Vol. 134, No. 16 — April 15, 2000

Regulations Amending the Food and Drug Regulations (1097 — Aminopeptidase)

Statutory Authority

Food and Drugs Act

Sponsoring Department

Department of Health

REGULATORY IMPACT ANALYSIS STATEMENT

Description

Health Canada has received a submission to allow the use of aminopeptidase enzyme from Lactococcus lactis in the production of cheese, dairy based flavouring preparations and food protein hydrolyzates.

Extensive studies have determined the safety and efficacy of aminopeptidase from Lactococcus lactis for the proposed uses. The specifications for this enzyme conform to the requirements for enzyme preparations in the Food Chemicals Codex 4th Edition. This enzyme has been approved for use in the United States since 1995.

The proposed amendments would permit the use of the aminopeptidase enzyme from Lactococcus lactis in combination with other permitted food enzymes to enhance the rate of ripening in (Naming the Variety) cheese and to prevent the formation of bitter off-flavours in the production of dairy based flavouring preparations and food protein hydrolysates. In these applications, the aminopeptidase enzyme would be used at levels consistent with "Good Manufacturing Practice."

Alternatives

Under the Food and Drug Regulations, enzymes are considered to be food additives. In the case of aminopeptidase, provision for the use of this enzyme, and its use in combination with other approved enzymes, can only be accommodated by regulatory amendment. Maintaining the status quo was rejected as this would preclude the use of an enzyme which has been shown to be both safe and effective.

Benefits and Costs

This amendment will provide the industry with another enzyme to use in the production of cheese, dairy based flavouring preparations and food protein hydrolyzates and will allow the production of better products for the consumer.

It is not anticipated that there will be any increased costs to Government from the administration of this amendment to the Regulations.

Compliance costs are not a factor, as the use of aminopeptidase by manufacturers of cheese, dairy based flavouring preparations and food protein hydrolyzates would be optional.

Consultation

The Canadian Food Inspection Agency and the Technical Committee of the National Dairy Council were consulted and support these proposed amendments to the Food and Drug Regulations.

Compliance and Enforcement

If the proposed amendment is adopted, compliance will be monitored by ongoing domestic and import inspection programs.

Contact

Ronald Burke, Director, Bureau of Food Regulatory, International and Interagency Affairs, Health Canada, Address Locator 0702C1, Ottawa, Ontario K1A 0L2, (613) 957-1828 (Telephone), (613) 941-3537 (Facsimile), sche-ann@hc-sc.gc.ca (Electronic mail).

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to subsection 30(1) of the Food and Drugs Act, proposes to make the annexed Regulations Amending the Food and Drug Regulations (1097 — Aminopeptidase).

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Mr. Ronald Burke, Director, Bureau of Food Regulatory, International & Interagency Affairs, Department of Health, Health Protection Building, Room 200, Tunney's Pasture, Address Locator 0702C, Ottawa, Ontario, K1A 0L2 (Tel.: 957-1828; fax: 941-3537; E-mail: sche-ann@hc-sc.gc.ca).

The representations should stipulate the parts of the representations that should not be disclosed pursuant to the Access to Information Act and, in particular, pursuant to sections 19 and 20 of that Act, the reason why those parts should not be disclosed and the period during which they should remain undisclosed. The representations should also stipulate those parts of the representations for which there is consent to disclosure pursuant to the Access to Information Act.

Ottawa, April 13, 2000

MARC O'SULLIVAN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE FOOD AND DRUG REGULATIONS (1097 — AMINOPEPTIDASE)

AMENDMENTS

1. Paragraph B.08.033(3)(a)(see footnote 1) of the Food and Drug Regulations(see footnote 2) is replaced by the following:

(a) milk coagulating enzymes derived from Mucor miehei (Cooney and Emerson), Mucor pusillus Lindt or Aspergillus oryzae RET-1 (pBoel777), aminopeptidase derived from Lactococcus lactis, Chymosin A derived from Escherichia coli K-12, GE81 (pPFZ87A), Chymosin B derived from Aspergillus niger var. awamori, GCC0349 (pGAMpR) or from Kluyveromyces marxianus var. lactis, DS1182 (pKS105), protease derived from Micrococcus caseolyticus, pepsin, rennet or bovine rennet, in the manufacture of any cheese to which subsection (1) applies;

