CSA and CCIR Notice of Publication: Total Cost Reporting Enhancements for Investment and Segregated Funds

CSA and CCIR Notice of Publication
CCIR Individual Variable Insurance Contract Ongoing Disclosure Guidance Regulation to amend Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations Amendments to Policy Statement to Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations Total Cost Reporting (TCR) for Investment Funds and Segregated Funds April 20, 2023 Introduction The Canadian Securities Administrators (the CSA) and the Canadian Council of Insurance Regulators (the CCIR, together, the Joint Regulators or we), are adopting enhanced cost disclosure reporting requirements for investment funds and new cost and performance reporting guidance for individual variable insurance contracts or IVICs (referred to here as Segregated Fund Contracts), as described below (collectively, the Total Cost Reporting Enhancements or TCR Enhancements). The TCR Enhancements have been developed by a joint project committee composed of members from the CSA, CCIR, Canadian Insurance Services Regulatory Organizations (CISRO) and the New Self-Regulatory Organization of Canada (New SRO) (the Project Committee). The TCR Enhancements for the securities sector (the Securities Amendments) are for amendments to Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations (Regulation 31-103) and to the Policy Statement to Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations (Policy Statement 31-103). The TCR Enhancements for the insurance sector are found in the Individual Variable Insurance Contract Ongoing Disclosure Guidance (the Insurance Guidance) – an enhanced disclosure

framework for Segregated Fund Contracts. The CCIR expects each of its member jurisdictions will adopt the framework by local guidance or, in certain jurisdictions, regulation. In addition to including cost and performance reporting guidance, the Insurance Guidance also includes additional ongoing performance disclosure guidance designed to bring the insurance sector into closer harmony with the securities sector, as well as guidance with respect to ongoing disclosure with respect to Segregated Fund Contract guarantees. The Securities Amendments are relevant for all registered dealers, advisers and investment fund managers. The Insurance Guidance will apply to all insurers offering Segregated Fund Contracts to their policy holders. We expect New SRO to amend its member rules, policies and guidance to be materially harmonized with the Securities Amendments. In some jurisdictions, ministerial approvals are required for the implementation of the Securities Amendments. Provided all ministerial approvals are obtained, they will come into force on January 1st, 2026, subject to the transition period discussed below. Substance and Purpose The TCR Enhancements are part of the Joint Regulators’ harmonized response to concerns we have identified relating to current cost disclosure requirements for investment funds and segregated funds and product performance reporting requirements for segregated funds. One important concern which we aim to address is that there are currently no requirements for securities industry registrants or insurers to provide ongoing reporting to investors and policy holders on the amount of such costs after the initial sale of the investment product, in a form which is specific to the individual’s holdings and easily understandable. We believe the TCR Enhancements will enhance investor protection by improving investors’ and policy holders’ awareness of the ongoing embedded fees such as management expense ratios (MER) and trading expense ratios (TER) that form part of the cost of owning investment funds and segregated funds. The Insurance Guidance will also enhance policy holder protection by improving policy holders’ awareness of their rights to guarantees under their Segregated Fund Contracts and how their actions might affect their guarantees. The TCR Enhancements are as consistent as possible between the securities and insurance sectors with respect to disclosure of the ongoing costs of owning Segregated Fund Contracts and investment funds, taking into account the material differences among those products and in the ways the two sectors and their regulatory regimes operate. New elements for the securities sector The Securities Amendments add the following new elements to Regulation 31-103:

In the annual report on charges and other compensation (the ARCC) under section 14.17
for the account as a whole, for all investment fund securities owned by a client during the year, excluding labour-sponsored investment funds (LSIFs) and prospectus-exempt funds, information relating to:
o the aggregate amount of fund expenses, in dollars, for all investment funds; o the aggregate amount of any direct investment fund charges (e.g., short-term trading fees or redemption fees), in dollars, for all investment funds, and; o the fund expense ratio (the FER), as a percentage, for each investment fund class or series.
Additions to the existing requirement for investment fund managers to provide necessary
information to the dealers and advisers who distribute their products.
Provisions relating to the calculation and reporting of this information.
Existing exemptions for statements and reports provided to non-individual permitted clients (including, for example, many different institutional investors), pursuant to subsections 14.14.1(6) and 14.17(5) of Regulation 31-103, will continue to apply. There are no grandfathering provisions.
Annex A – Summary of changes to Regulation 31-103 and Policy Statement 31-103 describes the
key changes to Regulation 31-103 and Policy Statement 31-103 in more detail. New elements for the insurance sector The Insurance Guidance indicates insurers should provide the following information in statements to investors with respect to the cost of holding segregated fund contracts, in addition to the information already described in the December 2017 CCIR Segregated Funds Working Group Position Paper and the June 2018 appendix amendments (the Segregated Fund Position Paper):
the fund expense ratio, stated as a percentage, for each segregated fund held by the client
within their Segregated Fund Contract during the statement period; and
for the Segregated Fund Contract as a whole:
o the aggregate amount of fund expenses, in dollars, for all segregated funds held in the contract during the statement period; o the aggregate cost of insurance guarantees under the Segregated Fund Contract, in dollars, for the statement period; and o the aggregate amount of all other expenses under the Segregated Fund Contract, in dollars, for the statement period. Although the Insurance Guidance itself is not legally binding, insurance regulators in each jurisdiction will implement this initiative in line with their respective regulatory requirements, which will, in some jurisdictions, include legally binding requirements with effective dates which match the Securities Amendments. Background The TCR enhancements were developed over the course of an extensive consultation process.

Publication for Comment
We published proposed securities amendments and insurance guidance for comment on April 28, 2022 for a 90-day comment period (the Proposals). We received 38 letters for both the insurance and securities sectors. We have considered the comments received and thank all of the commenters for their input. We have made changes to some of the Proposals. These changes are summarized below and discussed in Annex B – Summary of comments and responses - Securities. As these changes are not material, we are not publishing the Proposals for another comment period. Copies of the comment letters were posted on the following websites:

the Alberta Securities Commission at www.albertasecurities.com
the Autorité des marchés financiers at www.lautorite.qc.ca
the Ontario Securities Commission at www.osc.gov.on.ca
the Canadian Council of Insurance Regulators at www.ccir-ccrra.org
Other Consultations
The TCR Enhancements follow on work securities regulators began after the completion of the Client Relationship Model, Phase 2 project in 2016 and the Segregated Fund Position Paper, as well as extensive consultations with investor advocates and market participants, including at the June 2021 and June 2022 meetings of the Joint Forum of Financial Market Regulators.1 Following the end of the comment period, the Project Committee created a joint working group and held technical consultations with industry stakeholders and service providers in order to discuss potential issues related to the proposed transition date and implementation issues (the Additional Consultations). Summary of Changes to the Proposals In developing the TCR Enhancements, we carefully reviewed the comments that we received on the Proposals. We found some of the comments recommending changes to be persuasive and revised the Proposals accordingly. We have sought to adequately balance the regulatory burden imposed, while maximizing investors’ awareness and understanding of their costs of investing. We have summarized the most notable changes below. 1 https://www.securities-administrators.ca/news/joint-forum-of-financial-market-regulators-receive-early-feedbackregarding-total-cost-reporting-and-climate-change/; https://www.securities-administrators.ca/news/joint-forum-offinancial-market-regulators-engages-with-industry-and-investor-groups-on-investment-fee-transparency/

Securities sector
Fund expense ratio
We have moved the requirement to report the fund expense ratio for each investment fund from the quarterly or monthly account statements to the ARCC. We believe that consolidating all information related to costs in a single annual report will facilitate investor understanding of this information. Application of Securities Amendments We have excluded prospectus-exempt and LSIFs from the scope of the Securities Amendments due to the differences between how those products operate as compared to funds included within the scope of the TCR Enhancements and considering the potential implementation issues which may be related to their inclusion. The Securities Amendments apply to all other investment funds, including scholarship plans. Newly-established funds We have added new provisions specifying in which circumstances cost information about newly-established funds may be excluded, considering that this information may not be available for those funds. In the case where such information is excluded, a notification must be included in the report. Due diligence We have clarified that we do not expect dealers and advisers to routinely undertake a due diligence review of the information provided to them by investment fund managers, outside of certain exceptional circumstances outlined in Regulation 31-103 and Policy Statement 31-103. In the case where such exceptional circumstances arise, dealers and advisers will continue to be required to make reasonable efforts to obtain the required information, subject to considerations about the materiality and costs of doing so. Use of approximations We added guidance that encourages the use of exact information. However, we continue to allow IFMs to use reasonable approximations, recognizing that there can be circumstances in which exact information will be unavailable or that the costs of obtaining it may outweigh the potential improvement over an approximation. We have removed the requirement that approximations be based on information found in a fund’s most recently disclosed fund facts document, ETF facts document, prospectus or management report of fund performance in order to grant registered firms additional flexibility in using approximations and to minimize the regulatory burden imposed. However, we have also provided guidance in Policy Statement 31-103 which notes that those documents can generally be relied on for these purposes.

We have also allowed dealers and advisers to use reasonable approximations when making reasonable efforts to obtain or determine cost information, in the case where the exceptional circumstance referred to above apply. Despite the allowance for registered firms to use reasonable approximations, we have added guidance which encourages investment fund managers to provide exact information, whenever available, considering that doing so would enhance investor understanding of their costs of investing. We believe this approach adequately balances the need for investors to receive information about the ongoing costs of owning investments funds, while avoiding imposing an undue regulatory burden on registrants. Calculation methods We have modified how cost information such as fund expenses and direct investment fund charges are required to be calculated, in order to clarify how each type of fee should be accounted for. We have also specified that the actual fees paid by the investor, including any performance fees and deducting any fee waivers, rebates or absorptions, should be reported. We have however indicated through guidance that the additional disclosure of any waivers, rebates or absorptions as a separate line item will be allowed. We have also adjusted the formula which must be used when calculating fund expenses in order that it more accurately reflects the costs actually incurred by each client. The revised formula is based on the more accurate calculation of the fund expenses for each day for which a fund was owned by an investor. We continue however to allow registered firms to provide a reasonable approximation of this amount. Notifications We have revised the required notifications, in collaboration with the OSC Investor Office Research and Behavioural Insights Team (IORBIT), with the goal of enhancing investor understanding. In response to comments regarding the inclusion of third-party charges, we have mandated the inclusion of a notification when certain such charges are deducted, as well as a notification concerning the embedded fees which may be associated with ownership of products which are not included within the scope of the Securities Amendments, such as structured products. We have also mandated the inclusion of a notification that explains to investors how they can take action with regards to the fee information contained in the report, for example by contacting their advisor to discuss the fees they pay or by considering the impact of those fees on the long-term performance of their portfolio.

ARCC sample document
We have made the required changes to the ARCC sample document, in collaboration with IORBIT, in order to reflect other changes made to the Proposals. Other The Securities Amendments also include revisions to the guidance in Policy Statement 31-103 which are primarily intended to clarify the interpretation of the new requirements. Insurance sector Harmonization We modified the Insurance Guidance to harmonize with the changes made to the Securities Amendments, as described above, taking into account the material differences among those products and in the ways the two sectors and their regulatory regimes operate. This includes changes such as adding definitions and calculation methodologies for Fund Expenses and Fund Expense Ratios, permitting insurers to use approximations, adding additional notifications and clarifying when cost information about newly-established funds may be excluded. Insurance Costs We clarified insurers are only required to disclose the dollar amount of insurance cost as a separate item in a policyholder’s annual statement where the insurance cost is not already included in another cost, such as fund expenses. Legacy Contracts We added a process for insurers to apply for exemptions from specific expectations in the Insurance Guidance in the unusual cases where costs to policyholders of insurer compliance will exceed the benefits to the policyholders. We recognize that where certain contracts are no longer being sold and the overall number of policyholders is low, the cost to upgrade systems to comply with the Insurance Guidance might be passed on to only a few policyholders, resulting in a disproportionate impact to individuals who own these older Segregated Fund Contracts. CCIR will only grant exemptions in exceptional circumstances, as described in the Insurance Guidance, in cases where an insurer can demonstrate to CCIR that complying with an expectation will result in costs to policyholders that would exceed the benefit to the same policyholders. The changes to the Proposals and our reasons for making them are discussed in more detail in
Annex B – Summary of comments on the Proposals and responses.

