Securities Law & Instruments

Headnote

Exemptionsfrom most continuous disclosure requirements granted to a truston specified conditions, including the conditions that the parentcompany remains a reporting issuer and security holders of thetrust receive the continuous disclosure documents of the parentcompany. Because of the terms of the trust a security holder'sreturn depends upon the financial condition of the parent companyand its publicly traded holding company and not that of the trust.Trust offered trust units to the public in order to provide theparent company with a cost effective means of raising capitalfor Canadian insurance company regulatory purposes. No distributionsare payable on the trust units if the parent company fails topay dividends on its preferred shares and if distributions arenot paid the parent company is prevented from paying dividendson its preferred shares. Trust units are not redeemable but areexchangeable at the option of the holder after a fixed term forshares of the parent company. Trust units are non-voting. Holdersof trust securities have no claim or entitlement to the incomeof the Trust or the assets held by the Trust.

ApplicableOntario Statutory Provisions

SecuritiesAct, R.S.O. 1990, c.S.5, as am., ss 77, 78,79, 80(b)(iii),81

ApplicableOntario Rules Cited

OSCRule 51-501- AIF and MD&A

OSCRule 52-501- Financial Statements


INTHE MATTER OF

THESECURITIES LEGISLATION OF

BRITISHCOLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA,ONTARIO, QUEBEC, NOVA SCOTIA

ANDNEWFOUNDLAND AND LABRADOR

AND

INTHE MATTER OF

THEMUTUAL RELIANCE REVIEW SYSTEM FOR

EXEMPTIVERELIEF APPLICATIONS

AND

INTHE MATTER OF

SUNLIFE FINANCIAL SERVICES OF CANADA INC.

AND

INTHE MATTER OF

SUNLIFE ASSURANCE COMPANY OF CANADA

AND

INTHE MATTER OF

SUNLIFE CAPITAL TRUST

MRRSDECISION DOCUMENT

WHEREASthe local securities regulatory authority or regulator(the "Decision Maker", and collectively the "Decision Makers")in each of the Provinces of British Columbia, Alberta, Saskatchewan,Manitoba, Ontario, Quebec, Nova Scotia and Newfoundland andLabrador (the "Jurisdictions") has received an application (the"Application") from Sun Life Financial Services of Canada Inc.("SLF"), Sun Life Assurance Company of Canada ("Sun Life Assurance")and Sun Life Capital Trust (the "Trust") for a decision pursuantto the securities legislation of the Jurisdictions (the "Legislation"),that the requirements contained in the Legislation to:

(a)file interim financial statements and audited annual financialstatements (collectively, "Financial Statements") with the DecisionMakers and deliver such statements to the security holders ofthe Trust;

(b)make an annual filing ("Annual Filing") with the Decision Makersin lieu of filing an information circular, where applicable;

(c)file an annual report ("Annual Report") and an information circularwith the Decision Maker in Quebec and deliver such report orinformation circular to the security holders of the Trust residentin Quebec; and

(d)prepare and file under OSC Rule 51-501 AIF and MD&A, section159 of the Regulation to the Securities Act (Quebec)and the Saskatchewan Securities Commission Local Policy 6.2,an annual information form ("AIF"), including management's discussionand analysis ("MD&A") of the financial condition and resultsof operation of the Trust and send such MD&A to securityholders of the Trust (collectively "the AIF and MD&A Requirements");

shallnot apply to the Trust, subject to certain terms and conditions;

ANDWHEREAS pursuant to the Mutual Reliance Review Systemfor Exemptive Relief Applications (the "System"), the OntarioSecurities Commission is the principal regulator for this application;

ANDWHEREAS SLF, Sun Life Assurance and the Trust representedto the Decision Makers that:

SLF

1.SLF is a holding company incorporated under the InsuranceCompanies Act (the "ICA"), is a reporting issuer or equivalentunder the Legislation and to the best of its knowledge is notin default of any requirement of the Legislation.

2.The authorized capital of SLF consists of an unlimited numberof common shares ("SLF Common Shares"), an unlimited numberof Class A Shares, issuable in series and an unlimited numberof Class B shares, issuable in series. As at January 31, 2002,the only shares outstanding were the SLF Common Shares, of which431,708,287 were outstanding.

