Form 44-101F1: NI - 44-101 - Short Form Prospectus Distributions

Request for Comment National Instrument

February 20, 1998

NATIONAL INSTRUMENT 44-101
FORM 44-101F1 AIF
- and -
SCHEDULE 1 TO FORM 44-101FI MD&A
TABLE OF CONTENTS

TITLE

CONTENTS OF AIF
Item 1: Cover Page
Item 2: Corporate Structure
Item 3: General Development of the Business
Item 4: Narrative Description of the Business
Item 5: Selected Consolidated Financial Information
Item 6: Management's Discussion and Analysis
Item 7: Market for Securities
Item 8: Directors and Officers
Item 9: Additional Information
CONTENTS OF MD&A
Item 1: General
Item 2: Liquidity and Capital ResourcesItem 3: Results of Operations

NATIONAL INSTRUMENT 44-101
PROMPT OFFERING QUALIFICATION SYSTEM
FORM 44-101F1
AIF

INSTRUCTIONS⁽¹⁾

(1) And AIF is intended to provide background information that is essential to a proper understanding of the nature of an issuer, its operations, andprospects.⁽²⁾

(2) Focus the AIF disclosure on the issuer and external factors affecting the issuer specifically; do not focus, unless specifically required, on external factorsthat affect issuers generally.⁽³⁾

(3) Provide the disclosure prescribed by this Form.⁽⁴⁾ In determining the degree of detail required, apply a standard of materiality. Materiality is a matter ofjudgment in particular circumstances, and should generally be determined in relation to an item's significance to investors, analysts and other users of theinformation. An item of information, or an aggregate of items, is considered material if it is probable that its omission or misstatement would influence orchange an investment decision with respect to the issuer's securities. In determining whether information is material, take into account both quantitative andqualitative factors. This concept of materiality is consistent with the financial reporting notion of materiality contained in the Handbook.⁽⁵⁾

(4) A requirement in this Form to discuss or disclose forward-looking information does not call for a forecast or projection as defined in the Handbook. Anissuer that chooses to provide a forecast or projection is required to comply with National Instrument 52-101 Future-Oriented Financial Information.⁽⁶⁾

(5) An issuer that is a special purpose vehicle and intends to issue or has issued asset-backed securities may have to modify the disclosure items in this Form toreflect the special purpose nature of its business.⁽⁷⁾

(6) Any information required in an AIF may be incorporated by reference in the AIF. Clearly identify in an AIF any document incorporated by reference. If anexcerpt of a document is incorporated by reference, clearly identify the excerpt in the AIF by page, caption and paragraph of the document. Any materialincorporated by reference in an AIF is required under subsection 3.3(1) of National Instrument 44-101 to be filed with the AIF unless it has been previouslyfiled.⁽⁸⁾

(7) Date an AIF no earlier than the date of the auditor's report on the issuer's financial statements for the financial year covered by the AIF.⁽⁹⁾

(8) Unless otherwise specified in this Form, present the information in an AIF as at a date not earlier than the end of the issuer's most recently completedfinancial year, except for

(a) an AIF filed by a successor issuer following a reorganization, in which case present the information as at a date not earlier than the latest financial yearend of any of the participants in the reorganization that were reporting issuers at the time of the reorganization; and

(b) an AIF filed by an issuer of asset-backed securities that has not completed its first financial year, in which case present the information as at a date within30 days before the date that the initial AIF is filed under section 3.1 of National Instrument 44-101.⁽¹⁰⁾

(9) If a material change affecting the issuer occurs after the date, as at which the disclosure in the AIF is required, and before filing, include this informationin the AIF.⁽¹¹⁾

(10) Terms used and not defined in this Form that are defined or interpreted in National Instrument 44-101 shall bear that definition or interpretation.⁽¹²⁾

(11) All references to the issuer in items 3 through 6 of this Form are to be read as applying to the issuer, its subsidiaries and investees.⁽¹³⁾

CONTENTS OF AIF

Item 1: Cover Page⁽¹⁴⁾

(1) Insert the date of the AIF.

(2) If an issuer has been notified that its renewal AIF is being reviewed, include the following statement in bold type on the outside front cover page of all copiesof the renewal AIF that are being distributed during the period from receipt of the notice of review until receipt of notice that the review is completed.

"This annual information form has been accepted for filing in [insert name of each jurisdiction in which the renewal AIF has been filed] but iscurrently subject to review by the Canadian securities regulatory authorities of one or more jurisdictions. Information contained herein is subject tochange."⁽¹⁵⁾

Instruction: The statement required by paragraph (2) of this item may be added by way of a stamp, sticker or other method that will ensure that the statementmay not be deleted or removed from the renewal AIF.⁽¹⁶⁾

(3) If revisions to an AIF are necessary, identify the AIF as a "revised initial AIF" or a "revised renewal AIF", as the case may be, on its cover page.⁽¹⁷⁾

Item 2: Corporate Structure⁽¹⁸⁾

(1) State the full corporate name of the issuer or, if the issuer is an unincorporated entity, the full name under which the entity exists and carries on business.

(2) State the statute under which the issuer is incorporated, continued or organized and if the issuer is an unincorporated entity, the laws of the jurisdiction orforeign jurisdiction under which the issuer is established and exists. If material, state whether the articles or other constating or establishing documents of theissuer have been amended and describe the substance of the material amendments.