Further Changes
We may consider making proposals for extending the TCR Enhancements to include prospectusexempt and labour sponsored investment funds at a future date. Transition The TCR Enhancements will take effect on January 1, 2026. Both securities registrants and insurers will have to deliver the first annual reports that incorporate the TCR Enhancements for the year ending December 31, 2026. We have extended the transition period in light of significant implementation issues and concerns identified in the comment letters and the Additional Consultations. We believe this would result in the shortest possible delay for clients to receive TCR-enhanced reports, while providing industry with a sufficient implementation period. We therefore:

encourage registrants and insurers to begin reviewing their systems and conducting
advanced planning as soon as possible in order to have all of the resources necessary for implementation in place on time; and
expect registrants and insurers to complete the implementation of all required changes to
their individual systems well in advance of January 1st, 2026, in order to allow sufficient time for testing and the resolution of any unanticipated issues. The CSA and CCIR will establish an implementation committee with the participation of New SRO to provide guidance, respond to questions and otherwise assist registrants to operationalize the TCR Enhancements within the transition period (the Implementation Committee). This could include assisting registrants in determining appropriate standards and timelines for transmission of information and obtaining high-level updates on the timely progress of the implementation of the TCR Enhancements. List of Annexes This notice contains the following annexes:
Annex A - Summary of changes to Regulation 31-103 and Policy Statement 31-103
Annex B - Summary of comments and responses - Securities
Annex C - Adoption of the Securities Amendments
Annex D - Insurance Guidance
Annex E - Insurance sample annual statement
This notice and the Securities Amendments will be available on the following websites of CSA jurisdictions:

www.lautorite.qc.ca www.asc.ca www.bcsc.bc.ca www.fcnb.ca nssc.novascotia.ca www.osc.ca www.fcaa.gov.sk.ca www.msc.gov.mb.ca They will also be available on the CCIR website: https://www.ccir-ccrra.org. Questions If you have any questions, please contact the staff members listed below. With respect to securities questions:
Gabriel Chénard
Senior Policy Analyst
Oversight of Intermediaries
Autorité des marchés financiers
514 395-0337, ext. 4482
Toll-free: 1 800 525-0337, ext. 4482 gabriel.chenard@lautorite.qc.ca Chad Conrad Senior Legal Counsel Alberta Securities Commission Corporate Finance 403 297-4295 chad.conrad@asc.ca Curtis Brezinski Compliance Auditor Financial and Consumer Affairs Authority of Saskatchewan 306 787-5876 curtis.brezinski@gov.sk.ca Jan Bagh Senior Legal Counsel Alberta Securities Commission Corporate Finance 403 355-2804 jan.bagh@asc.ca Kathryn Anthistle Senior Legal Counsel, Legal Services Capital Markets Regulation Division British Columbia Securities Commission 604 899-6536 kanthistle@bcsc.bc.ca Clayton Mitchell Registration and Compliance Manager Financial and Consumer Services Commission (New Brunswick) 506 658-5476 Clayton.mitchell@fcnb.ca

Nick Doyle
Compliance Officer
Financial and Consumer Services
Commission (New Brunswick)
506 635-2450
Nick.doyle@fcnb.ca
Chris Jepson
Senior Legal Counsel
Ontario Securities Commission
416 593-2379 cjepson@osc.gov.on.ca
Brian Murphy
Manager, Registration
Nova Scotia Securities Commission
902 424-4592 brian.murphy@novascotia.ca
With respect to insurance questions:
Chantale Bégin CPA auditor
Senior Accountant, Capital and Liquidity
Policy
Autorité des marchés financiers
418 525-0337, ext 4595
Toll free : 1 877 525-0337, ext 4595 chantale.begin@lautorite.qc.ca Mr. Tony Toy, Policy Manager Canadian Council of Insurance Regulators National Regulatory Coordination Branch 416 590-7257 ccir-ccrra@fsrao.ca

ANNEX A
SUMMARY OF CHANGES TO REGULATION 31-103 AND POLICY STATEMENT 31-103 This annex summarizes the changes that the Securities Amendments will make to the current versions of Regulation 31-103 and Policy Statement 31-103. In addition to the changes summarized in this annex, the Securities Amendments also include technical drafting changes and clarifications. Reporting of investment fund cost information in ARCC We have expanded section 14.17 of Regulation 31-103 to require reporting the following information in the ARCC, for the account as a whole, for all investment funds securities owned by a client during the year, with the exception of LSIFs and prospectus-exempt funds (references to investment funds in this annex therefore exclude LSIF and prospectus-exempt funds):

the total amount of fund expenses, in dollars, for all investment fund securities;
the total amount of direct investment fund charges (e.g., short-term trading fees or
redemption fees), in dollars, for all investment fund securities, and;
the fund expense ratio, as a percentage, for each investment fund class or series of
securities.
The total amount of fund expenses, as well as each fund expense ratio must be reported inclusive of performance fees and net of any fee waivers, rebates or absorptions. In addition, the following total amounts must be reported in the ARCC:
the total investment fund expenses and charges, consisting of the total amount of
(a) the fund expenses and (b) the direct investment fund charges
the total costs of investing, consisting of the total amount of (a) the registered
firm’s charges, which are required to be reported under current requirements and (b) the total investment fund expenses and charges, which are newly required under the Securities Amendments. Notifications to clients in ARCC We have expanded section 14.17 to require the following notifications to be included in the ARCC:
a notification explaining to clients how they can take action based on the
information provided in the report;
if the client owned investment fund securities during the period covered by the
report:
o a notification which provides explanations to clients concerning fund expenses;

o a notification which refers clients to fund issuers’ documents for more information about fund expenses and fund performance, and to their account statements for information about their current holdings;

if deferred sales charges (DSC) were paid by the client, an explanation of those
charges;
if other direct investment fund charges were charged to client, an explanation of
those charges;
if information reported about the fund expenses, direct investment fund charges or
fund expense ratio(s) is based on an approximation or any other assumption, a notification that this is the case1 ;
if a structured product, LSIF or prospectus-exempt investment fund securities
were owned by the client, a notification that such products have embedded fees which may not be required to be reported in the ARCC;
if the registered firm knows or has reason to believe that the client paid custodial
fees, intermediary fees or interest charges to third-parties related to securities owned by the client, a notification that such charges or fees may not be reported in the ARCC;
if any foreign funds were owned by the client, a notification that information
about those funds may not be directly comparable to equivalent information for Canadian investment funds, and that it may include different types of fees. IFM duty to provide information to dealers and advisers We have expanded the IFM’s duty to provide information under section 14.1.1 of Regulation 31-103 to encompass the additional information dealers and advisers are required to deliver to clients under the Securities Amendments. We have added section 14.1.2 [Determination of fund expenses per security] to specify what information IFMs should provide registered dealers and advisers to allow them to comply with section 14.17(1)(i), as well as to specify how the fund expenses per security for the day, which are used as an input in the formula for calculating the aggregate amount of fund expenses under section 14.17(6), must be calculated. Calculation methods for cost information We have added subsection 14.17(6) to specify the method which must be used for calculating the aggregate amount of fund expenses. In summary, for each day in the reporting period, registered dealers and advisers must multiply the amount of fund expenses per security for that day by the number of securities owned by the client on that day, for each class or series of investment fund securities owned by a client. The dealer or adviser must then add together the resulting amounts for each class or series of investment fund securities owned by a client and for 1 A detailed description of those approximations or assumptions is not required to be reported.

each day in the reporting period to obtain the aggregate amount of fund expenses for the year. Reporting of fund expenses and direct investment fund charges by dealers and advisers We have added section 14.17.1 to specify that registered dealers and advisers must report information based on the information provided by IFMs, in the case where IFMs are required to do so. We have added subsection 14.17.1(2)(a) which provides that, in certain exceptional circumstances, such as if no information is provided by the IFM, the registered firm must make reasonable efforts to obtain or determine the required information by other means. This subsection also allows dealers or advisers to obtain or determine a reasonable approximation of that information. Use of reasonable approximations We have added subsection 14.1.2(2) to allow for the use of approximations by IFMs where it would not result in misleading information:

paragraph 14.1.2(2)(a) allows IFMs to use a reasonable approximation of the
inputs referenced in the formula for calculating the fund expenses per that security for the day;
paragraph 14.1.2(2)(b) allows IFMs to provide dealers or advisers with a
reasonable approximation of the aggregate amount of fund expenses, aggregate amount of direct investment fund charges and fund expense ratio for each class or series of investment fund securities. We have added subsection 14.17(8) to allow registered dealers or advisers to report reasonable approximations to their clients, in the case where approximations are provided by IFMs or determined by the registered dealer or adviser consistent with other requirements in the Securities Amendments. Guidance in Policy Statement 31-103 discusses our expectations with respect to the use of approximations contemplated in the Securities Amendments. Exemptions We have included exemptions from certain reporting requirements for newly-established investment funds, considering that information about the fund expenses and fund expense ratio of such funds may not be available. We note that the existing exemption from the requirement to provide an ARCC to a nonindividual permitted client (including, for example, many institutional investors), pursuant to subsection 14.17(5) will continue to apply. There are no grandfathering provisions.

ANNEX B
SUMMARY OF COMMENTS AND RESPONSES - SECURITIES This annex summarizes the written public comments we received on the Proposals and our responses to those comments. Out of the 33 comment letters we received for the securities sector, 27 were from industry stakeholders (including registrants, industry associations and law firms), and 6 were from non-industry stakeholders (including investors, investor advocates, academics and others). This annex contains the following sections:
A. General comments and responses
B. Transition
C. Reportable costs
D. Calculation Methodology
E. Use of estimates and approximations
F. IFMs’ duty to provide information
G. Dealer reliance on IFMs
H. Issues related to specific product types
I. Disclosure Format
J. Exemptions
K. List of securities commenters
A. GENERAL COMMENTS AND RESPONSES
Comment Response
Balance of costs and benefits

Investor advocates and the majority of
industry commenters expressed support for the objectives of the Proposals. However, there were some industry comments that expressed the view that TCR is or may be unnecessary or that the costs for the industry to implement and comply would outweigh the benefits to investors. Some of these commenters urged more research and consultation before proceeding further with the project. Investor advocates, however, urged us not to delay implementation of the Proposals, in light of its importance for investors. One industry commenter stated that they were unsure of why the TCR project was needed and suggested that it could be We continue to believe that it is necessary to provide investors with complete and transparent information relating to the ongoing costs of owning investment funds because doing so will allow investors to make better-informed decisions and will ultimately result in better investing outcomes. We do not agree with suggestions that it is sufficient that investors be provided with a notification about fund expenses and be directed to contact their investment representative for more information. While registered representatives are required to make recommendations to

adequately addressed through the proposed notification regarding fund expenses and by directing investors to contact their investment representative for more information regarding fund expenses. They also asked that further research be conducted to confirm whether TCR will change investment decision-making patterns by retail investors. This commenter was also of the view that it is unrealistic to expect that retail investors, through TCR, will achieve the same level of understanding as dealing representatives regarding the cost structures of investment funds. Investor advocates however noted that increased transparency should help investors identify the more expensive products in their portfolio and ways to lower their costs. One commenter cited a recent study which found that higher investment fees can set back an individual’s retirement by four years. An investor advocate further qualified the ability for consumers to see and understand all the fees and costs associated with buying a product as a fundamental investor right and stated that the current regime leads many investors to believe that they already have full disclosure of costs. Investor advocates were of the view that the project would promote competition within the fund management industry and help drive down costs as firms compete on delivering products and services more efficiently. They also noted that Canada has some of the highest mutual fund costs in the world. However, an industry commenter asked that the CSA explain how transparency about costs would encourage clients which are suitable, clients, and not registered representatives, make investment decisions1 . We also note that self-directed investors do not receive advice from registered representatives. We also believe that it is not sufficient that investors can access individual fund cost information on their own initiative, for example by consulting each investment fund’s most recent Fund Facts or ETF facts. Finding and collecting up-to-date information for all the funds an investor has owned during the year, taking into account purchases and redemptions during this period, would be complex, time-consuming, especially for ordinary retail investors. Costs have a significant impact on returns, which add up over time. It is necessary for investors to be aware and understand the costs they pay in order to allow them to assess the value they receive in return and make informed decisions. Investors should therefore receive clear personalized information about the ongoing costs of their investment funds in the same way as they already receive such information about their other costs of investing. We aim to increase investor awareness and understanding of investment fund costs, which will help address the information asymmetry between investors and registrants. We do not believe that investors would be required to achieve the same level of understanding as dealing representatives regarding the cost structures of 1 This excludes
the specific case of managed account where discretionary trading authority has been delegated to a registered adviser or investment dealer.

more competition. Some industry commenters were also of the view that the project could lead to dealer consolidation. investment funds in order to benefit from the TCR enhancements. In making enhancements to the ARCC, we have been careful in assessing what information should be included in the ARCC in order to increase investor awareness and understanding of costs, as discussed in more detail in other responses in this annex. We have provided a sample document showing how that information can be presented in an accessible format. It is also important to bear in mind that dealers and advisers are expected to provide the context for information contained in the reports that are sent to their clients. The need to address the information gap regarding costs and compensation paid by clients to other parties, such as IFMs, was publicly identified by securities regulators following the completion of the CRM2 project in 2016.The MFDA published a discussion paper for consultation in 20182 . The CSA and CCIR then established the joint TCR project and published the Proposals for comments, following extensive prior consultations with investor advocates and market participants, notably at the 2021 Joint Forum of Financial Market Regulators, as well as through informal technical consultations with industry associations and service providers. We are satisfied that sufficient research and consultation has been done and that it is time to move forward with the Securities Amendments. We have made changes to the Proposals that will reduce the costs of 2 MFDA Bulletin #0748-P, Discussion Paper on Expanding Cost Reporting – Summary of Comments, April 19, 2018.

implementation and compliance for industry stakeholders, including:

consolidation of the enhanced
disclosure requirements in the
ARCC, so that there will be no new elements in monthly or quarterly client statements
allowing the use of reasonable
approximations where appropriate, without requiring overly detailed notifications
providing guidance that in the
normal course, IFMs can provide reasonable approximations which rely on information in existing disclosure documents when providing information dealers and advisers who distribute their funds, without rigidly requiring them to do so in all circumstances
providing guidance that in the
normal course, dealers and advisers can rely on the information provided by IFMs without undertaking burdensome due diligence
excluding private investment
funds and LSIFs in light of their unique nature and potential implementation issues
providing a significantly longer
transition period
Prospectus-exempt funds and labour-sponsored funds

Industry commenters expressed significant
concerns about the implementation issues related to the inclusion of prospectusexempt investment funds (private funds) and LSIFs, including the following:

IFMs of private funds do not
typically calculate a FER as a percentage since they are not required to do so under Regulation 81-106 respecting Investment Fund Continuous Disclosure We have concluded that these differences and resulting implementation issues are sufficiently large that it would not be appropriate to include private funds and LSIFs in the Securities Amendments. Additional consultations would be necessary before making any proposals to include private funds and LSIFs.
private funds do not have publicly
available information that would allow a dealer or adviser to calculate a FER or determine if a reported FER is misleading
investment funds with illiquid assets
generally do not publish NAV on a daily basis and there is no standard valuation frequency with the result that if an IFM does not provide an exempt-market dealer (EMD) with FER information for an investment fund that meets the requirements of the Proposals, it will be the norm and not the exception that an EMD’s client account statements will simply state that such information is unavailable and not being reported
there is a wide variety of prospectusexempt fund structures and features,
some with complex pricing structures (e.g., alternative investments) that would be challenged in calculating and communicating cost information in a manner consistent with the Proposals
applying TCR to pooled funds may
lead dealers and adviser to discontinue offering them to their clients, especially in the case of pooled funds of managers with smaller amounts of assets under management, who may not have the same resources as larger IFMs to build and maintain the necessary support for dealers and advisers to provide TCR regarding their pooled funds
investors in private funds must be
accredited investors or satisfy other criteria
there is no pre-existing infrastructure
to transmit information about private funds that could be built out to support TCR This would require consideration of the costs and benefits of including them in a potential future phase of the project. Our regulatory regime generally distinguishes the exempt market, among other things to encourage capital raising. Investors in exempt-market funds must be qualified under a prospectus exemption and meet certain investor criteria, such that less disclosure is required to be provided to them.
due to the nature of LSIFs and the
underlying small- and medium-sized business investment criteria, LSIFs with inactive trading status or in the wind-up phase may not have current prices Harmonization

Commenters supported harmonizing annual
reporting requirements between the securities and the insurance sectors, with some noting the need to recognize unique features of the products in doing so. Commenters encouraged us to adopt the same timetable for the implementation of both the Securities Amendments and the Insurance Guidance. They pointed out that a shared schedule would be in the interests of investors and policyholders, who would wish to receive comparable information at the same time, and also in the interests of the industry participants in both sectors, who would be able to share some of the implementation costs. Harmonization is a core objective of the TCR project. We have sought to ensure that the TCR enhancements are as consistent as possible between the securities and insurance sectors, taking into account the material differences among those products and in the ways the two sectors and their regulatory regimes operate. The removal of the proposed requirement to include new information in monthly or quarterly account statements has further increased harmonization, with both sectors requiring information to be reported on an annual basis. Drafting comments
We received a number of drafting
suggestions and comments on the Proposals.
While we incorporated some of these suggestions in the Securities Amendments, this summary does not include a detailed list of all the drafting comments or changes that we made.

