IMPORTANT INFORMATION FOR SHAREHOLDERS

 

Notice of the Annual General Meeting of Shareholders

and

Information Circular

February 29, 2008

 

 

www.methanex.com

 

TABLE OF CONTENTS

 

 

Invitation to Shareholders

 

On behalf of the entire Board of Directors of Methanex Corporation, I would like to invite you to join us at our Annual General Meeting of shareholders. The meeting will be held at the Vancouver Convention & Exhibition Centre in Vancouver, British Columbia on Tuesday, May 6, 2008 at 10:30 a.m.

 

At the meeting, we will be voting on a number of important matters. We hope you will take the time to consider the information describing these matters in the accompanying Information Circular. We encourage you to exercise your vote, either at the meeting or by completing and sending in your proxy. Use of the proxy form is explained in the Information Circular. If you are a “non-registered” shareholder, you should follow the instructions that you should receive from or on behalf of your intermediary to ensure that your shares get voted at the meeting in accordance with your wishes.

 

The meeting will provide you with a forum to learn more about our 2007 performance and hear first-hand our strategy for the future. It will also provide you with an excellent opportunity to meet the Company’s directors and senior management and ask them your questions.

 

We hope that you will attend the Annual General Meeting and we look forward to seeing you there. If you are unable to attend, the meeting will also be webcast live through our website: www.methanex.com.

 

Sincerely,

 

Bruce Aitken

President and Chief Executive Officer

 

METHANEX CORPORATION

 

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

The Annual General Meeting (the “Meeting”) of the shareholders of Methanex Corporation (the “Company”) will be held at the following time and place:

 

 

The Meeting is being held for the following purposes:

 

 

If you are a holder of Common Shares of the Company and do not expect to attend the Meeting in person, please complete the enclosed proxy form and either fax it to (416) 368 2502 or toll free in North America 1 866 781 3111 or forward it to CIBC Mellon Trust Company using the envelope provided with these materials. Proxies must be received no later than 24 hours (excluding Saturdays, Sundays and holidays) before the time fixed for commencement of the Meeting or any adjournment thereof.

 

DATED at the City of Vancouver, in the Province of British Columbia, this 29th day of February, 2008.

 

BY ORDER OF THE BOARD OF DIRECTORS

 

RANDY MILNER

Senior Vice President, General Counsel and

Corporate Secretary

 

METHANEX CORPORATION

 

 

 

Information contained in this Information Circular is given as at February 29, 2008 unless otherwise stated. Except where otherwise noted, all dollar amounts are stated in Canadian dollars.

 

Solicitation of Proxies

 

This Information Circular is provided in connection with the solicitation of proxies by or on behalf of the management and Board of Directors (the “Board”) of Methanex Corporation (the “Company”) for use at the Annual General Meeting (the “Meeting”) of the shareholders of the Company to be held at the time and place (including any adjournment thereof) and for the purposes set forth in the accompanying Notice of Annual General Meeting of Shareholders.

 

It is anticipated that this Information Circular and the accompanying proxy form will be mailed on or about March 28, 2008 to holders of common shares of the Company (“Common Shares”).

 

What will be voted on at the Meeting?

 

Shareholders will be voting on those matters that are described in the accompanying Notice of Annual General Meeting of Shareholders. The Notice includes all the matters to be presented at the Meeting that are presently known to management. A simple majority (that is, greater than 50%) of the votes cast, in person or by proxy, will constitute approval of these matters, other than the election of directors and the appointment of auditors.

 

Who is entitled to vote?

 

Only registered holders of Common Shares (“Registered Shareholders”) on March 14, 2008 (the “Record Date”) are entitled to vote at the Meeting or at any adjournment thereof. Each Registered Shareholder has one vote for each Common Share held at the close of business on March 14, 2008. As of February 29, 2008, there were 96,638,054 Common Shares outstanding. As of that date, to the knowledge of the directors and senior officers of the Company, the only person who beneficially owned, directly or indirectly, or exercised control or direction over Common Shares carrying more than 10% of the voting rights of the Company was AllianceBernstein L.P. Based on information filed by them, AllianceBernstein L.P. beneficially owned and exercised control or direction over 15,222,082 Common Shares, representing approximately 15.75% of the voting rights attached to the Company’s voting securities.

 

Can I vote Common Shares that I acquired after March 14, 2008?

 

No. The Canada Business Corporations Act (“CBCA”) states that only a shareholder whose name is on the list of shareholders as at the Record Date is entitled to vote at the Meeting.

 

How do I vote?

 

If you are a Registered Shareholder, there are two ways in which you can vote your shares. You can either vote by proxy or vote in person at the Meeting.

 

 

If you do not plan to come to the Meeting, you can have your vote counted by appointing someone who will attend the Meeting as your proxyholder. In the proxy, you can either direct your proxyholder how you want your shares to be voted or let your proxyholder choose for you. You can always revoke your proxy if you decide to attend the Meeting and wish to vote your shares in person (see “How do I revoke a Proxy” on page 3).

 

 

Registered Shareholders who will attend the Meeting and wish to vote their shares in person should not complete a proxy form. Your vote will be taken and counted at the Meeting. Please register with the transfer agent, CIBC Mellon Trust Company, upon your arrival at the Meeting.

 

What if I am not a Registered Shareholder?

 

Many shareholders are in fact “non-registered shareholders.” Non-registered shareholders are those whose shares are registered in the name of an intermediary (such as a bank, trust company, securities broker, trustee or custodian). Unless you have previously informed your intermediary that you do not wish to receive material relating to the Meeting, you should receive or have already received from your intermediary either a request for voting instructions or a proxy form.