(3) Illustrate by way of a diagram or otherwise the intercorporate relationships among the issuer and the issuer's subsidiaries as of the most recent financial yearend of the issuer, indicating the place of incorporation, continuance or organization and stating separately the percentage of the votes attaching to all votingsecurities of the subsidiary represented by voting securities beneficially owned or over which control or direction is exercised by the issuer. Also disclose thepercentage of each class of non-voting securities beneficially owned or over which control or direction is exercised by the issuer.⁽¹⁹⁾

Instruction: A particular subsidiary may be omitted if

(a) the total assets of the subsidiary do not constitute more than 10 percent of the consolidated assets of the issuer at the most recent financial year end; and

(b) if the assets of the omitted subsidiaries, in the aggregate, do not constitute more than 30 percent of the consolidated assets of the issuer.⁽²⁰⁾

Item 3: General Development of the Business⁽²¹⁾

(1) Describe the general development of the business of the issuer over the last three financial years. Include only major events or conditions that have influencedthe general development of the business of the issuer. If the business consists of the production or distribution of more than one product or the rendering of morethan one kind of service, describe the principal products or services. Also discuss changes in the business of the issuer that are expected to occur during the current finanical year of the issuer.

Instruction: Include the business of subsidiaries only in so far as is necessary to explain the character and development of the business conducted by thecombined enterprise.

(2) Disclose any material acquisitions and dispositions relating to the issuer's business made by the issuer during the last three financial years of the issuer, orlesser period that the issuer has been in existence, and any intended material acquisitions or dispositions if a decision to proceed with the transaction has beenmade by an issuer's board of directors, or by senior management with the expectation of concurrence from the board of directors. Include particulars of

(a) the nature of the assets acquired or disposed of or to be acquired or disposed of;

(b) the actual or proposed date of each acquisition or disposition;

(d) any material obligations that must be complied with to keep any acquisition or disposition agreement in good standing; and

(e) whether the transaction is at arm's-length and, if not, the identity of the parties and the relationship of the parties to the issuer.⁽²²⁾

Instruction: Disclosure is not required if the issuer has made a confidential filing under the continuous disclosure provisions of securities legislation.

(3) Discuss any trend, commitment, event or uncertainty that is both presently known to management and reasonably expected to have a material effect on theissuer's business, financial condition or results of operations, providing forward-looking information based on the issuer's expectations as of the date of theAIF.⁽²³⁾

Instruction: Issuers are encouraged, but not required, to supply other forward-looking information. Optional forward-looking disclosure involves anticipatinga future trend or event or anticipating a less predictable effect of a known event, trend or uncertainty. This other forward-looking information is to bedistinguished from presently known information that is reasonably expected to have a material effect on future operating results, such as known futureincreases in costs of labour or materials, which information is required to be disclosed.⁽²⁴⁾

Item 4: Narrative Description of the Business⁽²⁵⁾

(1) Describe the business of the issuer with reference to the reportable operating segments as defined in the Handbook and the issuer's business in general.⁽²⁶⁾Include for each reportable operating segment of the issuer

(a) for principal products or services,

(i) the methods of their distribution and their principal markets;⁽²⁷⁾

(ii) as dollar amounts or as percentages, for each of the last two completed financial years, the revenues for each category of principal products or services thataccounted for 15 percent or more of total consolidated revenues for the applicable financial year derived from

(A) sales to customers outside the consolidated entity, and

(B) sales or transfers to investees;⁽²⁸⁾

(b) the competitive conditions in the principal markets and geographic areas in which the issuer operates, including, if reasonably possible, an assessment of theissuer's competitive position;⁽²⁹⁾

(c) if there has been a public announcement of the introduction of a new product or reportable operating segment, the status of the product or segment;⁽³⁰⁾

(d) the sources and availability of raw materials, component parts or finished products;⁽³¹⁾

(e) the importance, duration and effect on the segment of identifiable intangible properties such as brand names, circulation lists, copyrights, franchises, licences,patents, software, subscription lists and trademarks;⁽³²⁾

(f) the extent to which the business of the segment is seasonal;⁽³³⁾

(g) a description of any aspect of the issuer's business that may be affected in the current financial year by renegotiation or termination of contracts orsub-contracts;⁽³⁴⁾

(h) the financial and operational effects of environmental protection requirements on the capital expenditures, earnings and competitive position of the issuer inthe current financial year and the expected effect on future years;⁽³⁵⁾

(i) the number of employees, as at the most recent financial year end or as an average over the year, whichever is more relevant;⁽³⁶⁾

(j) any risks associated with foreign operations of the issuer and any dependence of one or more of the issuer's reportable operating segments upon the foreignoperations;⁽³⁷⁾

(k) the nature and results of any bankruptcy, receivership or similar proceedings against the issuer or any of its subsidiaries within the last three financial years;⁽³⁸⁾and

(l) the nature and results of any material reorganization of the issuer or any of its material subsidiaries within the last three financial years.⁽³⁹⁾

(2) For issuers with asset-backed securities outstanding, disclose

(a) a description of any events, covenants, standards or preconditions that are dependant or based on the economic performance of the underlying pool offinancial assets and that may impact on the timing or amount of payments or distributions to be made under the asset-backed securities;

(b) for the past two completed financial years of the issuer or such lesser period commencing on the first date on which the issuer had asset-backed securitiesoutstanding, information on the underlying pool of financial assets relating to

(i) the composition of the pool as of the end of the financial year or partial period,

(ii) income and losses from the pool, on at least a quarterly basis,

(iii) the payment, prepayment and collection experience of the pool on a quarterly basis, and

(iv) any significant variances experienced in the matters referred to in subparagraphs (i), (ii) and (iii);

Instruction: Present the information required by paragraph (b) in a manner that will enable a reader to easily determine if, and the extent to which, the events,covenants, standards and preconditions referred to in paragraph (a) have occurred, are being satisfied or may be satisfied.