2. Paragraph B.08.034(2)(a) (see footnote 3) of the Regulations is replaced by the following:

(a) lipase, pepsin, rennet, milk coagulating enzymes derived from Mucor miehei (Cooney and Emerson), Mucor pusillus Lindt or Aspergillus oryzae RET-1 (pBoel777), aminopeptidase derived from Lactococcus lactis, Chymosin A derived from Escherichia coli K-12, GE81 (pPFZ87A) or Chymosin B derived from Aspergillus niger var. awamori, GCC0349 (pGAMpR) or from Kluyveromyces marxianus var. lactis, DS1182 (pKS105); and

3. Table V to section B.16.100 of the Regulations is amended by adding the following after item A.01:

Item No.	Column I Additive	Column II Permitted Source	Column III Permitted in or Upon	Column IV Maximum Level of Use
A.02	Aminopeptidase	Lactococcus lactis	(1) Cheese	(1) Good Manufacturing Practice
			(2) Dairy based flavouring preparations	(2) Good Manufacturing Practice
			(3) Hydrolyzed animal, milk and vegetable protein	(3) Good Manufacturing Practice

4. (1) The portion of item L.2 of Table V to section B.16.100 of the Regulations is amended by adding, in columns III and IV after subitem (5), the following subitem opposite the permitted source "Aspergillus niger var.; Aspergillus oryzae var.; Edible forestomach tissue of calves, kids or lambs; Animal pancreatic tissue; Rhizopus oryzae var.":

Item No.	Column III Permitted in or Upon	Column IV Maximum Level of Use
L.2	(6) Hydrolyzed animal, milk and vegetable protein	(6) Good Manufacturing Practice

(2) The portion of item L.2 of Table V to section B.16.100 of the Regulations is amended by adding, in columns III and IV after subitem (1), the following subitems opposite the permitted source "Aspergillus oryzae (MLT-2) (pRML 787) (p3SR2); Mucor miehei (Cooney and Emerson); Rhizopus niveus":

Item No.	Column III Permitted in or Upon	Column IV Maximum Level of Use
L.2	(2) Cheese	(2) Good Manufacturing Practice
	(3) Dairy based flavouring preparations	(3) Good Manufacturing Practice
	(4) Hydrolyzed animal, milk and vegetable protein	(4) Good Manufacturing Practice

5. The portion of item M.1 of Table V to section B.16.100 of the Regulations is amended by adding, in columns III and IV after subitem (1), the following subitems opposite the permitted source "Mucor miehei (Cooney and Emerson) or Mucor pusillus Lindt by pure culture fermentation process or Aspergillus oryzae RET-1 (pBoel777)":

Item No.	Column III Permitted in or Upon	Column IV Maximum Level of Use
M.1	(2) airy based flavouring preparations	(2) Good Manufacturing Practice
	(3) Hydrolyzed animal, milk and vegetable protein	(3) Good Manufacturing Practice

COMING INTO FORCE

6. These Regulations come into force on the day on which they are registered.

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Regulations Amending the Food and Drug Regulations (1122 — Lysozyme)

Statutory Authority

Food and Drugs Act

Sponsoring Department

Department of Health

REGULATORY IMPACT ANALYSIS STATEMENT

Description

Health Canada has received a submission to amend the Food and Drug Regulations to provide for the use of a new enzyme, lysozyme obtained from egg white, in the production of medium- and long-term ripening cheese. The use of lysozyme would prevent gas formation as a result of butyric acid fermentation due to the presence of the bacteria of the Clostridium species, particularly Clostridium tyrobutyricum. The formation of gas produces undesirable effects in texture, unacceptable tastes and smells and causes breakage of the cheese block.

Extensive studies have determined the safety of the use of lysozyme from egg white in cheese production. In addition, data have demonstrated that lysozyme is efficacious in preventing gas formation during cheese production and provides a better quality of cheese.

At the present time, there is no provision for the use of this particular enzyme in the Food Additive Tables under Division 16 of the Food and Drug Regulations. Therefore, it is proposed to amend the Regulations to include the use of lysozyme from egg white in cheese production at a level of use consistent with good manufacturing practice.

Alternatives

Under the Food and Drug Regulations, enzymes used in the production of food products are considered to be food additives. In the case of lysozyme from egg white, provision for the use of this enzyme can only be accommodated by a regulatory amendment. Maintaining the status quo was rejected as this would preclude the use of a food additive which has been shown to be both safe and effective in the proposed application.

