National Post from Toronto, Ontario, Canada • 5

1685 News THE FINANCIAL POST June 14, 1986 ANNOUNCEMENT SUN LIFE Book tariff stirs industry outcry By Andrew Cohen THE NEW tariff on imported books and periodicals has drawn publishers and retailers into a hot dispute with the federal government. Rather than welcoming the new protectionism, they call it a tax on reading, a threat to their livelihood and an invitation to U.S. retaliation. Publishers, writers, booksellers and manufacturers were mobilizing this week to protest the tariff. They fear it will raise book prices, hurt sales, create administrative chaos and weaken Canada's position in free trade talks with the U.S.

HMi "MB mmssl B. MMB MTMEi 1 EJ Eft Mv Marcel Mane: Fait accompli M. COLYER CRUM SIR PETER BAXENDELL i Sun Life Assurance Company of Canada announces the election to the Board of Directors of Sir Peter Baxendell, CBE, Chairman, Hawker Siddeley Group PLC, and M. Colyer Crum, Professor of Investment Management, Harvard Graduate School of Business Administration. Publishing: Industry stunned of their advertising only in magazines with substantial Canadian content.

The bill is widely credited with creating an indigenous magazine industry. Second, the U.S. wants the government to soften its protective policy preventing-foreign interests from acquiring majority ownership in Canadian book publishing and distribution. The tariff, then, would increase the government's bargaining power. When the Americans ask the government to withdraw C-58 and the ownership policy, it could offer to drop the tariff instead.

Raised issue But critics are unconvinced the government is that sly. "If that is clever, it's too clever for me," sniffs New Democratic Party MP Lynn McDonald. "The fact is While the industry is smarting from the political fallout of the tariff, it is no less worried about the economic impact. The tariff will make an imported book from the U.S. 1.6 times as expensive in Toronto as New York.

The price will rise by 10 (the tariff is paid on the book in Canadian dollars), and publishers will have to hire a broker to clear shipments through Canada Customs. The tariff does not apply uniformly. Only magazines publishing less than four times a year specialty publications and scholarly journals will be covered. Educational, religious and library books are exempt from the tariff, as are books in French. Still, publishers complain that the categories are vague.

They predict costly paperwork when books are stopped at the border and publishers have to fill out forms and prove their right to an exemption. In the past, there has also been confusion over which libraries qualify to buy dutyfree books. Moreover, booksellers predict consumers will resist higher prices. The book market, which was $1.12 billion in 1982, is flat. The fear is consumers will not pay $35 for an American bestseller.

For the last year, the book chains and independent stores have been trying to stimulate the market by discounting bestsellers. Some retailers will absorb the duty but inevitably it will passed on. Unlike other industries, import substitution is unlikely to work in books. Few readers looking for Norman Mailer will settle for Margaret Atwood. To the Canadian Booksellers Association, the tariff is a blow to a fragile trade.

"The book market is not growing," says Executive Director Serge Lavoie. "People are coming in now largely because they can buy bestsellers at a discount. At a time when other forms of entertainment like video movies are growing, they hit us with this. It's an unmitigated disaster." The booksellers and nine other leading industry associations plan to meet Finance Minister Michael Wilson this week to make their case. At the same time, they are organizing a write-in campaign to send the government one million postcards protesting the tariff.

ANNOUNCEMENT CHINESE ACADEMY OF MEDICAL SCIENCES, BEIJING books by American authors to be printed in the U.S. The exemption ha6 allowed Canadian firms to print American books. However, the exemption expires June 30. While a three-year extension seemed likely, it is now in doubt. A Senate subcommittee has recommended extension of the exemption but it goes to the Finance Committee this week, where it is likely to come under intense scrutiny.

The Graphic Arts Industries Associations says losing the exemption will be devastating. It could cost printers $80 million in business and 700 jobs. Publishers cannot understand how the government could revive the tariff, particularly while the exemption is under review. Certainly the industry was not consulted. The decision was made by the Department of Finance.

Communications Minister Marcel Masse a self-styled champion of cultural industries was presented with a fait accompli. He been conspicuously silent on the issue. The decision to include books with tea-bags and Christmas trees is so extraordinary that some observers see a larger strategy at work to strengthen the hand of the government in the free trade talks. This school of thought says the tariff will be used to trade off against other American demands. The Americans are seeking concessions in two areas affecting cultural industries.