(d) the investment parameters applicable to investments of any cash flow surpluses;

(e) the amount of payments made in respect of principal and interest or capital and yield on asset-backed securities of the issuer outstanding during the mostrecently completed financial year or partial period;

(f) the occurrence of any events that have led or with the passage of time could lead to the accelerated payment of principal or capital of asset-backed securities;and

(g) the identity of any principal obligors for the outstanding asset-backed securities of the issuer at the end of the most recent financial year or partial period, thepercentage of the underlying pool of financial assets represented by obligations of each principal obligor and whether the principal obligor, if any, has filed anAIF in any jurisdiction or a Form 10-K or Form 20-F in the United States.⁽⁴⁰⁾

(3) For issuers with natural resource operations, other than oil and gas operations, disclose (in tabular form, if appropriate)

(a) the name, location, size, net interest in, number of claims and concessions of, and means of access to, material properties and the nature of the right to hold oroperate the properties as at the most recent financial year end, indicating any conditions that the issuer must meet to obtain or retain the properties;⁽⁴¹⁾

(b) the general geology and structure of the material properties for non-producing properties and for producing properties if further exploration is being carriedout to enhance the resources on those properties;⁽⁴²⁾

(c) estimated resources and reserves by deposit and by categories that conform to the classifications and definitions in National Policy Statement No. 2-A Guidefor Engineers, Geologists and Prospectors Submitting Reports on Mining Properties to Canadian Provincial Securities Commissions and any successorinstrument;⁽⁴³⁾

(d) the source of the reserve estimates made and whether they have been prepared by the issuer or by independent engineers or other qualified independentpersons and any other information required to be disclosed in an AIF relating to reserve estimates by any successor instrument to National Policy Statement No.2-A Guide for Engineers, Geologists and Prospectors Submitting Reports on Mining Properties to Canadian Provincial Securities Commissions;⁽⁴⁴⁾

(e) a reconciliation of reserves by category as at the financial year end immediately preceding the most recently completed financial year to the reserveinformation furnished under paragraph (c), with the effects of production, acquisition, discoveries and revisions of estimates shown individually; and

(f) the dollar amounts expended on property acquisition, exploration and development, each stated separately, during each of the last two completed financialyears.⁽⁴⁵⁾

(4) For issuers with oil and gas operations, disclose (in tabular form, if appropriate)

(a) the number of wells the issuer has drilled or has participated in drilling, the number of these wells that were completed as oil wells and gas wells that arecapable of production, each stated separately, and the number of dry holes, expressed in each case as gross and net wells, during each of the last two financialyears of the issuer;

(b) the geographical areas of the issuer's production, the groups of oil and gas properties, the individual oil and gas properties and the plants, facilities andinstallations that, in each case, are owned or leased by the issuer and are material to the issuer's operations or exploratory activities;⁽⁴⁶⁾

(c) the location, stated separately for oil wells and gas wells, by jurisdiction or state, if in the United States, and by country otherwise, of producing wells andnon-unitized wells capable of producing, in which the issuer had an interest, with the interest expressed in terms of gross and net wells;⁽⁴⁷⁾

(d) for interests in properties on which there are no current reserves, the gross acreage in which the issuer has an interest and the net interest of the issuer, andthe location of acreage by geographical area;

(e) estimated reserves by country and by categories and types that conform to the classifications and definitions of National Policy Statement No. 2-B Guide forEngineers and Geologists Submitting Oil and Gas Reports to Canadian Provincial Securities Commissions and any successor instrument, on both a gross and netbasis as at the most recent financial year end; include a brief discussion of the royalty rates if they are subject to material variation;⁽⁴⁸⁾

(f) the source of the reserve estimates made and whether they have been prepared by the issuer or by independent engineers or other qualified independentpersons and any other information required to be disclosed in an AIF relating to reserve estimates by any successor instrument to National Policy Statement No.2-B Guide for Engineers and Geologists Submitting Oil and Gas Reports to Canadian Provincial Securities Commissions;⁽⁴⁹⁾

(g) a reconciliation of the reserves by categories as at the financial year end immediately preceding the most recently completed financial year to the reserveinformation furnished under paragraph (e), with the effects of production, acquisitions, discoveries and revision of estimates shown individually;

(h) for each quarter of the most recently completed financial year of the issuer, with comparative data for the same periods in the preceding financial year,

(i) the average daily production, after deduction of royalties payable in kind, of

(A) conventional crude oil,

(B) natural gas liquids,

(D) oil and gas in the aggregate, on a barrel of oil equivalent basis,

(ii) the following on a per barrel basis for conventional crude oil and natural gas liquids and on a per thousand cubic feet basis for natural gas

(A) the average net product prices received,

(B) crown royalties,

(D) administrative expenses, and

(E) netback received,

(iii) the average net product price received for the following, if the issuer's production of the following is material to the issuer's overall production,

(A) light conventional crude oil,

(B) heavy conventional crude oil, and

(iv) the dollar amounts expended on

(A) property acquisition,

(B) exploration, including drilling, and

(v) the finding and development costs for proved reserves added on a barrel of oil equivalent basis;⁽⁵⁰⁾

(i) the current effect and the anticipated effect, if in each case material, of the issuer's hedging programs on the net product prices received;⁽⁵¹⁾

(j) the reserve life index as at the end of the most recent financial year on both a proved reserves basis and a proved plus probable reserves basis, specifying thereserve life index in each case for

(A) conventional crude oil,

(B) natural gas liquids,

(D) oil and gas in the aggregate, on a barrel of oil equivalent basis;⁽⁵²⁾ and

Instruction: Determine the reserve life index as the year end reserves in each category divided by the production for the year from that category.

