Exhibit 20.3
IVANHOE MINES LTD.
Suite 654 - World Trade Centre
999 Canada Place
Vancouver, British Columbia, V6C 3E1
MANAGEMENT PROXY CIRCULAR
THIS MANAGEMENT PROXY CIRCULAR IS FURNISHED TO THE COMMON SHAREHOLDERS
("SHAREHOLDERS") OF IVANHOE MINES LTD. (THE "CORPORATION") BY MANAGEMENT OF THE
CORPORATION IN CONNECTION WITH THE SOLICITATION OF PROXIES TO BE VOTED AT THE
ANNUAL GENERAL MEETING (THE "MEETING") OF THE SHAREHOLDERS TO BE HELD AT 10:00
A.M., LOCAL TIME, ON JUNE 12, 2003 IN THE TERMINAL CITY CLUB, FERGUSON/ATKINS
ROOM, 837 WEST HASTINGS STREET, VANCOUVER, BRITISH COLUMBIA, AND AT ANY
ADJOURNMENT THEREOF, FOR THE PURPOSES SET FORTH IN THE NOTICE OF MEETING. UNLESS
OTHERWISE STATED, THIS MANAGEMENT PROXY CIRCULAR CONTAINS INFORMATION AS AT
APRIL 15, 2003.
SOLICITATION OF PROXIES
The solicitation of proxies by management will be primarily by mail, but proxies
may be solicited personally or by telephone by directors, officers and regular
employees of the Corporation.
All costs of this solicitation will be borne by the Corporation.
APPOINTMENT OF PROXYHOLDERS
A shareholder entitled to vote at the Meeting may, by means of proxy, appoint a
proxyholder or one or more alternate proxyholders, who need not be shareholders,
to attend and act at the Meeting for the shareholder and on the shareholder's
behalf.
The individuals named in the accompanying form of proxy are directors and/or
officers of the Corporation. A SHAREHOLDER MAY APPOINT, AS PROXYHOLDER OR
ALTERNATE PROXYHOLDER, A PERSON OR PERSONS OTHER THAN ANY OF THE PERSONS
DESIGNATED IN THE ACCOMPANYING FORM OF PROXY, AND MAY DO SO EITHER BY INSERTING
THE NAME OR NAMES OF SUCH PERSONS IN THE BLANK SPACE PROVIDED IN THE
ACCOMPANYING FORM OF PROXY OR BY COMPLETING ANOTHER SUITABLE FORM OF PROXY.
An appointment of a proxyholder or alternate proxyholders will not be valid
unless a form of proxy making the appointment, signed by the shareholder or by
an attorney of the shareholder authorized in writing, (a "Proxy") is deposited
with CIBC Mellon Trust Company, by facsimile (604) 688-4301 or (416) 363 9524,
by mail to P.O. Box 1900, Vancouver, B.C. V6E 3X1, or 200 Queens Quay East, Unit
6, Toronto, Ontario, M5A 4K9, or by hand, to Suite 1600, The Oceanic Plaza, 1066
Hastings Street, Vancouver, British Columbia, V6E 3K9 not less than 48 hours
(excluding Saturdays, Sundays and statutory holidays) before the Meeting or the
adjournment thereof at which the Proxy is to be used.
REVOCATION OF PROXIES
A shareholder who has given a Proxy may revoke the Proxy
(a) by depositing an instrument in writing executed by the shareholder or
by the shareholder's attorney authorized in writing
(i) with CIBC Mellon Trust Company, not less than 48 hours
(excluding Saturdays, Sundays and statutory holidays) before the
Meeting or the adjournment thereof at which the Proxy is to be
used,
(ii) at the registered office of the Company at any time up to and
including the last business day preceding the day of the
Meeting, or an adjournment thereof, at which the Proxy is to be
used,
(iii) with the chairman of the Meeting on the day of the Meeting or an
adjournment thereof, or
(b) in any other manner provided by law.
A revocation of a Proxy will not affect a matter on which a vote is taken before
the revocation.
EXERCISE OF DISCRETION
On a poll, the nominees named in the accompanying form of Proxy will vote or
withhold from voting the shares represented thereby in accordance with the
instructions of the shareholder. The Proxy will confer discretionary authority
on the nominees named therein with respect to
(a) each matter or group of matters identified therein for which a choice
is not specified, other than the appointment of an auditor and the
election of directors,
(b) any amendment to or variation of any matter identified therein, and
(c) any other matter that properly comes before the Meeting.
IN RESPECT OF A MATTER FOR WHICH A CHOICE IS NOT SPECIFIED IN THE PROXY, THE
NOMINEES NAMED IN THE ACCOMPANYING FORM OF PROXY WILL VOTE SHARES REPRESENTED BY
THE PROXY AT THEIR OWN DISCRETION FOR THE APPROVAL OF SUCH MATTER.
As of the date of this Management Proxy Circular, management of the Company
knows of no amendment, variation or other matter that may come before the
Meeting, but if any amendment, variation or other matter properly comes before
the meeting, each nominee named in the accompanying form of Proxy intends to
vote thereon in accordance with the nominee's best judgment.
VOTES NECESSARY TO PASS RESOLUTIONS
The Corporation's by-laws provide that a quorum for the transaction of business
at the Meeting consists of at least one individual present and holding, or
representing by proxy the holder(s) of, shares carrying in the aggregate not
less than five percent (5%) of the shares entitled to vote at the Meeting.
Under the Yukon Business Corporations Act (the "YBCA") a majority of the votes
cast by shareholders at the Meeting is required to pass an ordinary resolution
and a majority of two-thirds of the votes cast at the Meeting is required to
pass all special resolutions.
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At the Meeting, shareholders will be asked to consider and, if deemed warranted,
to pass an ordinary resolution, the full text of which is set out under
"Particulars of Matters to be Acted Upon - Share Issue Resolution" in this
Management Proxy Circular (the "Share Issue Resolution"), authorizing the
Company to approve issues of equity securities in connection with Australian
Stock Exchange listing rules for the period from December 9, 2003 until the date
of the Corporation's Annual General Meeting in 2004.
The Share Issue Resolution is an ordinary resolution and as such, requires
approval by a majority of the votes cast by shareholders at the Meeting.
Shareholders will also be asked to elect directors and appoint auditors for the
ensuing year. If there are more nominees for election as directors or
appointment as the Corporation's auditors than there are vacancies to fill,
those nominees receiving the greatest number of votes will be elected or
appointed, as the case may be, until all such vacancies have been filled. If the
number of nominees for election or appointment is equal to the number of
vacancies to be filled, all such nominees will be declared elected or appointed
by acclamation.
VOTING SHARES
The Corporation has an authorized capital consisting of an unlimited number of
Common Shares without par value and an unlimited number of Preference Shares
without par value.
As of April 15, 2003, the Corporation had issued 226,706,473 fully paid and
non-assessable Common Shares without par value, each carrying the right to one
vote. As of such date no Preference Shares were issued or outstanding.
A holder of record of one or more common shares on the securities register of
the Corporation at the close of business on April 23, 2003 (the "Record Date")
who either attends the Meeting personally or deposits a proxy in the manner and
subject to the provisions described above will be entitled to vote or to have
such share or shares voted at the Meeting, except to the extent that
(a) the shareholder has transferred the ownership of any such share after
the Record Date, and
(b) the transferee produces a properly endorsed share certificate for, or
otherwise establishes ownership of, any of the transferred shares and
makes a demand to CIBC Mellon Trust Company no later than 10 days
before the Meeting that the transferee's name be included in the list
of shareholders in respect thereof.
NOTICE TO HOLDERS OF CHESS UNITS OF FOREIGN SECURITIES OVER COMMON SHARES TRADED
ON THE AUSTRALIAN STOCK EXCHANGE
In Australia the "holders" of the Company's common shares traded on the
Australian Stock Exchange may not actually hold the shares but rather CHESS
Units of Foreign Securities ('CUFS'), a form of depositary receipt. The shares
are held by the Company's depositary nominee, CHESS Depositary Nominees Pty Ltd
('CDN').
If you are a holder of CUFS you cannot vote personally at the meeting. However,
you may direct CDN on how it should vote on the resolutions described in the
Notice of
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Meeting and Management Proxy Circular. If you do so, CDN will cast proxy votes
in accordance with your directions. You are also permitted to attend the
Meeting.
If you wish to direct CDN on how it should vote on the resolutions you should
complete the attached 'Direction to CDN Form' and return it to Advanced Share
Registry Services ("ASRS"), Level 7, 200 Adelaide Terrace, Perth, Western
Australia, 6000, Australia (Telephone: +61 8 9221 7288, Facsimile: +61 8 9221
7869). You must complete the form and return it to ASRS by 5pm (Perth time) on 6
June 2003.
Please note that as a CUFS holder you must complete the 'Direction to CDN Form'
not the Proxy form.
ADVICE TO BENEFICIAL HOLDERS OF COMMON SHARES
The information set forth in this section is of significant importance to many
holders of Common Shares as a substantial number of holders of Common Shares do
not hold their Common Shares in their own name.
Holders of Common Shares who do not hold their Common Shares in their own name
(referred to in this Information Circular as "Beneficial Holders of Common
Shares") should note that only proxies deposited by holders of Common Shares
whose names appear on the records of the Corporation as the registered holders
of Common Shares can be recognized and acted upon at the Meeting. If the Common
Shares are listed in an account statement provided to a holder of common Shares
by a broker, then in almost all cases those shares will not be registered in the
name of the holder of the Common Shares on the records of the Corporation. Such
Common Shares will more likely be registered under the names of the holders' of
Common Shares broker or an agent of that broker. In Canada, the vast majority of
shares are registered under the name of CDS & Co. (the registration name for The
Canadian Depositary for Securities, which acts as nominee for many Canadian
brokerage firms). Common Shares held by brokers or their agents or nominees can
only be voted (for or against resolutions) upon the instructions of the
Beneficial Holder of Common Shares. Without specific instructions, brokers and
their agents and nominees are prohibited from voting shares for the broker's
clients. Therefore, Beneficial Holders of Common Shares should ensure that
instructions respecting the voting of their Common Shares are communicated to
the appropriate person.