 

Intermediaries have their own mailing procedures and provide their own instructions. These procedures may allow you to provide your voting instructions by telephone, on the Internet, by mail or by fax. You should follow the directions and instructions received from your intermediary carefully to ensure that your Common Shares are voted at the Meeting.

 

If you wish to vote in person at the Meeting you should follow the procedure in the directions and instructions provided by or on behalf of your intermediary. Do not otherwise complete any voting or proxy form you may receive directing how you want your shares voted as your vote will be taken at the Meeting. Please register with the transfer agent, CIBC Mellon Trust Company, when you arrive at the Meeting.

 

What is a Proxy?

 

A proxy is a document that authorizes someone else to attend the Meeting and cast your votes for you. Registered Shareholders are being sent a form of proxy for the Meeting permitting them to appoint a person to attend and act as proxyholder at the Meeting. Registered Shareholders may use such form, or any other valid proxy form, to appoint a proxyholder. The enclosed form of proxy authorizes the proxyholder to vote and otherwise act for you at the Meeting, including any continuation after adjournment of the Meeting.

 

If you are a Registered Shareholder and you complete the enclosed form of proxy by marking the appropriate boxes on the proxy form, your shares will be voted as instructed. If you do not mark any boxes your proxyholder can vote your shares at their discretion.

 

How do I appoint a Proxyholder?

 

Your proxyholder is the person you appoint and name on the proxy form to cast your votes for you. You can choose anyone you want to be your proxyholder. It does not have to be another shareholder. Just fill in the person’s name in the blank space provided on the enclosed proxy form or complete any other valid proxy form and deliver it to CIBC Mellon Trust Company within the time specified below for receipt of proxies.

 

If you leave the space on the proxy form blank, either Pierre Choquette or Bruce Aitken, both of whom are named in the form, are appointed to act as your proxyholder. Mr. Choquette is the Chairman of the Board and Mr. Aitken is President and Chief Executive Officer of the Company.

 

For the proxy to be valid, it must be completed, dated and signed by the holder of Common Shares (or the holder’s attorney as authorized in writing) and then delivered to the Company’s transfer agent, CIBC Mellon Trust Company, in the envelope provided or by fax to (416) 368 2502 or toll free in North America 1 866 781 3111 and received no later than 24 hours (excluding Saturdays, Sundays and holidays) prior to the Meeting or any adjournment thereof.

 

How will my shares be voted if I give my Proxy?

 

If you have properly filled out, signed and delivered your proxy, then your proxyholder can vote your shares for you at the Meeting. If you have specified on the proxy form how you want to vote on a particular issue (by marking FOR, AGAINST or WITHHOLD), then your proxyholder must vote your shares accordingly.

 

If you have not specified how to vote on a particular issue, then your proxyholder can vote your shares as they see fit. However, if you have not specified how to vote on a particular issue and Mr. Choquette or Mr. Aitken have been appointed as proxyholder, your shares will be voted in favour of the particular issue. For more information on these issues, see Part II “BUSINESS OF THE MEETING.” The enclosed form of proxy confers discretionary authority upon the proxyholder you name with respect to amendments or variations to the matters identified in the accompanying Notice of Annual General Meeting of Shareholders and other matters that may properly come before the Meeting. If any such amendments or variations are proposed to the matters described in the Notice, or if any other matters properly come before the Meeting, your proxyholder may vote your shares as they consider best.

 

How do I revoke a Proxy?

 

Only Registered Shareholders have the right to revoke a proxy. Non-registered shareholders who wish to change their voting instructions must, in sufficient time in advance of the Meeting, arrange for their intermediaries to change their vote and if necessary revoke their proxy.

 

If you are a Registered Shareholder and you wish to revoke your proxy after you have delivered it, you can do so at any time before it is used. You or your authorized attorney may revoke a proxy by (i) clearly stating in writing that you want to revoke your proxy and delivering this revocation by mail to Proxy Department, CIBC Mellon Trust Company, P.O. Box 721, Agincourt, ON M1S 0A1, Canada or by fax to (416) 368 2502 or toll free in North America 1 866 781 3111, or by mail to the registered office of the Company, Suite 1800, 200 Burrard Street, Vancouver, BC V6C 3M1, Canada, Attention: Corporate Secretary, or by fax to the Company to (604) 661 2602, at any time up to and including the last business day preceding the day of the Meeting or any adjournment thereof or (ii) in any other manner permitted by law. Revocations may also be hand-delivered to the Chairman of the Meeting on the day of the Meeting or any adjournment thereof. Such revocation will have effect only in respect of those matters upon which a vote has not already been cast pursuant to the authority confirmed by the proxy. If you revoke your proxy and do not replace it with another in the manner described in “How do I appoint a Proxyholder” above, you will be able to vote your shares in person at the Meeting.

 

Who pays for this solicitation of Proxies?

 

The cost of this solicitation of proxies is borne by the Company. It is expected that the solicitation will be primarily by mail, but proxies may also be solicited personally or by telephone or other means of communication by directors and regular employees of the Company without special compensation. In addition, the Company may retain the services of agents to solicit proxies on behalf of management of the Company. In that event, the Company will compensate any such agents for such services, including reimbursement for reasonable out-of-pocket expenses, and will indemnify them in respect of certain liabilities which may be incurred by them in performing their services. The Company may also reimburse brokers or other persons holding Common Shares in their names, or in the names of nominees, for their reasonable expenses in sending proxies and proxy material to beneficial owners and obtaining their proxies.

 

Who counts the votes?