Benefits and Costs

This proposed amendment will provide industry with an alternative means to reduce loss of product related to defects caused by gas formation during the production of cheese. This proposed amendment would increase the availability in Canada of better quality premium cheeses. Furthermore, the proposed amendment would provide Canadian cheese manufacturers with an equal competitive status with manufacturers in other countries who have been using this enzyme for some time.

Currently, lysozyme from egg white is used in cheese production in the United States and many European countries. This proposed amendment is an additional step towards harmonization of food additive usage with major trading partners such as United States and Europe and would permit importation of the cheeses so treated into Canada.

There is no anticipated increase in cost to Government from the administration of this proposed amendment to the Regulations. Compliance costs are not a factor as the use of lysozyme from egg white in the production of cheese will be optional.

Because lysozyme is obtained from egg white, concerns have been raised regarding potential adverse effects to sensitive individuals allergic to eggs. Therefore, the proposed amendment includes a labelling requirement for manufacturers using lysozyme during cheese production. The presence of this enzyme would have to be declared in the list of ingredients in order to inform consumers of the presence of egg by-product in these particular cheeses. This labelling requirement would apply to both domestic and imported products. The additional costs of this labelling requirement are expected to be minor for the cheese industry.

Consultation

The Canadian Food Inspection Agency and the National Dairy Council have been consulted and expressed support for this proposal.

Compliance and Enforcement

If this proposed amendment is adopted, compliance will be monitored by ongoing domestic and import inspection programs.

Contact

Ronald Burke, Director, Bureau of Food Regulatory, International and Interagency Affairs, Health Canada, Address Locator 0702C1, Ottawa, Ontario K1A 0L2, (613) 957-1828 (Telephone), (613) 941-3537 (Facsimile), sche-ann@hc-sc.gc.ca (Electronic mail).

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council proposes, pursuant to subsection 30(1) of the Food and Drugs Act, to make the annexed Regulations Amending the Food and Drug Regulations (1122 — Lysozyme).

Interested persons may make representations with respect to the proposed Regulations within 75 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice and be addressed to Mr. Ronald Burke, Director, Bureau of Food Regulatory, International & Interagency Affairs, Department of Health, Room 200, Address Locator 0702C1, Health Protection Building, Tunney's Pasture, Ottawa, Ontario K1A 0L2. (Tel.: (613) 957-1828; fax: (613) 941-3537; E-mail: sche-ann@hc-sc.gc.ca)

The representations should stipulate the parts of the representations that should not be disclosed pursuant to the Access to Information Act and, in particular, pursuant to sections 19 and 20 of that Act, the reason why those parts should not be disclosed and the period during which they should remain undisclosed. The representations should also stipulate those parts of the representations for which there is consent to disclosure pursuant to the Access to Information Act.

Ottawa, April 13, 2000

MARC O'SULLIVAN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE FOOD AND DRUG REGULATIONS (1122 — LYSOZYME)

AMENDMENTS

1. Section B.01.009 of the Food and Drug Regulations(see footnote 4) is amended by adding the following after subsection (4):

(5) Notwithstanding subsection B.01.008(10) and item 23 of the table to subsection (1), if lysozyme from egg white is added to a food described in section B.08.033 or B.08.034, the label of the food shall show "lysozyme from egg white" in the list of ingredients in the same manner that is required in subsection B.01.008(4) or (5), as applicable.

2. Subsection B.08.033(3) of the Regulations is amended by striking out the word "and" at the end of paragraph (d), by adding the word "and" at the end of paragraph (e) and by adding the following after paragraph (e):

(f) lysozyme derived from egg white.

3. Subsection B.08.034(2) of the Regulations is amended by striking out the word "and" at the end of paragraph (a), by adding the word "and" at the end of paragraph (b) and by adding the following after paragraph (b):

(c) lysozyme derived from egg white.