Applicable regulatory policy requires intermediaries/brokers to seek voting
instructions from Beneficial Holders of Common Shares in order to ensure that
their Common Shares are voted at the Meeting. The purpose of the Instrument of
Proxy or other form of proxy supplied to a Beneficial Holder of Common Shares by
its broker (or agent of the broker) is limited to instructing the registered
holder of common Shares (the broker or agent of the broker) how to vote on
behalf of the Beneficial Holder of common Shares. The majority of brokers now
delegate responsibility for obtaining instructions from clients to Independent
Investor Communications Corporation ("IICC"). IICC typically mails a special
proxy form to the Beneficial Holders of common Shares and asks Beneficial
Holders of Common Shares to return such proxy forms to IICC. IICC then tabulates
the results of all instructions received and provides appropriate instructions
respecting the voting of Common Shares to be represented at the Meeting. A
Beneficial Holder of Common Shares receiving a proxy form from IICC cannot use
that proxy to vote Common Shares directly at the Meeting - the proxy must be
returned to IICC well in advance of the Meeting in order to have the Common
Shares voted at the meeting.
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Although a Beneficial Holder of Common Shares may not be recognized directly at
the Meeting for the purposes of voting Common Shares registered in the name of
his or her broker (or agent of the broker), a Beneficial Holder of Common Shares
may attend at the Meeting as proxy holder for the registered holder of Common
shares and vote the common Shares in that capacity. Beneficial Holders of common
shares who wish to attend at the Meeting and indirectly vote their Common Shares
as proxy holder for the registered holder of Common Shares should enter their
own names in the blank space on the Instrument of Proxy provided to them and
return the same to their broker (or the broker's agent) in accordance with the
instructions provided by such broker (or agent), well in advance of the Meeting.
PRINCIPAL HOLDERS OF SECURITIES
To the knowledge of the directors and senior officers of the Corporation, the
only persons who beneficially own, directly or indirectly, or exercise control
or direction over shares carrying more than 10% of the voting rights attached to
the outstanding Common Shares of the Corporation, the approximate number of
common shares so owned, controlled or directed and the percentage of voting
shares of the Corporation represented by such shares and the share ownership by
the current directors and senior officers of the Company as a group are:
NAME AND ADDRESS NUMBER OF SHARES OWNED, PERCENTAGE OF
CONTROLLED OR DIRECTED SHARES OUTSTANDING
- -------------------------------- ------------------------------- ---------------------
Robert M. Friedland
Hong Kong 100,758,334 44.44%
- -------------------------------- ------------------------------- ---------------------
Directors and Officers as a
group(1) 101,671,406(2) 44.85%
- -------------------------------- ------------------------------- ---------------------
(1) The directors and senior officers, as a group, hold 5,408,500 common shares
issuable upon exercise of incentive stock options.
(2) Includes 100,758,334 shares held directly and indirectly by Robert M.
Friedland.
ELECTION OF DIRECTORS
The Articles of the Corporation provide that the number of directors of the
Corporation will be a minimum of 3 and a maximum of 9. The term of office of
each of the current directors will end at the conclusion of the Meeting. Unless
a director's office is earlier vacated in accordance with the provisions of the
YBCA, each director elected will hold office until the conclusion of the next
annual meeting of the corporation or, if no director is then elected, until a
successor is elected.
The following table sets out the names of management's nominees for election as
directors, all major offices and positions with the Corporation and any of its
significant affiliates each now holds, each nominee's principal occupation,
business or employment, the period of time during which each has been a director
of the Corporation and the number of shares of the Corporation beneficially
owned by each, directly or indirectly, or over which each exercised control or
direction, as at April 15, 2003.
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Period as a Shares Beneficially
Name and Position Principal Occupation, Business or Director of the owned, controlled
Employment(1) Corporation or directed(1)(2)
- ------------------------------------------ -------------------------------------- ------------------ ---------------------
ROBERT M. FRIEDLAND Chairman, Ivanhoe Mines Ltd. (March March, 1994 100,758,334
Chairman, Chief Executive Officer, 1994 - present); Chairman and
President and Director President, Ivanhoe Capital
Corporation
- ------------------------------------------ -------------------------------------- ------------------ ---------------------
R. EDWARD FLOOD(4) Deputy Chairman of the Corporation March, 1994 147,450
Deputy Chairman and Director (May 1999 - present); Senior
Analyst, Haywood Securities (May
2000 - November 2001)
- ------------------------------------------ -------------------------------------- ------------------ ---------------------
GORDON L. TOLL Senior Vice-President, Ivanhoe March, 1996 322,500
Deputy Chairman and Director Capital Corporation (December 1995 -
present)
- ------------------------------------------ -------------------------------------- ------------------ ---------------------
JOHN WEATHERALL(3)(5) President, Scarthingmoor Assets June, 1996 50,500
Director Management Inc.
(January, 1996-present)
- ------------------------------------------ -------------------------------------- ------------------ ---------------------
KJELD THYGESEN(3)(4)(5) Managing Director of Lion Resource February, 2001 NIL
Director Management (1989 - present)
- ------------------------------------------ -------------------------------------- ------------------ ---------------------
ROBERT HANSON(4)(5) Chairman of Hanson Capital Limited February, 2001 NIL
Director (February 1998 - present);Chairman
of Hanson Transport Group (1996 to
present); Chairman of Hanson Pacific
Limited (March 1994 - 1997);
Director, Hanson PLC (1990-1997)
- ------------------------------------------ -------------------------------------- ------------------ ---------------------
MARKUS FABER(3) Managing Director, Marc Faber Ltd. February, 2002 NIL
Director (1990 to present)
- ------------------------------------------ -------------------------------------- ------------------ ---------------------
(1) The information as to principal occupation, business or employment and
shares beneficially owned, controlled or directed by a nominee is not
within the knowledge of the management of the Corporation and has been
furnished by the nominee.
(2) Does not include unissued common shares issuable upon the exercise of
incentive stock options. See "Voting Shares".
(3) Indicates members of the Audit Committee.
(4) Indicates members of the Compensation and Benefits Committee.
(5) Indicates members of Nominating and Corporate Governance Committee.
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EXECUTIVE COMMITTEE
The Corporation does not have an Executive Committee of the Board of Directors.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No person who has been a director or officer of the Corporation at any time
since the beginning of its last completed financial year, any proposed nominee
for director of the Corporation or any associate or affiliate of the foregoing
has any material interest, direct or indirect, in any matter to be acted upon at
the Meeting, except as disclosed in this Information Circular.
PARTICULARS OF MATTERS TO BE ACTED UPON
SHARE ISSUE RESOLUTION
At the Meeting, Shareholders will be asked to consider and, if deemed advisable,
pass a resolution authorizing the issue by the Corporation of up to 50 million
Equity Securities (in addition to any other securities issuable in compliance
with the Australian Stock Exchange ("ASX") Listing Rules) to such allottees and
at such issue price(s) determined by the directors as set out in this Management
Proxy Circular, such issue(s) to take place, subject to any applicable ASX
waiver, during the period between December 9, 2003 and the date of the
Corporation's annual general meeting in 2004.
This resolution is to be effective if the Corporation is not exempt from ASX
listing rule 7.1 (or its successor provisions) during such period by virtue of
the grant by the ASX of an extension of the ASX waiver of listing rule 7.1 dated
December 9, 2002 (the "Waiver") or otherwise. For purposes of this resolution,
an "Equity Security" is a Common Share or a security or other right convertible
into or exchangeable for a Common Share including a Common Share Purchase
Warrant or a Special Warrant.
BACKGROUND
TORONTO STOCK EXCHANGE REQUIREMENTS IN RESPECT OF SHARE ISSUANCES
The Corporation's Common Shares have been listed on the TSX since June 1996,
and, accordingly, the Corporation is subject to regulation under the rules and
policies of the TSX Company Manual (the "TSX Code"), including TSX Code
restrictions on the number of equity securities that may be issued pursuant to
private placement transactions.
The TSX Code provides that the aggregate number of listed securities which are
issued (or made subject to issuance) pursuant to a "private placement"
transaction during any six month period may not exceed 25% of the number of
securities of the issuer which are outstanding (on a non-diluted basis) prior to
giving effect to such transaction without both TSX and shareholder approval. A
"private placement" transaction is the issuance of treasury securities of a
listed class (or convertible into a listed class) without Canadian prospectus
disclosure or reliance on the exempting provisions of Canadian provincial
securities legislation. Public offerings of securities by prospectus are not
limited by any percentage restriction under the TSX Code.
The applicable provisions of the TSX Code referred to above are set out on
Schedule A to this Management Proxy Circular.
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AUSTRALIAN STOCK EXCHANGE REQUIREMENTS IN RESPECT OF SHARE ISSUANCES
The Common Shares of the Corporation have been listed on the ASX since September
1996 as a Foreign Exempt Listing. On July 1, 2002, as the result of a change in
the policy of the ASX in respect of the listing of foreign companies on the ASX,
the Corporation changed its listing category from an exempt listing to a full
listing in order for the Corporation's Common Shares to remain listed on the
ASX. Accordingly since July 1, 2002, the Corporation has been subject to the ASX
Listing Rules applicable to all non-exempt listed companies, including a
specific limitation on the ability of listed companies to raise equity capital
without ongoing shareholder approvals.
ASX listing rule 7.1 restricts the ability of the Corporation to issue certain
equity securities during any twelve month period to 15% of the outstanding
Common Shares at the beginning of such period (subject to certain adjustments).
This restriction will not apply to an issue of Equity Securities if the
Corporation has received shareholder approval of the transaction or a specific
exemption or waiver is applicable. Shareholder approval can be either
prospective or, provided an issuance of shares is in compliance with the 15%
limitation, in the form of a subsequent ratification. Unlike the TSX Code, the
ASX listing rule restrictions include all issuances of "equity securities" of
the Corporation, including public offerings by prospectus, unless a specific
exemption is available under listing rule 7.2 or a waiver is received from the
ASX. The principal exemption relevant to capital raising under the listing rule
is a rights issue whereby new equity securities to be issued must first be
offered pre-emptively to existing shareholders on a pro-rata basis.
The text of listing rules 7.1 through 7.5 is set out in Schedule B to the
Management Proxy Circular.
WAIVER OF ASX LISTING RULE 7.1
Following July 1, 2002 the Corporation sought a number of waivers from the ASX
in order to harmonise, as far as possible, the requirements of the ASX Listing
Rules with the regulatory framework of the TSX and other Canadian regulators.
One of the principal waivers sought by the Corporation was a conditional waiver
from listing rule 7.1.
It is the Corporation's position that strict compliance with listing rule 7.1
restricts the Corporation's ability to raise capital in North American and other
markets. Because North American capital raising practices do not typically
involve pre-emptive offers to existing shareholders, but rely instead on rapid
financing techniques designed to accelerate the completion of offerings to third
parties, the effect of listing rule 7.1 is to oblige the Corporation to obtain
ongoing shareholder approvals of specifiable tranches or specific transactional
exemptions or waivers from the ASX in order to take advantage of market windows
to raise equity capital.