 

The Company’s transfer agent, CIBC Mellon Trust Company, counts and tabulates the proxies. This is done independently of the Company to preserve confidentiality in the voting process. Proxies are referred to the Company only in cases where a shareholder clearly intends to communicate with management or when it is necessary to do so to meet the requirements of applicable law.

 

How do I contact the transfer agent?

 

If you have any inquiries, the Company’s principal registrar and transfer agent is CIBC Mellon Trust Company, and can be contacted as follows:

 

 

The Company’s co-registrar and co-transfer agent in the United States is Registrar and Transfer Company, however all shareholder inquiries should be directed to CIBC Mellon Trust Company.

 

 

 

The consolidated financial statements for the year ended December 31, 2007 will be received by shareholders of the Company at the Annual General Meeting of the Company and are included in the Annual Report, which has been mailed to Registered Shareholders as required under the CBCA and to non-registered shareholders that have requested such financial statements with the Notice of the Annual General Meeting of Shareholders and this Information Circular.

 

 

 

The directors of the Company are elected each year at the Annual General Meeting of the Company and hold office until the close of the next Annual General Meeting or until their successors are elected or appointed. The articles of the Company provide that the Company have a minimum of 3 and a maximum of 15 directors. The bylaws of the Company state that when the articles of the Company provide for a minimum and maximum number of directors, the number of directors within the range may be determined from time to time by resolution of the Board of Directors. The Board of Directors, on an annual basis, considers the size of the Board and on February 29, 2008, the directors determined that the Board of Directors shall consist of 11 directors, such size being consistent with effective decision-making.

 

The Corporate Governance Committee recommends to the Board nominees for election as directors. The process by which the Committee identifies new candidates for nomination to the Board of Directors is described on page 18, under the heading “Nomination of Directors”. The persons listed below are being proposed for nomination for election at the Meeting. The persons named in the accompanying proxy, if not expressly directed otherwise in such proxy, will vote the Common Shares in respect of which they have been appointed proxyholder in favour of the election of those persons listed below as nominees for directors.

 

The following table sets out the names, ages and places of residence of all the persons to be nominated for election as directors and other relevant information, including the number of Common Shares⁽¹⁾, Deferred Share Units⁽²⁾ and Restricted Share Units⁽³⁾ held by each of them as at the date of this Information Circular and their market value. In the case of Mr. Aitken, the Company’s President and Chief Executive Officer, the table also sets out the number of Performance Share Units⁽⁴⁾ and Stock Options⁽⁵⁾ he holds. The table also sets out whether a nominee is independent or not independent. See page 15 for information on how director independence is determined.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary of Board and Committee Meetings Held
For the 12-month period ending December 31, 2007

 

Board of Directors			7
Audit, Finance and Risk Committee			8
Corporate Governance Committee			4
Human Resources Committee			4
Public Policy Committee			2
Responsible Care Committee			3

 

Summary of Attendance of Directors at Board and Committee Meetings
For the 12-month period ending December 31, 2007

 

								%								%
								Board								Committee
			Board Meetings					Meetings					Committee			Meetings
Director			Attended					Attended					Meetings Attended			Attended
Bruce Aitken				7 of 7					100				—(1)				—
Howard Balloch				6 of 7					86				4 of 4 (CG)				100
													4 of 4 (HR)				100
													2 of 2 (PP – Chair)				100
Pierre Choquette				7 of 7					100				—(2)				—
Phillip Cook				7 of 7					100				8 of 8 (Audit)				100
													2 of 2 (PP)				100
													3 of 3 (RC)				100
Thomas Hamilton(3)				4 of 4					100				2 of 2 (CG)				100
													2 of 2 (PP)				100
													2 of 2 (RC)				100
Douglas Mahaffy				7 of 7					100				4 of 4 (CG – Chair)				100
													4 of 4 (HR)				100
A. Terence Poole				7 of 7					100				8 of 8 (Audit – Chair)				100
													2 of 2 (PP)				100
John Reid				7 of 7					100				8 of 8 (Audit)				100
													2 of 2 (CG)(4)				100
													3 of 3 (HR – Chair)(4)				100
Janice Rennie				6 of 7					86				8 of 8 (Audit)				100
													4 of 4 (HR)				100
Monica Sloan				6 of 7					86				2 of 2 (CG)(4)				100
													4 of 4 (HR)				100
													3 of 3 (RC)				100
Graham Sweeney				7 of 7					100				8 of 8 (Audit)				100
													2 of 2 (PP)				100
													3 of 3 (RC – Chair)				100

 

Committees:
Audit:		Audit, Finance and Risk Committee
CG:		Corporate Governance Committee
HR:		Human Resources Committee
PP:		Public Policy Committee
RC:		Responsible Care Committee

 

 

The directors of the Company recommend the reappointment of KPMG LLP, Chartered Accountants, Vancouver, as the auditors of the Company to hold office until the termination of the next annual meeting of the Company. KPMG LLP has served as the auditors of the Company for more than five years. As in past years, it is proposed that the remuneration to be paid to the auditors be determined by the directors of the Company.

 

The persons named by the Company in the accompanying proxy, if not expressly directed to the contrary in such proxy, will vote the Common Shares for which they have been appointed proxyholder to reappoint KPMG LLP, Chartered Accountants, as the auditors of the Company and to authorize the directors to determine the remuneration to be paid to the auditors.

 

Principal Accountant Fees and Services

 

Pre-Approval Policies and Procedures

 

The Company’s Audit, Finance and Risk Committee (the “Audit Committee”) annually reviews and approves the terms and scope of the external auditors’ engagement. The Audit Committee oversees the Audit and Non-Audit Pre-Approval Policy, which sets forth the procedures and the conditions by which permissible services proposed to be performed by KPMG LLP are pre-approved. The Audit Committee has delegated to the Chair of the Audit Committee pre-approval authority for any services not previously approved by the Audit Committee. All such services approved by the Chair of the Audit Committee are subsequently reviewed by the Audit Committee.

