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Notice 2004-003-New Continuous Disclosure Rules

March 18, 2004


As a service to CNQ Issuers and their advisors, CNQ will periodically publish details of initiatives by other regulators that may affect quoted companies. This notice should not be construed as legal advice nor relied upon for compliance with the new rules.

On March 30, new continuous disclosure rules (National Instrument 51-102) adopted by the Canadian Securities Administrators will come into effect, subject to ministerial approval. The new rules distinguish between 2 types of issuer. CNQ Issuers are considered �venture issuers� and have less stringent requirements than other issuers, but will be subject to some significant new rules.

At the same time the new resale rules providing a four-month hold period for all reporting issuers will come into effect. Please refer to CNQ Notice 2004-001 for details.

Management�s Discussion and Analysis (new)

All reporting issuers must file both annual and interim MD&A on new Form 51-102F1. In particular, the MD&A must:

� Discuss any forward-looking information disclosed in prior MD&A if, in light of intervening events that disclosure could be misleading;
� Disclose off-balance sheet transactions that are reasonably likely to have an effect on results of operations or financial condition;
� Discuss all transactions with related parties (as defined); and
� Disclose any new accounting policies that the issuer has adopted or expects to adopt.

Venture issuers that do not have significant revenue must provide a breakdown of expenditures, progress and milestones.

Annual and interim financial statements and MD&A must be approved by the Board, although the Board may delegate approval of interim statements and MD&A to the audit committee.

The new MD&A requirements take effect for fiscal years beginning on or after January 1, 2004. The deadline for filing MD&A is the same as for the interim or annual financial statements, as the case may be.

The first interim MD&A under the new rules must provide all of the information required in the full (annual) MD&A unless the issuer voluntarily provided its previous annual MD&A on the new form. Subsequent interim MD&A will update the initial MD&A.

Business Acquisition Reports (new)

All reporting issuers must file a Business Acquisition Report on Form 51-102F4 within 75 days of completing a significant acquisition. For venture issuers, an acquisition is considered significant if the issuer�s proportionate share of consolidated assets, investments or income from continuing operations associated with the acquisition exceeds 40% of the issuer�s consolidated assets or income from continuing operations. The BAR must be accompanied by one year of audited financial statements of the acquired business and subsequent interim statements.

A BAR is not required if the issuer files an information circular containing the disclosure (including financial statements) that would be made in a BAR, provided the acquisition is within 9 months of the date of the circular and there are no material changes to the terms of the acquisition from those set out in the circular.

Annual Information Forms

Venture issuers are exempt from the requirement to prepare and file an AIF.

Filing Requirements (new)

Issuers will be required to file the following documents on SEDAR:

� Articles of incorporation and other constating documents;
� By-laws in effect;
� Material security-holder and voting trust agreements to which the issuer has access;
� Shareholder Rights Plans (�poison pills�);
� Any other contract of the issuer or subsidiary that affects or reasonably could affect the rights or obligations of security holders generally.*

In addition, issuers must file copies of any material contract entered into other than in the ordinary course of business (unless the contract was entered into prior to January 1, 2002 or is no longer in effect). The CSA expects that few contracts will be caught by this requirement as most are entered into in the ordinary course of business.

CNQ Issuers are reminded that any documents posted on SEDAR must also be posted on the CNQ Website.

The documents must be filed no later than the filing of any applicable material change report or 120 days after the year end. For issuers with a December 31 year end, pre-existing documents must be filed by March 2005.

The full text of the new rules is available on the OSC website at

Please note that CNQ cannot provide advice on the new rules or undertake to update this notice; questions should be directed to professional advisors.

*E.g. a warrant trust indenture.



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