Given North American capital market dynamics, the Corporation cannot rely on
rights offerings to complete large equity offerings. This technique may be
appropriate for companies based and principally operating in certain
jurisdictions such as Australia, but North America capital raising practices
rarely rely on this financing technique, the only significant capital raising
exemption to the restrictions under ASX listing rule 7.1, absent a shareholders'
meeting.
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The Corporation is actively involved in ongoing exploration activities in
Mongolia and elsewhere which require ongoing funding in order to continue
development of such properties. Over the longer term, the Corporation will need
to obtain additional funding for, or third party participation in, its
undeveloped or partially developed properties to bring them into production.
Accordingly the Corporation continually monitors the opportunity to raise
additional equity capital as a method of funding its activities, provided market
conditions are favourable. It is important for the Corporation and its
shareholders for the Corporation to be in a position to respond to such market
opportunities.
On December 9, 2002 following application and appeal procedures, the ASX granted
the Corporation the Waiver from listing rule 7.1 for the period ending December
9, 2003. As a result of this Waiver, the Corporation is not required to obtain
shareholder approval for issues of Equity Securities exceeding the 15% limit in
listing rule 7.1 during this period. The Corporation is not seeking shareholder
approval at the Meeting for issues of Equity Securities during the period ending
December 9, 2003. During the period from July 1, 2002 to the date of this
Circular the Company has raised Cdn.$134,536,280 through the issue of 41,296,000
Common Shares issued directly or issued or issuable upon exercise of a right of
conversion of Equity Securities.
REASONS FOR SEEKING SHAREHOLDER APPROVAL AT THE MEETING
When the Waiver expires on December 9, 2003, the Corporation will again be
subject to the restriction under listing rule 7.1 on issuing Equity Securities
unless the Corporation receives a grant from the ASX of a further extension of
the Waiver or is otherwise exempted from the provisions of listing rule 7.1.
Management of the Corporation believe that it is important for the Corporation
to have flexibility in its ability to raise capital, particularly since the
Corporation is currently and expects to continue to be, engaged in
capital-intensive exploration and development projects in Mongolia and
elsewhere. Accordingly, it is management's current intention to apply to the ASX
for an extension of the Waiver prior to its expiry or a new waiver, to further
exempt the Corporation from listing rule 7.1 during the period from December 9,
2003 until the date of the Corporation's annual general meeting in 2004
(expected to be in June 2004).
The Corporation is proposing that at the Meeting the shareholders prospectively
approve the issue of up to 50 million Equity Securities during the period from
December 9, 2003 until the Corporation's annual general meeting in 2004. Such
approval will not at this time satisfy the ASX listing rule requirements for
shareholder approval of an issue of equity securities. Listing rule 7.3 requires
the notice of the meeting at which approval will be sought to specify a date for
issue of the securities, which must be a date within 3 months following the date
of the shareholders meeting authorizing the issue of securities. Accordingly,
even if the Share Issue Resolution is passed and effective in accordance with
its terms, it will not at this time constitute effective prospective approval
for the issue of specifiable tranches of securities for ASX listing rule
purposes and a waiver from the requirements of listing rule 7.1 and/or 7.3 will
be required. However management feels it is prudent to obtain shareholders
approval for the Share Issue Resolution to support the Corporation's application
for a waiver if this becomes necessary or advisable to avoid the necessity and
expense of holding another shareholders meeting to authorize the issue of Equity
Securities during the period between December 9, 2003 and the Corporation's
annual general meeting in 2004. This proposed shareholder resolution is intended
to be effective if the Corporation is not otherwise fully exempt from ASX
listing rule 7.1 (or its successor provisions) during the period from December
9, 2003 until the Corporation's annual general meeting in 2004.
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The Corporation will during such period continue to be subject to the TSX Code
restrictions in respect of private placements of Equity Securities.
The contents of this Management Proxy Circular have not been endorsed by ASX at
this time.
PARTICULARS IN RESPECT OF PROPOSED RESOLUTION
The following particulars relate to the proposed resolutions:
(i) The maximum number of Common Shares issuable either directly by the
Corporation or upon exercise of a right of conversion of Equity Securities
will be 50 million Common Shares;
(ii) Any Equity Securities issued pursuant to this Resolution will be issued
between December 9, 2003 and the date of the Corporation's annual general
meeting in 2004, expected to be in June, 2004;
(iii)The minimum issue price for each whole Common Share or underlying Common
Share will be Cdn.$2 per Common Share or underlying Common Share. As a
practical matter, Equity Securities issued by way of a private placement
will not be issued for less than a 15% discount to market price in
accordance with applicable TSX Code. Equity Securities issued by public
offering would be determined by the Corporation based on prevailing market
conditions and, if applicable, negotiation with underwriters;
(iv) Equity Securities issued under a private placement will be issued primarily
to institutional or sophisticated investors in accordance with applicable
North American or other securities laws. Equity Securities may also be
issued to investors under an underwritten or best efforts public offering.
Equity Securities may also be issued in connection with an acquisition by
the Corporation to a vendor of assets. The persons to whom securities will
be issued will be determined by the Directors of the Corporation. The names
of the allottees are not known, with the Directors of the Corporation to
use their absolute discretion in respect of any allotment. It is not
anticipated that any director or their associates would participate in any
such allotment in the absence of appropriate approvals;
(v) Equity Securities issuable with the specifiable tranche(s) if ASX grants
either of the waivers contemplated by these resolutions would be Common
Shares, or a security or other right convertible into, or exchangeable for,
Common Shares including Common Share Purchase Warrants or Special Warrants.
o Any Common Shares issued would be fully paid Common Shares ranking in
parity to the other outstanding Common Shares of the Corporation.
o A Common Share Purchase Warrant is a right exercisable by the holder
to acquire a Common Share upon payment of minimum exercise price of
Cdn.$2, and may be issued for no additional consideration at the time
of issue.
o Pursuant to applicable rules of the TSX, any Common Share Purchase
Warrant issued in a private placement transaction will not be
exercisable for an exercise price less than the closing market price
of the underlying
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Common Share on the trading day preceding the date of stock exchange
notification of the issue and may only be exercisable for five years
from the date of issuance. A purchaser of Common Share Purchase
Warrants would be entitled upon exercise to no more than one Common
Share per Common Share Purchase Warrant, subject to adjustment
provisions which would entitle the purchaser to adjust the number of
Common Shares issuable in order to account for the effect of a stock
dividend, share split or consolidation or other capital structure
change affecting the Common Shares of the Corporation;
o Special Warrants would be issued by private placement and subject to a
minimum Cdn. $2 issue price per underlying Common Share. Special
Warrants grant the holder (of Special Warrants) Common Shares upon
exercise or deemed exercise of the Special Warrants, upon clearance of
a prospectus with respect to the distribution of securities, without
payment of additional consideration by the holders of the Special
Warrants;
o The Equity Securities may be issued in one or more transactions. The
Corporation may, at the request of a purchaser or as required by
applicable securities laws, prepare and file in British Columbia and
other applicable jurisdictions a prospectus in connection with an
issuance of Equity Securities;
o The Equity Securities, or some of them, may be sold through
underwriters or licensed brokers and the Corporation may pay
negotiated underwriting or brokers commissions or finder's fees in
accordance with applicable laws;
(vi) The intended use of proceeds raised is to fund drilling and exploration
expenditures in respect of the Corporation's properties in Mongolia, to
fund exploration activities in respect of the Corporation's other existing
properties and properties acquired in the future, to fund the acquisition
of additional properties or assets and for working capital and general
corporate and administrative purposes.
(vii) Allotments of Equity Securities would occur progressively.
TEXT OF RESOLUTION
At the Meeting, the Shareholders will be asked to approve the Share Issue
Resolution, the text of which is as follows:
"RESOLVED that the Corporation is authorized to issue up to 50 million
Equity Securities (in addition to any other securities issuable in
compliance with Australian Stock Exchange ("ASX") Listing Rules) to such
allottees and at such issue price(s) determined by the directors as set
out in this Management Proxy Circular, such issue(s) to take place,
subject to any applicable ASX waiver, during the period between December
9, 2003 and the date of the Corporation's annual general meeting in 2004.
This resolution is to be effective if the Corporation is not exempt from
ASX listing rule 7.1 (or its successor provisions) during such period by
virtue of the grant by the ASX of an extension of the ASX waiver of
listing rule 7.1 dated December 9, 2002 or otherwise. For purposes of this
resolution, an "Equity Security" is a Common Share or a security or other
right convertible into
11
or exchangeable for a Common Share, including a Common Share Purchase
Warrant or a Special Warrant".
VOTING EXCLUSION - The Corporation will disregard any votes cast on this
resolution by (i) persons who may participate in the proposed issue and (ii)
persons who might obtain a benefit if this resolution is passed, except a
benefit solely in the capacity of a holder of Common Shares, and (iii) any
associates of those persons. However, the Corporation need not disregard a vote
if: it is cast by the person as proxy for a person who is entitled to vote, in
accordance with the directions on the proxy form; or it is cast by the person
chairing the meeting as proxy for a person who is entitled to vote, in
accordance with a direction on the proxy form to vote as the proxy decides.
APPOINTMENT OF AUDITORS
Deloitte & Touche, Chartered Accountants, will be nominated at the Meeting for
re-appointment as auditors of the Corporation at a remuneration to be fixed by
the directors. Deloitte & Touche have been auditors of the Corporation since
January 1995.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
Other than as disclosed below or elsewhere in this Management Proxy Circular, no
insider and no associate or affiliate of any such insider, has any material
interest, direct or indirect, in any material transaction since the commencement
of the Corporation's last financial year or in any proposed transaction, which,
in either case, has materially affected or would materially affect the
Corporation, other than as set out below.
The Corporation is a party to cost sharing agreements with other companies in
which Robert M. Friedland has a material direct or indirect beneficial interest.
Through these agreements, we share office space, furnishings, equipment and
communications facilities in Vancouver, Singapore and London and an aircraft on
a cost recovery basis. The Corporation also shares the costs of employing
administrative and non-executive management personnel in these offices. During
the year ended December 31, 2002, our share of these costs was US$5,143,000. The
companies with which the Corporation is a party to the cost sharing agreements,
and Mr. Friedland's ownership interest in each of them, are as follows:
R.M. FRIEDLAND
COMPANY NAME OWNERSHIP INTEREST
- ------------ ------------------
Ivanhoe Energy Inc. 32.17%
Ivanhoe Capital Corporation 100.00%
African Minerals Ltd. 54.58%
EXECUTIVE COMPENSATION
In accordance with the requirements of applicable securities legislation in
Canada, the following executive compensation disclosure is provided in respect
of the Company's Chief Executive Officer as at December 31, 2002, and each of
the four most highly compensated executive officers ("Named Executive Officers")
whose annual compensation exceeded $100,000 in the year ended December 31, 2002.