 

All non-audit service engagements, regardless of the cost estimate, are required to be coordinated and approved by the Chief Financial Officer to further ensure that adherence to this policy is monitored.

 

Audit and Non-Audit Fees Paid to the Independent Auditors

 

Fees paid to KPMG LLP during the years ended December 31, 2007 and December 31, 2006 were as follows:

 

US$000s			2007					2006
Audit Fees				1,810					1,654
Audit-Related Fees				42					146
Tax Fees				393					397
All Other Fees				—					—
Total				2,245					2,197

 

The nature of each category of fees is described below.

 

Audit Fees

 

Audit fees were paid for professional services rendered by the external auditors for the audit of the Company’s consolidated financial statements; statutory audits of the financial statements of the Company’s subsidiaries; quarterly reviews of the Company’s financial statements; consultations as to the accounting or disclosure treatment of transactions reflected in the financial statements; and services associated with registration statements, prospectuses, periodic reports and other documents filed with securities regulators.

 

Audit fees paid in 2007 are in respect of an “integrated audit” performed by KPMG LLP. The integrated audit encompasses an opinion on the fairness of presentation of the Company’s financial statements as well as an opinion on the effectiveness of the Company’s internal controls over financial reporting.

 

Audit-Related Fees

 

Audit-related fees were paid for professional services rendered by the auditors for financial audits of employee benefit plans; procedures and audit or attest services not required by statute or regulation; and consultations as to the accounting or disclosure treatment of other transactions.

 

Tax Fees

 

Tax fees were paid for professional services rendered for tax compliance, tax advice and tax planning. These services consisted of: tax compliance, including the review of tax returns; assistance in completing routine tax schedules and calculations; and tax planning and advisory services relating to common forms of domestic and international taxation.

 

 

None of the directors or officers of the Company, no proposed nominee for election as a director of the Company, none of the persons who have been directors or officers of the Company at any time since the beginning of the Company’s last completed financial year and no associate or affiliate of any of the foregoing has any material interest, direct or indirect, in any matter to be acted upon at the Meeting, other than the election of directors.

 

 

None of the directors or officers of the Company, no director or officer of a body corporate that is itself an insider or a subsidiary of the Company, no person or company who beneficially owns, directly or indirectly, voting securities of the Company or who exercised control or direction over voting securities of the Company or a combination of both carrying more than 10% of the voting rights attached to any class of outstanding voting securities of the Company entitled to vote in connection with any matters being proposed for consideration at the Meeting, no proposed director or nominee for election as a director of the Company and no associate or affiliate of any of the foregoing has or had any material interest, direct or indirect, in any transaction or proposed transaction since the beginning of the Company’s last financial year that has materially affected or would or could materially affect the Company or any of its subsidiaries.

 

Board of Directors

 

The Board has adopted a set of Corporate Governance Principles to provide for a system of principled goal-setting, effective decision-making and ethical actions. The Principles can be found in Schedule A of this Circular and on our website. In addition, the Board of Directors establishes an annual set of “Board Objectives.” In 2007, the Board established several key objectives which call for particular attention to be paid to natural gas feedstock issues, the risks involved in investments in natural gas exploration, monitoring the progress of our new Egypt methanol project, reviewing the development of a strategic framework for investments in China and maintaining an ongoing overview of global energy markets and their relationships to methanol. The status and future actions in respect of each objective are discussed at each Board meeting.

 

Committees of the Board of Directors

 

The Board has established five standing Committees with written mandates defining their responsibilities and a requirement to report regularly to the Board. All Committee members have been determined to be independent in accordance with Nasdaq rules and Canadian securities regulations and no Committee member was, during 2007, or is currently, an officer or employee of the Company or any of its subsidiaries.

 

Audit, Finance and Risk Committee

 

Members: Ms. Rennie and Messrs. Cook, Poole (Chair), Reid and Sweeney.

 

The Company’s Audit, Finance and Risk Committee is appointed by the Board to assist the Board in fulfilling its oversight responsibility relating to: the integrity of the Company’s financial statements; the financial reporting process; the systems of internal accounting and financial controls; the professional qualifications and independence of the external auditors; the performance of the external auditors; risk management processes; financing plans; pension plans; and compliance by the Company with ethics policies and legal and regulatory requirements. Mr. Poole is the “audit committee financial expert.” In 2007, this Committee met eight times. The overall Committee member attendance rate at these meetings was 100%.

 

The mandate of this Committee, together with the relevant education and experience of its members and other Committee information, may be found in the “Audit Committee Information” section of the Company’s Annual Information Form dated March 18, 2008.

 

Corporate Governance Committee

 

Members: Ms. Sloan and Messrs. Balloch, Hamilton, Mahaffy (Chair) and Poole.

 

This Committee is responsible for the composition, compensation and governance of the Board and recommends to the Board nominees for election or appointment as directors. The functions of this Committee also include assessing and enhancing the performance of the Board and maintaining an effective working relationship between the Board and management of the Company. It is also responsible for taking a leadership role in shaping the corporate governance of the Company and developing and recommending to the Board corporate governance principles for the Company. In 2007, this Committee met four times. The overall Committee member attendance rate at these meetings was 100%.

 

Human Resources Committee

 

Members: Ms. Rennie, Ms. Sloan and Messrs. Balloch, Mahaffy and Reid (Chair).