4. Table V to section B.16.100 of the Regulations is amended by adding the following after item L.3:

Item No.	Column I Additive	Column II Permitted Source	Column III Permitted in or Upon	Column IV Maximum Level of Use
L.4	Lysozyme	Egg white	Cheese	Good Manufacturing Practice

COMING INTO FORCE

5. These Regulations come into force on the day on which they are registered.

[16-1-o]

Regulations Amending the Public Sector Pension Investment Board Regulations

Statutory Authority

Public Sector Pension Investment Board Act

Sponsoring Agency

Treasury Board Secretariat

REGULATORY IMPACT ANALYSIS STATEMENT

Description

Overview

The Public Sector Pension Investment Board Act, S.C. 1999, c. 34, (PSPIBA), created the Public Sector Pension Investment Board, charged with managing and investing newly created pension funds under the Canadian Forces Superannuation Act, the Public Service Superannuation Act and the Royal Canadian Mounted Police Superannuation Act.

The proposed Regulations Amending the Public Sector Pension Investment Board Regulations set out details regarding permissible investments and various limitations on the making of investments, applicable to the Public Sector Pension Investment Board and its subsidiaries (the Board) and certain other related matters. Most of the proposed provisions are drawn from the Pension Benefits Standards Act, 1985 (PBSA) and Regulations, which establish rules of operation and investment criteria for most pension plans falling within federal jurisdiction.

The proposed Regulations amend the Public Sector Pension Investment Board Regulations that were published in the Canada Gazette, Part I, on December 25, 1999. The prior development of these latter Regulations was to enable the nomination process to the Board of Directors to take place in advance of the start of the actual operations of the Board. Those provisions addressed the sole issue of the independence of the members of the Board of Directors and the Chairperson of the nominating committee by disqualifying persons eligible to receive certain public sector pension benefits from holding these offices.

Details

In addition to the above-mentioned provision regarding the independence of members of the Board of Directors and the Chairperson of the nominating committee, which will be retained, the proposed Regulations will accomplish the following:

1. Broadly subject the Board to the same investment rules as other pension funds under federal jurisdiction in Canada i.e., the PBSA Regulations. The PBSA Regulations are the standard prudential constraints applicable to almost all pension plans falling within federal jurisdiction. In some instances, the relevant PBSA provisions have been slightly modified to adapt them to the particular circumstances of the Public Sector Pension Investment Board. Provisions adopted or adapted establish various limitations on investments that can be made by the Board. For example, the proposed Regulations set a limit on the portion of the Board's assets that may be invested in real property or Canadian resource properties. They also provide that no more than 10 percent of a fund may normally be invested in securities of a single entity, and that a fund may not own more than 30 percent of the common shares of a corporation, other than those of a subsidiary of the Board. (The PBSA Regulations do permit certain exceptions to this "30 percent" rule. This is a matter currently under policy review for consideration for possible inclusion in future amendments to the PSPIBA Regulations. Any such exceptions, if developed, would not be required prior to the expiry of the passive investment period, ending March 31, 2003.)

2. Provide that with respect to equity investments, the Board shall adopt a passive investment style, substantially replicating one or more broad market indexes of securities in Canada, for a period ending March 31, 2003. These Regulations are to ensure that the Board's entry into the Canadian market proceeds smoothly. A fund that invests in this way tends to reflect the composition and average return of the market as a whole.

3. Define various concepts of the relationship of parties involved in transactions with the Board and its subsidiaries and limit those transactions. The proposed Regulations define notions of "control," "substantial investment," and "related parties." Provisions regarding related party transactions place limitations on transactions between related parties and the Board in order to ensure that such transactions are transparent and have either neutral or nominal effect. These limitations are based on the nature of the relationship between certain parties and the Board, the timing of the transaction, the nature and circumstances of the transaction and the terms and conditions of the transaction.

4. List the contents of the statement of investment policies, standards and procedures to be established by the Board. This section closely follows the PBSA Regulations. In addition to what is set out in the PBSA, these Regulations require that the Board include a statement on the use of options, futures and other derivatives and its financial risk management policies.

5. Establish the conditions for the Board's use of derivative instruments. The Regulations provide the Board with the authority to use derivatives for limited purposes only — to offset the risk associated with an existing investment or group of investments, or as an alternative to investing in the underlying asset.

6. Set out certain requirements regarding maintenance of records of investments and registration of investments of the Board.

7. Set out certain details of the content of the annual report. Beyond the already extensive requirements set out in the PSPIBA, the Board will be required to include in its annual report the total compensation awarded to the directors and top five most highly compensated executive officers of the Board, and a statement of corporate governance practices. Such requirements are intended to ensure a high degree of transparency and accountability.

Alternatives

There is no alternative to use of the regulatory route.