During the year ended December 31, 2002, the aggregate compensation paid to all
officers of the Company who received more than $40,000 in aggregate compensation
during such period was US$1,120,730.
12
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of all compensation paid during the
years ending December 31, 2000, 2001 and 2002 to each of the Named Executive
Officers of the Corporation.
Annual Compensation Long Term Compensation
-------------------------------- --------------------------------
Awards Payouts
----------------------- -------
Securities Restricted
Other Under Shares or
Annual Options/ Restricted All Other
Compen- SARs Share LTIP Compen-
Name and Salary Bonus sation Granted Units Payout sation
Principal Position Year (US$) (US$) (US$)(1) (#) (US$) (US$) (US$)(2)
- ------------------ ---- ------ ----- -------- ---------- ---------- ------ --------
DANIEL KUNZ 2002 200,000 - - - - - 9,740
President 2001 250,000 - - 1,578,000 - - 9,740(7)
2000 200,000 35,000 - - - - 9,740(7)
- ------------------------------------------------------------------------------------------------------------------------------------
GORDON TOLL 2002 201,267 - - - - - 3,330
Deputy Chairman 2001 202,593 - - - - - 3,330(7)
2000 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
EDWARD C. ROCHETTE 2002 160,102 - 17,092(3) - - - 3,300
Senior Vice-President 2001 156,619 - 15,471(3)(7) 682,500 - - 3,300(7)
Legal and Administration 2000 143,628 - 38,365(3)(7) - - - 3,300(7)
- ------------------------------------------------------------------------------------------------------------------------------------
DOUGLAS KIRWIN 2002 150,000 65,000(4) 44,877(5) - - - 6,718
Senior Vice-President 2001 150,000 - 39,773(5)(7) 182,500 - - 4,750(7)
Exploration 2000 109,200 - 38,597(5)(7) - - - 4,750(7)
- ------------------------------------------------------------------------------------------------------------------------------------
JAIME TRONCOSO 2002 150,000 - 70,847(6) - - - -
Vice-President, 2001 150,000 - 73,103(6)(7) 176,667 - - -(7)
Kazakhstan 2000 150,000 - 89,580(6)(7) - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Perquisites and benefits do not exceed the lesser of $50,000 and 10% of the
total of the annual salary and bonus for any of the Named Executive
Officers except where numbers are disclosed in this column.
(2) Includes share purchase plan contributions and life insurance premiums.
(3) Mr. Rochette's other annual compensation included medical and dental
premiums of $13,096 (2002), $11,388 (2001) and $34,948 (2000).
(4) Mr. Kirwin received a bonus in 2002 of $65,000 which was applied to repay a
loan from the Company to pay the mortgage on his home. The loan was
forgiven in 2002 although for accounting purposes the amount was booked in
2001.
(5) Mr. Kirwin's other annual compensation includes a housing allowance of
$36,000 in each of 2002, 2001 and 2000.
(6) Mr. Troncoso's other annual compensation includes a housing allowance of
$27,750 (2002), $27,375 (2001) and $27,450 (2000), and tax gross up
allowance of $40,407 (2002), $42,328 (2001) and $60,173 (2000).
(7) Reflects adjustment from previous disclosure.
13
LONG TERM INCENTIVE PLAN
The Corporation does not presently have a long-term incentive plan for its
executive officers.
OPTIONS/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
There were no options or stock appreciation rights granted to any of the Named
Executive Officers in the financial year ended December 31, 2002.
AGGREGATED OPTION EXERCISES
Other than as described below, no options or stock appreciation rights were
exercised during the year ended December 31, 2002 by the Named Executive
Officers.
Value of Unexercised in the
Securities Aggregate Unexercised Options at Money Options at
Acquired on Value December 31, 2002 December 31, 2002
Name Exercise Realized (Exercisable/Unexercisable) (Exercisable/Unexercisable)
- ---- ----------- --------- --------------------------- -----------------------------
Daniel Kunz 872,000 $1,370,080 0/578,000 0/$1,173,340
Edward Rochette 100,000 $181,625 310,375/239,625 $605,061/$486,439
OPTION AND SAR REPRICING
No options or stock appreciation rights were repriced during the year ended
December 31, 2002.
DEFINED BENEFIT AND PENSION PLANS
The Corporation does not presently provide any defined benefit or pension plan
for its directors, executive officers or employees.
EMPLOYMENT CONTRACTS
The Company does not have an employment contract with any of the Named Executive
Officers.
COMPENSATION COMMITTEE
During the year ended December 31, 2002, the Compensation and Benefits Committee
was comprised of Messrs R. Edward Flood, Kjeld Thygesen and Robert Hanson. Mr.
Flood, as Deputy Chairman of the Company is an officer and employee of the
Company. Messrs Thygesen and Hanson are both independent directors of the
Company.
Directors who were officers or employees of the Company during the financial
year ended December 31, 2002, were: Mr. Robert Friedland - Chairman, Mr. R.
Edward Flood - Deputy Chairman, Mr. Gordon L. Toll - Deputy Chairman, Mr. Daniel
Kunz - President.
REPORT ON EXECUTIVE COMPENSATION
The Corporation's executive compensation program is administered by the
Compensation and Benefits Committee. The basic philosophy underlying the
Corporation's executive compensation program is that the interests of the
Corporation's executive officers should be aligned as closely as possible with
the interests of Ivanhoe
14
and its shareholders as a whole. Compensation for the Corporation's senior
executive officers is, accordingly, designed to reflect the following
considerations: to provide a strong incentive to management to achieve the
Corporation's corporate goals each year; to ensure that the interests of
management and of the Corporation's shareholders are aligned; and to enable the
Corporation to attract, retain and motivate executives of the calibre necessary
to successfully develop and operate the Corporation's business.
The compensation that the Corporation's executive officers receive generally
consists of cash, equity and equity incentives. Typically, base salary comprises
the entire cash component of each senior executive officer's compensation. The
Corporation does not maintain a pension plan or other long term compensation
plan for its executive officers and, generally, does not pay cash bonuses.
Compensation over and above base salary usually takes the form of incentive
stock options but can also include bonus awards of fully paid common shares of
the Corporation.
The relative emphasis on the various compensation components is variable and
tends not to be comparable year over year. Although the cash component of
overall compensation tends to remain relatively consistent, the equity and
equity incentive component, being entirely within the discretion of the board of
directors, can fluctuate significantly from one year to another. Factors
influencing the nature and scope of equity compensation and equity incentives
awarded in a given year include: awards made in previous years and, particularly
in the case of equity incentives, the number of stock options that remain
outstanding and exercisable from grants in previous years and the exercise price
and the remaining exercise term of those outstanding stock options. During 2002,
the Corporation did not grant any incentive stock options to its executive
officers. Accordingly, the relative emphasis in 2002 was entirely on cash
compensation.
The Corporation's compensation policy is based on the proposition that some
element of the compensation for the Corporation's executive officers should be
tied to the risks and rewards of owning the Corporation's common shares and that
stock options can create a strong incentive to build shareholder value. The
Compensation and Benefits Committee oversees and sets the general guidelines and
principles for the compensation packages for senior management. As well, the
Compensation and Benefits Committee assesses the individual performance of the
Corporation's senior executive officers and makes recommendations to the board
of directors. Based on these recommendations, the board of directors makes
decisions concerning the nature and scope of the compensation to be paid to the
Corporation's senior executive officers over and above their base salaries.
Although the base salaries of executive officers may be reviewed from time to
time on an ad hoc basis, the Compensation and Benefits Committee does not, as a
matter of course, review base salaries on an annual basis.
The specific relationship of corporate performance to executive compensation
under the Corporation's executive compensation program is created exclusively
through equity compensation mechanisms. Incentive stock options, which vest and
become exercisable with the passage of time, link the bulk of the Corporation's
equity-based executive compensation to shareholder return, measured by increases
in the market price of the Corporation's common shares. From time to time, the
Board of Directors also makes discretionary bonus awards of common shares to the
Corporation's employees, including the Corporation's executive officers. Such
awards are intended to recognize extraordinary contributions to the achievement
of corporate objectives or the fulfillment of defined business development goals
and milestones tied to pre-determined equity incentives.
15
The compensation paid to the Corporation's Chief Executive Officer for the
fiscal year ended December 31, 2002 was based on the same basic factors and
criteria used to determine executive compensation generally. The Corporation's
former Chief Executive Officer left the Corporation in early 2003 to become the
chief executive officer of an associated mining company in which the Corporation
holds a significant interest. The cash compensation paid to the Corporation's
former Chief Executive Officer reflected the Compensation and Benefits
Committee's views as to what constituted a fair and reasonable base salary for
an executive with his skills, expertise and experience having due regard to the
nature and stage of development of the Corporation's business.
In assessing the cash compensation paid to the Chief Executive Officer, the
members of the Compensation Committee drew primarily upon their collective
experience in the mining and mining finance industries industry experience. As a
source of comparison, the Compensation and Benefits Committee reviewed the rates
of publicly reported cash compensation paid to other chief executive officers of
intermediate mining development and exploration companies considered by the
Compensation and Benefits Committee to be the Corporation's industry peers.
These companies included Bema Gold Corporation, Breakwater Resources Ltd., First
Quantum Minerals Ltd. and Southernera Resources Limited. The cash compensation
paid to our former Chief Executive Officer was in the median range of cash
compensation paid to chief executive officers among the members of the
Corporation's industry peer group. The Compensation and Benefits Committee did
not use a peer comparison in assessing equity compensation. The Corporation's
current Chief Executive Officer, who is also the Corporation's largest
shareholder, does not receive a salary or any other cash compensation for acting
as such. He is, however, eligible to receive equity compensation and equity
incentives.
The former Chief Executive Officer's compensation during 2002 consisted solely
of base salary and standard employee benefits. He did not receive any cash or
equity bonus nor any additional incentive stock options. Accordingly, there was
no measurable relationship between the Corporation's performance, as reflected
in the Corporation's share price, the Corporation's financial results or the
development of the Corporation's business, and the former Chief Executive
Officer's compensation. The value of the equity component of the Chief Executive
Officer's compensation, consisting solely of incentive stock options granted
before 2002, was exclusively determined with reference to the Corporation's
performance as measured by the appreciation or decline in the market price of
the Corporation's common shares.