(k) a sensitivity analysis of the effect on cash flow and net earnings in the most recently completed financial year of each of the following, in each case both intotal and on a per share basis,

(i) a change of U.S. $1.00 in the price per barrel of West Texas Intermediate crude oil,

(ii) a change of $0.10 per thousand cubic feet of natural gas,

(iii) a change of U.S. $0.01 per Canadian dollar in the U.S. dollar/Canadian dollar exchange rate, and

(iv) a change of 1 percent in the prime interest rate.⁽⁵³⁾

Item 5: Selected Consolidated Financial Information⁽⁵⁴⁾

(1) Provide the following financial data for the issuer in summary form for each of the last three completed financial years, accompanied by a discussion of thosefactors affecting the comparability of the data, including discontinued operations, changes in accounting policies, significant acquisitions or disposals and majorchanges in the direction of the business:

1. Net sales or total revenues.

2. Income or loss before discontinued operations and extraordinary items, in total and on a per share and fully diluted per share basis, calculated in accordancewith the 3. Net income or loss, in total and on a per share and fully diluted per share basis, calculated in accordance with the Handbook.

4. Total assets.

5. Total long-term financial liabilities as defined in the Handbook.⁽⁵⁵⁾

6. Cash dividends declared per share for each class of share.

7. Such other information as the issuer believes would enhance an understanding of and would highlight other trends in financial condition and results ofoperations.

(2) For each of the last eight quarters ending at the end of the most recently completed financial year, provide the information required in paragraphs (1)1, (1)2and (1)3, provided that, if the issuer is only required to file six month interim financial statements, the information may instead be provided for each of the lastfour completed six month periods ending at the end of the most recently completed financial year.

(3) Describe any restriction that could prevent the issuer from paying dividends. Disclose the issuer's dividend policy and if a decision has been made to changethe dividend policy, disclose the intended change in dividend policy.⁽⁵⁶⁾

(4) If an issuer's primary financial statements have been prepared using foreign GAAP, the issuer may present the selected consolidated financial informationrequired in this itements containing the reconciliation.⁽⁵⁷⁾

Item 6: Management's Discussion and Analysis⁽⁵⁸⁾

(1) Provide the disclosure required by Schedule 1 to this Form. If an issuer has securities registered under the 1934 Act, the issuer may satisfy this requirementby providing, directly or through incorporation by reference, the disclosure required by the requirements applicable to it under the 1934 Act that are analogous tothe requirement to provide the disclosure required by Schedule 1.

(2) If an issuer's primary financial statements have been prepared using foreign GAAP and is required under securities legislation to have reconciled its financialstatements to Canadian GAAP at the time of filing its financial statements, or has otherwise done so at that time, then provide a cross-reference in the MD&A tothe notes to the financial statements containing the reconciliation.⁽⁵⁹⁾

Item 7: Market for Securities⁽⁶⁰⁾

Identify the exchange(s) and quotation system(s) on which the issuer's securities are listed and posted for trading or quoted.

Item 8: Directors and Officers⁽⁶¹⁾

(1) List the name and municipality of residence of each director and each officer of the issuer and indicate their respective principal occupations within the fivepreceding years.

(2) State the period or periods during which each director has served as a director and when the term of office of each director will expire.

(3) State the number and percentage of securities of each class of voting securities of the issuer or any of its subsidiaries beneficially owned, directly or indirectly,or over which control or direction is exercised, by all directors and senior officers of the issuer as a group.

Instruction: Securities of subsidiaries that are beneficially owned, directly or indirectly, or over which control or direction is exercised by directors or seniorofficers through ownership or control or direction over securities of the issuer do not need to be included.

(4) Disclose the board committees of the issuer and identify the members of eachcommittee.

(5) If a director or officer of the issuer is, or within the 10 years before the date of the AIFhas been, a director or officer of any issuer that, while that person was acting in thatcapacity,

(6) If a director or officer of the issuer has, within the 10 years before the date of the AIF, been subject to any penalties or sanctions imposed by a court orsecurities regulator relating to trading in securities, promotion or management of a publicly traded issuer, or theft or fraud, describe the penalties or sanctionsimposed and the grounds on which they were imposed.

(7) If a director or officer of the issuer, within the 10 years before the date of the AIF, became bankrupt, made a proposal under any legislation relating tobankruptcy or insolvency, or was subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager ortrustee appointed to hold the assets of the director or officer, state the fact.

(8) Disclose particulars of existing or potential material conflicts of interest between the issuer or a subsidiary of the issuer and a director or officer of the issueras a result of the director's or officer's outside business interests.

Item 9: Additional Information⁽⁶²⁾

(1) Include a statement to the effect that the issuer, upon request to the secretary of the issuer, will provide to any person or company

(a) when the securities of the issuer are in the course of a distribution under a short form prospectus or a preliminary short form prospectus has been filed for adistribution of its securities,

(i) one copy of the AIF of the issuer, together with one copy of any document, or the pertinent pages of any document, incorporated by reference in the AIF,

(ii) one copy of the comparative financial statements of the issuer for its most recently completed financial year for which financial statements have been filedtogether with the accompanying report of the auditor and one copy of any interim financial statements of the issuer for any period after the end of its mostrecently completed financial year,

(iii) one copy of the information circular of the issuer in respect of its most recent annual meeting of shareholders that involved the election of directors or onecopy of any annual filing prepared instead of that information circular, as appropriate, and

(iv) one copy of any other documents that are incorporated by reference into the preliminary short form prospectus or the short form prospectus and are notrequired to be provided under subparagraphs (i) to (iii); or

(b) at any other time, one copy of any documents referred to in subparagraphs (1)(a)(i), (ii) and (iii), provided that the issuer may require the payment of areasonable charge if the request is made by a person or company who is not a securityholder of the issuer.