Benefits and Costs

The application of these Regulations is limited to the operations of the Public Sector Pension Investment Board and its subsidiaries, and as such does not impose any costs on other parties.

Consultation

The broad parameters of these Regulations were the subject of discussion during the Parliamentary review undertaken during the enactment process of the Public Sector Pension Investment Board Act. The portion of these Regulations that addresses the independence of members of the board of directors and chairperson of the nominating committee were prepublished in the Canada Gazette, Part I, on December 25, 1999, as part of their approval process. The Regulations Amending the Public Sector Pension Investment Board Regulations are being prepublished to afford interested parties a 30-day period in which to submit comments before they are finalized, prior to being published in the Canada Gazette, Part II.

Compliance and Enforcement

Compliance should not be an issue as the Regulations apply solely to the Public Sector Pension Investment Board and its subsidiaries. The Board has stringent transparency and accountability standards. In addition to the public nature and attendant public scrutiny that will accompany the actions of the Public Sector Pension Investment Board as manager of what will become some of the largest pension funds in Canada, the Act provides for ongoing Parliamentary scrutiny. Normal administrative compliance structures will also apply, including audits. Failure on the part of a director of the Board to comply with or to enforce compliance with the Regulations, could result in the removal of the director for cause.

Contact

Joan M. Arnold, Director, Pensions Legislation Development Group, Pensions Division, Treasury Board Secretariat, Ottawa, Ontario K1A 0R5, (613) 952-3119.

PROPOSED REGULATORY TEXT

Notice is heregy given that the Governor in Council, pursuant to section 50 of the Public Sector Pension Investment Board Act(see footnote a), proposes to make the annexed Regulations Amending the Public Sector Pension Investment Board Regulations.

Interested persons may make representations with respect to the proposed Regulations within thirty (30) days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Sharon G. Hamilton, Assistant Secretary, Pensions Division, Treasury Board Secretariat, L'Esplanade Laurier, 140 O'Connor Street, Ottawa, Ontario, K1A 0R5.

Ottawa, April 13, 2000

MARC O'SULLIVAN
Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE PUBLIC SECTOR PENSION INVESTMENT BOARD REGULATIONS

AMENDMENT

1. Sections 1 and 2 of the Public Sector Investment Board Regulations(see footnote 5) are replaced by the following:

INTERPRETATION

1. The definitions in this section apply in these Regulations.

"Act" means the Public Sector Pension Investment Board Act. (Loi)

"Canadian corporation" means a body corporate incorporated or formed by or under an Act of Parliament or the legislature of a province. (société canadienne)

"Canadian resource property" has the same meaning as in paragraph (c) of the definition "Canadian resource property" in subsection 66(15) of the Income Tax Act. (avoir minier canadien)

"child" means the child of, or an individual adopted either legally or in fact by, a person or the person's spouse or common-law partner. (enfant)

"common-law partner", in relation to an individual, means a person who is cohabiting in a relationship of a conjugal nature with the individual, having so cohabited for a period of at least one year at the relevant time. (conjoint de fait)

"debt obligation" means a bond, debenture, note or other evidence of indebtedness of an entity. (titre de créance)

"derivative" means a financial instrument or agreement whose value is derived from or is based on an underlying asset or the relationship between two underlying assets, other than

(a) a convertible security;

(b) an asset-backed security;

(c) a security of a mutual fund;

(d) an index participation unit;

(e) a security of a non-redeemable fund;

(f) a government or corporate strip bond; or

(g) a listed dividend share of a subdivided equity or fixed income security. (instrument dérivé)

"financial institution" means

(a) a bank;

(b) a body corporate to which the Trust and Loan Companies Act applies;

(c) a cooperative credit society to which the Cooperative Credit Associations Act applies;

(d) an insurance company to which the Insurance Companies Act applies;

(e) a trust, loan or insurance corporation incorporated by or under an Act of the legislature of a province;

(f) a cooperative credit society incorporated and regulated by or under an Act of the legislature of a province;

(g) an entity that is incorporated or formed by or under an Act of Parliament or of the legislature of a province and that is primarily engaged in dealing in securities, including portfolio management and investment counselling; or

(h) a foreign institution. (institution financière)

"foreign institution" means an entity that is

(a) engaged in the business of banking, the trust, loan or insurance business, the business of a cooperative credit society or the business of dealing in securities or is engaged primarily in the business of providing financial services; and