Submitted on behalf of the Compensation and Benefits Committee:
R. Edward Flood
Robert Hanson
Kjeld Thygesen
PERFORMANCE GRAPH
The following graph compares the cumulative shareholder return on a $100
investment in Common Shares of the Corporation to a similar investment in
companies comprising the S&P/TSX Total Return Index, including dividend
reinvestment, for the period December 31, 1997 to December 31, 2002.
16
(LINE GRAPH)
COMPENSATION OF DIRECTORS
Currently no fixed compensation is paid to directors of the Corporation for
acting as such, although all directors have been granted stock options. The
directors may be reimbursed for actual expenses reasonably incurred in
connection with the performance of their duties as directors.
INDEBTEDNESS OF DIRECTORS AND OFFICERS
Other than "routine indebtedness" as that term is defined in applicable
securities legislation, no director or senior officer of the Corporation, or
associate or affiliate of any such director or senior officer, is or has been
indebted to the Corporation since the beginning of the last completed financial
year of the Corporation.
CORPORATE GOVERNANCE
The Board considers good corporate governance practices as an important factor
in the continued and long term success of the Corporation by helping to maximize
shareholder value over time.
The rules and policies of the TSX require corporations listed on the TSX to
disclose their corporate governance practices with reference to a series of
guidelines for effective corporate governance (the "TSX Guidelines") adopted by
the TSX.
17
RECENT DEVELOPMENTS
Canadian securities regulators and the TSX are currently engaged in a review of
corporate governance standards applicable to Canadian public companies. In April
of 2002, the TSX published for public comment proposed changes to its corporate
governance standards. Following the enactment in the United States of the
Sarbanes-Oxley Act of 2002, the TSX initiated a review of its proposed standards
in light of new U.S. legislation. While the review continues, TSX-listed
companies have been advised by the TSX to disclose their corporate governance
practices against current TSX guidelines, although they may, at their
discretion, provide additional disclosure in reference to the proposed
amendments.
The Canadian Securities Administrators have also undertaken a review of
corporate governance requirements. The Ontario Securities Act has been amended
effective April 7, 2003, granting the Ontario Securities Commission rule-making
authority with respect to the functioning and responsibilities of audit
committees and other certain corporate governance matters. The form of such
rules has not yet been released.
The ASX Corporate Governance Council has also recently released best practice
recommendations for corporations listed on the ASX which will apply in respect
of the Corporation's financial year commencing January 1, 2004. The Corporation
has commenced reviewing its corporate governance practices against these
recommendations.
Although the introduction by the TSX of certain corporate governance listing
standards (the "Proposed TSX Listing Standards") and certain amendments to its
corporate governance guidelines (the "Proposed TSX Amendments") have not yet
advanced past the proposal stage, the Corporation has begun the process of
conforming its governance standards to those being proposed.
The Corporation has recently undertaken a comprehensive review of its corporate
governance practices in light of the developing TSX standards as well as the
corporate governance and best practice standards in Canada, the U.S. and
Australia. Consequently, the Board has recently;
i. approved and adopted a new mandate for the Board;
ii. created the position of "lead director" with specific responsibility
for maintaining the independence of the Board and ensuring the Board
carries out its responsibilities contemplated by the Proposed TSX
Amendments;
iii. appointed a Nominating and Corporate Governance Committee consisting
solely of outside and unrelated directors (as such terms are defined
in the TSX Guidelines and Proposed TSX Amendments);
iv. determined to make a change to the directors appointed to the
Compensation and Benefits Committee to consist solely of outside
unrelated directors, such change to be made upon the election or
appointment of an additional outside independent director to the
Board;
v. commissioned each of the Corporation's board committees, being the
Audit Committee, the Compensation and Benefits Committee and the
Nominating and Corporate Governance Committee, to formalize their
mandates in charters for approval by the Board;
vi. formalized the Company's existing management committee responsible for
disclosure matters as the Corporation's Disclosure Committee, with the
mandate to oversee the Corporation's disclosure practices; and
18
vii. determined to adopt a formal Code of Business Conduct and Ethics and
for the Corporation that governs the behavior of directors, officers
and employees.
BOARD COMPOSITION
The TSX Guidelines recommend that a majority of the directors of a corporation
be "unrelated" directors. An "unrelated" director is a director who is
independent of management and is free from any interest and any business or
other relationship which could, or could reasonably be perceived to, materially
interfere with the director's ability to act with a view to the best interests
of the corporation, other than interests and relationships arising from
shareholding.
The Proposed TSX Amendments provide that an unrelated director is an outside
director (being a director that is not a member of management) and is free from
any interest and any business, family or other relationship which could
reasonably be perceived to materially interfere with the director's ability to
act with a view to the best interests of the issuer other than interests and
relationships arising solely from holdings in the issuer; and who (a) is not
currently, or has not been within the last three years, an officer, employee of
or material service provider to the issuer or any of its material subsidiaries
or affiliates; and (b) is not an officer, employee or controlling shareholder of
an entity that has a material business relationship with the issuer.
A total of seven persons have been nominated for election as directors at the
Meeting. The Board has determined that if all such nominees are elected, the
Board will consist of four unrelated directors in John Weatherall, Markus Faber,
Robert Hanson and Kjeld Thygesen and three related directors in Robert
Friedland, Ed Flood and Gordon Toll, applying the definitions in both the TSX
Guidelines and the Proposed TSX Amendments. Each of Messrs. Friedland, Flood and
Toll are related directors in their capacities as senior officers of the
Corporation and/or one or more of its subsidiaries and members of management.
The TSX Guidelines provide that if an issuer has a significant shareholder which
the TSX Guidelines define as "a shareholder with the ability to exercise a
majority of the votes for the election of the Board of Directors", in addition
to a majority of unrelated directors, the Board should include a number of
directors who do not have interests in or relationships with either the
Corporation or the significant shareholder and which fairly reflects the
investment in the Corporation by shareholders other than the significant
shareholder.
The Corporation does not have a "significant shareholder", as defined in the TSX
Guidelines. However, the Chairman and Chief Executive Officer of the Corporation
holds approximately 44.44% of the Corporation's voting securities as of the date
of this Circular. The Board has determined that the Corporation currently has
four of seven directors in John Weatherall, Markus Faber, Robert Hanson and
Kjeld Thygesen, who are unrelated as such term is defined under the TSX
Guidelines and the Proposed TSX Amendments to both the Corporation and its
Chairman and Chief Executive Officer. Accordingly, if the shareholders elect the
individuals proposed for election in the Circular, four of the seven members of
the Board shall be unrelated.
The directors of the Corporation are satisfied with the size and composition of
the Board and believe that the current Board composition results in a balanced
representation on the Board of Directors among management, unrelated directors,
the Corporation's major shareholder. While the board functions effectively given
the Corporation's stage of
19
development and the size and complexity of its business, the Board, through its
Nominating and Corporate Governance Committee, will continue to seek qualified
candidates to augment its experience and expertise and to enhance the
Corporation's ability to effectively develop its business interests.
MANDATE OF THE BOARD
Under the Business Corporations Act (Yukon), the directors of the Corporation
are required to manage the Corporation's business and affairs, and in doing so
to act honestly and in good faith with a view to the best interests of the
Corporation. In addition, each director must exercise the care, diligence and
skill that a reasonably prudent person would exercise in comparable
circumstances.
The Board of Directors is responsible for supervising the conduct of the
Corporation's affairs and the management of its business. The Board's mandate
includes setting long term goals and objectives for the Corporation, to
formulate the plans and strategies necessary to achieve those objectives and to
supervise senior management in their implementation. Although the Board
delegates the responsibility for managing the day to day affairs of the
Corporation to senior management personnel, the Board retains a supervisory role
in respect of, and ultimate responsibility for, all matters relating to the
Corporation and its business.
The Board's mandate requires that the Board be satisfied that the Corporation's
senior management will manage the affairs of the Corporation in the best
interest of the shareholders, in accordance with the Corporation's principles,
and that the arrangements made for the management of the Corporation's business
and affairs are consistent with their duty described above. The Board is
responsible for protecting shareholder interests and ensuring that the
incentives of the shareholders and of management are aligned. The obligation of
the Board must be performed continuously, and not merely from time to time, and
in times of crisis or emergency the Board may have to assume a more direct role
in managing the affairs of the Corporation.
In discharging this responsibility, the Board's mandate provides that the Board
oversees and monitors significant corporate plans and strategic initiatives. The
Board's strategic planning process includes annual and quarterly budget reviews
and approvals, and discussions with management relating to strategic and
budgetary issues. The Board also devotes at least one meeting per year to be
devoted substantially to review of strategic plans proposed by management.
The Board reviews the principal risks inherent in the Corporation's business,
including financial risks through periodic reports from management of such
risks, in conjunction with its review of operations and risk issues at each
Board meeting, at which time the Board assesses the systems established to
manage those risks. Directly and through the Audit Committee, the Board also
assesses the integrity of the internal financial control and management
information systems.
In addition to those matters that must, by law, be approved by the Board, the
Board is required under its mandate to approve annual operating and capital
budgets, any material dispositions, acquisitions and investments outside of the
ordinary course of business or not provided for in the approved budgets,
long-term strategy, organizational development plans and the appointment of
senior executive officers. Management is authorized to act, without Board
approval, on all ordinary course matters relating to the Corporation's business.
20
The mandate provides that the Board also expects management to provide the
directors on a timely basis with information concerning the business and affairs
of the Corporation, including financial and operating information and
information concerning industry developments as they occur, all with a view to
enabling the Board to discharge its stewardship obligations effectively. The
Board expects management to efficiently implement its strategic plans for the
Corporation, to keep the Board fully apprised of its progress in doing so and to
be fully accountable to the Board in respect to all matters for which it has
been assigned responsibility.
The Board has instructed management to maintain procedures to monitor and
promptly address shareholder concerns and has directed and will continue to
direct management to apprise the Board of any major concerns expressed by
shareholders.
Each Committee of the Board is empowered to engage external advisors as it sees
fit. Any individual director is entitled to engage an outsider advisor at the
expense of the Corporation provided such director has obtained the approval of
the Nominating and Corporate Governance Committee to do so.
MEETINGS OF THE BOARD
The Board holds regular annual and quarterly meetings. Between the quarterly
meetings, the board meets as required, generally by means of telephone
conferencing facilities. As part of the annual and quarterly meetings, the
independent directors also have the opportunity to meet separate from
management. Management also communicates informally with members of the Board on
a regular basis, and solicits the advice of the Board members on matters falling
within their special knowledge or experience.
BOARD COMMITTEES
The Corporation has an Audit Committee, a Compensation and Benefits Committee
and a Nominating and Corporate Governance Committee.