 

The Human Resources Committee is responsible for approving the goals and objectives of the CEO and evaluating the CEO’s performance; reviewing and recommending to the Board the remuneration of the Company’s senior executives and approving the remuneration of all other employees on an aggregate basis; reporting to the Board on the Company’s organizational structure, officer succession plans, total compensation practices, human resource policies and executive development programs; approving the report on executive compensation; recommending grants and various administrative matters in connection with the long-term incentive plan; and reviewing the operations and administration of the Company’s retirement plans. In 2007, this Committee met four times. The overall Committee member attendance rate at these meetings was 100%.

 

Public Policy Committee

 

Members: Messrs. Balloch (Chair), Cook, Hamilton, Poole and Sweeney.

 

The Public Policy Committee is responsible for reviewing and making recommendations to the Board regarding public policy matters that have a significant impact on the Company, including those relating to government relations and public affairs. In 2007, this Committee met twice. The overall Committee member attendance rate at these meetings was 100%.

 

Responsible Care Committee

 

Members: Ms. Sloan and Messrs. Cook, Hamilton, Reid and Sweeney (Chair).

 

The Responsible Care Committee is responsible for reviewing and making recommendations to the Board regarding matters relating to the environment and occupational health and safety issues that impact significantly on the Company and has oversight responsibility for the Company’s Corporate Social Responsibility Policy. The Committee also reviews the policies and standards that are in place to ensure that the Company is carrying out all of its operations in accordance with the principles of Responsible Care^®. In 2007, this Committee met three times. The overall Committee member attendance rate at these meetings was 100%.

 

Statement of Corporate Governance Practices

 

Corporate governance is a key priority for the Company. We define corporate governance as having the appropriate processes and structures in place to ensure that our business is managed in the best interests of our shareholders, and we believe good corporate governance is critical to a company’s effective, efficient and prudent operation.

 

The Company is a Canadian reporting issuer with its Common Shares listed on the TSX, the Nasdaq Global Market in the United States and the Foreign Securities Market of the Santiago Stock Exchange of Chile. In Canada, we are subject to National Instrument 58-101 — Disclosure of Corporate Governance Practices (the “Disclosure Instrument”) and National Policy 58-201 — Corporate Governance Guidelines (the “Guidelines”). The Disclosure Instrument requires us to disclose certain corporate governance practices that we have adopted, while the Guidelines provide guidance on various corporate governance practices that companies like ours should adopt. A brief description of our corporate governance practices, with reference to the areas set out in the Disclosure Instrument and the Guidelines, follows.

 

1. Board of Directors

 

Director Independence

 

 

Ten of the 11 nominees who are standing for election to the Company’s Board have been determined by the Board to be independent in accordance with Nasdaq rules and the Disclosure Instrument. Mr. Aitken is the President and Chief Executive Officer of the Company and is therefore not independent.

 

The Chairman, Mr. Choquette, became an independent director on May 13, 2007. Prior to May 13, 2007, Mr. Choquette was not independent as in the past he was the Chief Executive Officer of the Company. He retired from his position as Chief Executive Officer of the Company on May 13, 2004.

 

Committees of the Board are constituted exclusively of independent directors. Mr. Aitken, in his capacity as President and Chief Executive Officer of the Company, and Mr. Choquette, in his capacity as Chairman of the Board, attend Committee meetings.

 

Other Directorships and Interlocking Relationships

 

Several of the nominees are directors of other reporting issuers. For details, please refer to the information about each nominee under “Election of Directors.” There are no nominees who served together as directors on the boards of other corporations or acted as trustees for other entities during the financial year ended December 31, 2007.

 

In Camera Sessions

 

Following each in-person Board meeting, the independent directors hold regularly scheduled “in camera” sessions at which non-independent directors and members of management are not in attendance. Prior to the Chairman, Mr. Choquette, becoming an independent director on May 13, 2007, these in camera sessions were chaired by the Lead Independent Director. After May 13, 2007, these sessions were chaired by the Chairman. In 2007, six out of seven Board meetings were held in-person and in camera sessions followed each in-person meeting. In camera sessions may, at the discretion of each Committee Chair, follow Committee meetings.

 

Independence of Board Chair and Lead Independent Director

 

The Chairman of the Board, Mr. Choquette, became independent on May 13, 2007 in accordance with Nasdaq rules and the Disclosure Instrument. Prior to May 13, 2007, the Board had appointed a Lead Independent Director. However, the Board determined that the role of the Lead Independent Director should cease to exist upon the Chairman becoming independent.

 

Meeting Attendance Records

 

The cumulative Board and Committee meeting attendance rate for all directors in 2007 was 89%. For information concerning the number of Board and Committee meetings held in 2007, as well as the attendance record of each director for those meetings, see the chart on page 11.

 

 

The Company’s Corporate Governance Principles include a Board mandate describing the Board’s responsibilities. The Principles can be found in Schedule A of this Circular and on our website.

 

 

Board Chair and Committee Chairs

 

The Board has developed written position descriptions (which we call “Terms of Reference”) for the Chairman of the Board and each Committee Chair. The Terms of Reference for both the Chairman of the Board of Directors and for Committee Chairs are found on our website.

 

Individual Directors

 

The Board has developed written Terms of Reference for individual directors and they are found on our website. The Corporate Governance Principles also set out the responsibilities of each director.