General and Out-of-scope matters
5. We received a number of comments on
topics that are outside the scope of the TCR project, including:

material revisions to the ARCC not
related to ongoing cost information
extending the ARCC to include
investment products not within the jurisdiction of CSA members
allowing consolidation of ARCCs for
clients with multiple accounts with a registrant
allowing consolidation of ARCCs for
portfolio manager clients whose accounts are held at an investment dealer
revisiting the content of the annual
investment performance report
adding new exemptions or waivers to
the existing requirements to deliver
ARCCs or investment performance reports to clients
delivery methods for mandated
reports
mandating a notification concerning
proprietary product shelves
changes to Fund Facts and ETF Facts
documents and other point-of-sale requirements
comments relating to other CSA
projects
We also received comments recommending that regulators:
strongly enforce the amendments
impose impactful sanctions and fines
undertake investor education
initiatives regarding investment fees and costs We note the comments, but have not provided specific responses to comments outside the scope of the project, as well as to general comments.

B. TRANSITION
Comment Response
Length of transition period
6. Most industry commenters asked that the
transition period be extended.
They underlined the complexity of the project and that it will require significant time and resources, and argued that the proposed implementation timeframe was unreasonable, given the need to develop infrastructure to automate the required cost calculations and transmit the required calculations between IFMs and dealers and advisers. Some also noted that not all funds are sold through Fundserv, so more than one solution may be required, including the use of manual processes and development of a new centralized infrastructure. Investor advocates and a few industry commenters, however, supported the proposed transition period or asked that it be shortened. They stressed the importance of providing enhanced cost information to investors. Some also questioned the validity of industry concerns about the amount of time that would be required to implement the new requirements. We also received some comments for and against different forms of phased implementation, with some commenters proposing that different products be phased in at different times. We have extended the transition period in light of the significant implementation issues and concerns identified in the comment letters and the Additional Consultations. We believe that this extended transition period will result in the shortest possible delay for clients to receive enhanced reports, while providing industry with sufficient time to implement the new requirements. We do not anticipate extending it. Adopting a shorter implementation timeline would not have been realistic, as requiring that the first enhanced annual reports be received for the year 2025, as opposed to the year 2026, would have allowed for a transition period of only up to 20 months. We also considered, but rejected, an implementation period which would have required that TCR-enhanced information be delivered for only a portion of the reporting period, considering the potential regulatory burden of for registrants, as well as the limited benefits for investors of a report presenting partial information. Our assessment included consideration of a phased approach to implementation. We concluded that it would not be in the interests of investors to receive incomplete and potentially further delayed reports. We also concluded that it would be ultimately less efficient and more costly for industry to implement in stages, and

considered the level playing field implications of doing so.
Conflict with T+1 project
7. Several industry commenters in the securities
sectors indicated that the proposed timeline for implementation of the Securities Proposals conflicts with the move from T+2 to T+1, which is proposed to take effect in September 2024. We understand concerns about the pace of change, and we are mindful of that consideration. We considered the potential impact of the T+1 project in determining the extended transition period for the Securities Amendments. We also note that the CSA announced on December 15, 2022 that it is not proposing amendments to Regulation 81-102 respecting Investment Funds to mandate a shorter settlement cycle for investment funds3 . Starting implementation before final publication
8. Several industry commenters said that it
would not be reasonable to expect firms to spend resources on building a system until amendments are published in final form and have received all necessary approvals. However, other commenters stated that there is no reason why industry groups could not have already had conversations about the data likely required. We understand that registrants will not be able to fully begin implementing the Securities Amendments until they have the certainty that they will be fully approved. However, firms can begin reviewing their systems and conduct advanced planning in order to have all of the resources necessary for implementation in place at an early stage, before final approvals are obtained. Implementation Committee
9. Many industry commenters recommended
setting up an implementation committee of industry participants, including Fundserv and the various trading associations, in order for the securities regulators to facilitate timely dialogue with stakeholders and vendors to develop and implement a final rule. As part of the Additional Consultations, the Project Committee established a joint working group and held consultations with industry stakeholders and service providers. We will continue this work through the Implementation Committee which will be established jointly by the CSA and CCIR with New SRO participation to provide guidance, respond to questions and otherwise assist registrants to operationalize the TCR Enhancements. 3 See : https://www.securities-administrators.ca/news/canadian-securities-regulators-outline-steps-tosupport-transition-to-t1/

This could include assisting registrants in determining appropriate standards and timelines for transmission of information and obtaining high-level updates on the timely progress of the implementation of the TCR Enhancements.
C. REPORTABLE COSTS
Comment Response
Use of MER or FER
10. Some industry comments recommended
reporting the MER only, as opposed to the
FER, as, according to those commenters, the
TER, which forms part of the FER, is not generally a material cost associated with investing and the MER makes up the majority of the embedded fees over the long term. Many industry commenters and investor advocates, however, were of the view that reporting MERs, but not TERs would not be acceptable, notably as TCR needs to include all costs and failing to disclose the TER could lead to a failure to disclose material costs to the client. An industry commenter more specifically highlighted that while TERs generally average about 10 basis points annually, there are instances where a fund’s TER is significant, in some cases exceeding the same fund’s MER. Some industry commenters also acknowledged that the FER is a more comprehensive metric for investors. We believe that using the FER, which includes both the MER and TER, is necessary in order to provide investors with a complete picture of their total costs of investing. We considered that for some funds, the amount of the TER is material and may exceed the amount of the MER.

Disclosure of the FER or MER as a percentage for each fund
11. Many industry commenters and investor
advocates were in favour of including disclosure of the FER or MER of each fund as a percentage. They stated that providing investors with such disclosure would give them clear and useful information. They also indicated that while dollar amounts fluctuate, percentages remain stable. On the contrary, some industry commenters were not in favour of including disclosure of fund costs as a percentage. Some industry commenters were of the view that the FER fails to provide adequate information for clients to assess cost appropriateness and could be confusing or misleading if provided without cost data for other products or performance indications, which could in turn be counterproductive for clients’ financial objectives. Some industry commenters also mentioned that Fund Facts already include MER and TER information for funds subject to Regulation 81-106. Some further added that this information could conflict with the new metric suggested in the Proposals. We believe that requiring disclosure of the FER as a percentage will increase investors’ awareness and understanding of their costs of investing. More specifically, we believe that it will allow them to understand which funds they owned during the reporting period have higher or lower costs. We believe that this will in turn allow them to make better-informed investment decisions, for example by enabling them to ask relevant questions about the costs of different products to their advisors. While the FER of many investment funds is disclosed in their Fund Facts or ETF Facts, this information is not personalized to an investor’s holdings and is only communicated at the point of sale, as opposed to an ongoing basis. Thus, the information found in those documents is not sufficient to allow investors to become aware of the current total ongoing costs of the investment funds they own or owned during the reporting period. Separate reporting of MER and TER
12. Some commenters were in favour of
reporting the MER and TER separately, as opposed to combining them in a single FER number, indicating that it would provide investors with superior information. A commenter expressed the view that combining the MER and TER into a single FER metric would not allow investors to ask informed questions and make informed decisions about their investments. They also expressed that disclosure should allow investors to use MERs to compare the compensation of IFMs in respect of different funds while also alerting them to the impact The Securities Amendments do not require separate disclosure of the MER and TER, considering the benefits of providing simple and clear disclosure to investors and policyholders, as well as the potential burden of requiring such additional disclosure.

of TER as a cost of their investments. They recommended including a breakdown of the management fees and other costs reflected in MER and the trading expenses reflected in TER, with clear, separate explanations of what these each of these measures and their underlying expenses represent. Disclose FER or MER information in annual report only
13. Many industry commenters expressed
concerns about the client confusion and the operational and system challenges that may arise from providing fund FER or MER reporting on a quarterly or monthly basis, especially if it is provided without a holistic CRM2 view on annual returns and full distribution costs. Those commenters also underlined that reporting fund FER in periodic account statements may be duplicative and present clients with information in a different format. Industry commenters also mentioned that the proposed data elements may be operationally prohibitive for IFMs to provide to dealers within a time period required to produce monthly or quarterly statements. Consequently, some industry commenters, as well as an investor advocate recommended that the FER be included in the ARCC, in order to keep all cost-related information in one place. An industry commenter was of the view that reporting information annually would be sufficient, except in the case of significant portfolio restructuring. We have moved the requirement to report the FER for each fund from the quarterly or monthly account statements to the ARCC. We believe that consolidating all information related to costs in a single annual report will facilitate investor understanding of this information. Reporting of fund expenses per fund in dollars
14. Some industry and independent commenters
indicated that fund-level cost information should be reported both in percentage and in dollars, indicating notably that providing costs in percentage only would only inconvenience clients by requiring them to do the math themselves. The Securities Amendments do not require reporting the amount of fund expenses in dollars incurred for each investment fund. Fund-by-fund dollar costs would not allow clients to make meaningful comparisons, since the principal amounts invested in different

funds will vary, as will the time periods during which they were held. We also note that implementing the proposed change would have required additional consultations. Disclose fund MER and estimated cost per $1000 invested only
15. An industry commenter recommended that
the MER not be used to attempt to calculate an actual dollar cost for an investor due to the resulting costs being an estimate that could be materially misleading. This commenter instead recommended that the MER be disclosed, along with the estimated cost per $1,000 invested, as is done for Fund Facts and ETF Facts. We believe that requiring reporting of the MER and estimated cost per $1,000 invested of each fund would not be an acceptable alternative to requiring reporting of the total amount of fund expenses in dollars for all funds owned by a client, as it would not allow clients to become aware of the total ongoing costs of the funds they own in dollars. Inclusion of performance fees in reported FER and fund expenses
16. Some industry commenters and investor
advocates were in favour of including performance fees to improve investors’ understanding and assessment of fund costs, including for alternate funds, mentioning that performance fees subtract from returns. An industry commenter in favour of including such fees also mentioned that performance fee disclosures are confusing and that stated management fees can be significantly different than MERs. This commenter also mentioned that funds with performance fees are better equipped to provide up-to-date fee disclosures, noting that overseeing these funds requires sophisticated systems to track fee accruals given the complex nature of performance fee calculations and that, often, fees must be tracked daily. A securities industry association also recommended that the CSA provide guidance allowing appropriate adjustments to the FER calculation to account for Investors and policyholders should be made aware of all the fees and expenses associated with the investment funds and segregated funds they own, including the performance fees they pay. We have made changes to the Proposals to ensure that the FER reported for each fund, as well as the total amount of fund expenses reported, are inclusive of performance fees. We have also made adjustments to the calculation method for fund expenses, which is now based on a fund’s FER for each day that it was owned by the client, to ensure that performance fees incurred at varying periods of the year and material changes in a fund’s FER throughout the year are accurately accounted for. We, however, continue to allow for the use of reasonable approximations.

variation of the performance fee from one year to another.
On the contrary, an industry association suggested excluding performance fees from the MER calculation as, in their view, (1) the focus on reporting costs to investors should be on costs that they will incur regardless of whether the fund is profitable, as those costs are manageable to a degree by the IFM, whereas performance fees are only incurred if an investor’s holdings are increasing in value and represent a portion of that increase and (2) inclusion of performance fees in annualized MER for a fund that has performance fees at varying periods of the year can distort the estimated expenses reported. Presentation of performance fees as separate line item
17. An industry commenter suggested that
performance fees should be presented as a separate line or noted as in Fund Facts to highlight how much of the MER it accounts for. We have added guidance to clarify that performance fees can be presented as a separate line item. Reporting of MER waivers or rebates
18. An industry commenter suggested that the
effective rate the client pays, after accounting for any fee reduction program, and not the stated rate of the funds should be reported to clients. We agree that the effective rate the client pays, as opposed to the posted rate, should be used. As such, we have made changes in the Securities Amendments to require that the FER for each fund and the amount of fund expenses reported are inclusive of performance fees and net of fee waivers, rebates or absorptions. Proposed notification concerning householding and management fee rebates
19. A securities industry commenter
recommended the inclusion of a footnote to explain that actual costs could be materially different than those listed, due to the impact of householding and management fee rebates. The Securities Amendments require that the FER for each fund and the amount of fund expenses reported are inclusive of performance fees and net of fee waivers, rebates or absorptions. We have also clarified through guidance that if a dealer or adviser provides a

client with fee waivers, rebates or absorptions, as would be the case for a householding rebate provider by a dealer or adviser, they must not be included in the total amount of fund expenses reported, but should be included in the corresponding dealer or adviser charges required to be reported under paragraphs 14.17(1)(a) to (f) of Regulation 31-103. Scope of costs captured
20. According to some investor advocates and
industry commenters, TCR should capture all direct and indirect costs incurred by a client in their account. This includes, but is not limited to, product costs, advice and service fees, account fees, fund trading costs, DSC early redemption penalty fees, NSF charges, switch fees, transaction commissions, RRSP account fees, front loads, embedded trailing commissions, short-term trading fees, cost of borrowing, sales commissions embedded in IPO offerings and the like. An investor advocate also suggested that interest costs should be included if an investor uses leveraging or has borrowed stock on margin. If the figure is not known, the report should state that the investor should add the interest expense to his/her total investing cost. If regulators decide not to include interest charges, the report should explicitly state that any costs incurred for leveraging are not included in the report. One investor advocate further suggested that foreign exchange fees be included since their disclosure is opaque because the conversion is subsumed in the exchange rate charged. We have striven to ensure that the Securities Amendments capture clients’ total costs of investing, while accounting for the need to minimize the regulatory burden imposed on registrants and considering which types of fees are related to securities or derivatives, as opposed to other types of products. We have added a mandatory notification to clients, in the cases where it would be appropriate, that the fees reported may not include any fees the client pays directly to third parties, including custodial fees, intermediary fees or interest charges which may be deducted from the client’s account. We have also added a mandatory notification concerning the embedded fees which may be associated with ownership of products which are not included within the scope of the Securities Amendments, such as structured products.