AUDIT COMMITTEE
The mandate of the Audit Committee is to oversee the Corporation's financial
reporting obligations, systems and disclosure, including monitoring the
integrity of the Corporation's financial statements, monitoring the independence
and performance of the Corporation's external auditors and acting as a liaison
between the Board and the Corporation's auditors. The activities of the Audit
Committee typically include reviewing interim financial statements and annual
financial statements, ensuring that internal controls over accounting and
financial systems are maintained and that accurate financial information is
disseminated to shareholders, reviewing the results of internal and external
audits and any change in accounting procedures or policies, and evaluating the
performance of the Corporation's auditors. The Audit Committee communicates
directly with the Corporation's external auditors in order to discuss audit and
related matters whenever appropriate.
The Audit Committee currently consists of Messrs. Faber, Weatherall and
Thygesen, all of whom are outside directors, as required by the TSX Guidelines
and unrelated directors, as contemplated by the Proposed TSX Listing Standards
and the Proposed TSX Amendments.
21
COMPENSATION AND BENEFIT COMMITTEE
The role of the Compensation Committee is primarily to review the adequacy and
form of compensation of senior management and the directors with such
compensation realistically reflecting the responsibilities and risks of such
positions, to administer the Corporation's Employees' and Directors' Equity
Incentive Plan, to determine the recipients of, and the nature and size of share
compensation awards granted from time to time and to determine the remuneration
of executive officers and to determine any bonuses to be awarded.
The Compensation and Benefits Committee currently consists of Messrs. Thygesen,
Hanson and Flood, of which Messrs. Thygesen and Hanson are unrelated directors,
and Mr. Flood is a related director. The Board has determined to appoint a new
unrelated director in the place of Mr. Flood on this committee, such change to
be made once an additional outside independent director is elected or appointed
to the Board. Once this occurs, the composition of the Compensation and Benefits
Committee will align with the Proposed TSX Amendments.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee is responsible for making recommendations to
the Board with respect to developments in the area of corporate governance and
the practices of the Board. Consistent with the Proposed TSX Guidelines, the
Nominating and Corporate Governance Committee has expressly assumed
responsibility for developing the Corporation's approach to governance issues.
The Committee is also responsible for reporting to the Board with respect to
appropriate candidates for nominations to the Board, for overseeing the
execution of an assessment process appropriate for the Board and its committees
for evaluating the performance and effectiveness of the Board.
The Nominating and Corporate Governance Committee of the Board currently
consists of Messrs. Weatherall, Hanson, and Thygesen of which Messrs. Thygesen
is chairman of the committee, in addition to being the Corporation's lead
director. All of such directors are outside unrelated directors.
ALIGNMENT WITH THE EXCHANGE GUIDELINES OF THE TSX
The Corporation's statement of corporate governance practices is set out in
Schedule "C" to this Circular. In addition to indicating how the Corporation's
governance practices align with the TSX Corporate Governance Guidelines ("TSX
Guidelines"), the statement describes those governance practices with reference
to the Proposed TSX Listing Standards and the Proposed TSX Amendments.
OTHER BUSINESS
Management of the Corporation is not aware of any matter to come before the
Meeting other than the matters referred to in the Notice of the Meeting.
22
DIRECTORS' APPROVAL
The contents of this Management Proxy Circular and its distribution to
shareholders have been approved by the Board of Directors of the Corporation.
DATED at Vancouver, British Columbia, as of the 15th day of April, 2003.
BY ORDER OF THE BOARD
"BEVERLY A. BARTLETT"
CORPORATE SECRETARY
23
SCHEDULE "A"
TSX CODE PROVISIONS
SCOPE OF THE PRIVATE PLACEMENT REQUIREMENTS
SEC. 618. The Exchange defines the term "private placement" as an issuance of
treasury securities without prospectus disclosure, in reliance on the exempting
provisions of clause (b) of section 72(1) of the Ontario Securities Act, or
section 2.3 of Ontario Securities Commission Rule 45-501, Exempt Distributions,
or equivalent legislation of another jurisdiction. In certain circumstances,
however, the Exchange may consider it appropriate to apply the rules set out in
Sections 619 to 622 to other types of transactions.
Sections 619 to 621 are not applicable to private placements of securities
which are neither of a class listed on the Exchange nor convertible into
securities of a class listed on the Exchange.
Sections 619, 620 and 622 are not necessarily applicable to private
placement transactions which, in the opinion of the Exchange, have not been
negotiated at arm's length. Each non-arm's length transaction is considered on
its own merits.
SIZE OF TRANSACTION
SEC. 620.
(a) Subject to paragraphs (b) and (c), the aggregate number of securities of a
listed issue which are issued or made subject to issuance pursuant to
private placement transactions during any six-month period must not exceed
25% of the number of securities of the issue which are outstanding (on a
non-diluted basis) prior to giving effect to such transactions.
(b) The Exchange will give consideration to requests by listed companies to
exceed the 25% limit referred to in paragraph (a), but only on condition
that approval of the shareholders be obtained.
(c) If the listed company has more than one outstanding class of participating
securities, the Exchange may, in appropriate circumstances, regard the
separate classes as a single class for the purposes of paragraph (a).
(d) In the case of a private placement of convertible securities, or where
warrants are issued to a private placement purchaser, the underlying
securities will be regarded as being "subject to issuance", for the
purposes of paragraph (a), at the time of the closing of the private
placement transaction, regardless of when the right of conversion or
exercise commences.
(e) Where the number of securities of a listed issue which would be issued or
made subject to issuance pursuant to a proposed private placement
transaction (or series of related transactions) would exceed 100% of the
number of securities of the issue which are outstanding (on a non-diluted
basis) prior to giving effect to the transaction, reference should be made
to Sections 699.10 to 699.15 respecting "backdoor listings".
24
SCHEDULE "B"
SECTION 7.1 TO 7.5 OF ASX RULES
ISSUES EXCEEDING 15% OF CAPITAL
7.1 Without the approval of holders of ordinary securities, an entity must not
issue or agree to issue more equity securities than the number calculated
according to the following formula.
(A x B) - C
A = The number of fully paid ordinary securities on issue 12 months before the
date of issue or agreement,
o plus the number of fully paid ordinary securities issued in the 12 months
under an exception in rule 7.2,
o plus the number of partly paid ordinary securities that became fully paid
in 12 months,
o plus the number of fully paid ordinary securities issued in the 12 months
with approval of holders of ordinary securities under this rule,
o less the number of fully paid ordinary securities cancelled in the 12
months.
B = 15%
C = The number of equity securities issued or agreed to be issued in the 12
months before the date of issue or agreement to issue but not under an exception
in rule 7.2 or with approval under this rule.
7.1.1 - 7.1.3 [REPEALED]
7.1.4 In working out the number of equity securities that an entity may issue or
agree to issue, and the number of equity securities in "C", the following rules
apply.
(a) If the equity securities are fully paid ordinary securities, each security
is counted as one.
(b) If the equity securities are convertible into ordinary securities or are
partly paid securities, each security is counted as the maximum number of
fully paid ordinary securities into which it can be converted or paid up.
(c) In any other case, each security is counted as ASX decides.
7.1.5 The following rules apply regarding issues of equity securities or
agreements to issue equity securities.
(a) An agreement to issue equity securities that is conditional on holders of
ordinary securities approving the issue before the issue is made is not
25
treated as an agreement. If an entity relies on this rule it must not issue
the equity securities without approval.
(b) In working out if there is an issue of equity securities the sale or
reissue of forfeited equity securities is treated as an issue of equity
securities.
7.1.6 In working out the number of fully paid ordinary securities on issue 12
months before the date of issue or agreement in "A", if first quotation of the
entity's securities occurred less than 12 months before the date of issue or
agreement, the number of securities is the number of fully paid ordinary
securities on issue on the date of first quotation.
EXCEPTIONS TO RULE 7.1
7.2 Rule 7.1 does not apply in any of the following cases.
Exception 1 An issue to holders of ordinary securities made under a pro rata
issue and to holders of other equity securities to the extent that the terms of
issue of the equity securities permit participation in the pro rata issue.
Exception 2 An issue under an underwriting agreement to an underwriter of a pro
rata issue to holders of ordinary securities if the underwriter receives the
securities within 15 business days after the close of the offer.
Exception 3 An issue to make up the shortfall on a pro rata issue to holders of
ordinary securities. The entity must make the issue within 3 months after the
close of the offer, and the directors of the entity (in the case of a trust, the
responsible entity or management company) must have stated as part of the offer
that they reserve the right to issue the shortfall at their discretion. The
issue price must not be less than the price at which the securities were offered
under the pro rata issue.
Exception 4 An issue on the conversion of convertible securities. The entity
must have issued the convertible securities before it was listed or complied
with the listing rules when it issued the convertible securities.
Exception 5 An issue under an off-market bid that is required to comply with
the Corporations Act or under a merger by way of scheme of arrangement under
Part 5.1 of the Corporations Act.
Exception 6 An issue to fund the cash consideration in any of the following
circumstances if the terms of the issue are disclosed in the takeover or scheme
documents.
o An off-market bid that is required to comply with the Corporations Act,
when the offer becomes unconditional.
o A market bid that is required to comply with the Corporations Act, when the
market bid is announced under section 635 of the Corporations Act.
o A merger by way of scheme of arrangement under Part 5.1 of the Corporations
Act, when the arrangement is approved by the court under section 411(4) of
the Corporations Act.
26
Exception 7 An issue under a dividend or distribution plan, excluding an issue
to the plan's underwriters. Exception 7 is only available in the following
cases.
(a) In the case of a plan that was established before the entity was listed - a
summary of the plan's terms was set out in the prospectus or information
memorandum.
(b) In the case of a plan that was established after the entity was listed -
the plan's terms were approved by holders of ordinary securities.
Exception 8 [REPEALED]
Exception 9 An issue under an employee incentive scheme if within 3 years
before the date of issue one of the following occurred.
(a) In the case of a scheme established before the entity was listed - a
summary of the terms of the scheme were set out in the prospectus, Product
Disclosure Statement or information memorandum.
(b) Holders of ordinary securities have approved the issue of securities under
the scheme as an exception to this rule. The notice of meeting must have
included each of the following.
o A summary of the terms of the scheme.
o The number of securities issued under the scheme since the date of the last
approval.
o A voting exclusion statement.
(c) The scheme was approved by holders or ordinary securities under rule 7.37
or 7.38.
Exception 10 An issue of preference shares which do not have any rights of
conversion into another class of equity security. The preference shares must
comply with chapter 6.