 

The Board of Directors has determined that there should not be a mandatory retirement age for directors and the Corporate Governance Principles establish that there should not be cumulative term limits for directors. The Company’s Corporate Governance Principles state as follows:

 

Cumulative term limits for directors should not be established as this could have the effect of forcing directors off the Board who have gained a deep and detailed knowledge of the company’s operations and business affairs. At the same time, the value of some turnover in Board membership to provide an ongoing input of fresh ideas and new knowledge is recognized. The Corporate Governance Committee shall review annually the membership of the Board to enable the Board to manage its overall composition and maintain a balance of directors to ensure long-term continuity.

 

Lead Independent Director

 

Prior to May 13, 2007, the Board had a Lead Independent Director due to the Chairman not being independent. The Board determined that the role of the Lead Independent Director should cease to exist upon the Chairman becoming independent on May 13, 2007.

 

Chief Executive Officer (“CEO”)

 

The CEO has a written position description that sets out the position’s key responsibilities. In addition, the CEO has specific annual corporate and personal performance objectives and incentive compensation targets that he is responsible for meeting. These objectives and targets are reviewed, approved and tracked during the year by the Board through the Human Resources Committee. See “Chief Executive Officer Compensation” on page 29 for more complete information on these objectives and targets.

 

 

To familiarize new directors with the role of the Board, its Committees, the directors and the nature and operation of the Company’s business, each new director and, indeed, all directors, are provided with a director’s manual in the form of an electronic CD that contains information regarding these matters as well as information on the responsibilities and liabilities of directors and other relevant information. CDs containing updated information are provided to all directors on an ongoing basis. In addition, the Company encourages new directors to meet with senior management and to visit our operations and plant locations.

 

The Board recognizes the importance of ongoing education for directors. The Company’s Corporate Governance Principles state that directors are encouraged to attend seminars, conferences and other continuing education programs to help ensure that they stay current on relevant issues. The Company is a member of the Institute of Corporate Directors and our directors have attended some of the courses and programs it offers. The Company is prepared to contribute to the cost of directors attending appropriate continuing education programs. As well, written materials that are likely to be of interest to directors and that have been published in periodicals, newspapers or by law or accounting firms are routinely forwarded to directors. Such materials are often also included in a “supplemental reading” section in Board and Committee books.

 

Board meetings and associated activities also provide directors with educational opportunities. They often include an educational presentation on a particular aspect of the Company’s operations and may include a presentation by an individual director on a topic relevant to the Company’s business that lies within that director’s area of expertise. The Board also conducts an annual one-day strategy session that provides detailed information on the business environment and trends affecting the Company. Periodically, Board meetings are held at a location where the Company has methanol production operations or significant commercial activities. These site visits give directors an extended opportunity to interact with customers, business associates, government officials and high potential employees, tour facilities and gain an in-depth understanding of the context of our global operations.

 

 

Code of Business Conduct

 

The Company has a written Code of Business Conduct (the “Code”) that applies to all employees, officers and directors. It provides a set of standards meant to assist them in avoiding wrongdoing and to promote honest and ethical behaviour while conducting the Company’s business. The Code also establishes a confidential “whistle-blower” hotline for reporting suspected violations of the Code. The Code is reviewed annually by the Board. A copy of our Code of Business Conduct may be found on our website. A printed version is also available upon request to the Corporate Secretary of the Company.

 

The Board monitors compliance with the Code primarily through the Audit, Finance and Risk Committee and the Corporate Governance Committee, which have as part of their mandates the obligation to annually monitor compliance with the Code. These Committees receive regular updates on matters relating to the Code, including an annual report on the activities undertaken by management to maintain and increase Code awareness throughout the organization and the results of surveys designed to determine employee awareness of the Code.

 

The Code states that suspected Code violations are to be reported to the legal department and the General Counsel shall investigate the matter. The Corporate Governance Committee is made aware of all such reports. Furthermore, the Chair of the Audit, Finance and Risk Committee is advised of all reports that concern accounting or audit matters and the Chair of that Committee and the General Counsel together determine how such a matter should be investigated and by whom.

 

No material change report has been filed since the beginning of the Company’s most recently completed financial year that pertains to any conduct of a director or executive officer that constitutes a departure from the Code.

 

Transactions Involving Directors or Officers

 

The Code of Business Conduct contains a specific provision relating to the need for directors, officers and all employees to avoid conflicts of interest with the Company. Furthermore, the Corporate Governance Committee is mandated to consider questions of independence and possible conflicts of interest of directors and officers. To that end, each director and officer completes an annual questionnaire in which they report on all transactions material to the Company in which they have a material interest. These reports, together with management’s knowledge of all transactions involving the Company and the directors and officers, are provided to the Corporate Governance Committee.

 

CEO Trading Policy

 

The Company has implemented a policy stating that if the President and Chief Executive Officer intends to trade in Company securities, including the exercise of options, a press release will be issued no less than five business days in advance of the date of the intended transaction. The press release shall contain information that includes the maximum amount of shares or options intended to be sold or exercised, the expected date of the transaction, the approximate number of common shares the President and CEO will hold after the intended transaction, the share ownership guideline applicable to the President and CEO and whether it is reasonably expected that the President and CEO will meet the guideline immediately after the anticipated transaction.

 

Other Measures

 

The Board takes other steps to encourage and promote a culture of ethical business conduct. First, the Company’s Corporate Governance Principles state that the Board has an obligation to satisfy itself as to the integrity of the CEO and other executive officers and that they are creating a culture of integrity throughout the organization. On an annual basis, the Corporate Governance Committee considers and reports to the Board on this issue. In addition, the Board has adopted a Corporate Social Responsibility (CSR) policy that covers a host of activities such as social investment, governance, employee engagement and development and community involvement and creates a linkage with the Company’s firmly-established Responsible Care ethic. The Company also has several other policies governing ethical business conduct, including a Corrupt Payments Prevention Policy, a Political Donation Policy and a Corporate Gifts and Entertainment Policy. The Corrupt Payments Prevention Policy prohibits the payment of bribes and kickbacks by Company employees and agents. The Political Donation Policy prohibits all political donations unless they are specifically approved in advance by the Company’s President and CEO. The Corporate Gifts and Entertainment Policy provides guidelines to Company employees on the appropriate manner that gifts, gratuities or entertainment are to be offered to or accepted from third parties with whom the Company has commercial relations.

