Continuous Disclosure Obligations.

Relief Granted to Canadian Cross-Border Issuers

This supplement is for Canadian cross-border issuers that file with the U.S. Securities and Exchange Commission. It accompanies and should be read with our client memo no. 2004-9T, Canadian Continuous Disclosure Obligations Revamped, dated February 18, 2004, which discusses changes to the continuous disclosure obligations of reporting issuers in Canada. This supplement discusses the ability of Canadian cross-border issuers to file U.S. GAAP financial statements under National Instrument 52-107, Acceptable Accounting Principles, Auditing Standards and Reporting Currency, and to file SEC forms in Canada under relief granted in National Instrument 51-102, Continuous Disclosure Obligations.

In this memo, "Canadian cross-border issuer" refers to a Canadian domestic company that is a reporting issuer in Canada that has a class of securities registered under section 12 of the U.S. Securities Exchange Act of 1934 (1934 Act) or is required to file reports under section 15(d) of the 1934 Act, and is not registered as an investment company under the U.S. Investment Company Act of 1940.

U.S. GAAP Financial Statements

Canadian cross-border issuers are permitted to file financial statements prepared in accordance with U.S. GAAP. In the first two years of reporting under U.S. GAAP, the issuer must (a) explain the material differences between Canadian and U.S. GAAP as they relate to recognition, measurement and presentation; (b) quantify the effect of material differences between Canadian and U.S. GAAP, including a tabular reconciliation of net income; and (c) provide disclosure consistent with Canadian GAAP to the extent that this disclosure is not already reflected in the financial statements.

If the issuer switches to U.S. GAAP reporting mid-year, the previously filed Canadian GAAP interim financial statements must be restated in accordance with U.S. GAAP and be filed with the Canadian securities regulators.

The financial statements of a Canadian cross-border issuer may also be audited under U.S. GAAS. The auditor's report must identify the auditing standards used to conduct the audit and the accounting principles used to prepare the financial statements.

Many Canadian corporate statutes (including the Canada Business Corporations Act and Ontario's Business Corporations Act) still require that Canadian GAAP financial statements and a auditor's report prepared in accordance with Canadian GAAS be presented to the shareholders. Corporations Canada has proposed amendments to the regulations to the CBCA to permit Canadian cross-border issuers to avail themselves of this relief. We expect these amendments to become effective later this year. We expect that the regulations to the OBCA will also be changed, but draft amendments have not yet been released.

Other

MD&A. A Canadian cross-border issuer that prepares its annual or interim MD&A in accordance with Item 303 of Regulation S-K or S-B under the 1934 Act will be permitted to file that document in Canada in lieu of the Canadian form of MD&A. The document must be filed by the earlier of the date the issuer is required to file its financial statements in Canada and the date the document is filed with the SEC. In certain cases, a Canadian cross-border issuer must also prepare and file a supplement that restates any U.S. GAAP information to Canadian GAAP. This supplement is required only for periods that require a reconciliation to Canadian GAAP.

AIFs. A Canadian cross-border issuer will be permitted to file its Form 10-K, Form 10-KSB or Form 20-F in Canada in lieu of the Canadian form of AIF. The applicable U.S. form must be filed by the earlier of 90 days after the end of the issuer's financial year and the date the form is filed with the SEC.

Documents filed with the SEC. Any document that a Canadian cross-border issuer files with or furnishes to the SEC that contains information not included in filings made under another requirement of Canadian securities legislation must also be filed in Canada.

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NI52-107, Acceptable Accounting Principles, Auditing Standards and Reporting Currency is available on the OSC's website at:

www.osc.gov.on.ca/en/Regulation/Rulemaking/Rules/rule_20040116_52-107_ni.htm

1. National Instrument 71-102, Continuous Disclosure and Other Exemptions Relating to Foreign Issuers exempts non-Canadian companies that are reporting issuers in Canada from many of the Canadian continuous disclosure requirements. See our client memo no. 2004-10T, Exemptions From Canadian Continuous Disclosure Obligations for Non-Canadian Issuers, dated February 18, 2004.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Ms Jennifer Friesen

Torys LLP

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Box 270 TD Centre

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