(2) Include a statement to the effect that additional information including directors' and officers' remuneration and indebtedness, principal holders of the issuer'ssecurities, options to purchase securities and interests of insiders in material transactions, if applicable, is contained in the issuer's information circular for its mostrecent annual meeting of shareholders that involved the election of directors, and that additional financial information is provided in the issuer's comparativefinancial statements for its most recently completed financial year.

NATIONAL INSTRUMENT 44-101

PROMPT OFFERING QUALIFICATION SYSTEM

SCHEDULE 1 TO FORM 44-101F1⁽⁶³⁾

MD&A

INSTRUCTIONS

(1) MD&A is supplemental analysis and explanation that accompanies, but does not form part of, the financial statements. MD&A provides management withthe opportunity to discuss an issuer's current financial results, position and future prospects. MD&A is intended to give a reader the ability to look at the issuerthrough the eyes of management by providing both a historical and prospective analysis of the business of the issuer. MD&A requires that management discussthe dynamics of the business and analyze the financial statements. Coupled with the financial statements, this information should enable readers to betterassess the issuer's performance, position and future prospects.⁽⁶⁴⁾

(2) Focus the MD&A on material information about the financial condition of the issuer, as well as its operations, with particular emphasis on liquidity,capital resources and known material trends, commitments, events, risks or uncertainties that are reasonably expected to have a material effect on the issuer'sbusiness, financial condition or results of operations.⁽⁶⁵⁾

(3) Issuers are not required to disclose information described in this schedule if the information is not material.⁽⁶⁶⁾

(4) If information required by this schedule is disclosed in a note to an issuer's financial statements, the issuer may comply with the disclosure requirement byproviding a cross-reference to the note in which the information appears.⁽⁶⁷⁾

(5) Focus the MD&A on the primary financial statements, even if the primary financial statements have been prepared using foreign GAAP.⁽⁶⁸⁾

(6) The MD&A form is intentionally general and contains a minimum of specific instructions in order to allow, as well as encourage, issuers to discuss theirbusinesses in the most appropriate manner and to tailor their comments to their individual circumstances. Issuers should avoid boilerplate.⁽⁶⁹⁾

CONTENTS OF MD&A

Item 1: General⁽⁷⁰⁾

(1) Provide an analysis of the issuer's financial condition, changes in financial condition and results of operations in the most recently completed financial year,including a comparison against the previously completed financial year. Provide all information necessary to understand the analysis and comparison. Include

(a) an analysis and comparison over a period longer than two financial years if necessary to describe a trend;

(b) an analysis and comparison on the basis of each reportable operating segment or other part of the business, as well as on the issuer as a whole, if necessary tounderstand the analysis and comparison;

Instruction: In making the determination whether an analysis and comparison on the basis of a reportable operating segment or other part of the business isrequired, give consideration to whether any part of the business has a disproportionate effect on revenues, profitability or cash needs; whether there are anylegal or other restrictions on the free flow of funds from one part of the issuer's business to another; and whether known trends, demands, commitments, eventsor uncertainties within a part of the business are reasonably likely to have a material effect on the business as a whole.

(d) an explanation of why changes have or have not occurred in the financial condition and results of operations of the issuer;

Instruction: In providing an explanation of causes affecting more than one item, an overall analysis is sufficient.

(e) the effect of discontinued operations;

(f) major changes in the direction of the business.⁽⁷¹⁾

Instruction: Issuers need only include information that is reasonably available to the issuer and that does not clearly appear in the issuer's financialstatements. Numerical data included in, or readily calculable from, the financial statements need not be repeated in the analysis and comparison. For example,if it is clear from the comparative financial statements what the amount of increase or decrease in revenues or the respective percentage change would be fromthe prior year, it is not necessary to include this information in the discussion since it is readily calculable. Showing these increases and decreases immediatelybefore the discussion is nonetheless often useful to readers.

(2) Disclose information on risks and uncertainties facing the issuer necessary to understand the issuer's financial condition, changes in financial condition andresults of operations.⁽⁷²⁾

(3) Provide an analysis of the risks, events and uncertainties that could cause reported financial information to not necessarily be indicative of future operatingresults or of future financial position. Include both qualitative and quantitative descriptions of factors that

(a) could have an effect on future operations or financial position and have not had an effect in the past; and

(b) have had an effect on reported operations or financial position, and are not expected to have an effect in the future.⁽⁷³⁾

(4) Describe any changes in the accounting policies of the issuer adopted subsequent to its most recent financial year end or any changes in its accounting policiesthat are expected to be adopted by the issuer, including those resulting from a change in an accounting standard, or the issuance of a new accounting standard,that does not require adoption until some future date. Disclose the estimated effect on the financial statements of the implementation of any changes in theaccounting policies described.⁽⁷⁴⁾

(5) If not already disclosed in the issuer's financial statements, provide

(a) a discussion of the nature and extent of the issuer's use of financial instruments and the business purposes that they serve;

Instruction: The discussion should be designed to enhance a reader's understanding of the significance of recognized and unrecognized financial instrumentson the issuer's financial position, results and cash flows. The information should also be designed to assist a reader in assessing the amounts, timing, andcertainty of future cash flows associated with those instruments.