Presentation of costs as a percentage of total portfolio in ARCC
21. An industry association recommended
stating the cost as a percentage of the total portfolio next to each section of the total cost reporting table that details the cost in dollars. According to this commenter, this will give investors a better understanding of the portion of their total cost that is attributable to each line item, as well as their total weighted average cost. An investor advocate also suggested adding a footnote which would disclose a client’s total costs as a percentage of their portfolio. This commenter believed that it will encourage clients to put the cost of investing in perspective and, in turn, help in getting investors more engaged with valuefor-money considerations. We note that requiring the presentation of a client’s total costs of investing as a percentage of their portfolio would have required additional consultations, notably to determine which calculation method should be used to calculate this percentage. For example, it could be calculated as a percentage of a client’s current assets or as a percentage of a client’s average monthly assets over the reporting period, which would better account for deposits and withdrawals made during the reporting period. We would also have concerns about adding to the amount and complexity of information in the ARCC, as presenting too much information may in some cases be detrimental to investor understanding. For these reasons, we have not made the change. Deferred Sales Charges (DSC) and Redemption Fees
22. One industry commenter recommended that
the proposed footnote concerning DSC should be adjusted to reference the prospectus or fund facts at the time the units or shares were purchased, as DSC options are no longer offered. We agree and have modified the notification concerning DSC to reference the prospectus or fund facts document made available at the time of purchase. Specify in notification that DSC are not paid to dealer
23. One industry commenter suggested
modifying the notification concerning DSC to specify that redemption fees are not received by the dealer or dealing representative, to avoid investor confusion. No changes were made. We believe that the mention in the notification that the redemption fee is payable to the investment fund company is sufficient to avoid investor confusion. Direct investment fund charges
24. An industry commenter asked that we
clarify whether amounts charged by other parties such as dealers, registered plan administrators and custodians are intended to be included since those “other parties” We have clarified in the Securities Amendments that direct investment fund charges include amounts charged to the client by an investment fund, IFM or any other party, in relation to securities of

are not included in the definition of “direct investment fund charges”. investment funds owned by the client during the period covered by the report. Newly established funds
25. Many industry commenters and an investor
advocate mentioned that the Proposals do not address new funds for which the MER and TER are not available and many suggested that they be excluded until year two and there is an established MER and TER. We have added new provisions specifying in which circumstances cost information about newly established funds may be excluded, considering that this information may not be available for those funds. In the case where such information is excluded, a notification must be included in the report. Taxes – Separate tax deductible and non-deductible fees
26. An industry commenter recommended that
a separate line item be added below the total cost disclosure that provides the taxdeductible portion of the disclosed fees. The purpose of the ARCC is to provide investors with information on their costs and other compensation received by registrants in connection with their accounts. It is not intended to be a substitute for other sources of information that provide information for tax purposes. Exclude or disclose sales taxes as a separate line item
27. Some industry commenters and an investor
advocate noted that sales taxes are significant.
One commenter recommended that they be disclosed as a separate line item even where taxes are already included under an existing reportable (i.e., MER). An industry association also suggested excluding taxes from the MER calculation. We believe that investors and policy holders should be made aware of their actual total costs of investing, which should include sales taxes, when applicable. D. CALCULATION METHODOLOGY Comment Response Calculation methodology and format should be prescribed
28. Industry commenters and some investor
advocates suggested that the calculation methodology and format should be prescribed. The Securities Amendments prescribe the calculation methodology for determining required cost information.

We have also made changes to the
Securities Amendments and added guidance to clarify the calculation methodology for information required to be reported. Suggested calculation methodology for fund expenses
29. An industry association recommended
using the following methodology for calculating fund expenses:
Determine the reporting date cost per unit/share calculated as A/B = C, where:
Reporting date = a day on which fund purchase/sale transactions are allowed. This could be either daily or monthly. A = the expenses charged/accrued to each class/series of the fund for the reporting date. This is done by the IFM, or the administrator, as part of the calculation of NAV. B = determine the number of units/shares of the class or series outstanding on the reporting date. Calculate A/B = C. This provides a clear allocation of actual fund dollars to a unit holder on the reporting date and is reconcilable to the fund f/s since actual dollars accrued are allocated. If the fund is valued monthly, or on some other period, this value would be divided by the number of days in the reporting period to determine a daily cost. The daily value from a Friday would be assumed to apply to the following Saturday and Sunday. Impact on accuracy of using annualized ratios in calculation methodology Some industry commenters also stated that, since the MER and TER are annualized ratios, applying them daily will not necessarily be representative of how the fund is incurring expenses over time. This We have revised the calculation method for fund expenses, which is now based on the FER for the day for each day that a fund was owned by a client during the reporting period, in order to enhance the accuracy of this calculation and avoid potential implementation issues. This will ensure that that performance fees incurred at varying periods of the year and material changes in a fund’s FER throughout the year are accurately accounted for. We expect that the FER for the day will reflect the actual expenses charged or accrued to each security of the applicable class or series of the investment fund for that day. We note that the Securities Amendments continue to allow for the use of reasonable approximations.

may be especially the case if the MER includes performance fees.
Use of NAV or market value (Securities question 3)
30. Some commenters were in favour of using
the net asset value (NAV) per security for the purposes of the fund expenses calculation, while others supported using the market value. One argument for using the NAV is that it’s readily available for conventional mutual funds. However, some commenters recommended using market value instead of the NAV for investment funds that trade on a stock exchange. We have replaced references to the NAV with references to the market value, which must be determined according to
section 14.11.1. of Regulation 31-103
[Determining market value].
This provision and accompanying guidance prescribe the methodology which must be used to determine market value, which will, in some cases, be determined by reference to a fund’s NAV. Number of days to be used in calculations
31. Many industry commenters recommended
using a 365-day period for calculating the fund expenses, but highlighted that it would be challenging for products which do not have daily valuations. We have removed the specific reference to a period of 365 days in the formula for calculating fund expenses to instead require that they be calculated based on the FER for the day for each day that a fund was owned by a client during the reporting period, in order to enhance the accuracy of this calculation and avoid potential implementation issues. We note that the Securities Amendments continue to allow for the use of reasonable approximations. Clarifications for funds with no daily NAV or other
32. Many securities industry commenters
requested clarifications and guidance for funds that no longer strike a NAV, do not strike a daily NAV (e.g., weekly, monthly, or quarterly NAV), and with respect to funds with delayed NAVs, which are common in private market products. Registrants should use their professional judgment and refer to section 14.11.1. of Regulation 31-103 [Determining market value] and appropriate guidance in order to determine the market value per security in the case of funds which do not strike a daily NAV, no longer strike a NAV or use a delayed NAV. We have also required IFMs to make any adjustments which are reasonably necessary to accurately determine the amount of fund expenses per security for the day. These could include adjustments to address these circumstances.

We note that the Securities Amendments continue to allow for the use of reasonable approximations, which may be appropriate in the case where no NAV or market value was calculated or was available for the day. We also note that we have excluded prospectus-exempt investment funds from the scope of the Securities Amendments, which more frequently do not strike a daily NAV or use a delayed NAV. TER calculation issues
33. Some industry commenters indicated that
while the MER is generally stable day-today, the TER exhibits a higher degree of variability depending on fund flows and changes in portfolio holdings and can be distorted by significant purchases or redemptions of a fund activity in the fund. Therefore, applying a TER as of a specific point in time, such as the most recently published TER, could lead to inaccurate reporting. We have revised the formula for calculating fund expenses, so that it be based on the calculation of the FER for the day of each day that a client owned the fund. We expect that the FER for the day will reflect the actual expenses charged or accrued to each security of the applicable class or series of the investment fund for that day, including trading expenses included in a fund’s TER. We also note that the Securities Amendments continue to allow the use of reasonable approximations. We believe this will be sufficient to ensure accurate reporting of the expenses included in the TER, while minimizing the burden for registrants. Fund expenses calculation
34. A securities industry commenter noted that
section 14.17(6) provides a formula to be
used where the term “A” used in the formula cross-references section 14.1.1(2) which only includes the FER. This commenter stated that it would provide an accurate calculation for the amounts in
section 14.17(1)(i)(b), but does not believe
We have removed the requirement in subparagraph 14.17(1)(i)(a) to report the amount of fund expenses charged to the client by an investment fund, its IFM or any other party, as it was duplicative with the requirement to report direct investment fund charges under paragraph 14.17(1)(j).

that it would be correct for expenses charged directly to the investor described in
section 14.17(1)(i)(a).
E. USE OF ESTIMATES AND APPROXIMATIONS
Comment Response
Allow use of approximations based on existing disclosure
35. Many industry commenters were of the
view that IFMs should be able to rely on approximations based on an investment fund’s most recent Fund Facts/ETF Facts document, prospectus, or management report of fund performance (MRFP). An investor advocate also viewed approximations as an acceptable imperfection. An industry commenter suggested that IFMs should apply uniform assumptions or approximations to provide meaningful information to investors. A securities industry association also suggested making it mandatory for IFMs to provide approximate cost information based on an investment fund’s most recent Fund Facts/ETF Facts document, prospectus, or MRFP. The Securities Amendments continue to allow, but not require, registrants to use reasonable approximations where they would not result in misleading information being reported to clients. We have removed the requirement that approximations must be based on information found in a fund’s most recently disclosed fund facts document, ETF facts document, prospectus or management report of fund performance in order to grant registered firms additional flexibility in using approximations and to minimize the regulatory burden imposed. We have however provided guidance that those documents can generally be relied on for these purposes. We have not made the use of approximations mandatory, as we believe that investors should receive exact information whenever possible without unreasonable cost or delay. We have added guidance which strongly encourages IFMs to provide exact information, whenever available, considering that doing so would enhance investor understanding of their costs of investing. We have also taken into account comments by dealers and advisers who highlighted the importance of receiving

accurate and timely information in order to report reliable data to their clients. We believe that this adequately balances the regulatory burden, while maximizing investor awareness and understanding of their costs of investing. We also note that we have established the Implementation Committee which may assist industry stakeholders in the development of common standards. Requirement that approximations should not result in misleading information being reported to clients should be struck
36. An industry association requested the
removal of the prohibition on the use of approximations if the IFM reasonably believes that doing so would cause the information disclosed in the statement or report to be misleading. According to this commenter, the standard places too high a burden on IFMs, is subjective and places a significant legal obligation to report information rather than using estimates. This commenter also highlighted that IFMs are already subject to an obligation not to provide misleading information to investors. We have not removed the requirement that approximations used must not result in misleading information being reported to a dealer or adviser’s clients. We continue to believe that the inclusion of this requirement is necessary, as misleading information should not be reported to clients, and that the test of “reasonable belief” will adequately balance the potential burden imposed on IFMs. We also considered that the existing legal and regulatory duties which apply to IFMs when transmitting information to dealers and advisers may not be sufficiently specific to adequately prevent misleading information from being reported to clients. Make explicit allowance of estimates and threshold for “misleading” disclosure
37. An industry commenter stated that the
threshold for “misleading” disclosure should be made explicit in requirements. Registrants should use their professional judgment to determine when the use of an approximation could result in misleading information being reported to clients. Attempting to prescribe in advance the threshold for misleading disclosure risks omitting unforeseen circumstances and precluding a reasonable evaluation by registrants.

Relying on outdated information
38. An industry association stated that the
requirement that an IFM must not rely on previously publicly disclosed MER and TER information if it is outdated or if the IFM reasonably believes doing so would cause the information in the statement or report to be misleading should be struck. The rationale for doing so is that at the time dealers and advisers prepare their December 31 client statements, the most recent MER and TER figures available for most ETFs will be as of the previous June 30 (i.e., six months old). Consequently, the requirement would, in some circumstances, require IFMs to revise the MER and TER figures for an ETF between already regulated disclosure intervals. We have removed the requirement that reasonable approximations must be based on information in a fund’s most recently disclosed fund facts document, ETF facts document, prospectus or management report of fund performance in order to grant registered firms additional flexibility in using approximations and to minimize the regulatory burden imposed. We have also removed the prescription that registrants must not rely on outdated information, as we consider that the requirement that the approximations used must be reasonable and must not result in misleading information being reported to a dealer or adviser’s clients are sufficient to ensure adequate investor protection. Add/remove or modify notifications regarding use of approximations
39. Some industry commenters suggested that
the requirements to disclose a description of the assumption or approximation should be removed. They suggested that a notification be added explaining that the provided data are estimates based on the historical MER and TER of the fund and reflect the estimated costs that could be incurred in connection with the investor’s holdings. We have removed the requirement to report a description of the assumptions or approximations used. We considered the potential burden of reporting such descriptions, as well as the fact that this could result in overly lengthy disclosure to clients, as the approximations or assumptions used may vary for each investment fund. The Securities Amendments however require inclusion of a notification that reported cost information is based on an approximation or any other assumption, when that is the case. Double counting of trailing commissions
40. One industry commenter highlighted that
under the Proposals, there is potential for trailing commissions to be double counted, since the MER already includes trailing commissions. We took into account potential concerns regarding disclosure of trailing commissions in developing the Proposals and have made changes to the sample documents to clarify that the fund expenses include trailing commissions.

