CANADA

Background

Computershare entered the Canadian transfer agency market in 2000 when it acquired the Bank of Montreal's stock transfer business as well as the stock transfer business of Montreal Trust and American Securities Transfer and Trust.

Since its acquisition, Computershare Trust Company of Canada has retained its dominant position in the market and currently has 62% market share. Market share of Employee Plans market is much more competitive with five major competitive groups participating in the Canadian marketplace.

We have always focused on client retention efforts and winning new transfer agency business, and have set down foundations for improved operational efficiency and the introduction of new technologies in 2002.

Recognition of the Computershare brand in the Canadian market is established and we continue to build on this. Our most recent customer relationship initiatives include:

  • The introduction of monthly shareholder satisfaction surveys that tracked satisfaction ratings with measurable goals and targets
  • Increased focus on operational efficiencies and improving delivery of services to issuers and investors.

Significant Transactions During the Year

The critical success factors that have been a major feature of the high profile contracts this year include:

  • Key relationships with existing clients and market place advisors
  • Reputation for technological expertise and ability to execute complicated transactions
  • Competitive pricing
  • Integrated global offering.

Outlined below are some of the high profile corporate actions that we have been involved with during the year:

  • Canadian Pacific Limited Plan of Arrangement where CP Limited split into five different public companies, including Canadian Pacific Railway, Canadian Pacific Ships, Fording Coal, Fairmont Hotels, and Pan Canadian Petroleums. We were selected to handle the reorganisation for four of the five new companies with the exception of Pan Canadian Petroleums. The deal was effective October 2001 with 32,000 shareholders and a value of 17.0 billion CDN.
  • Agricore merger with United Grain Growers. The date of amalgamation was November 2001. Reorganisation fees plus recurring annual income increased.
  • Duke Energy Corporation Plan of Arrangement with Westcoast Energy Ltd. It has a value of 8.5 billion CDN. The offer details are 50% cash and 50% in either share of Duke Canada or Duke Energy at the option of the holder.
  • Purchase of Centura Bank by Royal Bank of Canada (RBC). The effective date was June 2001 (not included in last year's annual report) and included 17,000 shareholders with a value of 3.0 billion CDN.
  • Boralex Power Income Fund IPO. The issue on the TSX was 25 million units at $10 a unit, which was the cash value of the offering that took place on 21 February, 2002. This was one of the largest single transaction wins for the Montreal branch.
  • Canada Mortgage Bonds. We were selected as Central Paying Agent and document custodian for the new bond programme. Canada Mortgage Bonds closed for a record-breaking $2.5 billion and total pool issuances exceeded records by closing with 25 new NHA MBS pools totalling $2.7 billion.

Global Offering Contracts

  • Franco-Nevada plan of arrangement with Newmont Mining. This deal was effective 15 February, 2002 and the 1,300 shareholders of Franco-Nevada could elect to receive either 0.80 of exchangeable shares of Newmont or 0.80 of United States common stock of Newmont Mining Corp. It was an international deal where Computershare Canada was the transfer agency for Franco-Nevada and Computershare Australia was the transfer agency for Normandy, which was taken over by Newmont.
  • Canada Life's NYSE listing requirement that they have a full service transfer agent in the United States and in Canada. We were able to provide a unique solution due to our complementary business capabilities on both sides of the border. Computershare United States now supports United States shareholders of Canada Life - as opposed to the traditional co-agency relationship. This allows Canada Life to issue book entry positions in the United States and support a direct purchase programme if they choose.

The Market

We have seen a general decline in the number of IPOs and mergers and acquisitions activity over the period. The number of IPOs in 2001 on the TSE was 97. At present, Computershare has a market share of 62.80%.

Shareholders continue to demand electronic solutions such as IVR and internet access. The internet is playing a key role in the development of services by industry players and their usage by clients. Flexibility, access 24/7, and user ease and convenience are major market drivers.

Important Legislative Changes

The most significant regulatory change this past year was the approval of National Instrument (NI) 54-101. Acceptance of NI 54-101 provides transfer agencies with access to a select market of beneficial holders known as NOBOs (non-objecting beneficial owners). As a result of this policy change, issuers will gain access to information about their NOBOs and have the ability to communicate with them directly. Starting in September 2002, issuers will be able to access NOBO data for purposes other than the distribution of proxy-related material. By September 2004 (or possibly earlier) issuers will be able to deliver proxy-related material to NOBOs and then directly see the results of their voting. This change puts the United States market in a unique position where similar legislation has not been approved. Computershare is working with the NYSE to introduce similar changes in the United States following Canada's lead.

Other legislative changes include the introduction of a national policy governing the electronic distribution of proxy materials to shareholders and the ability for shareholders to vote electronically (e-voting and e-delivery were approved in Canada).

Direct share purchase plans, which allow individual investors to purchase stock directly from sponsoring companies without broker intervention, have been approved in Ontario under Rule 32-501. However, DPPs have limited scope given that they are only available in Ontario. We are meeting with other provincial securities commissions to gain approval on a national basis.

Employee share plan outsourcing is on the rise. The reasons for this are that prior to 2000, tax treatment was neutral and did not present a particular advantage to offering share plans. Most Canadian provinces have legislation providing substantial tax credits (up to 40%) for investment in employer stock. Several hundred companies have taken advantage of this process.

Priorities

  • Expansion of our client service offering: - Delivery of new services for corporate actions in the last quarter of 2002 - NOBO data made available for non-proxy related purposes, September 2002 - Electronic Proxy Voting through both the internet and Interactive Voice Response (IVR) telephony - NOBO data made available for proxy related purposes, by September 2004
  • Electronic Data Capture and workflow technology to be fully implemented across Canada
  • Conversion of all Canadian accounts to SCRIP by March 2003 (Bank of Montreal book of business completed)
  • Improved efficiency of Client Contact Centre to be now serviced by I3 telephony technology at new state-of-the-art facility in Montreal
  • Pursue additional revenue opportunities from launch of CDS and Analytics (IRtrack product)
  • Promote increased functionality now offered through web-based Shareholder Communications.