(b) incorporated or formed otherwise than by or under an Act of Parliament or of the legislature of a province. (institution étrangère)

"loan" includes a deposit, financial lease, conditional sales contract, repurchase agreement and any other similar arrangement for obtaining money or credit, but does not include investments in securities or the making of an acceptance, endorsement or other guarantee. (prêt)

"market terms and conditions", in respect of a transaction, means terms and conditions, including those relating to price, rent or interest rate, that would apply to a similar transaction in an open market under conditions requisite to a fair transaction between parties who are at arm's length and acting prudently, knowledgeably and willingly. (conditions du marché)

"person" includes an entity. (personne)

"public exchange" means a market for the trading of securities that is recognized by an appropriate governmental authority. (bourse)

"real property" includes a leasehold interest in real property. (biens immeubles)

"related party" means a person who is

(a) a director, officer or employee of the Board;

(b) a person responsible for holding or investing the assets of the Board, or any director, officer or employee of the person;

(c) a contributor within the meaning of subsection 2(1) of the Canadian Forces Superannuation Act, subsection 3(1) of the Public Service Superannuation Act or subsection 3(1) of the Royal Canadian Mounted Police Superannuation Act;

(d) a survivor within the meaning of subsection 2(1) of the Canadian Forces Superannuation Act, subsection 3(1) of the Public Service Superannuation Act or subsection 3(1) of the Royal Canadian Mounted Police Superannuation Act;

(e) an association or union representing a person referred to in any of paragraphs (a) to (d), or a director, an officer or an employee of that association or union;

(f) the spouse, common-law partner or child of any person referred to in any of paragraphs (a) to (e) or the spouse orcommon-law partner of that child;

(g) a corporation that is directly or indirectly controlled by a person referred to in any of paragraphs (a) to (f); or

(h) an entity in which a person referred to in any of paragraphs (a) to (f) has a substantial investment.

It does not include Her Majesty in right of Canada or of a province, or an agency of either one, or a trust company or financial institution that holds the assets of the Board. (apparenté)

"security" means

(a) in respect of a corporation, a share of any class of shares of the corporation or a debt obligation of the corporation, and includes a warrant of the corporation, but does not include a deposit with a financial institution or an instrument evidencing such a deposit; and

(b) in respect of any other entity, any ownership interest in, or debt obligation of, the entity. (titre ou valeur mobilière)

"transaction" includes

(a) a contract;

(b) a guarantee;

(c) an investment;

(d) the taking of an assignment of, or otherwise acquiring, a loan made by a third party;

(e) the taking of a security interest in securities; and

(f) any modification, renewal or extension of a prior transaction. (transaction)

"underlying asset" means a financial instrument, security, commodity, currency, interest rate, foreign exchange rate, economic indicator, index, basket, agreement, benchmark or any other financial reference, interest or variable. (actif sous-jacent)

"voting share" means a share of any class of shares of a corporation that carries voting rights under all circumstances, by reason of an event that has occurred and is continuing or by reason of a condition that has been fulfilled. (action avec droit de vote)

2. (1) For the purposes of these Regulations,

(a) a person controls a corporation if securities of the corporation to which are attached more than 50 per cent of the votes that may be cast to elect the directors of the corporation are beneficially owned by the person and the votes attached to those securities are sufficient, if exercised, to elect a majority of the directors of the corporation;

(b) a person controls an unincorporated entity, other than a limited partnership, if more than 50 per cent of the ownership interests into which the unincorporated entity is divided are beneficially owned by the person and the person is able to direct the business and affairs of the unincorporated entity;

(c) the general partner of a limited partnership controls the limited partnership; and

(d) a trustee of a trust controls the trust.

(2) For the purposes of these Regulations, a person who controls an entity is deemed to control any other entity that is controlled by the entity.

3. For the purposes of these Regulations, a corporation is a subsidiary of another corporation if it is controlled by the other corporation.

4. For the purposes of these Regulations, an entity is affiliated with another entity if the entity is controlled by the other entity or if both entities are controlled by the same person.