Exception 11 The reissue or sale of forfeited shares within 6 weeks after the
day on which the call was due and payable.
Exception 12 An issue on the exercise of options to an underwriter of the
exercise. Exception 12 is only available if each of the following applies.
(a) The entity complied with the listing rules when it issued the options.
(b) The underwriter receives the underlying securities within 10 business days
after expiry of the options.
(c) The underwriting agreement was disclosed under rule 3.11.3.
Exception 13 An issue under an agreement to issue securities. The entity must
have complied with the listing rules when it entered into the agreement to issue
the securities.
27
Exception 14 An issue made with the approval of holders of ordinary securities
under listing rule 10.11. The notice of meeting must state that if approval is
given under listing rule 10.11, approval is not required under listing rule 7.1.
NOTICE REQUIREMENTS FOR APPROVAL UNDER RULE 7.1 AND 7.1.5(a)
7.3 For the holders of ordinary securities to approve an issue or agreement
to issue, the notice of meeting must include each of the following.
7.3.1 The maximum number of securities the entity is to issue (if
known) or the formula for calculating the number of securities
the entity is to issue.
7.3.2 The date by which the entity will issue the securities. The
date must be no later than 3 months after the date of the
meeting. However, if court approval of a reorganization of
capital (in the case of a trust, interests) is required before
the issue, the date must be no later than 3 months after the
date of court approval.
7.3.3 The issue price of the securities, which must be either:
o A fixed price; or
o A minimum price. The minimum price may be fixed or a
stated percentage that is at least 80% of the average
market price for securities in that class. The
average is calculated over the last 5 days on which
sales in the securities were recorded before the day
on which the issue was made or, if there is a
prospectus, Product Disclosure Statement or offer
information statement relating to the issue, over the
last 5 days on which sales in the securities were
recorded before the date the prospectus, Product
Disclosure Statement or offer information statement
is signed.
7.3.4 The names of the allottees (if known) or the basis upon which
allottees will be identified or selected.
7.3.5 The terms of the securities.
7.3.6 The intended use of the funds raised.
7.3.7 The dates of allotment or a statement that allotment will
occur progressively.
7.3.8 A voting exclusion statement. This does not apply if the issue
is part of a public offer of equity securities and the notice
of meeting states each of the following.
(a) The entity will offer securities to all holders of
ordinary securities in priority to anyone else, and
will issue them in a fair and equitable manner.
(b) Apart from an agreement for the allotment of
securities, the entity will limit the number of
securities it issues to a holder of ordinary
securities to the higher of 5% of all the securities
being offered
28
and the number the holder would be entitled to under
a pro rata issue of all those securities.
7.3.9 In the case of an agreement for the allotment of securities
which is part of a public offer, a voting exclusion statement
in relation to a party to the agreement, and an adequate
summary of the agreement.
SUBSEQUENT APPROVAL OF AN ISSUE OF SECURITIES
7.4 An issue of securities made without approval under rule 7.1 is treated
as having been made with approval for the purpose of rule 7.1 if each
of the following apply.
7.4.1 The issue did not breach rule 7.1.
7.4.2 Holders of ordinary securities subsequently approve it.
7.5 For the holders to approve the issue subsequently, the notice of
meeting must include each of the following.
7.5.1 The number of securities allotted.
7.5.2 The price at which the securities were issued.
7.5.3 The terms of the securities.
7.5.4 The names of the allottees or the basis on which allottees
were determined.
7.5.5 The use (or intended use) of the funds raised.
7.5.6 A voting exclusion statement.
29
SCHEDULE "C"
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Corporation's Statement of Corporate Governance Practices is set out below.
In addition to indicating how the Corporation's governance practices align with
the TSX Corporate Governance Guidelines ("TSX Guidelines"), the statement
describes those governance practices with reference to the Proposed TSX Listing
Standards and the Proposed TSX Amendments.
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
1. Mandate of the Board
The board of directors of every Yes The Board of Directors has assumed
corporation should explicitly assume responsibility for the stewardship of
responsibility for stewardship of the the Corporation and has adopted a
corporation. formal mandate (as described above)
setting out its stewardship
responsibilities, as contemplated by
the Proposed TSX Amendments.
As part of the overall stewardship
responsibility, the Board should
assume responsibility for the
following matters:
(a) adoption of a strategic Yes In April 2003, the Board adopted a
planning process; strategic planning process which
involves, among other things, the
following:
(a) at least one meeting per year will
be devoted substantially to review of
strategic plans that are proposed by
management;
(b) meetings of the Board, at least
quarterly, to discuss strategic
planning issues, with and without
members of management;
(c) the Board reviews and assists
management in forming short and long
term objectives of the Corporation on
an ongoing basis;
(d) the Board also maintains
30
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
oversight of management's strategic
planning initiatives through annual
and quarterly budget reviews and
approvals. The strategic planning
process adopted by the Board takes
into account, among other things, the
opportunities and risks of the
business.
(b) the identification of the principal Yes In order to ensure that the principal
risks of the Corporation's business business risks borne by the
and ensuring the implementation of Corporation are identified and
appropriate systems to manage these appropriately managed, the Board
risks; receives periodic reports from
management of the Corporation's
assessment and management of such
risks. In conjunction with its review
of operations which takes place at
each Board meeting, the Board
considers risk issues and approves
corporate policies addressing the
management of the risk of the
Corporation's business.
(c) succession planning, including Yes The Board takes ultimate
appointing, training and monitoring responsibility for the appointment and
senior management; monitoring of the Corporation's senior
management. The Board approves the
appointment of senior management and
reviews their performance on an
ongoing basis.
(d) a communication policy for the Yes The Corporation has a disclosure
corporation; policy addressing, among other things,
how the Corporation interacts with
analysts and the public, and contains
measures for the Corporation to avoid
selective disclosure. Effective April
9, 2003, the Board has established a
Disclosure Committee responsible for
overseeing the Corporation's
disclosure practices. This committee
consists of the Chief
31
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
Executive Officer, the Chief Financial
Officer, the Corporate Secretary and
senior Corporate Communications and
Investor Relations Department
personnel, and receives advice from
the Corporation's outside legal
counsel. The Disclosure Committee will
establish benchmarks for a preliminary
assessment of materiality and
determines when developments justify
public disclosure. The committee will
review the disclosure policy annually
and as otherwise needed to ensure
compliance with regulatory
requirements. The Board reviews and
approves the Corporation's material
disclosure documents, including its
annual report, annual information form
and management proxy circular. The
Corporation's annual and quarterly
financial statements, Management's
Discussion and Analysis and other
financial disclosure is reviewed by
the Audit Committee and recommended to
the Board prior to its release.
(e) the integrity of the corporation's Yes The Audit Committee has the
internal control and management responsibility to monitor and assess
information systems. the integrity of the Corporation's
internal controls and management
information systems, review them with
management and the Corporation's
external auditors, and report to the
Board with respect thereto.
2/3. Composition of the Board
The board of directors of every of Yes At the date of this Circular, four of
corporation should be constituted the seven members of the Board
32
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
with a majority of individuals who of Directors are "unrelated", both as
qualify as unrelated directors. that term is defined in the existing
TSX Guidelines and as it is defined in
the Proposed TSX Amendments, as more
particularly described below. At least
two directors are unrelated, as
contemplated by the Proposed TSX
Listing Standards.
The definitions are as follows:
(TSX Guidelines)
- a director who is independent
of management and is free from
any interest and any business or
other relationship which could, or
reasonably be perceived to, materially
interfere with the directors ability
to act with a view to the best
interest of the company, other than
interests and relationships arising
from shareholding.
(Proposed TSX Amendments)
- an outside director who is not a
member of management and is free from
any interest and any business, family
or other relationship which could
reasonably be perceived to materially
interfere with the director's ability
to act with a view to the best
interests of the issuer, other than
interests and relationships arising
solely from holdings in the issuer;
and who
(a) is not currently, or has not been
within the last three years, an
officer, employee of or material
service provider to the issuer or any
of its subsidiaries or affiliates; and
(b) is not an officer, employee or
controlling shareholder of an entity
that has a material business
relationship with the issuer.
33
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
A "related director" is a director who
is not an unrelated director or is a
member of management.
If the corporation has a significant Yes The TSX Guidelines define "significant
shareholder, in addition to a majority of shareholder" to mean a shareholder
unrelated directors, the board should with the ability to exercise a
include a number of directors who do not majority of the votes for the election
have interests in or relationships with of the board of directors. The
either the corporation or the significant Corporation does not have a
shareholder and which fairly reflects the "significant shareholder" as so
investment in the corporation by defined. However, the Chairman and the
shareholders other than the significant Chief Executive Officer of the
shareholder. Corporation holds approximately 44.44%
of the Corporation's voting securities
as at the date of this Circular. The
Corporation has four of seven
directors who are "unrelated" (as
defined under the existing TSX
Guidelines under the Proposed TSX
Amendments) to both the Corporation
and its Chairman and Chief Executive
Officer.
Disclose for each director whether he or she Messrs. Friedland, Flood and Toll, as
is related, and how that conclusion was senior officers of the Corporation
reached. and/or one or more of its subsidiaries
and members of management, are
considered to be related directors.
Messrs. Weatherall, Faber, Hanson and
Thygesen are considered to be
unrelated directors, both as defined
in the TSX Guidelines and in the
proposed TSX Amendments, as set forth
above. The Board has determined that
they are not members of and
independent of management, and are
free from any interest and any
business, family or other relationship
which could, or could reasonably be
perceived to, materially interfere
with their ability to act with a view
to the best interests of the
Corporation, other than interests
34
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
and relationships arising solely from
shareholdings in the Corporation, and
who are not currently and have not
been within the last three years,
officers, employees or material
service providers to the Corporation
or any of its subsidiaries or
affiliates, or officers, employees or
controlling shareholders of an entity
that has a material business
relationship with the Corporation.
4. Nominating/Corporate Governance Committee
The board of directors of every corporation Yes The Board has appointed a Nominating
should appoint a committee of directors and Corporate Governance Committee,
composed exclusively of outside (i.e. effective April 9 2003, consisting of
non-management) directors, with the Messrs. Hanson, Weatherall and
responsibility of proposing to the full Thygesen, all of whom are outside
board new nominees to the board and for unrelated directors. The full Board
assessing directors on an ongoing basis. will determine, in light of the
opportunities and risks facing the
Corporation, what competencies, skills
and personal qualities it should seek
in new Board members in order to add
value to the Corporation. Based on
this framework, the Nominating and
Corporate Governance Committee has
responsibility for approaching and
proposing to the full Board new
nominees to the Board, and for
assessing directors on an ongoing
basis.