3. TheSLF Common Shares are listed and posted for trading on the Toronto,New York, London and Philippines stock exchanges.

SunLife Assurance

4. SunLife Assurance is a Canadian insurance company incorporated underthe ICA, is a reporting issuer or equivalent under the Legislation,excluding the securities legislation of British Columbia, Manitobaand Newfoundland and is eligible to use the short form prospectussystem in British Columbia, Manitoba and Newfoundland pursuantto National Instrument 44-101 and to the best of its knowledgeis not in default of any requirement of the Legislation.

5.The authorized share capital of Sun Life Assurance consists ofan unlimited number of common shares (the "SLA Common Shares"),an unlimited number of Class A Shares (including the SLA PreferredShares Series Y and SLA Preferred Shares Series Z, each as definedbelow), issuable in series, an unlimited number of Class B Shares,issuable in series, an unlimited number of Class C Shares, issuablein series and an unlimited number of Class D Shares, issuablein series. As at January, 31, 2001, the only shares of Sun LifeAssurance outstanding were 400,148,005 SLA Common Shares and 40,000Class B Non-Cumulative Preferred Shares Series A. All of the outstandingSLA Common Shares and Class B Non-Cumulative Preferred SharesSeries A are owned by SLF.

SunLife Capital Trust

6. TheTrust is an open-end trust established under the laws of the Provinceof Ontario by The Canada Trust Company ("Trustee"), as trustee,pursuant to a declaration of trust made as of August 9, 2001,as amended and restated on October 19, 2001 (the "Declarationof Trust").

7.The beneficial interests of the Trust are divided into two classesof units, issuable in series, designated as Sun Life ExchangEableCapital Securities ("SLEECS") and Special Trust Securities ("SpecialTrust Securities" and, collectively with SLEECS, "Trust Securities").The Special Trust Securities are held in their entirety by SunLife Assurance.

8.The Trust was established solely for the purpose of effectingthe Offering (as defined below) and possible future offeringsof securities in order to provide Sun Life Assurance (and indirectly,SLF) with a cost effective means of raising capital for Canadianinsurance company regulatory purposes. The Trust does not andwill not carry on any operating activity other than in connectionwith the Offering and any future offerings.

9.The Trust became a reporting issuer, or the equivalent, in eachof the Jurisdictions upon the filing of a final prospectus datedOctober 11, 2001 in connection with the Offering (the "Prospectus")and the issuance of a final MRRS Decision Document dated October12, 2001 in relation to the Prospectus.

SLEECS

10.The Trust has distributed SLEECS - Series A in the Jurisdictionsunder the Prospectus (the "Offering"). The Prospectus also qualifiescertain other related securities for distribution in the Jurisdictions,including the Conversion Right which will allow the Trust to satisfythe Holder Exchange Right and the Automatic Exchange Right (eachas defined below).

11.The SLEECS are listed on the Toronto Stock Exchange.

12.The Trust has also issued 2,000 Special Trust Securities to SunLife Assurance in connection with the Offering.

13.The business objective of the Trust is to acquire and hold a debenture,issued by Sun Life Assurance (the "Sun Life Debenture"), whichwill generate income for distribution to holders of the TrustSecurities.

14.Subject to paragraph 15, each SLEECS entitles the holder ("SLEECSHolders") to receive a fixed cash distribution (a "Distribution")payable by the Trust on the last day of June and December of eachyear (each such day, a "Distribution Date" and each period fromthe Distribution Date to but excluding the next Distribution Datea "Distribution Period").

15.SLEECS Holders are not entitled to receive Distributions in respectof a particular Distribution Date if Sun Life Assurance has notdeclared regular cash dividends on its preferred shares in thethree month period immediately prior to the commencement of theDistribution Period ending on the day preceding that DistributionDate.

16.Pursuant to the share exchange agreement entered into by SLF,Sun Life Assurance, the Trust and the Exchange Trustee, SLF andSun Life Assurance have agreed, for the benefit of the holdersof SLEECS, that, in the event the Trust fails, on any DistributionDate, to pay in full Distributions on the SLEECS to which theSLEECS Holders are entitled, (i) Sun Life Assurance will not paydividends of any kind on its preferred shares, and (ii) if SunLife Assurance does not have any preferred shares outstanding,SLF will not pay dividends of any kind on its preferred sharesor the SLF Common Shares, in each case, until a specific periodof time has elapsed, unless the Trust first pays such Distribution(or the unpaid portion thereof) to SLEECS Holders ("Dividend StopperUndertaking").