5. For the purposes of these Regulations, a person has a substantial investment in

(a) an unincorporated entity if the person or an entity controlled by the person beneficially owns more than 25 per cent of the ownership interests in the unincorporated entity; and

(b) a corporation if

6. For the purposes of these Regulations, a person is associated with

(a) a corporation that the person controls and every affiliate of every such corporation;

(b) a person who controls the person;

(c) a partner who has a substantial investment in a partnership in which the person has a substantial investment;

(d) a trust or estate in which the person has a substantial investment or for which the person serves as trustee or in a capacity similar to that of a trustee;

(e) the spouse or common-law partner of the person; and

(f) a brother, sister or child or other descendant of the person, or the spouse or common-law partner of any of them.

7. For the purposes of subparagraphs 6(2)(g)(ii) and 10(1)(a)(ii) of the Act, the prescribed kind of superannuation or pension benefit is one that is

(a) granted under the Judges Act;

(b) payable under the Governor General's Act or the Lieutenant Governors Superannuation Act; or

(c) payable out of the Consolidated Revenue Fund, or out of a superannuation or pension fund or plan pursuant to which contributions have been paid out of the Consolidated Revenue Fund in respect of employees engaged locally outside of Canada, and that is

PART 1

INVESTMENTS

General

8. In selecting investments, the Board shall evaluate them having regard to the overall rate of return and risk of loss of the entire portfolio of investments held by the Board.

Statement of Investment Policies, Standards and Procedures

9. (1) A written statement of the investment policies, standards and procedures in respect of the Board's portfolio of investments, established under section 32 of the Act, shall include

(a) categories of investments;

(b) the use of options, futures and other derivatives;

(c) diversification of the investment portfolio;

(d) asset mix and rate of return expectations;

(e) policies for the management of credit, market and other financial risks;

(f) liquidity of investments;

(g) the lending of cash or securities;

(h) the retention or delegation of voting rights acquired through investments;

(i) policies for the identification of an index suitable for the purpose of section 10 and procedures for choosing investments which will replicate the composition of such an index;

(j) the method of, and basis for, the valuation of investments that are not regularly traded at a public exchange; and

(k) related party transactions permitted under section 17 and the criteria used to establish whether the value of a transaction is nominal.

(2) The statement referred to in subsection (1) shall include a description of all factors that may affect the funding of the pension plans established under the Acts referred to in paragraph 4(1)(a) of the Act and the ability of the pension plans to meet their financial obligations and the relationship of those factors to those policies, standards and procedures.

(3) The board of directors shall review and confirm or amend the statement at least once each financial year.

Limitation on Shares

10. Until March 31, 2003, in acquiring securities, other than debt obligations, of Canadian corporations for investment of the Board's assets, the Board shall substantially replicate the composition of one or more widely recognized broad market indexes of securities traded on a public exchange located in Canada.

Quantitative Limits

11. (1) The Board shall not directly or indirectly invest more than 10 per cent of the total book value of the Board's assets in the securities of

(a) any one person;

(b) two or more associated persons; or

(c) two or more affiliated corporations.

(2) Subsection (1) does not apply in respect of investments in

(a) a subsidiary of the Board;

(b) securities issued or fully guaranteed by the Government of Canada, the government of a province, or an agency of either of them;

(c) a fund composed of mortgage-backed securities that are fully guaranteed by the Government of Canada, the government of a province, or an agency of either of them;

(d) a fund that substantially replicates the composition of a widely recognized index of a broad class of securities traded on a public exchange; or

(e) a segregated fund or mutual or pooled fund that complies with the requirements applicable to a plan under the Pension Benefits Standards Regulations, 1985.

12. (1) The Board shall not directly or indirectly invest in real property or Canadian resource properties if, at the time the investment is made,

(a) the book value of the investment in any one parcel of real property or Canadian resource property exceeds 5 per cent of the book value of the Board's assets;

(b) the aggregate book value of all investments in Canadian resource properties exceeds 15 per cent of the book value of the Board's assets; or

(c) the aggregate book value of all investments in real property and Canadian resource properties exceeds 25 per cent of the book value of the Board's assets.

(2) Where real property is subdivided into two or more parcels and the beneficial ownership of the real property remains the same, or where a person directly or indirectly acquires two or more parcels for consolidation, the real property shall be treated as one parcel for the purposes of the investment limits set out in subsection (1).

13. (1) The Board shall not directly or indirectly invest in the securities of a corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of the corporation.

(2) Subsection (1) does not apply in respect of investments in securities issued by a subsidiary of the Board.