A securities industry association similarly stated that the presentation of the ARCC raises the issue of potential double counting because a client could add the “Your total cost of investing” amount in the “What you paid” table and the “Total we received for advice and services we provided to you” amount in the “Our Compensation table”. This commenter suggested using an alternative prototype provided in its submission, which deducts the amount of the trailing commissions from the amounts indirectly paid to the IFMs and/or investment funds and adds it to the amounts paid to the dealer or adviser. We have however avoided making extensive changes to the proposed sample documents, which were developed following testing by IORBIT of various prototypes to determine which ones would be most effective in maximizing investor or policyholder’s comprehension of cost information. We also note that trailing commissions will not be double-counted in the investor’s total costs of investing required to be reported under paragraph 14.17(1)(l). F. IFMs’ DUTY TO PROVIDE INFORMATION Comment Response Guidance that IFMs must work with advisors and dealers
41. A securities industry association suggested
that guidance indicating that IFMs must work with advisors and dealers to determine the dealer and advisor data needs be removed. Instead, the rules should set out the required data that IFMs need to provide dealers. Another industry commenter, however, noted that IFMs send hundreds of data points to data providers and that dealers and IFMs work diligently to exchange holdings and price details with FundSERV, CDS and custodians. According to this commenter, there is no reason they will not be able to do the same for the benefit of their clients. We believe that the principles-based requirements specified in section 14.1.1 of Regulation 31-103 that IFMs must work with advisors and dealers are adequate. Request for regulators to set timelines and uniform standards
42. Request for regulators to set timelines
Some industry commenters requested that an industry standard be provided for what is a reasonable period of time, as that concept is used in section 14.1.1, to ensure consistency across the industry, or that We believe that the principles-based requirements specified in section 14.1.1 of Regulation 31-103 are adequate. We expect IFMs to work with the dealers and advisers who distribute their funds to determine what information they need

regulator. Another commenter requested guidance from the regulator regarding an “as at” date for alignment across the industry, as MERs and TERs are calculated on certain cycles for each fund and vary across fund families and fund managers. A securities industry association suggested that regulators prescribe a maximum period of time for IFMs to provide information to dealers. An industry commenter also pointed out that delays by IFMs in delivering cost information would impact delivery of all client reporting. Request for uniform standards A commenter also indicated that there must be a uniform standard of what information is required to be provided by the IFM to the dealer, and when that information must be delivered. Another commenter highlighted that, from an IFM perspective, significant work would have to be done to ensure consistency in: (i) calculation methodology and (ii) reporting format. from them and how it will be delivered in order to satisfy the dealers’ and advisers’ client reporting obligations. We strongly encourage the development of common standards and arrangements for its delivery across the industry, but acknowledge that those arrangements may sometimes vary, reflecting different operating models and information systems. We also note that IFMs are already required to transmit certain information to dealers and advisers under the existing CRM2 requirements, for example concerning the amount of the trailing commission paid to the dealer or adviser. We have established the Implementation Committee which will work jointly with industry to provide guidance, respond to questions and assist registrants to operationalize the Securities Amendments. This could include assisting registrants in determining appropriate standards and timelines for transmission of information. G. DEALER RELIANCE ON IFMS Comment Response Dealers and advisers should be able to fully rely on IFMs
43. Many industry commenters were of the
view that dealers and advisers should be able to fully rely on cost information provided to them by IFMs or on IFMs disclosure documents without having to make additional validations themselves stating the impracticality for dealers to source and calculate cost data where the We agree that dealers and advisers should generally be able to rely on cost information provided to them by IFMs. We have clarified both through guidance and changes to the Securities Amendments that we do not expect dealers and advisers to routinely undertake a due diligence review of the information provided to them by IFMs,

IFM does not provide total cost data (e.g.,
ETFs and foreign funds).
As such, industry commenters recommended that, in cases where the required information is not provided by the IFMs or unavailable, no information should be reported, and the dealer should indicate that the information is unavailable/unreported. One commenter recommended that the required information be excluded from calculations if the registrant has not obtained it from an IFM within a reasonable timeframe. Furthermore, some commenters recommended that the proposed section
14.17.1 be revised and some provisions,
such as s. 14.17.1 (2) and (3), be deleted entirely. outside of certain exceptional circumstances. However, we believe that in those exceptional circumstances, for example in the case of foreign funds for which no cost information is provided by a registered IFM, dealers and advisers should be required to make reasonable efforts to obtain this information, subject to considerations about the materiality and costs of doing so. We expect dealers and advisers to exercise their professional judgment in determining when such exceptional circumstances apply. We believe this adequately balances the regulatory burden imposed, while maximizing investor and policy holder awareness of their costs of investing. Require IFMs to ensure accuracy of information transmitted
44. An industry commenter recommended that
IFMs be required to ensure processes are in place to ensure the accuracy of the information provided to dealers, since dealers are not afforded any protection from investor complaints if the IFM's information proves to be inaccurate or prevents dealers from getting the client statements out in a timely manner. We note that registered IFMs must establish, maintain and apply policies and procedures that establish a system of controls and supervision sufficient to provide reasonable assurance that the firm and each individual acting on its behalf complies with securities legislation. This includes complying with their duty to provide required information to dealers and advisers. We also note that any approximations used by IFMs must be reasonable and cannot result in misleading information being reported to clients. We have also added guidance encouraging IFMs to provide exact information wherever they are able to do so without unreasonable cost or delay.

We believe this will be sufficient to ensure that misleading information is not reported to the dealer or adviser’s clients. Implementation costs for dealers
45. One industry commenter stated that the
Proposals put the onus on dealers to compile and present very detailed information, in reliance on an unverifiable third-party source of information, that will involve significant system and technology builds and an enormous amount of data from many service providers, as dealers are being asked to ingest, calculate, and publish detailed, unverified information for costs they do not collect nor control. We believe that the Securities Amendments adequately balance the regulatory burden imposed, while maximizing investor and policy holder awareness of their costs of investing. We have clarified through guidance that dealers and advisers should generally be able to rely on cost information provided to them by IFMs and that we do not expect dealers and advisers to routinely undertake a due diligence review of the information provided to them by IFMs, outside of certain exceptional circumstances. We also believe that the extended transition period should provide registrants with sufficient time to develop the necessary infrastructure to transmit the required cost information. H. ISSUES RELATED TO SPECIFIC PRODUCT TYPES Comment Response ETFs
46. Industry commenters noted that ETF IFMs
do not have access to investors’ identities, which are only accessible to dealers and advisers. Commenters also expressed concerns regarding the lack of standards within the industry as to how ETFs are treated, with certain dealers treating them as equity, making it difficult to calculate their cost. An industry commenter noted that, as the TER is driven by portfolio transactions executed by ETFs, it is not possible for an IFM to determine at any point whether the We believe that the extended transition period should provide registrants with sufficient time to develop the required infrastructure and resolve any implementation related to the inclusion of ETFs. We have also established the Implementation Committee which will work jointly with industry to assist registrants to operationalize the Securities Amendments. We also note that the Securities Amendments continue to allow the use of

current TER will be the same as the publicly disclosed TER. reasonable approximations. We believe that the use of such approximation may be appropriate in cases where a precise
figure for daily trading costs included in a
fund’s TER would be overly costly or burdensome to determine.
Foreign funds
47. Many industry commenters recommended
excluding foreign investment funds from the scope of the Proposals, because they may use a different calculation methodology for the required MER and TER figures, or do not provide them altogether. On the contrary, an industry commenter noted that allowing the use of methodologies used in foreign markets would be a close approximation for costs incurred by Canadian investors (for example, for foreign ETFs). This commenter further speculated that IFMs and dealers are already adjusting costs disclosed by foreign-listed funds to make an apples-to-apples comparison and meet suitability requirements. One industry commenter was also concerned that foreign investment funds would cease to offer their products to Canadians as a result of the new requirements. Commenters also noted that foreign investment funds are not traded on Fundserv. The Securities Amendments continue to mandate the inclusion of foreign funds, considering the importance for investors to be aware of their total costs of investing, as well as the importance of ensuring a level playing field between Canadian and foreign funds. We believe that the extended transition period should provide registrants with sufficient time to develop the required infrastructure and resolve any implementation related to the inclusion of foreign funds. Calculation issues specific to foreign funds
48. An industry commenter noted that the
Total Expense Ratio is used in the US, as opposed to the MER.
Another industry commenter highlighted that while U.S. funds generally disclose the dollar amount of fund-level brokerage commissions in the Statement of Additional Information (SAI), this commenter was not able to obtain such In the case of information required to be reported for a foreign investment fund, we believe it would generally be acceptable for registrants to report a reasonable approximation based on similar information which is required to be reported in the foreign fund’s jurisdiction, if more accurate information cannot be obtained by other means using reasonable efforts.

information for U.S. closed-end fund, making TER calculations impossible. This commenter also noted that cost data for all U.S. funds is not available in an electronic format to feed into Canadian registrants’ reporting systems, or that it would be challenging to obtain. For example, we believe that the following could generally be considered a reasonable approximation of a foreign fund’s FER:

for a US mutual fund, its total
expense ratio;
for a fund to which the
Undertakings for the
Collective Investment in
Transferable Securities
(UCITS) framework applies, its ongoing charges.
We also believe that third-party service providers may be able to develop their service offering and assist registrants in accessing data about foreign funds. Enforcement of regulation outside of Canada

One commenter expressed the view that
applying the TCR requirements to nonCanadian fund managers would give rise to the extraterritorial application of Canadian regulation, which would be problematic. We agree that if the manager of a fund is not required to register as an IFM in a CSA jurisdiction, it will not be subject to the requirements of Regulation 31-103, including those related to the delivery of information to Canadian dealers and advisers. We are not proposing to enforce this requirement on foreign investment fund managers not required to register as an IFM. In such circumstances, dealers and advisers must make reasonable efforts to obtain or determine this information or a reasonable approximation. We believe this adequately balances the regulatory burden imposed, while maximizing investor awareness and understanding of their costs of investing. We have also added in the ARCC a notification to clients who have foreign funds in their accounts.

Reporting issue for funds holding foreign funds
50. An industry association noted that if a fund
of funds is unable to obtain cost information from non-Canadian fund managers, it will not be able to accurately report its expenses. This commenter suggested providing an exemption from the TCR requirements to allow the Regulation 81-102 fund to report the total cost, excluding U.S. ETFs. A note would be added, indicating that it does not include foreign investment fund total cost, as this is not available. Other commenters noted that similar issues would apply in the case of prospectusexempt funds. Investment funds subject to Regulation 81-102 respecting Investment Funds are generally already required to report their MER and TER according to the requirements in Regulation 81-106 respecting Investment Fund Continuous Disclosure. Section 15.2 of that regulation specifies how the MER should be calculated in the case of a fund of funds. The Securities Amendments will not modify cost reporting requirements that apply to investment funds. We have also exempted prospectus-exempt funds from the scope of the amendments. As such, no change is required.
I. DISCLOSURE FORMAT
Comment Response
Format of ARCC
51. We received mixed feedback on whether to
prescribe the format of the ARCC.
Several industry members identified a need for flexibility to implement the Proposals and adapt them to their client base. Several investor advocates asked that the format of the ARCC be mandated. Their concerns included readability, which they thought could be better assured with prescribed fonts and layouts, and comparability across accounts at different firms. Some of these commenters expressed preferences for the formats of sample documents published during the earlier MFDA consultation process or proposed their own alternative content or formats. More specifically:
We have adopted a flexible approach which allows registrants to make changes to the format of the reports. We believe that adopting a more prescriptive approach would be unduly limiting in view of the variety of business models used by registrants, and burdensome in that it might require firms that already report cost information to clients to make costly changes to the format of their client reports. As indicated in the notice of publication of the Proposals, we worked with IORBIT to develop prototypes for TCRenhanced reports, which were tested with investors, to determine which ones would be most effective in maximizing investor comprehension of cost information. Considering that the sample document included in the Proposals was developed

some commenters suggested that
we develop our sample report through testing with investors and in collaboration with behavioural science experts;
an investor advocate suggested that
we include a glossary of terms and include hyperlinks leading to expanded reporting details, terminology and calculators;
investor advocates recommended
that the report contain language nudging investors to ask questions and take action, as well as provide a simple list of actions investors can take to lower costs, referencing research which indicates that investors are not aware of all the actions they can take based on the information they receive. Commenters also suggested including certain key elements, such as :
disclosure of a client’s total costs of
investing at the top of the report,
(1) the current value of a client’s
investments (2) how much their value increased or decreased (3) their cost of investing;
a brief description of the
information in the report and why it’s important
an explanation of how costs affect a
client’s returns
what steps a client can take if
concerned about their costs following this process, we have made the minimum changes necessary to this document in order to reflect changes to the Securities Amendments and address comments received. We also took into account that providing more information can sometimes reduce comprehension. We also note that many suggested elements, such as inclusion of clients’ total costs of investing at the top of the report, have been included in the sample report. We have made changes to require the inclusion of a notification nudging investors to ask questions and take action based on the information in the report. Revisiting point-of-sale disclosure documents

We received comments encouraging greater
integration of cost disclosure requirements in point-of-sale documents, such as the Fund Facts, and ongoing reports to clients, such as the ARCC. Suggestions included designing cost disclosure and point-of-sale disclosures together with references to each other and employing common metrics and design features. We have referenced and made use of metrics from existing point-of-sale disclosure documents in developing the Proposals and Securities Amendments. We note that reviewing the format of current point-of-sale disclosure documents was beyond the scope of

this project. Any proposals in this direction would require a further consultation as part of a separate regulatory project to consider their costs and benefits. We also considered it important that investors be provided with enhanced cost information at the earliest time possible. Link cost, performance and other information
53. A securities industry association and an
investor advocate suggested linking performance information with costs in account statements to provide a better comparison of costs and performance among different investment funds and so that investor can understand cost information in relation to performance.
Section 14.20 of Regulation 31-103
and corresponding New SRO rules provide that the ARCC and Investment Performance Report (the IPR) must be delivered together and must include information for the same 12-month period. We note that the ARCC is currently limited to presenting information about costs and compensation, while information about performance is presented in the IPR and information about a client’s current holdings is presented in the account statement. An extensive review of the format and information presented in each of the ARCC, IPR and account statement was beyond the scope of this project and would have required additional consultations. We also note that registered firms and their representatives are expected to provide contextual information to clients about the costs of their investments in relation to investment performance and other relevant factors. Registered firms can also include additional information, including performance information, in the

ARCC, if they believe doing so would enhance client understanding. If doing so, we strongly recommend that firms undertake behavioural testing to ensure that any additional information increases investor understanding and does not lead to investor confusion. Modify notification concerning fund expenses
54. According to an industry commenter, the
concern with respect to fund expenses can be more correctly stated as fund costs are relevant to the extent that the costs do not generate additional return. We believe the mandated notification is accurate in stating that investment fund fees affect clients because they reduce the fund’s returns, which in turn affects the performance of the client’s portfolio. Proposed notifications
55. An industry commenter suggested adding an
additional explanation that ongoing fees such as MERs or TERs are charged by managers and not by dealers or salespeople. An industry association also suggested adding a notification that fees paid a client’s advisor are in consideration for services provided by them. The mandatory notification in section 14.17(1)(n)(i) includes an explanation that fund expenses are periodically deducted from the value of a client’s investments by the companies that manage and operate those funds. We believe this notification adequately explains that fund expenses are charged by investment fund companies. We note that registered firms and representatives can provide information to clients about the value of the services they offer in exchange for their costs. We also considered that providing more information can sometimes reduce comprehension and have strived to minimize the number of mandated notifications.