 

 

Nominating Committee and Nomination Process

 

The Board has established the Corporate Governance Committee as its nominating committee. The Committee is composed entirely of independent directors. A description of the responsibilities, powers and operation of the Corporate Governance Committee can be found on page 14.

 

The Committee is responsible for identifying new candidates to stand as nominees for election or appointment as directors to our Board of Directors. The Committee uses a Board skills matrix to assist in this process. On an annual basis, the Committee reviews a matrix that sets out the various skills and experience considered to be desirable for the Board to possess in the context of the Company’s strategic direction. The Committee then assesses the skills and experience of each current Board member against this matrix. When completed, the matrix helps the Committee identify any skills or experience gaps and provides the basis for a search to be conducted for new directors to fill any gaps. Below is a summary of the current Board skills matrix which sets out the various skills and experience categories and the Committee’s determination as to how many directors on the Board should possess those skills and experience. The Committee has

reviewed all of the skills and experience of the current Board members against the matrix and has determined that the target numbers have been met.

 

 

In identifying potential director candidates, the Committee also takes into account a broad variety of additional factors it considers appropriate, including board dynamics and personal characteristics. Desirable individual characteristics include integrity, strength of character, the ability to generate public confidence and maintain the goodwill and confidence of our shareholders, sound and independent business judgment, general good health and the capability and willingness to travel to, attend and contribute at Board functions on a regular basis.

 

Suitable director candidates have, over the past several years, been identified primarily through the use of an executive search firm retained under the authority of the Committee. The selection process is led by the Chair of the Committee but all Committee members and the Chairman of the Board are routinely updated on the process and the individuals being considered. The recommended candidate is then formally considered by the Committee and, if approved, the candidate is recommended to the Board.

 

Majority Voting for Directors

 

In 2006, the Board adopted a policy that states that any nominee for election as a director at an Annual General Meeting for whom the number of votes withheld exceeds the number of votes cast in his or her favour will be deemed not to have received the support of shareholders. A director elected in such circumstances will tender his or her resignation to the Chair of the Corporate Governance Committee and that Committee will review the matter and make a recommendation to the Board. The Board will, within 90 days of the Annual General Meeting, issue a public release either announcing the resignation of the director or justifying its decision not to accept the resignation.

 

If the resignation is accepted, the Board may appoint a new director to fill the vacancy created by the resignation. This policy applies only to uncontested director elections, meaning elections where the number of nominees for director is equal to the number of directors to be elected.

 

 

Process for Determining Director Compensation

 

The Corporate Governance Committee, composed entirely of independent directors, is responsible for reviewing and recommending to the Board for approval director compensation and benefits. The Committee targets director compensation in relation to the 50th percentile of North American-based chemical companies with international operations. This is the same comparison group of companies that the Company uses for executive compensation purposes. The Board has received independent advice that it is common practice to establish the same comparison group for director compensation as for executive officer compensation. The Committee reviews director compensation and benefits bi-annually. In 2007, Mercer Human Resource Consulting was engaged by the Committee to review the market competitiveness of the compensation of the Company’s independent directors.

 

Process for Determining Officer Compensation

 

The Human Resources Committee, composed entirely of independent directors, is responsible for reviewing and recommending to the Board for approval the compensation for the Company’s officers. For further information on this Committee’s responsibilities, powers and operation, please see page 14. The Company’s executive compensation policy is designed to provide competitive compensation to enable the Company to attract and retain high-quality and high-performance executives who will significantly contribute to the Company meeting its strategic business objectives. The Committee periodically reviews the levels of compensation for officers and obtains independent advice from consultants with respect to the competitiveness of officer compensation. Please see page 24 for more information on the use of compensation consultants by the Committee. The Committee also obtains advice from the Chief Executive Officer with respect to compensation matters pertaining to the Company’s other officers.

 

 

In addition to the Audit, Finance and Risk Committee, the Corporate Governance Committee and the Human Resources Committee, the Board has established a Public Policy Committee and a Responsible Care Committee. A description of their responsibilities can be found on page 15.

 

 

The Company’s Corporate Governance Principles state as follows:

 

Performance as a director is the main criterion for determining a director’s ongoing service on the Board. To assist in determining performance, each director will take part in an annual performance evaluation process which shall include a self-evaluation and a confidential discussion with the Chairman.

 

Our Board of Directors conducts an annual performance evaluation and the Corporate Governance Committee oversees the process. The process is designed to evaluate the effectiveness and contribution of the Board, its Committees and individual directors. Results of the process are reported to the Board.

 

The Company has carried out annual evaluation processes for a number of years. In 2007, the process was comprised of the following:

 

Evaluation of the Chairman of the Board

 

Directors were provided with an opportunity to evaluate the Chairman of the Board’s performance and to make suggestions for improvement. Directors rated the Chairman of the Board and provided comments on issues that addressed the conduct of Board meetings, leadership issues and the Chairman’s ability to facilitate positive contributions from other directors. Results were tabulated by the Corporate Secretary and were provided to the Chair of the Corporate Governance Committee who then had a private conversation with the Chairman of the Board. The content of that conversation was reported by the Chair of the Corporate Governance Committee to the full Committee at its November 2007 meeting.