5. Board Assessment
Every board of directors should implement a Yes The Nominating and Corporate
process to be carried out by the nominating Governance Committee is charged with
committee or other appropriate committee for the responsibility for developing and
assessing the effectiveness of the board, as recommending to the Board, and
a whole, the committees of the board and the overseeing the execution of, a process
contribution of individual directors. for assessing the effectiveness of the
Board as a whole, the committees of
the Board and the
35
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
contribution of individual
directors, on an annual
basis. The Nominating and Corporate
Governance Committee is currently
developing an assessment process
appropriate for the Board and each of
its committees.
6. Orientation and Education
Every corporation, as an integral element of Yes The Corporation takes steps to ensure
the process of appointing new directors, that prospective directors fully
should provide an orientation and education understand the role of the Board and
program for new recruits to the board. its committees and the contribution
individual directors are expected to
make, including in particular the
commitment of time and energy that the
Corporation expects of its directors.
New directors are provided with a
comprehensive information package,
including pertinent corporate
documents and a director's manual
containing information on the duties,
responsibilities and liabilities of
directors. New directors are also
briefed by management as to the status
of the Corporation's business.
Directors are provided with the
opportunity to make site visits to the
Corporation's properties.
Management and outside advisors provide
information and education sessions to
the Board and its committees on s
continuing basis as necessary to keep
the directors up-to-date with the
Corporation, its business and the
environment in which it operates as
well as with developments in the
responsibilities of directors, as
contemplated by the Proposed TSX
Amendments.
36
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
7. Size and Composition of the Board
Every board of directors should examine its Yes The directors of the Corporation have
size and undertake, where appropriate, a reviewed the size of the Board and
program to establish a board size which believe that the current Board
facilitates effective decision-making. composition results in a balanced
representation on the Board of
Directors among management, unrelated
directors and the Corporation's major
shareholder. While the Board functions
effectively, given the Corporation's
stage of development and the size and
complexity of its business, the Board,
through its Nominating and Corporate
Governance Committee, will continue to
seek additional qualified candidates
to augment its experience and
expertise and to enhance the
Corporation's ability to effectively
develop its business interests. The
Nominating and Corporate Governance
Committee will continue to examine the
size and composition of the Board and
recommend adjustments from time to
time to ensure that the Board continue
to be of a size that facilitates
effective decision-making.
8. Compensation
The board of directors should review the Yes The Corporation's directors receive no
adequacy and form of compensation of cash compensation for acting as
directors and ensure the compensation directors. Directors of the
realistically reflects the responsibilities Corporation are compensated primarily
and risk involved in being an effective through the grant of stock options.
director.
37
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
The Board acts through its
Compensation and Benefits Committee to
review the adequacy and form of
compensation of the directors and
ensure that such compensation
realistically reflects the
responsibilities and risk involved in
being an effective director. The
members of the Compensation Committee
are Messrs. Flood, Thygesen and
Hanson. Messrs. Thygesen and Hanson
are unrelated directors and Mr. Flood
is an inside director. At the date of
this Circular, the Compensation and
Benefits Committee does not consist
solely of unrelated directors and
accordingly, does not align with the
Proposed TSX Amendments. However, the
Board has determined to appoint a new
unrelated director in the place of Mr.
Flood on this committee, such change
to be made once an additional outside
independent director is elected or
appointed to the Board. Once this
occurs, the composition of the
Compensation and Benefits Committee
will align with the Proposed TSX
Amendments.
9. Composition of Committees
Committees of the board of directors Yes The Board of Directors has established
should generally be composed of outside three standing committees of directors
(i.e. non-management) directors, the (the Audit Committee, the Compensation
majority of whom are unrelated and Benefits Committee and the
directors, although some board Nominating and Corporate Governance
committees may include one or more Committee), each of which is comprised
inside directors. entirely of outside unrelated
directors, with the exception of the
Compensation and Benefits Committee,
which currently has one inside
director as described under Item 8
above.
38
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
10. Governance Committee
Every board of directors should assume Yes The Nominating and Corporate
responsibility for, or assign to a Governance Committee is responsible
committee of directors, the general for making recommendations to the
responsibility for, developing the Board relating to the Corporation's
corporation's approach to governance approach to corporate governance and
issues. This committee would, among the Corporation's response to the TSX
other things, be responsible for the Guidelines.
corporation's response to the TSX
Guidelines.
11. Position Descriptions Yes The Board of Directors has adopted a
formal mandate for the Board, as
The board of directors, together with stated in Item 1, and is developing a
the CEO, should develop position formal position description for the
descriptions for the Board and for the CEO. The Board of Directors requires
CEO, including the definition of limits management to obtain the Board of
to management's responsibilities. Directors' approval for all
significant decisions, including major
financings, acquisitions,
dispositions, budgets and capital
expenditures. The Board of Directors
expects management to keep it aware of
the Corporation's performance and
events affecting the Corporation's
business, including opportunities in
the marketplace and adverse or
positive developments. The Board of
Directors retains responsibility for
any matter that has not been delegated
to senior management or to a committee
of directors.
In addition, the board should approve Yes The Board of Directors is developing
or develop the corporate objectives, specific financial and business
which the CEO is responsible for objectives for the Corporation, which
meeting. will be used as a basis for measuring
the performance of the CEO.
12. Procedures to Ensure Independence
Every board of directors should Yes Mr. Friedland, the Corporation's
implement structures and procedures President and Chief Executive Officer,
which ensure that the currently serves as
39
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
Chairman of the Board of
board can function independently of Directors. The Board of
management. An appropriate structure would Directors is of the view that
be to (i) appoint a chair of the board who appropriate structures and procedures
is not a member of management with are in place to allow the Board to
responsibility to ensure the board function independently of management
discharges its responsibilities or (ii) while continuing to provide the
assign this responsibility to an Corporation with the benefit of having
outside director, sometimes referred to a Chairman of the Board with extensive
as the "lead director". The chair or experience and knowledge of the
lead director should ensure that the Corporation's business.
board carries out its responsibilities
effectively which will involve the The Board has created the position of
board meeting on a regular basis lead director effective April 9, 2003
without management present and may with specific responsibility for
involve assigning the responsibility maintaining the independence of the
for administering the board's Board and ensuring that the Board
relationship to management to a carries out its responsibilities as
committee of the board. contemplated by the Proposed TSX
Amendments. Mr. Thygesen, who also
serves as chair of the Nominating and
Corporate Governance Committee, has
been appointed as lead director.
The Nominating and Corporate
Governance Committee also provides a
forum without management being present
to receive any expression of concern
from a director, including a concern
regarding the independence of the
Board from management.
The Board sets aside a portion of each
regularly scheduled meeting to discuss
any issues without management
directors being present. In addition,
all committees meet without management
or related directors being present at
the request of any directors.
40
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
13. Composition of the Audit Committee
The audit committee of every board of Yes The Audit Committee is composed only
directors should be composed only of of outside directors (as required by
outside directors. the TSX Guidelines), all of whom are
also unrelated directors, as
contemplated by the Proposed TSX
Listing Standards and the Proposed TSX
Amendments.
The Board has determined that all
members of the Audit Committee are
financially literate, as contemplated
by the Proposed TSX Amendments, since
each member has the ability to read
and understand a balance sheet, an
income statement, a cash flow
statement and the notes attached
thereto.
The Board has determined that
at least one member of the Audit
Committee has accounting or related
financial expertise, as contemplated
by the Proposed TSX Amendments, being
the ability to analyse and interpret a
full set of financial statements,
including the notes thereto, in
accordance with Canadian generally
accepted accounting principles.
The roles and responsibilities of the audit Yes The mandate of the Audit Committee
committee should be specifically defined includes the overseeing of the
so as to provide appropriate guidance to Corporation's financial reporting
audit members as to their duties. obligations, systems and disclosure,
including monitoring the integrity of
the Corporation's financial
statements, monitoring the
independence and performance of the
Corporation's external auditors and
acting as a liaison between the Board
and the Corporation's auditors. The
activities of the Audit Committee
41
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
include reviewing the Corporation's
interim financial statements and
annual financial statements and
Management's Discussion and Analysis,
ensuring that internal controls over
accounting and financial systems are
maintained and that accurate financial
information is disseminated to
shareholders, reviewing the results of
audits and any change in accounting
procedures or policies, and evaluating
the performance of the Corporation's
auditors.
An Audit Committee charter is in the
process of preparation for the
approval of the Board which will
codify the existing mandate of the
Audit Committee to, and specifically
define its relationship with, and
expectations of, the external
auditors, including the establishment
of the independence of the external
auditor and the approval of any
non-audit mandates of the external
auditor; the engagement, evaluation,
remuneration and termination of the
external auditor; its relationship
with, and expectations of, the
internal auditor function and its
oversight of internal control; and the
disclosure of financial and related
information. The Board will review and
reassess the adequacy of the Audit
Committee charter on an annual basis,
all as contemplated by the Proposed
TSX Listing Standards and the Proposed
TSX Amendments.
The audit committee should have direct Yes The Audit Committee has regular access
communication channels with the to the Chief Financial Officer of the
internal and the external auditors to Corporation. The external auditors
discuss and review specific issues as regularly attend all meetings of the
appropriate. Audit Committee. At each meeting of
42
DOES THE
CORPORATION
TSX CORPORATE GOVERNANCE GUIDELINE ALIGN? COMMENTS
----------------------------------- ------------ ---------------------------------------
the Audit Committee, a portion of the
meeting is set aside to discuss
matters with the external auditors
without management being present. In
addition, the Audit Committee has the
authority to call a meeting with the
external auditors without management
being present, at the Committee's
discretion.
Audit Committee duties should include Yes The Audit Committee oversees
oversight responsibility for management management reporting on the
reporting on internal control. While it Corporation's internal controls and
is management's responsibility to annually reviews management's system
design and implement an effective of internal control to ensure that it
system of internal control, it is the is effective.
responsibility of the Audit Committee
to ensure that management has done so.
15. External Advisors
The board of directors should implement Yes Each committee is empowered to engage
a system which enables individual external advisors as it sees fit. Any
directors to engage an outside advisor, individual director is entitled to
at the expense of the company in engage an outside advisor at the
appropriate circumstances. The expense of the Corporation provided
engagement of the outside advisor that such director has obtained the
should be subject to the approval of an approval of the Nominating and
appropriate committee of the board. Corporate Governance Committee to do
so.
43
NOTICE OF ANNUAL MEETING OF THE SHAREHOLDERS
AND
MANAGEMENT PROXY CIRCULAR
OF
IVANHOE MINES LTD.
DATED: APRIL 15, 2003