J. EXEMPTIONS
Comment Response
Exemptions for non-individual permitted clients
56. A securities industry association
recommended that the exemptions in
14.14.1(6) and 14.17(5) of Regulation 31-
103 be expanded to include “overflow accounts” where a non-individual permitted client opens additional related accounts, as well as to health and welfare trusts, union and union-related benefit plans, multiemployer benefit plans, some foundations and registered charities, some overflow pension accounts, supplemental employee retirement plans, disability plans, First Nations trust vehicles and retirement compensation arrangements. Expansion of the statutory exemptions in those sections was beyond the scope of this project. Exemptive relief orders have been provided for overflow accounts in the context of other regulatory projects. However, only a very small number of registrants have found it necessary to seek such relief. We therefore do not think that adding a statutory exemption is necessary, but will consider exemptive relief applications on this subject.

K. LIST OF SECURITIES COMMENTERS
1 Advocis
2 The Alternative Investment Management Association (AIMA) 3 Arthur Ross 4 Banque Nationale / National Bank (BNC/NBC) 5 Borden Ladner Gervais (BLG) 6 Canadian Advocacy Council of CFA Societies Canada (CAC) 7 Canadian ETF Association (CETFA) 8 CARP 9 Citibank Canada Investment Funds Limited 10 FAIR Canada 11 Fasken Martineau DuMoulin LLP 12 Federation of Mutual Fund Dealers (FMFD) 13 Fidelity Investments 14 Financial Planning Association of Canada (FPAC) 15 Franklin Templeton 16 High Level Wealth Management 17 Highview 18 The Investment Funds Institute of Canada (IFIC) 19 IGM Financial Inc. 20 Investment Industry Association of Canada (IIAC) 21 Invesco Canada Ltd. 22 Investor Advisory Panel 23 Kenmar Associates 24 MICA Capital Inc. 25 Pacific Spirit Investment Management Inc. 26 Peter Whitehouse 27 Portfolio Management Association of Canada (PMAC) 28 Private Capital Markets Association of Canada (PCMA) 29 Raymond James Ltd. 30 Royal Bank of Canada (RBC) 31 Scotiabank 32 Steadyhand Investment Management Ltd. 33 TD

ANNEX C
ADOPTION OF THE SECURITIES AMENDMENTS
The Amendments to Regulation 31-103 will be implemented as:

a rule in each of Alberta, British Columbia, Manitoba, New Brunswick,
Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island and Yukon,
a regulation in Québec, and
a commission regulation in Saskatchewan.
The Amendments to Policy Statement 31-103 will be adopted as a policy in each of the CSA member jurisdictions. In Ontario, the Amendments to Regulation 31-103, as well as other required materials, were delivered to the Minister of Finance on or about April 20, 2023. The Minister may approve or reject these Amendments or return them for further consideration. If the Minister approves the Amendments or does not take any further action, the Amendments will come into force on January 1st, 2026. In Québec, the Amendments to Regulation 31-103 are adopted as a regulation made under
section 331.1 of the Securities Act and must be approved, with or without amendment, by
the Minister of Finance. The regulations are expected to come into force on January 1st,

They are also published in the Bulletin of the Autorité des marchés financiers.
In British Columbia, the implementation of the Amendments to Regulation 31-103 is subject to ministerial approval. If all necessary approvals are obtained, British Columbia expects these Amendments to come into force on January 1st, 2026. In Saskatchewan, the implementation of the Amendments to Regulation 31-103 is subject to ministerial approval. If all necessary approvals are obtained, these Amendments will come into force on January 1st, 2026 or if after January 1st, 2026, on the day on which they are filed with the Registrar of Regulations.

Individual Variable Insurance Contract Ongoing Disclosure Guidance
Part 1: Definitions.....................................................................................................................................2
Part 2: Scope.............................................................................................................................................5
Part 3: Annual Statement to Contract Owner..........................................................................................6
Part 4: Calculating Fund Expenses............................................................................................................6
Part 5: Calculation of Trading Expense Ratio: ..........................................................................................7
Part 6: Reminder to Update Customer Information.................................................................................7
Schedule A – Minimum Content of Annual Statement.................................................................................8
Schedule B – Modified Compliance and Exemptions .................................................................................14
ANNEX D – INSURANCE GUIDANCE

Part 1: Definitions
1.1 In this Guidance
“Accumulation Phase” means the time between the date the Owner begins making deposits to an IVIC that provides a guaranteed withdrawal benefit and the date the Owner notifies the Insurer the Owner wants to begin receiving such guaranteed payments under the IVIC. “Advisory Service Fee” means any fee payable by an Owner to an Intermediary with respect to the IVIC, that is paid by the Insurer to the Intermediary on direction of the Owner from assets within the IVIC. “Annuitant” means a person whose life triggers any guarantee on death or contract maturity or any payment for life under an IVIC. “Benefits Phase” means the time between the date when the Withdrawal Phase ends for all or
part of an IVIC that provides a guaranteed withdrawal benefit and the last date a guaranteed
withdrawal benefit is payable.
“CLHIA G2” means the Canadian Life and Health Insurance Association’s Guideline G2 Individual Variable Insurance Contracts Relating To Segregated Funds. “Fees and Charges” means any sales charges, distribution fees, management fees, administrative fees, account set-up or closing charges, surrender charges, transfer fees, insurance fees or any other fees, charges or expenses whether or not contingent or deferred which are or may be payable in connection with the acquisition, holding, transferring or withdrawal of units of a Segregated Fund credited to the IVIC. “Fund Expense Ratio” or “FER” means the sum of a Segregated Fund’s Management Expense Ratio and Trading Expense Ratio, expressed as a percentage. “Fund Expense Ratio For The Day” means the ratio, expressed as a percentage, of the amount of fund expenses of a class or series of Segregated Fund for the day to the fund’s net asset value for the day. “Fund Expenses" means all the Segregated Fund’s expenses that are paid out of assets of the fund, including Management Expenses and Trading Expenses. “Fund Facts” means a disclosure document in respect of a Segregated Fund under an IVIC; this document forms part of the information folder and includes information required by law or regulatory guidance in the relevant jurisdiction including information under the following headings:
a. Quick Facts b. What does the fund invest in?
c. How has the fund performed?

d. How risky is it? e. Are there any guarantees? f. Who is the fund for? g. How much does it cost? h. What if I change my mind? and
i. For More Information.
“Individual Variable Insurance Contract” or “IVIC” means an individual contract of Life Insurance, including an annuity contract, under which the Insurer’s liabilities vary in amount depending upon the market value of a specified group of assets in a Segregated Fund. IVIC includes a provision in an individual contract of Life Insurance under which policy dividends are deposited in a Segregated Fund. “Insurer” means an insurer as defined under the laws of the applicable Canadian jurisdiction. “Insurer’s Name” means an Insurer’s full legal name. “Intermediary” means a Licensed Individual authorized to sell and service IVICs under the laws of the relevant Canadian jurisdiction, or a Licensed Business. “Investment Option” in connection with an IVIC means each Segregated Fund offered for investment under the IVIC and any other investment offered under the IVIC, including a guaranteed interest investment. “IVIC Structure” with respect to an Owner’s IVIC means how the IVIC is structured, including the following:
a. Ownership structure, including whether there is one Owner or more than one and, if more than one, any division of rights among the Owners while they are alive and the rights surviving Owners will have when one Owner dies, and designation of successor or contingent Owners if applicable, b. Beneficiaries, and successor Annuitants or successor holders if applicable,
c. Annuitant or Annuitants upon whose death the IVIC will end, and
d. Measuring life or lives where benefits under the IVIC are available as long as one of the measuring lives are alive, if applicable; under some IVICs a measuring life may be different from the Annuitant. “Licensed Business” means any person licensed under the laws of the relevant Canadian jurisdiction to sell IVICs, other than an Insurer or a Licensed Individual. “Licensed Individual” means any of the following individuals:
a. an insurance agent, b. an insurance broker, or
c. an insurance representative
authorized under the laws of the applicable Canadian jurisdiction.

“Life Insurance” means life insurance as defined under the laws of the applicable Canadian jurisdiction and includes an annuity or an undertaking to provide an annuity. “Management Expense Ratio” or “MER” means the ratio, expressed as a percentage, of the Management Expenses of a Segregated Fund to the fund’s average daily net asset value for a financial year calculated in accordance with CLHIA G2. “Management Expenses” means a Segregated Fund’s management fees, operating and other administration expenses, including those of any Secondary Fund, and all taxes other than income taxes but excluding Trading Expenses. Management fees are net of any fees or expenses waived. “Market Value” of the units of a Segregated Fund in an IVIC is the value of the investments in that Segregated Fund, calculated by taking the number of fund units within the IVIC and multiplying it by the market value per unit at the end of the date for which the market value is calculated. “Material Change to Customer Information” means a change in information about the Owner that could result in a change in the Owner’s needs or the recommendations or advice provided to the Owner, or should reasonably cause an Intermediary to question whether the Owner’s IVIC, as structured, including investments, continues to meet the needs of the Owner. “Owner” means a person who owns an IVIC. “Secondary Fund” means a secondary fund as defined in the CLHIA G2. “Segregated Fund” means a specified and distinct group of assets the Insurer holds with respect to an IVIC, in which an Owner can invest by allocating deposits to units of a segregated fund under the IVIC. “Statement Date” means the date of the last day of the period covered by the statement. “Trading Expense Ratio” or “TER” means the ratio, expressed as a percentage, of the Trading Expenses of a Segregated Fund to the fund’s average daily net asset value for the financial year, as calculated under Part 5: Calculation of Trading Expense Ratio. “Trading Expenses” means the total commissions and other portfolio transaction costs paid or payable by the Insurer from the assets of the segregated fund on the purchase and sale of the fund’s assets, including those of any Secondary Fund. “Withdrawal Phase” means the time between when the Owner triggers the guaranteed withdrawal benefit under an IVIC that provides such a benefit, and ends when there is no longer enough money held within the IVIC to pay a scheduled withdrawal.

Part 2: Scope
This Guidance sets out the expectations of the Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organization (CISRO) for an enhanced disclosure framework for IVICs. This enhanced disclosure framework includes expectations to provide more transparency to Owners and covers:

IVIC investment performance,
cost reporting, and
insurance guarantees.
This Guidance applies only to:
IVICs, including, for greater certainty, IVICs issued and outstanding prior to the date of
this Guidance unless otherwise indicated in this Guidance, and
Insurers who design, distribute, issue, sell or administer IVICs in Canada.
This Guidance does not apply to group variable insurance products or any other non-IVIC insurance products. This guidance is the first component of an intended CCIR/CISRO guidance for the design, distribution, issuance, sale, and administration of IVICs. Once the other components have been finalized, this standalone guidance may be discontinued and its expectations reproduced as
part of the consolidated guidance.

Part 3: Annual Statement to Contract Owner
3.1 The Insurer shall provide to the Owner of each IVIC, within four months of each fiscal
year end of the Segregated Funds within the IVIC, a statement showing the information described in Schedule A.
3.2 Insurers may request exemptions from specific expectations in Schedule A from CCIR by
submitting a request in accordance with Schedule B.
Part 4: Calculating Fund Expenses
4.1 Insurers must calculate and report the amount of a Segregated Fund’s Fund Expenses
allocated to an IVIC based on:
a. how many Segregated Fund units the Owner held in the IVIC, and b. when the Owner held the Segregated Fund units during the reporting period.
4.2 Insurers must use the following formula to calculate the Fund Expenses of an applicable
class or series of Segregated Fund for each day an Owner held units of the applicable class or series of the Segregated Fund during the reporting period, making any adjustments reasonably necessary to accurately determine an Owner’s Fund Expenses. A x B x C A = the Fund Expense Ratio For The Day of the applicable class or series of the Segregated Fund; B = the market value of a unit for the day of the applicable class or series of the Segregated Fund; and C = the number of Segregated Fund units within the Owner’s IVIC for the day.
4.3 Insurers may use a reasonable approximation of the fund calculation inputs “A” and “B”
for s. 4.2 provided the Insurer reasonably believes that doing so would not result in reporting misleading information to an Owner. For example, a reasonable approximation may include estimating the Fund Expense Ratio For The Day by dividing the Segregated Fund’s FER in the most recent Fund Facts document or financial statement by the number of days in the year. It would be misleading to use this estimation if the Insurer knows there has been an event which resulted in a significant change to the FER since the document was published.
4.4 For reporting an Owner’s Fund Expenses under Schedule A s. 3) a), Insurers must repeat
the calculation under s. 4.2 for each class or series of Segregated Fund which the Owner held units of during the reporting period and aggregate the results.
4.5 Insurers are not required to calculate and report the Fund Expenses of a Segregated
Fund which was established less than 12 months before the Statement Date.