Derivatives

14. (1) The Board shall not directly or indirectly hold or invest in a derivative where the market exposure of the Board under the derivative is not covered by cash or other assets of the Board designated for that purpose.

(2) The Board may hold or invest in a derivative if the purpose of the transaction is

(a) to offset or reduce the risk associated with an existing investment or group of investments; or

(b) to hold or invest in the derivative as an alternative to holding or investing in the underlying asset itself.

Related Party Transactions

15. For the purposes of sections 16 and 17

(a) if a transaction is entered into by, or on behalf of, the Board with a person who the Board, or any person acting on the Board's behalf, knows will become a related party to the Board, the person shall be considered to be a related party of the Board in respect of the transaction; and

(b) the fulfilment of an obligation under the terms of any transaction, including the payment of interest on a loan or deposit, is part of the transaction and not a separate transaction.

16. Subject to sections 17 and 18, the Board shall not directly or indirectly enter into a transaction with a related party or with a person who has ceased to be a related party within the 12-month period preceding the transaction.

17. (1) The Board may enter into a transaction with a related party if

(a) the transaction is required for the operation or administration of the Board; and

(b) the terms and conditions of the transaction are not less favourable to the Board than market terms and conditions.

(2) The Board may invest the moneys of the Board in the securities of a related party if those securities are acquired at a public exchange.

(3) The Board may enter into a transaction with a related party if the value of the transaction is nominal.

(4) For the purposes of subsection (3), in assessing whether the value of a transaction is nominal, two or more transactions with the same related party shall be considered as a single transaction.

Miscellaneous

18. Sections 10 to 16 do not apply in respect of

(a) investments in a corporation that are held as a result of an arrangement, within the meaning of subsection 192(1) of the Canada Business Corporations Act, for the reorganization or liquidation of the corporation or for the amalgamation of the corporation with another corporation, if the investments are to be exchanged for shares or debt obligations; or

(b) assets that are acquired through the realization of a security interest held by the Board and that are held for a period not exceeding two years after the day on which the assets were acquired.

19. (1) The moneys of the Board are to be invested

(a) in a name that clearly indicates that the investment is held in trust for the Board and, where the investment is capable of being registered, registered in that name;

(b) in the name of a financial institution, or a nominee of one, in accordance with a custodial agreement or trust agreement, entered into with the financial institution, that clearly indicates that the investment is held for the Board; or

(c) in the name of The Canadian Depository for Securities Limited, or a nominee of it, in accordance with a custodial agreement or trust agreement, entered into with a financial institution, that clearly indicates that the investment is held for the Board.

(2) For the purposes of subsection (1), "custodial agreement" means an agreement providing that

(a) an investment made or held on behalf of the Board pursuant to the agreement

(b) records shall be maintained by the custodian that are sufficient to allow the ownership of any investment to be traced to the Board at any time.

20. The Board shall maintain a current record that clearly identifies every investment held by the Board in its name and every investment held in the name of a third party on behalf of the Board, the name in which the investment is made and, where appropriate, the name in which the investment is registered.

PART 2

ANNUAL REPORT

21. The definitions in this section apply in this Part.

"compensation" includes annual salary, bonuses, non-cash remuneration, termination arrangements, and deferred compensation, including pension benefits funded by the Board, for service rendered by an individual in all capacities to the Board and its subsidiaries. (rémunération)

"executive officers" means the five most highly compensated officers of the Board or its subsidiaries. (principaux dirigeants)

22. (1) The annual report must include a statement of the corporate governance practices of the board of directors that sets out

(a) its duties, objectives and mandate;

(b) its committees, their composition, mandates and activities;

(c) the decisions requiring its prior approval;

(d) the procedures in place for the assessment of its performance; and

(e) its expectations in respect of the Board's management.

(2) The Board shall include, in its annual report, information disclosing the total compensation awarded to, earned by, or paid to the directors and executive officers during the financial year.

(3) The annual report must include a summary of the procedures established under paragraph 7(2)(d) of the Act.

COMING INTO FORCE

2. These Regulations come into force on the day on which they are registered.

[16-1-o]

Footnote 1

SOR/98-458

Footnote 2

C.R.C., c. 870

Footnote 3

SOR/98-458

Footnote 4

C.R.C., c. 870

Footnote a

S.C. 1999, c. 34

Footnote 5

SOR/2000-77

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