First, they want the repeal of Bill C-58, which allows companies to deduct the cost Since Canada lifted the tariff in 1979, all books have entered the country duty-free. The new tariff revived last week in response to a U.S. tariff on Canadian cedar shakes and shingles was accompanied by duties on teabags, computers, and Christmas trees. Almost three-quarters of the books sold in Canada are imported; 90 of those come from the U.S. The new measure will affect about $360 million in imported books.

Although the tariff is aimed at the U.S., it will apply to English-language books from other countries. The tariff has stunned the industry. Publishers were resigned to the likelihood that cultural industries would be part of trade negotiations, but they did not expect to be a weapon in an emerging trade war. "The very scenario that we feared has happened," says Marcia George, executive director of the Association of Canadian Publishers. "Cultural industries are being linked to totally unrelated industries.

Trade-offs and retaliations are inevitable, and the outcome can only be detrimental to Canadian publishing and cultural sovereignty." For months representatives of cultural industries have asked the government for assurances they would not be a bargaining chip in the talks. Now they feel betrayed. The tariff comes as the U.S. Senate is considering the exemption Canada now enjoys from the Manufacturing Clause of the U.S. Copyright Act, which forces some that in imposing the tariff, the government has introduced the question of cultural industries.

It has made it an issue; it wasn't there before." Jacqueline Hushion, executive director of the Canadian Book Publishers' Council, understands using the tariff to prevent losing the exemption. (It was dropped to zero in 1979 in exchange for the exemption.) But all signs in recent weeks were that Canada would retain it. "If there was concern we were going to lose that exemption, this might have made sense," she says. "But we thought it would go through. When you are literally days away, why would you do this?" "flHPjl Kmw JUST 3 OF THE MANY SYMPTOMS OF MULTIPLE SCLEROSIS.

STOP MS BEFORE IT STOPS YOU. Support the Multiple Sclerosis Society of Canada and buy a little hope for 50,000 Canadians with MS. Southam decision rouses minority Emrty dreams THE SECOND pastel pencil di THE SECOND pastel pencil drawing to be By Tessa Wilmott THE ONTARIO Securities Commission decision to suspend trading by directors of Southam Inc. and Tor star Corp. may be just the invitation minority shareholders need.

DR. MICHEL CHRETIEN The Clinical Research Institute of Montreal is proud to announce the appointment of Dr. Michel Chretien, Scientific Director and Chief Executive Officer, as Honorary Professor of the Chinese Academy of Medical Sciences. Dr. Chretien is internationally known for his research work on hormonal chemistry and more specifically, on endorphins.

Since 1979, 15 doctors from mainland China have benefited from their two-year research training at the Clinical Research Institute of Montreal. offered through the Petroleum Art Collectors Series recently is aptly entitled: Empty Pockets, Ciolden Dreams. Not only does the $35 print of the Dingman No. 1 and No. 2 wells, drilled at Turner Valley in 1914, capture the image of an Alberta landmark.

But Calgary artist Jean Pilcher may have coined a potentially well-used catchphrase. Coincidentally, the spot price of a barrel of West Texas Intermediate Crude (North America's oil standard) has fallen 56 mMMS Tim iiiiv i plunging uic iiiuiik ui many oil firms and service companies into disarray. The transaction put the Southam family firmly in control of Southam and ended takeover speculation. At the same time, it ended minority shareholder hopes of getting a higher price for their Southam shares. In doing the August share exchange, the two companies and their financial advisers chose to ignore a Toronto Stock Exchange bylaw that required immediate notice of the sale of treasury shares.

The TSE accepted the transaction but did ask the OSC to deal with the directors for breach of the bylaw. According to the OSC decision, both boards were aware they were in breach of the bylaw but each board thought it "in the best interests of its company to proceed." Shared concern "Southam board members shared Tor-star's concern that a delay in the share exchange could well give a hostile bidder the opportunity to frustrate the Torstar transaction by quickly obtaining an injunction," the Southam statement of facts said. The OSC, in its decision, pointed out the directors were concerned "compliance with the rules would result in disclosure to, and the possible requirement of approval by, its shareholders. To place the share issuance to Torstar before the Southam shareholders was to risk serious opposition and possible defeat." Further, the boards' action took away the shareholders' right to deal with their shares as they wished. "In such circumstances, the voice of the shareholders ought to predominate," the decision said.

The OSC ruling has received various reactions. Montreal investment counselor and Southam shareholder Stephen Jarislowsky considers the sanctions a wrist slap. "The commission," he says, "is totally remiss at not protecting shareholder rights." He also took a swipe at the TSE who approved the transaction: "It could have stopped it right at the start." But as OSC Counsel Harry Malcolmson points out, the OSC was asked by the TSE only to impose trading sanctions against the directors. It was the breaking of the TSE bylaw, not the transaction itself, that was before the commission. The sanctions applied were.