17.Upon the occurrence of certain adverse tax events or events relatingto the treatment of SLEECS for capital purposes, subject to regulatoryapproval and on not less than 30 nor more than 90 days' priorwritten notice, SLEECS will be redeemable, at the option of theTrust and with the approval of the Superintendent of FinancialInstitutions (Canada) (the "Superintendent"), in whole (but notin part) for a cash amount.

18.On December 31, 2006 and on any subsequent Distribution Date,subject to regulatory approval and on not less than 30 nor morethan 60 days' prior written notice, the SLEECS will be redeemablein whole or in part for a cash amount, at the option of the Trustand subject to the approval of the Superintendent.

19.Holders of SLEECS will have the right (the "Holder Exchange Right"),at any time, to surrender all or part of their SLEECS to the Trustat a price for each SLEECS equal to 40 Non-Cumulative PreferredShares Series Z of Sun Life Assurance ("SLA Preferred Shares SeriesZ").

20.Each SLEECS will be exchanged automatically (the "Automatic Exchange")without the consent of the holder, for 40 Non-Cumulative PreferredShares Series Y of Sun Life Assurance ("SLA Preferred Shares SeriesY") if: (i) an application for a winding-up order in respect ofSun Life Assurance pursuant to the Winding-up and RestructuringAct (Canada) (the "Winding-up Act") is filed by the AttorneyGeneral of Canada or a winding-up order in respect of Sun LifeAssurance pursuant to the Winding-up Act is granted by a court;(ii) the Superintendent advises Sun Life Assurance in writingthat the Superintendent has taken control of Sun Life Assuranceor its assets pursuant to the ICA; (iii) the Superintendent advisesSun Life Assurance in writing that Sun Life Assurance has a netTier 1 capital ratio of less than 75% or an MCCSR ratio of lessthan 120%; (iv) the board of directors of Sun Life Assurance advisesthe Superintendent in writing that Sun Life Assurance has a netTier 1 capital ratio of less than 75% or an MCCSR ratio of lessthan 120%; or (v) the Superintendent directs Sun Life Assurancepursuant to the ICA to increase its capital or to provide additionalliquidity and Sun Life Assurance elects to cause the exchangeas a consequence of the issuance of such direction or Sun LifeAssurance does not comply with such direction to the satisfactionof the Superintendent within the time specified.

21.The Holder Exchange Right and the Automatic Exchange will be effectedthrough the right to convert the whole or a part of the Sun LifeDebenture into SLA Preferred Shares Series Z and SLA PreferredShares Series Y, respectively (the "Conversion Right"). Upon theexercise of the Holder Exchange Right or the Automatic Exchange,the Trust will convert the corresponding principal amount of theSun Life Debenture into SLA Preferred Shares Series Z or SLA PreferredShares Series Y, as the case may be.

22.The SLA Preferred Shares Series Y and the SLA Preferred SharesSeries Z will be redeemable after specified dates, at the optionof Sun Life Assurance and subject to regulatory approvals, bythe payment of a cash amount or by the delivery of SLF CommonShares.

23.Beginning on June 30, 2012, the SLA Preferred Shares SeriesY and SLA Preferred Shares Series Z will be exchangeable, atthe option of the holder, into SLF Common Shares, except undercertain circumstances.

24.As set forth in the Declaration of Trust, SLEECS are non-votingexcept in certain limited circumstances and Special Trust Securitiesentitle the holders to vote.

25.Except to the extent that the Distributions are payable to SLEECSHolders and, other than in the event of termination of the Trust(as set forth in the Declaration of Trust), SLEECS Holders haveno claim or entitlement to the income of the Trust or the assetsheld by the Trust.

26.In certain circumstances (as described in paragraph 20 above),including at a time when Sun Life Assurance's financial conditionis deteriorating or proceedings for the winding-up of Sun LifeAssurance have been commenced, the SLEECS will be automaticallyexchanged for SLA Preferred Shares Series Y without the consentof SLEECS Holders. As a result, SLEECS Holders will have no claimor entitlement to the assets held by the Trust, other than indirectlyin their capacity as preferred shareholders of Sun Life Assurance.