Part 5: Calculation of Trading Expense Ratio
5.1 The Trading Expense Ratio of a Segregated Fund for any financial year shall be
calculated by:
a. dividing
i. the total commissions and other portfolio transaction costs before income taxes,
for the financial year as shown on its statement of comprehensive income; by
ii. the same denominator as is used to calculate the Management Expense Ratio
and b. multiplying the result obtained under paragraph (a) by 100. If a Segregated Fund invests in a Secondary Fund, the insurer must calculate the Trading Expense Ratio using the methodology required for the calculation of the Management Expense Ratio in section 8.1 of CLHIA G2 - Calculation of Management Expense Ratio, making reasonable assumptions or estimates when necessary.
Part 6: Reminder to Update Customer Information
6.1 Each Insurer must, on an annual basis, take reasonable steps to:
a. invite each Owner to contact and update their Intermediary about any Material Change to Customer Information since the last time the Owner provided information to their Intermediary, b. explain why it is important for the Owner’s Intermediary to have up-to-date information, and
c. invite each Owner to review the IVIC, IVIC Structure and Investment Options they
selected for each IVIC held and discuss proposed changes with their Intermediary.
6.2 For clarity, it is a reasonable step for an Insurer to include the elements of section 6.1 in
its annual statement to an Owner.

Schedule A – Minimum Content of Annual Statement

General
a) Statement Date, b) The following information about the Insurer:
i) Insurer’s Name, ii) Insurer’s phone number, and iii) Insurer’s website, c) The following information about the IVIC:
i) Contract name, ii) Contract tax status, iii) Contract number, and iv) When the contract began, d) Owner(s), e) Annuitant(s), f) Designated beneficiary(ies), g) The following information about the Licensed Individual responsible for servicing the IVIC:
i) Licensed Individual’s name, ii) Licensed Individual’s phone number, and iii) Licensed Individual’s email address, h) A notice in plain language to i) Remind Owner(s) that the information contained in the statement will help them track their financial goals, ii) Remind Owner(s) they can obtain copies of the most recent Fund Facts associated with their contract, annual audited financial statements and semi-annual unaudited financial statements for each Segregated Fund and how to obtain them, and iii) Invite Owner(s) to contact the Licensed Individual or the Insurer if the Owner needs additional information.
Performance – Contract
a) For the IVIC as a whole, the Market Value at the start of the year and at the Statement Date b) For the IVIC as a whole, as of the Statement Date, the total deposits i) Since the IVIC began, and ii) Since the start of the year, c) For the overall IVIC, as of the Statement Date, total withdrawals i) Since the IVIC began, and

ii) Since the start of the year, d) For the overall IVIC, as of the Statement Date, the change in value of investments in the IVIC for reasons other than deposits to or withdrawals from the IVIC i) Since the IVIC began, and ii) Since the start of the year, e) Personal rate of return, as a percentage, calculated on the dollar-weighted method:
i) Since the IVIC began, and ii) Where the IVIC has been in effect for the relevant time:
(1) For the 10 years ending on the Statement Date, (2) For the 5 years ending on the Statement Date, (3) For the 3 years ending on the Statement Date, and (4) For the year ending on the Statement Date, and f) A plain language explanation that the personal rate of return may be different than the rate realized by the Segregated Funds within the IVIC because calculation of personal rate of return depends on factors such as timing of deposits and withdrawals.
3) Fees and Charges – Contract
a) For the IVIC as a whole, the dollar amount the Owner incurred during the year for each of the following, i) Fund Expenses ii) Front end load charges, iii) Deferred sales charges, iv) Advisory Service Fee, v) Withdrawals fees vi) Transfer fees, vii) Reset fees, viii)Early withdrawal and/or short term trading fee, ix) Fees with respect to cheques returned due to insufficient funds, x) Small policy fee, xi) Insurance fees not paid by the Insurer from the assets of a Segregated Fund, and xii) Any other Fees and Charges deducted from the IVIC. b) For further clarity, the Insurer is not required to include one of the above Fees and Charges if the dollar amount the Owner incurred for that fee or charge in the year is zero. c) For the IVIC as a whole, the dollar amount of the total of the items listed in Schedule A s.
3) a),
d) Any changes to the insurance fee, where legally permitted,

e) A plain language explanation that any Fees and Charges the Owner pays directly to the Licensed Individual and/or Licensed Business, if applicable, are not included in the amount in Schedule A s. 3) c), and f) Plain language explanations of i) How Fees and Charges affect returns, ii) The actions an Owner can take regarding the Fees and Charges information in the statement, iii) The fact approximations have been used when calculating Fund Expenses, if applicable, iv) The fact an Owner can look at the Fund Facts document for more information about Fees and Charges, including Fund Expenses. g) Where applicable, a notice in plain language:
i) Explaining that the total Market Value of the contract is not necessarily the amount the Owner will receive if they end their contract, ii) Explaining how the Owner can get more details about the amount of money they would receive if they ended their contract, and iii) If the costs the Owner would incur if they withdrew the total Market Value of the IVIC are significant, explaining these costs in enough detail to allow the Owner to understand the effect of the costs. For further clarity, the disclosure explicitly required under this guidance with respect to deferred sales charges is sufficient to address item Schedule A s. 3) g) iii) regarding deferred sales charges.
4) Segregated Fund details – Value, Fund Expense Ratio, Deferred Sales Charges
a) For each Segregated Fund held within the IVIC during the year described by the statement:
i) The Segregated Fund name, ii) Market Value of the Segregated Fund at start of year, iii) Since the start of the year:
(1) Total deposits into the Segregated Fund, (2) Total withdrawals from the Segregated Fund, and (3) The change in value of investments in the Segregated Fund for reasons other than deposits or withdrawals, iv) As of the Statement Date:
(1) Number of Segregated Fund units held,
(2) Market value per Segregated Fund unit, and (3) Total Market Value of Segregated Fund units held, v) The Fund Expense Ratio for the fund,

vi) The fact that a deferred sales charge applies, if applicable, and vii) The fact that no Fund Expense Ratio is provided for a Segregated Fund because the fund was established less than 12 months before the Statement Date, if applicable. b) A plain language explanation of:
i) What the Fund Expense Ratio is, and ii) The fact that the dollar amount of the Fund Expenses allocated to the IVIC are included in the details of the charges for the IVIC for the year.
5) Guarantees
a) For the IVIC as a whole as of the Statement Date:
i) The Market Value of the Segregated Funds subject to the guarantee under the contract, ii) The maturity date of the guarantee of the contract as a whole, iii) The dollar value guaranteed on the contract maturity date, and iv) The dollar value guaranteed on death of the Annuitant(s). b) For further clarity, if the contract has more than one maturity date, the Insurer is only required to provide the information under Schedule A s. 5) a) i), ii) and iii) for the maturity guarantee of the contract as a whole, not for each separate deposit. c) If the contract has an automatic reset provision, the date of the next automatic reset and an explanation of the impacts of this reset on the values of the guarantees.
6) Guarantees – Contracts with guaranteed withdrawals
Accumulation Phase a) If the IVIC provides a guaranteed withdrawal benefit and all or part of the contract is in the Accumulation Phase, the following information with respect to the assets in the Accumulation Phase:
i) The annual guaranteed withdrawal amount for every withdrawal option available to the Owner under that contract at:
(1) The earliest age at which the Owner can begin receiving guaranteed withdrawals, (2) Age 65, if applicable, and (3) Age 70, if applicable, ii) A notice in plain language that the guaranteed amounts have been calculated assuming, (1) The Owner will make no further deposits to the IVIC, (2) The Owner will make no withdrawal from the IVIC, aside from the guaranteed withdrawals,

(3) The value of the units in the IVIC will not change between the date of calculation and the dates for which guaranteed withdrawal amounts are shown, (4) That no bonuses will be credited to the IVIC, if applicable, between the date of calculation and the dates for which guaranteed withdrawal amounts are shown, and (5) That the Owner will not reset any guarantees under the IVIC, if applicable, between the date of calculation and the dates for which guaranteed withdrawal amounts are shown, iii) A notice in plain language explaining how guarantees are affected by withdrawals, and iv) If applicable, a notice in plain language to remind the Owner of their ability to make discretionary resets of the guarantees under the contract. Withdrawal Phase b) If the IVIC provides a guaranteed withdrawal benefit and all or part of the contract is in the Withdrawal Phase, the following information with respect to the assets in the Withdrawal Phase:
i) The guaranteed annual withdrawal amount, ii) How long the guaranteed annual withdrawal amount will be payable, assuming the Owner does not make any withdrawals other than the scheduled withdrawals, iii) The amount the Owner has chosen to receive annually, if different from the guaranteed annual withdrawal amount, iv) If the IVIC is a registered retirement income fund (“RRIF”), life income fund (“LIF”), Locked-in Retirement Income Fund (“LRIF”) or Restricted Life Income Fund (“RLIF”), the minimum RRIF, LIF, LRIF or RLIF withdrawal for the year following the Statement Date, v) If the IVIC is a LIF, LRIF or RLIF, the maximum LIF, LRIF or RLIF withdrawal for the year following the Statement Date, vi) A notice that any withdrawals that exceed the guaranteed annual withdrawal amount will decrease future guaranteed withdrawal amounts, except if required with respect to RRIF, LIF, LRIF or RLIF minimum withdrawals, and vii) A notice in plain language explaining the guaranteed withdrawal amount will be payable to the Owner even if the Market Value of the relevant assets in the contract is less than the guaranteed withdrawal amount. Benefits Phase c) If the IVIC provides a guaranteed withdrawal benefit and all or part of the contract is in the Benefits Phase, the following information with respect to the assets in the Benefits Phase:

i) The guaranteed annual withdrawal amount, and ii) How long the withdrawal amount is guaranteed to be payable.

Schedule B – Modified Compliance and Exemptions
It is CCIR’s understanding that in some cases, given the long-term nature of IVICs, some products are housed on technical systems which are old. These systems were built at a time when different requirements were in place and the cost of upgrading these systems to comply with this guidance may be passed down to the Owners of the products administrated on older systems. To balance the overall benefit and costs Owners would receive from the expectations under this guidance, individual Insurers may submit a request to CCIR to be fully or partially exempt from specific expectations under this guidance or providing required information in a different format. The onus will be on the Insurer to identify how much information it can provide to Owners of specific IVICs before the cost to those Owners exceeds the benefits to those Owners. At a minimum, Insurers need to provide answers and supporting evidence to the following questions:

Which expectations are the Insurer seeking exemption from?
Why can’t the Insurer fully comply with the expectations?
How is a grant of an exemption consistent with fair treatment of customers?
What will be the costs to Owner where:
a) Insurers fully comply with the expectations? b) Insurers receive the requested exemptions under question 1?
Which product(s) are Insurers seeking an exemption for and whether they use the same
system(s)?
For each product:
a) Are these products still being sold? b) If these products are not being sold, are Insurers still accepting new deposits? c) How many contracts have been issued? d) How many unique policyholders are there? e) What are the total assets under management? f) What is the estimated run-off time for products? CCIR may request additional information. CCIR will then determine whether, in their view, the cost of complying with the expectation(s) would result in costs to Owners of specific IVICs that are higher than the benefit those Owners would receive from the expectation.

This statement provides you with information on how your contract has performed this year, including the rate of return and value of guarantees. It provides you with all charges and fees associated with your contract. It will help you track your financial goals. We recommend that you read it carefully. The Fund Facts documents and annual audited financial statements for segregated funds are available upon request. Please contact your representative or us if you require additional information. Information on your contract Your total annual personal rate of return (net of charges) The following graph shows your total annual personal rate of return net of charges for different periods. Note that this rate of return may be different than the rate of return realized by the segregated funds because it takes into account the timing of your deposits and withdrawals. ABC Insurer Inc. 1 This is not necessarily the amount you would receive if you made a withdrawal. As an example, deferred sales charges or withdrawal fees may change the withdrawal value. You can contact us to learn the actual amount you can receive. As at December 31, 2020 Segregated funds Number of units Market value per unit ($) Market value ($) ABC Management Monthly Income Fund, Standard Series, DSC Guarantee 75/100 250.00 $78.00 $19,500.00 ABC Management Canadian Equity Fund, Standard Series, FEL Guarantee 75/100 450.00 $50.00 $22,500.00 Total1 $42,000.00 Contract name: ABC RetirementPlus Contract tax status: Registered Contract no.: 78902314 Issue date: March 20, 2014 Owner: John Smith Annuitant: John Smith Designated beneficiary: Jane Smith Your representative: George Advisor Your representative’s telephone no.: 1 416 444 5353 Your representative’s e-mail address: gadvisor@advisor.ca 5.50% 4.10% 3.50% 2019 - 2020 2.50% 2015 - 2020 2017 - 2020 2014 - 2020
ANNEX E - INSURANCE SAMPLE ANNUAL STATEMENT
ACCUMULATION PROTOTYPE

Your Contract Number: 78902314
Holdings in your Contract
On December 31, 2020
Contract values since issue on March 20, 2014 Contract values since December 31, 2019 Segregated funds Market value at end of 2019 Deposits Withdrawals Net Growth or Loss2 Market value at end of Fund expense ratio3 ABC Management Monthly Income Fund, Standard Series 75/100, DSC4 $20,650.21 $0.00 $1,666.67 $516.46 $19,500.00 1.18% ABC Management Canadian Equity, Standard Series 75/100, FEL $21,951.22 $0.00 $0.00 $548.78 $22,500.00 2.04% Totals $42,601.43 $0.00 $1,666.67 $1,065.24 $42,000.00 Total annual rate of return (net of charges) 2.5% 2 Total charges deducted from your return are detailed in the following section. 3 The fund’s expenses are made up of the management fee, operating expenses, trading costs, applicable sales taxes and the insurance costs for your maturity and death benefit guarantees. You don't pay these expenses directly. We periodically deduct them from the value of your investments to manage and operate the funds. Different funds charge different levels of fees. They affect you because they reduce the fund's returns. These expenses add up over time. Fund expenses are expressed as an annual percentage of the total fund's value. They correspond to the sum of the fund’s management expense ratio (MER) and trading expense ratio (TER). These costs are already reflected in the current values reported for your fund investments. The dollar amount of the expense calculated from the fund expense ratio is included in the costs described below in the following section. 4 Your fund has a deferred sales charge. You can withdraw all the money in this fund, but you may be charged a fee to do so if you are withdrawing those funds before the end of the 7-year deferred sales charge period. Deposits $38,166.67 Withdrawals ($1,666.67) Net Growth or Loss2 $5,500.00 Market value at end of 2020 $42,000.00