(b) an analysis of the risks associated with the issuer's financial instruments;

(c) an analysis of management's policies for controlling the risks associated with the issuer's financial instruments, including an analysis of, if applicable, theissuer's policies forthe hedging of risk exposures, the avoidance of undue concentrations of risk and any requirements for collateral to mitigate credit risks, and, ifthe issuer has no policies for controlling the risks associated with the issuer's financial instruments, a statement indicating that the issuer does not have any suchpolicies;

Instruction: If the issuer is exposed to significant price, credit or liquidity risks, consideration should be given to providing a sensitivity analysis or tabularinformation that assists readers in assessing the degree of exposure. For example, an analysis of the effect of a hypothetical change in the prevailing level ofinterest or currency rates on the fair value of financial instruments and future earnings and cash flows may be useful in describing the issuer's exposure toprice risk.

(d) a discussion of the relationships between financial instruments and the components of individual financial instruments that may affect the amount, timing orcertainty of cash flows;

Instruction: For example, a discussion of the existence and terms of master netting agreements and the relationship between liability and equity components ofconvertible debt instruments would be appropriate.

(e) disclosure of significant accounting policies for financial instruments, including a description of how each class of financial instrument is reported in thefinancial statements, the policies for recognition and measurement of financial instruments, and the financial statement classification of gains and losses; and

(f) significant assumptions made in determining the fair value of financial instruments, the total amount of the change in fair value of financial instrumentsrecognized in income for the period, and the total amount of deferred or unrecognized gains and losses on financial instruments.⁽⁷⁵⁾

(6) If a decision to proceed with a transaction has been made by an issuer's board of directors, or by senior management with the expectation of concurrencefrom the board of directors, and the transaction involves a business acquisition or disposition, or an asset acquisition or disposition, discuss the transaction and itsanticipated effect as part of MD&A. Disclosure is not required if the issuer has made a confidential filing under the continuous disclosure provisions of securitieslegislation.⁽⁷⁶⁾

Item 2: Liquidity and Capital Resources⁽⁷⁷⁾

(1) With respect to the issuer's liquidity,

(a) discuss the ability of the issuer to generate adequate amounts of cash and cash equivalents, in the short term and the long term, when needed and to maintaincapacity to provide for planned growth;

(b) identify any known trends or expected fluctuations in the issuer's liquidity, taking into account known demands, commitments, events or uncertainties; if adeficiency is identified, indicate the course of action that has been taken or is proposed to be taken to remedy the deficiency;

(c) describe those balance sheet conditions or income or cash flow items that the issuer believes may be indicators of its liquidity;

(d) describe generally the requirements relating to working capital items;

Instruction: Examples of the disclosure required under this paragraph include situations where significant quantities of inventory are required to be carried tomeet rapid delivery requirements of customers or where extended payment terms have been provided to customers or furnished by suppliers.

(e) disclose the nature and extent of legal or practical restrictions on the ability of subsidiaries to transfer funds to the issuer and the effect that these restrictionshave had or are expected to have on the ability of the issuer to meet its obligations; and

(f) if the issuer is in arrears in the payment of dividends, interest or principal payment on borrowings, disclose this fact and provide details; if the issuer is indefault on any debt covenants or was in default during the most recently completed financial year, disclose information concerning the default and the method oranticipated method of curing the default; if the issuer is unable to make required redemptions or retractions or sinking fund payments, disclose this informationand provide details, and if the issuer anticipates being, in the current financial year, in any of the circumstances described in this paragraph, disclose thisinformation and provide details.⁽⁷⁸⁾

(2) With respect to the issuer's capital resources,

(a) describe and quantify commitments for capital expenditures as of the end of the most recently completed financial year, indicate the general purpose of thesecommitments and the anticipated source of funds needed to fulfil these commitments, and quantify expenditures that are necessary but not yet committed to meetplans discussed under MD&A or elsewhere in the AIF;

(b) describe any known trends, favourable or unfavourable, in the issuer's capital resources, indicating any expected changes in the mix and relative cost of theseresources; and

Instruction: Discussions of liquidity and capital resources may be combined if this facilitates the discussion.

Item 3: Results of Operations⁽⁸⁰⁾

(1) Describe any unusual or infrequent events or transactions and any significant economic changes that in each case materially affect income or loss fromcontinuing operations and the extent to which income or loss from continuing operations is affected. Also disclose any other significant components of revenueor expense necessary to understand the results of operations.⁽⁸¹⁾

(2) Describe any known trends or uncertainties that have had or that the issuer reasonably expects will have a favourable or unfavourable effect on net sales orrevenues or income or loss from continuing operations. If the issuer knows of factors that are expected to cause a change in the relationship between costs andrevenues, disclose the expected change in the relationship and the cause.⁽⁸²⁾

Instruction: Examples of such events include known future changes in costs of labour or materials or price changes or inventory adjustments.

(3) Provide a discussion of the extent to which any changes in net sales or revenues are attributable to changes in selling prices, to changes in the volume orquantity of goods or services being sold, or to the introduction of new products or services.⁽⁸³⁾

(4) Discuss briefly any effect of inflation and specific price changes on the issuer's net sales and revenues and on income or loss from continuing operations. Forpurposes of the discussion, no specific numerical financial data need be presented.⁽⁸⁴⁾

Footnotes

1. These instructions are based on both the guidelines and the instructions in Appendix A to NP47 ("NP47 AIF").

2. This instruction is based on guideline (1) to the NP47 AIF.

3. This instruction is based on guideline (2) to the NP47 AIF.

4. This sentence is new and has been added to clarify that issuers are required to comply with this Form and may not omit prescribed disclosure even if, in theissuer's opinion, the information is not material. Materiality determines the appropriate degree of detail issuers are required to provide.

