investment test and the resulting gain or loss from remeasurement should not be included in the profit or loss test. (See subsection 8.3(4.1) of the Instrument).

(4) Application of Investment Test for Significance of an Acquisition – One of the significance tests set out in subsections 8.3(2) and (4) of the Instrument is whether the reporting issuer’s consolidated investments in and advances to the business or related businesses exceed a specified percentage of the consolidated assets of the reporting issuer. In applying this test, the “investments in” the business should be determined using the consideration transferred, measured in accordance with the issuer’s GAAP, including any contingent consideration. In addition, any payments made in connection with the acquisition which would not constitute consideration transferred but which would not have been paid unless the acquisition had occurred, should be considered part of investments in and advances to the business for the purpose of applying the significance tests. Examples of such payments include loans, royalty agreements, lease agreements and agreements to provide a pre-determined amount of future services. For purposes of the investment test, “consideration transferred” should be adjusted to exclude the carrying value of assets transferred by the reporting issuer to the business or related businesses that will remain with the business or related businesses after the acquisition.

(5) Application of the Significance Tests When the Financial Year Ends are Non-Coterminous – Subsection 8.3(2) of the Instrument requires the significance of a business acquisition to be determined using the most recent audited annual financial statements of both the reporting issuer and the acquired business. For the purpose of applying the tests under this subsection, the year-ends of the reporting issuer and the acquired business need not be coterminous. Accordingly, neither the audited annual financial statements of the reporting issuer nor those of the business should be adjusted for the purposes of applying the significance tests. However, if the acquisition of a business is determined to be significant and pro forma income statements are required by subsection 8.4(5) of the Instrument and, if the business’ year-end is more than 93 days before the reporting issuer’s year-end, the business’ reporting period required under paragraph 8.4(7)(c) of the Instrument should be adjusted to reduce the gap to 93 days or less. Refer to subsection 8.7(3) of this Policy for further guidance.

Form 62-103F1 Required Disclosure under the Early Warning Requirements
Item 9

Certification

The acquiror must certify that the information in this report is true and complete in every respect. In the case of an agent, the certification is based on the agent’s best knowledge, information and belief but the acquiror is still responsible for ensuring that the information filed by the agent is true and complete.

This report must be signed by each person on whose behalf the report is filed or his or her authorized representative.

It is an offence to submit information that, in a material respect and at the time and in the light of the circumstances in which it is submitted, is misleading or untrue.

National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Appendix A

Appendix A – Control Block Distribution Definition

ALBERTA Clause 1(p)(iii) of the Securities Act (Alberta)

BRITISH COLUMBIA Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (British Columbia)

MANITOBA Paragraph 1(b) of the definition of “primary distribution to the public” contained in subsection 1(1) of the Securities Act (Manitoba)

NEW BRUNSWICK Paragraph (c) of the definition of “distribution” contained in section 1(1) of the Securities Act (New Brunswick)

NEWFOUNDLAND Clause 2(1)(l)(iii) of the Securities Act (Newfoundland)

NORTHWEST TERRITORIES Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (Northwest Territories)

NUNAVUT Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (Nunavut)

NOVA SCOTIA Clause 2(1)(l)(iii) of the Securities Act (Nova Scotia)

ONTARIO Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (Ontario)

PRINCE EDWARD Subclause (iii) of the definition of “distribution” contained in clause 1(k) of the Securities Act (Prince Edward Island)

QUEBEC Subparagraph 9 of the definition of “distribution” contained in section 5 of the Securities Act (Quebec)

SASKATCHEWAN Subclause 2(1)(r)(iii) of The Securities Act, 1988 (Saskatchewan)

YUKON TERRITORY Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (Yukon Territory)

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