 

Evaluation of the Board as a Whole

 

Directors were provided with an opportunity to evaluate how the Board and its committees are operating and to make suggestions for improvement. Directors rated and provided comments on issues such as how the Board is organized and functions, their satisfaction with their level of understanding of human resources issues, the Company’s strategic objectives, risks faced by the Company and the Company’s financial controls. A separate section addressed the Board’s committees and included questions such as the appropriateness of the current committee structure and the quality of reporting from committees to the full Board. Results were tabulated by the Corporate Secretary, provided to the Chairman of the Board and the Chair of the Corporate Governance Committee and then presented to the Corporate Governance Committee at its November 2007 meeting.

 

Evaluation of Individual Directors

 

Directors were provided with an opportunity to examine their own effectiveness, comment on their peers’ effectiveness and have a private conversation with the Chairman of the Board regarding their performance and the performance of their fellow directors. Directors rated themselves and commented on their peers concerning a number of criteria including their satisfaction with their level of contribution on strategic issues and their comfort at being able to express frank and contrary positions at Board meetings. Directors were also asked to provide an overall rating for each of their peers and invited to comment on their performance. The Corporate Secretary received all questionnaires and each

director was provided with an individualized report detailing how that director scored himself or herself on each question, the combined average director score for each question and comments regarding that director’s performance from peers (on an anonymous basis). These reports were also provided to the Chairman of the Board who then conducted a confidential discussion with each director. The Chairman of the Board reported to the Corporate Governance Committee at its November 2007 meeting regarding this process.

 

In addition, each Committee conducts an annual “mandate assurance review” in which it reviews the appropriateness of its own mandate and evaluates whether it is acting in compliance with its mandate. The Corporate Governance Committee is responsible for annually reviewing the mandates and performance of each Committee.

 

 

Introduction

 

Directors’ compensation is paid only to non-management directors and is made up of an annual retainer, meeting fees (except in the case of the Chairman) and a Long-Term Incentive Award.

 

Annual Retainer and Meeting Fees

 

During the year ended December 31, 2007, annual retainers and meeting fees were paid to non-management members of the Board on the following basis:

 

Annual retainer for a non-management director			$40,000
Annual retainer for the Chairman of the Board			$150,000
Board meeting attendance fee			$2,500 per meeting
Committee meeting attendance fee			$2,500 per meeting
Committee Chair fee (in addition to the committee meeting attendance fee)			$2,500 per meeting
Cross-country or inter-continental travel fee to attend board or committee meetings			$2,500 per trip

 

All retainers and fees are paid in Canadian dollars. Non-management directors are also reimbursed for transportation and other expenses incurred for attending board and committee meetings. In 2005, the Chairman of the Board ceased to receive any “per meeting” attendance fees or travel fees as his annual retainer was converted to a flat annual amount. In May 2007, the Chairman’s annual retainer was increased from $120,000 to $150,000.

 

Directors’ Deferred Share Unit Plan

 

Under the Company’s Deferred Share Unit Plan (the “DSU Plan”), each non-management director elects annually to receive 100%, 50% or 0% of his or her retainer and meeting fees as Deferred Share Units (“DSUs”). The actual number of DSUs granted to a director is calculated at the end of each quarter by dividing the dollar amount elected to the DSU Plan by the five day average closing price of the Common Shares on the TSX during the last five trading days of that quarter. Additional DSUs are credited corresponding to dividends declared on the Common Shares. Under the terms of the DSU Plan, individuals who became directors in 2007 were not eligible to participate in the DSU Plan in 2007.

 

DSUs held by directors are redeemable only after the director retires as a director of the Company or upon death (“Termination Date”) and a lump sum cash payment, net of any withholdings, is made after the director chooses a valuation date. For DSUs granted after March 2, 2007, directors may choose a valuation date falling between the Termination Date and December 1 of the first calendar year beginning after the Termination Date, but the director cannot choose a date retroactively. For DSUs granted prior to March 2, 2007, the valuation date chosen may fall on any date within a period beginning one year before the Termination Date and ending on December 1 of the first calendar year beginning after the Termination Date. The lump sum amount is calculated by multiplying the number of DSUs held in the account by the closing price of the Common Shares on the TSX on the valuation date.

 

Long-Term Incentive Awards

 

Non-management directors ceased to be granted options in 2003 and the Company’s current Incentive Stock Option Plan does not permit the granting of options to non-management directors. No non-management director currently holds any options. Instead, directors are awarded Restricted Share Units (“RSUs”) under the Company’s Restricted Share Unit Plan for Directors as part of the annual long-term incentive component of their compensation. Directors may elect to

receive their RSU award in the form of DSUs, which are more fully described on page 22. The following table summarizes the last two long-term incentive awards granted to directors:

 

			2007					2008
Chairman of the Board				4,500 DSUs or RSUs					4,500 DSUs or RSUs
All other non-management directors				3,000 DSUs or RSUs					3,000 DSUs or RSUs

 

Restricted Share Unit Plan for Directors

 

RSUs are notional shares credited to an “RSU Account.” When dividends are paid on Common Shares, an equivalent value of additional RSUs is calculated and credited to each individual’s RSU Account. RSUs granted in any year will vest on December 1, in the 24th month following the end of the year in which the award was made. Following vesting, directors are entitled to receive a cash payment based on the price of the Company’s Common Shares at that time, net of applicable withholding tax. RSUs do not entitle participants to any voting or other shareholder rights and are non-dilutive to shareholders.

 

The following table sets out what each director received by way of annual retainer, meeting fees and long-term incentive awards for 2007.