5. This instruction is based on the guideline (3) to the NP47 AIF.

6. This instruction is based on guideline (6) to the NP47 AIF.

7. This instruction is new and has been added to reflect the inclusion in section 2.7 of proposed National Instrument 44-101 of POP eligibility criteriaspecifically applicable to special purpose vehicle issuers of asset-backed securities.

8. This instruction is based on instruction (1) to the NP47 AIF.

9. This instruction is based on instruction (2) to the NP47 AIF.

10. This instruction is based on instruction (3) to the NP47 AIF. Clause (a) is new and has been included to address disclosure dates for successor issuers.Clause (b) is new and has been included to accommodate special purpose vehicle issuers of asset-backed securities filing an AIF for the first time.

11. This instruction is based on the last sentence in instruction (3) to the NP47 AIF.

12. This instruction is new.

13. This instruction is based on instruction (5) to the NP47 AIF.

14. This item consolidates the requirements relating to the disclosure on the cover page of an AIF.

15. This paragraph is based on item 5.2(6)(c) of NP47. However, the reference in item 5.2(6)(c) of NP47 to varying the legend has been omitted as issuersmay apply for exemptive relief if they wish to vary the legend.

16. This instruction is based on the footnote to item 5.2(6)(c) of NP47.

17. This paragraph is based on the fifth sentence of section 5.1 and paragraph 5.2(6)(h) of NP47.

18. This item is based on item 1 of the NP47 AIF. The scope of the disclosure requirements in paragraphs (1) and (2) has been expanded compared to items1(1) and (2) of the NP47 AIF to reflect the possibility that an issuer may be an unincorporated entity such as a trust or partnership. Special purpose vehicleissuers of asset-backed securities are frequently trusts. Also, the last sentence of paragraph (2) has been qualified by the requirement to only disclose materialamendments. This is consistent with the test under the long form prospectus regime in most jurisdictions.

19. This paragraph is based on item 1(2) of the NP47 AIF and has been modified to mirror the requirement contained in item 4.2(1) of the proposed long formprospectus form in Ontario, Form 41-501F1 Information Required In A Prospectus.

20. This instruction is based on the last sentence of item 1(2) of the NP47 AIF. The revenue test that in item 1(2) of the NP47 AIF has been omitted, which isconsistent with the proposed long form prospectus form in Ontario, Form 41-501F1 Information Required In A Prospectus.

21. This item is based on item 2 of the NP47 AIF. However, the disclosure period in paragraph (1) has been changed from five years to three years to mirroritem 5.1(1) of the proposed long form prospectus form in Ontario, Form 41-501F1 Information Required In A Prospectus and a reference to "financial" years hasbeen added for clarification.

22. This paragraph is new and is based on item 5.3 of the proposed long form prospectus form in Ontario, Form 41-501F1 Information Required In AProspectus.

23. This paragraph is based on guideline (4) to the NP47 AIF.

24. This instruction is based on guideline (5) to the NP47 AIF.

25. This item is based on item 3 of the NP47 AIF and has been modified to reflect the proposed long form prospectus form in Ontario, Form 41-501F1Information Required In A Prospectus. Paragraph (1) of item 3 of the NP47 AIF has been subdivided into three paragraphs in this item, paragraphs (1), (3) and(4). Paragraph (2) of this item is new and specifically applies to issuers of asset-backed securities. Paragraph (2) of item 3 of the NP47 AIF has beenincorporated into paragraph (1) of this item as it is generally applicable to all issuers.

26. The reference in item 3(1) of the NP47 AIF to "dominant industry segment" has been omitted and the reference to "reportable industry segment" has beenreplaced by "reportable operating segment" to reflect changes to the Handbook.

27. The reference in item 3(1)(a)(i) to "a description of the principal products or services" has been omitted because such a description is required in item 3(1)of this Form.

28. This paragraph is based on item 3(1)(a) of the NP47 AIF. Note that the disclosure requirements in items 3(1)(b) and (c) of the NP47 AIF have beenomitted in this Form due to changes in the Handbook.

29. This paragraph is based on item 3(2)(a) of the NP47 AIF and has been modified to reflect item 5.1(2)(a) of the proposed long form prospectus form inOntario, Form 41-501F1 Information Required In A Prospectus.

30. This paragraph is based on item 3(1)(d) of the NP47 AIF.

31. This paragraph is based on item 3(1)(e) of the NP47 AIF and has been modified to reflect item 5.2(2)(d) of the proposed long form prospectus form inOntario, Form 41-501F1 Information Required In A Prospectus.

32. This paragraph is based on item 3(1)(f) of the NP47 AIF.

33. This paragraph is based on item 3(1)(g) of the NP47 AIF.

34. This paragraph is based on item 3(1)(h) of the NP47 AIF.

35. This paragraph is based on item 3(2)(c) of the NP47 AIF.

36. This paragraph is based on item 3(2)(d) of the NP47 AIF.

37. This paragraph is based on item 3(2)(e) of the NP47 AIF.

38. This paragraph is new and is based on item 5.1(2)(f) of the proposed long form prospectus form in Ontario, Form 41-501F1 Information Required In AProspectus.

39. This paragraph is new and is based on item 5.1(2)(g) of the proposed long form prospectus form in Ontario, Form 41-501F1 Information Required In AProspectus. Item 3(2) of the NP 47 AIF has been integrated into item 4(1) of this Form, with the exception of paragraph (b) of item 3(2) of the NP47 AIF whichhas been omitted because of the sensitive nature of the disclosure and because the disclosure is not required under the Handbook. Paragraphs (l) and (m) of item3(1) of Appendix A to NP47 have also been omitted because the disclosure has been superseded by section 3025 of the Handbook.