27.SLEECS Holders may not take any action to terminate the Trust.

28.The Trust has not requested relief for the purposes of filinga short form prospectus pursuant to National Instrument 44-101-- Short Form Prospectus Distributions ("NI 44-101") (including,without limitation, any relief which would allow the Trust touse Sun Life Assurance's AIF as a current AIF of the Trust) andno such relief is provided by this Decision Document from anyof the requirements of NI 44-101.

29.Because of the terms of the Trust, the return to a SLEECS Holderdepends upon the financial condition of SLF and Sun Life Assuranceand not that of the Trust.

ANDWHEREAS pursuant to the System this MRRS Decision Documentevidences the decision of each Decision Maker (collectively, the"Decision");

ANDWHEREAS each of the Decision Makers is satisfied thatthe test contained in the Legislation that provides the DecisionMaker with the jurisdiction to make the Decision has been met;

THEDECISION of the Decision Makers under the Legislationis that the requirement contained in the Legislation:

(a)to file Financial Statements with the Decision Makers and deliversuch statements to holders of Trust Securities;

(b)to make an Annual Filing, where applicable, with the DecisionMakers in lieu of filing an information circular; and

(c)to file an Annual Report and an information circular with theDecision Maker in Quebec and deliver such report or informationcircular to holders of Trust Securities resident in Quebec;

shallnot apply to the Trust for so long as:

(i)SLF remains a reporting issuer under the Legislation;

(ii)Sun Life Assurance remains a reporting issuer under the Legislation,excluding the securities legislation of British Columbia, Manitobaand Newfoundland;

(iii)Sun Life Assurance remains eligible to use the short form prospectussystem in British Columbia, Manitoba and Newfoundland under NationalInstrument 44-101;

(iv)SLF and Sun Life Assurance file with the Decision Makers, in electronicformat under the Trust's SEDAR profile, the documents listed inclauses (a) to (c) above of this Decision, at the same time asthey are required under the Legislation to be filed by SLF andSun Life Assurance;

(v)the Trust pays all filing fees that would otherwise be payableby the Trust in connection with the filing of the documents referredto in clauses (a) to (c) above of this Decision;

(vi)SLF and Sun Life Assurance sends their Financial Statements toholders of Trust Securities, and their Annual Report to holdersof Trust Securities resident in the Province of Quebec at thesame time and in the same manner as if the holders of Trust Securitieswere holders of SLF Common Shares or SLA Common Shares;

(vii)all outstanding securities of the Trust are either SLEECS or SpecialTrust Securities;

(viii)the rights and obligations of holders of additional series ofSLEECS are the same in all material respects as the rights andobligations of the holders of SLEECS - Series A at the date hereof;and

(ix)all issued and outstanding Special Trust Securities continue tobe directly or indirectly owned by SLF;

andprovided that if a material adverse change occurs in the affairsof the Trust, this Decision shall expire 30 days after the dateof such change.

March14, 2002.

"PaulM Moore"       "Mary Theresa McLeod"

 

ANDTHE FURTHER DECISION of the Decision Makers in Ontario,Quebec and Saskatchewan is that the AIF and MD&A Requirementsshall not apply to the Trust for so long as:

(i)the conditions set out in clauses (i), (ii), (iii), (vii), (viii)and (ix) of the Decision above are complied with;

(ii)SLF and Sun Life Assurance file their AIF and annual and interimMD&A with the Decision Makers, in electronic format underthe Trust's SEDAR profile at the same time as they are requiredunder the Legislation to be filed by SLF and Sun Life Assurance;

(iii)the Trust pays all filing fees that would otherwise be payableby the Trust in connection with the filing of the documents referredto in clause (ii) above of this decision;

(iv)SLF and Sun Life Assurance send their annual and interim MD&Ato holders of Trust Securities at the same time and in the samemanner as if the holders of Trust Securities were holders of SLFCommon Shares or SLA Common Shares;

andprovided that if a material adverse change occurs in the affairsof the Trust, this Decision shall expire 30 days after the dateof such change.

March14, 2002.

"JohnHughes"