ABC Insurer Inc.
Your Contract Number: 78902314
Details of charges for the year 2020
Important: Review Your Costs
This part of the report shows the total cost of owning your contract last year. These costs impact your return. This does not include fees billed directly by your representative, if applicable. Your cost of investing is impacted by your choices. You can refer to Fund Facts documents for more information about the fund expenses and its component parts. Your total cost of investing was $760 last year What can I do with this information? Take action by contacting your advisor to discuss the fees you pay, the impact the fees have on the long-term performance of your investments and contract, and the value you receive in return. ABC Insurer Inc. 5 You paid this cost to us because you withdrew money from a fund before the end of the deferred sales charge period, and it was more than your contract said you could withdraw without paying a deferred sales charge. You paid this cost directly from money withdrawn from your contract and it reduced the amount you received when you withdrew money. 6 The number shown here is the estimated total dollar amount you paid in management fees, trading fees, operating expenses and insurance costs for your maturity and death benefit guarantees for all the segregated funds you owned last year. This amount depends on each of your funds’ fund expenses and the amount you invested in each fund. These costs are already reflected in the market values reported for your fund investments. 7 This is what you paid us this year for the guaranteed withdrawal amount under your contract. You paid this cost by withdrawing investments in your contract. Withdrawal fees on deferred sales charge investments5 $50.00 Transfer fee $20.00 Investment fund expenses (Fund expenses), including indirect insurance costs6 $645.00 Direct insurance cost for your guarantees7 $45.00 Total $760.00

Your Contract Number: 78902314
Your contract’s guarantees
Your contract contains insurance features that offer you protection against negative market movements. You have a death guarantee and a maturity guarantee that protect a portion of your investment. When you decide to withdraw money from your contract, you also have a guarantee that you will be able to withdraw a certain amount for a certain period of time or for the remainder of your life. The guaranteed withdrawal amount will be payable to you even if the market value of the guaranteed segregated funds in the contract is less than this amount. The chart below shows the actual value of those guarantees. Guarantee 75/1008 Market value of your segregated funds: $42,000.00 Maturity date of the guarantee: January 12, 2084 Value of 75% guarantee at maturity: $27,428.42 Value of 100% guarantee on death: $36,571.22 Date of the next automatic reset of your guarantees9 March 30, 2024 Accumulation phase Guaranteed lifetime annual withdrawal amount, if taken:10 At age 55 $575.50 At age 65 $893.65 At age 70 $1,353.20 8 On withdrawal, the value of your guarantees is adjusted proportionally to the market value of your contract at the time of withdrawal. For example, if someone withdraws $1,200 when the market value of the segregated fund contract is $6,000, the withdrawal will reduce the market value of the segregated funds by 20 per cent ($1,200/$6,000). The maturity and death benefit guarantee amounts will be reduced proportionally by the same 20 per cent. 9 You may make discretionary resets up to 3 times per year subject to certain conditions, as stipulated in your contract. Kindly contact your representative for additional information on the subject. A reset will lock-in a new maturity or death benefit guarantee based on the current market value of the IVIC. A reset to the maturity guarantee will also restart the maturity guarantee period, delaying the maturity date of your IVIC. 10 Guaranteed withdrawal amounts have been calculated assuming no bonus, no deposit or withdrawal, no future return and no reset of guarantees between now and the start of annual periodic withdrawals.

DEFINITIONS

Accumulation Phase: This phase starts
when you begin making deposits into the contract and continues until you notify us you would like to trigger the Withdrawal Phase to start taking scheduled withdrawals.
Deposit: Amount you paid to us for the
purchase of segregated fund units.
Market value: This is the value of your
investments, calculated by taking the number of fund units and multiplying it by the market value per unit.
Net Growth / Loss: This is the amount your
investments have increased or decreased other than due to deposits, withdrawals or transfers in or out.
Reset: Option enabling the contract holder
to revaluate the guaranteed values applicable to his or her contract.
Segregated Fund: A separate and distinct
group of assets maintained by an insurer in respect of which the benefits of a variable insurance contract are provided.
Total annual personal rate of return: This is how
your investments have performed over time. This is calculated using an industry-standard method known as the “money weighted method” which factors in the time of your deposits and withdrawals (net of all charged fees) and does not take income tax into account. Your actual returns will depend on your personal tax situation. Since most benchmarks do not consider funds’ management fees and operating fees, your personal rate of return cannot be directly compared with an index.
Transfer: Sometimes called a switch, this is the
withdrawal of units in a fund for the purpose of purchasing units in another fund.
Withdrawal: Withdrawals out of the contract from
specific segregated fund units.

This statement provides you with information on your contract, including the value of guarantees. It will help you track your financial goals. We recommend that you read it carefully. Please contact your representative or us if you require additional information. Information on your contract Your contract’s guarantees Your contract no longer has any active investments. However, it contains an insurance feature which provides guaranteed income payments for a certain period of time. The chart below shows the value of those payments. Benefit Payments Phase Guaranteed annual withdrawal amount: $7,000 Income payable until: Until the Annuitant’s death Contract name: ABC RetirementPlus Contract tax status: Non-Registered Contract no.: 78902314 Issue date: March 20, 2014 Owner: John Smith Annuitant: John Smith Your representative: George Advisor Your representative’s telephone no: 1 416 444 5353 Your representative’s e-mail address: gadvisor@advisor.ca
ANNEX E - INSURANCE SAMPLE ANNUAL STATEMENT (continued)
BENEFITS PROTOTYPE

1234 West Street,
Toronto, Ontario ABC Insurer Inc. 1 800 567 8901 abcinsurerinc.ca Your annual statement As at December 31 2020 This statement provides you with information on how your contract has performed this year, including the rate of return and value of guarantees. It provides you with all charges and fees associated with your contract. It will help you track your financial goals. We recommend that you read it carefully. The Fund Facts documents and annual audited financial statements for segregated funds are available upon request. Please contact your representative or us if you require additional information. Information on your contract Your total annual personal rate of return (net of charges) The following graph shows your total annual personal rate of return net of charges for different periods. Note that this rate of return may be different than the rate of return realized by the segregated funds because it takes into account the timing of your deposits and withdrawals. 1 This is not necessarily the amount you would receive if you made a withdrawal. As an example, deferred sales charges or withdrawal fees may change the withdrawal value. You can contact us to learn the actual amount you can receive. As at December 31, 2020 Segregated funds Number of units Market value per unit ($) Market value ($) ABC Management Monthly Income Fund, Standard Series, DSC Guarantee 75/100 250.00 $78.00 $19,500.00 ABC Management Canadian Equity Fund, Standard Series, FEL Guarantee 75/100 450.00 $50.00 $22,500.00 Total1 $42,000.00 Contract name: ABC RetirementPlus Contract tax status: Registered Contract no.: 78902314 Issue date: March 20, 2014 Owner: John Smith Annuitant: John Smith Your representative: George Advisor Your representative’s telephone no:
1 416 444 5353
Your representative’s e-mail address: gadvisor@advisor.ca 5.50% 4.10% 3.50% 2019 - 2020 2.50% 2015 - 2020 2017 - 2020 2014 - 2020
ANNEX E - INSURANCE SAMPLE ANNUAL STATEMENT (continued)
WITHDRAWAL PROTOTYPE

ABC Insurer Inc.
Your Contract Number: 78902314
Holdings in your Contract
On December 31, 2020
Contract values since issue on March 20, 2014 Contract values since December 31, 2019 Segregated funds Market value at end of 2019 Deposits Withdrawals Net Growth or Loss2 Market value at end of Fund expense ratio3 ABC Management Monthly Income Fund, Standard Series 75/100, DSC4 $20,650.21 $0.00 $1,666.67 $516.46 $19,500.00 1.18% ABC Management Canadian Equity, Standard Series 75/100, FEL $21,951.22 $0.00 $0.00 $548.78 $22,500.00 2.04% Totals $42,601.43 $0.00 $1,666.67 $1,065.24 $42,000.00 Total annual rate of return (net of charges) 2.5% 2 Total charges deducted from your return are detailed in the following section. 3 The fund’s expenses are made up of the management fee, operating expenses, trading costs, applicable sales taxes and the insurance costs for your maturity and death benefit guarantees. You don't pay these expenses directly. We periodically deduct them from the value of your investments to manage and operate the funds. Different funds charge different levels of fees. They affect you because they reduce the fund's returns. These expenses add up over time. Fund expenses are expressed as an annual percentage of the total fund's value. They correspond to the sum of the fund’s management expense ratio (MER) and trading expense ratio (TER). These costs are already reflected in the current values reported for your fund investments. The dollar amount of the expense calculated from the fund expenses ratio is included in the costs described below in the following section. 4 Your fund has a deferred sales charge. You can withdraw all the money in this fund, but you may be charged a fee to do so if you are withdrawing those funds before the end of the 7-year deferred sales charge period. Deposits $38,166.67 Withdrawals ($1,666.67) Net Growth or Loss2 $5,500.00 Market value at end of 2020 $42,000.00

ABC Insurer Inc.
Your Contract Number: 78902314
Details of charges for the year 2020
Important: Review Your Costs
This part of the report shows the total cost of owning your contract last year. These costs impact your return. This does not include fees billed directly by your representative, if applicable. Your cost of investing is impacted by your choices. You can refer to Fund Facts documents for more information about the fund expenses and its component parts. Your total cost of investing was $760 last year What can I do with this information? Take action by contacting your advisor to discuss the fees you pay, the impact the fees have on the long-term performance of your investments and contract, and the value you receive in return. 5 You paid this cost to us because you withdrew money from a fund before the end of the deferred sales charge period, and it was more than your contract said you could withdraw without paying a deferred sales charge. You paid this cost directly from money withdrawn from your contract and it reduced the amount you received when you withdrew money. 6 The number shown here is the estimated total dollar amount you paid in management fees, trading fees, operating expenses and insurance costs for your maturity and death benefit guarantees for all the segregated funds you owned last year. This amount depends on each of your funds’ fund expenses and the amount you invested in each fund. These costs are already reflected in the market values reported for your fund investments. 7 This is what you paid us this year for the guaranteed withdrawal amount under your contract. You paid this cost by withdrawing investments in your contract. Withdrawal fees on deferred sales charge investments5 $50.00 Transfer fee $20.00 Investment fund expenses (Fund expenses), including indirect insurance costs6 $645.00 Direct insurance cost for your guarantees7 $45.00 Total $760.00

ABC Insurer Inc.
Your Contract Number: 78902314
Your contract’s guarantees
Your contract contains insurance features that offer you protection against negative market movements. You have a death guarantee and a maturity guarantee that protect a portion of your investment. When you decide to withdraw money from your contract, you also have a guarantee that you will be able to withdraw a certain amount for a certain period of time or for the remainder of your life. The guaranteed withdrawal amount will be payable to you even if the market value of the guaranteed segregated funds in the contract is less than this amount. The chart below shows the actual value of those guarantees. Guarantee 75/1008 Market value of your segregated funds: $42,000.00 Maturity date of the guarantee: January 12, 2065 Value of 75% guarantee at maturity: $27,428.42 Value of 100% guarantee on death: $36,571.22 Withdrawal phase Guaranteed annual withdrawal amount: $1,470.00 Annual withdrawal amount you have chosen to receive:9 $1,500.00 Income payable until Until the Annuitant’s death RRIF/LIF/LRIF/RLIF minimum withdrawal amount $1,400.00 LIF/LRIF/RLIF maximum withdrawal amount No maximum 8 On withdrawal, the value of your guarantees is adjusted proportionally to the market value of your contract at the time of withdrawal. For example, if someone withdraws $1,200 when the market value of the segregated fund contract is $6,000, the withdrawal will reduce the market value of the segregated funds by 20 per cent ($1,200/$6,000). The maturity and death benefit guarantee amounts will be reduced proportionally by the same 20 per cent. 9 Any withdrawals that exceed the guaranteed annual withdrawal amount will decrease future guaranteed withdrawal amounts except if required in respect of a RRIF/LIF/LRIF/RLIF minimum withdrawal amount. The guaranteed annual withdrawal amount will be paid to you even if the amount of money in your contract is less than the guaranteed payment amount.

DEFINITIONS

Deposit: Amount you paid to us for the
purchase of segregated fund units.
Market value: This is the value of your
investments, calculated by taking the number of fund units and multiplying it by the market value per unit.
Net Growth / Loss: This is the amount your
investments have increased or decreased other than due to deposits, withdrawals or transfers in or out.
Reset: Option enabling the contract holder to
revaluate the guaranteed values applicable to his or her contract.
Segregated Fund: A separate and distinct
group of assets maintained by an insurer in respect of which the benefits of a variable insurance contract are provided
Total annual personal rate of return: This is
how your investments have performed over time. This is calculated using an industrystandard method known as the “money weighted method” which factors in the time of your deposits and withdrawals (net of all charged fees) and does not take income tax into account. Your actual returns will depend on your personal tax situation. Since most benchmarks do not consider funds’ management fees and operating fees, your personal rate of return cannot be directly compared with an index.
Transfer: Sometimes called a switch, this is
the withdrawal of units in a fund for the purpose of purchasing units in another fund.
Withdrawal: Withdrawals out of the contract
from specific segregated fund units.
Withdrawal Phase: This phase starts when
you trigger your guaranteed withdrawal benefit and start taking the scheduled withdrawals. It continues while the contract has enough invested money to pay each scheduled withdrawal. When there is no longer any money invested in the contract, the contract transitions to the benefit payment phase where you will continue to receive your guaranteed withdrawal amount.

CSA and CCIR Notice of Publication: Total Cost Reporting Enhancements for Investment and Segregated Funds

Lineage: In force

Timeline