40. This paragraph (2) is new and reflects the inclusion in section 2.7 of proposed National Instrument 44-101 of POP eligibility criteria specifically applicableto special purpose vehicle issuers distributing asset-backed securities.

41. The requirement to disclose the name of the property, number of claims and concessions, means of access and conditions to be met is new. Also, referenceis made here to "material properties" instead of "important properties" in item 3(1)(i) of the NP47 AIF.

42. This requirement is new.

43. The references to "resources" and to National Policy Statement No. 2-A and its successor are new.

44. This paragraph (d) is based on item 3(1)(k) of the NP47 AIF and has been modified to refer to National Policy Statement No. 2-A.

5. This paragraph (3) is based on item 3(1)(i) of the NP47 AIF and has been modified to reflect item 6.2 of the proposed long form prospectus form inOntario, Form 41-501F1 Information Required In A Prospectus.

46. This has been modified to refer to geographical areas of production and groups of properties and to replace the "importance" test with a "materiality" test.

47. The reference to "gross wells" is new.

48. This has been modified to require the reserve estimates on a country basis using National Policy Statement No. 2-B classifications.

49. This paragraph (f) is based on item 3(1)(k) of the NP47 AIF and has been modified to refer to National Policy Statement No. 2-B.

50. This requirement is new.

51. This requirement is new.

52. This requirement is new.

53. This requirement is new. This paragraph (4) is based on item 3(1)(j) of the NP47 AIF and has been expanded significantly.

54. This item is based on item 4 of the NP47 AIF. However, the disclosure required in this item has been changed from five years to three years to mirror item8.1(1) of the proposed long form prospectus form in Ontario, Form 41-501F1 Information Required In A Prospectus.

55. The reference to "total long-term financial liabilities" replaces the reference in item 4(1)(e) of the NP47 AIF to "total long-term debt, retractable preferredshares and redeemable preferred shares (where the redemption privilege is required or expected to be exercised) from which there shall be deducted the amountsrequired or expected to be repaid, retracted or redeemed in the financial year immediately following the relevant financial year".

56. The requirement in item 4(3) of the NP47 AIF to disclose an authorized intention to change the dividend policy in the near future has been changed to arequirement to disclose the intended change if a decision has been made to change the dividend policy.

57. This paragraph is based on the footnote to item 4 of the NP47 AIF that deals with reconciliation of financial statements to Canadian GAAP. However, thisparagraph requires only a cross-reference to the reconciliation, rather than a restatement of the selected financial information that has been reconciled toCanadian GAAP.

58. This item is based on item 5 of the NP47 AIF.

59. This paragraph is based on the footnote to item 5 of the NP47 AIF that deals with reconciliation of financial statements to Canadian GAAP in the MD&Awith the modification that a discussion of differences need not be included.

60. This item is based on item 6 of the NP47 AIF.

61. This item is based on item 7 of the NP47 AIF. Paragraph (4) has been expanded to include any committee, not just the executive committee and auditcommittee. Paragraphs (5) through (8) are new and are based on items 16.2, 16.3, 16.4 and 16.5 of the proposed long form prospectus form in Ontario, Form41-501F1 Information Required In A Prospectus.

62. This item is based on item 8 of the NP47 AIF.

63. Schedule 1 to the NP47 AIF entitled "Industry Segments" has been omitted.

64. This instruction is based on instruction (1) to the NP47 AIF MD&A.

65. This instruction is based on instruction (2) to the NP47 AIF MD&A.

66. This instruction is new.

67. This instruction is new.

68. This instruction is based on the footnote to item 5 of the NP47 AIF.

69. This instruction is based on instruction (3) to the NP47 AIF MD&A.

70. This item is based on item 1 of the NP47 AIF MD&A.

71. This paragraph (1) is based on items 1(1), (2), (3) and (4) of the NP47 AIF MD&A. Duplication has been omitted. Paragraph (1)(a) is new.

72. This paragraph is based on item 1(5) of the NP47 AIF MD&A. The requirement in item 1(5) of the NP47 AIF MD&A to emphasize risks anduncertainties likely to be factors within 2 years has been omitted.

73. This paragraph (3) is based on item 1(6) of the NP47 AIF MD&A.

74. This paragraph is based on item 1(7) of the NP47 AIF MD&A.

75. This paragraph (5) is based on item 1(8) of the NP47 AIF MD&A and has been expanded significantly.

76. This paragraph is based on item 1(9) of the NP47 AIF MD&A. The last sentence of item 1(9) of the NP47 AIF MD&A dealing with the requesting ofconfidentiality has been omitted and replaced with the last sentence of this paragraph.

77. This item is based on item 2 of the NP47 AIF MD&A.

78. This paragraph (1) is based on items 2(1) and (2) of the NP47 AIF MD&A. Parts of item 2(1) of the NP47 AIF MD&A have been omitted as redundantor otherwise unnecessary.

79. This paragraph (2) is based on item 2(3) of the NP47 AIF MD&A.

80. This item is based on item 3 of the NP47 AIF MD&A.

81. This paragraph is based on item 3(1) of the NP47 AIF MD&A.

82. This paragraph is based on item 3(2) of the NP47 AIF MD&A.

83. This paragraph is based on item 3(3) of the NP47 AIF MD&A.

84. This paragraph is based on item 3(4) of the NP47 AIF MD&A.