Malcolmson says, "substantial penalties" both in number and the prominence of the directors affected as well as in the period of trading suspension. (Exceptions to suspension include time-sensitive situations such as responding to takeover bids, issuer bids, conversion, redemptions and the like.) Dunsmill's Waisberg thought it a good decision and he considers it an "invitation" to minority shareholders from the commission to take the transaction to court under the Canada Business Corporations Act and urge the court to treat it as "oppressive conduct." There will be discussions with Jarislowsky and Imperial Life Assurance of Canada, another Southam shareholder and intervenor, before Dunsmill considers initiating a court action but "there is certainly a chance of that." From a stock point of view, shareholders displeased with Southam can profitably sell their shares, says Jarislowsky, but from a moral point of view, "an injustice has been done to existing shareholders." "Minority shareholders prepared to take the time could bring Southam directors to court under the Canada Business Corporations Act," says Lorie Waisberg, a lawyer with Goodman Goodman and president of Dunsmill Investments a minority shareholder in Southam. Dunsmill was an intervenor in the April 1 OSC hearing that focused on the August, 1985, share exchange between Southam and Torstar. Last week the OSC prohibited the 23 directors of the two Toronto-based communication giants from direct or indirect personal securities trading in Ontario from June 6 to Dec. 15.

"If the OSC and the TSE Toronto Stock Exchange cannot count on the integrity of boards of directors of companies such as Southam and Torstar to comply with the regulatory structure applicable to them as the price of selling their securities to the public, then there is little chance of creating fair and equitable markets in which the investing public can have confidence," the decision says. In the August, 1985, exchange, Southam issued treasury shares giving Torstar a 20 voting interest in Southam (which it later took to 25). Southam took a 30 nonvoting interest in Torstar. Cineplex pulls off movie house coup sstetfeHi tfwQ sEsV- Efl hb mm MLm IFNBR- 'm mmmm DM 186,326,777843.79 at work. He explains that Cineplex had been seeking another downtown property, as there is no room to expand its nearby Eaton Centre complex, the highest grossing Cineplex in the country with annual box office receipts of $4 million.

Famous Players responded by announcing its own major expansions. By the end of 1987, it will build 11 theatres with 60 screens in Toronto, Montreal, Vancouver, Calgary, Edmonton, Ottawa, Halifax and London. The company will also install wider, more comfortable seats and more 70-millimetre projection systems, and will modernize its theatre interiors. The Famous Players Canadian circuit consists of 189 theatres with 469 screens (including all six screens of the Imperial x). The Cineplex chain has 475 screens in 166 locations in Canada.

latei By Renate Lerch THE OLD adage, half a loaf is better than none, certainly isn't true as far as Famous Players Ltd. is concerned. In a daring move at the end of May, rival distributor Cineplex Odeon Corp. snapped up a long-term lease for 50 of the Imperial Six, the cinema complex that had been the Famous Players' flagship in downtown Toronto. This leaves Famous Players owning half the site, but without an entrance for its customers.

Its Yonge St. lobby and entrance way is blocked off by the Cineplex-controlled property, which also contains the only other entrance from Victoria St. The opportunity arose when Cineplex was approached by the lawyer for property owner Edna Rakas, after the Famous Players lease expired on May 24. The new lease will be more than the $182,000 rent paid by Famous Players last year. "Famous Players had started negotiations for renewal of the lease in February, 1986," says Garth Drabinsky, president and chief executive of Cineplex.

Last-ditch attempt "After a huge amount of frustration, her lawyer turned to us in a last-ditch attempt." On June 2, a decision by the Supreme Court of Ontario dismissed Famous Players' application for an injunction blocking the new lease. The Cineplex section of the Imperial Six holds the largest of the six theatres, which has 778 seats. Drabinsky announced his company would spend $1.5 million on renovations and building two smaller theatres with 250-300 seats each on the lower level. As he sees it, the whole affair is "a wonderful business opportunity it makes sense for the corporation and BANGKOK 1 GARDEN NORTH AMERICA'S PREMIER THAI RESTAURANT Offers three great lunch areas: The fabulous PATIO for outdoor dining; The ORIENT EXPRESS featuring our 5 95 9peedy lunch; and the classic GARDEN ROOM for client entertaining or leisurely dining. 077-6748 18 Elm Streat, Toronto 3 blocks North ol the Baton Centra DINING ROOM Hunpriin ind irjdum Cuisine Outstanding food, hospitality.

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