Securities Law & Instruments

Headnote

Exemptions from most continuous disclosure requirementsgranted to a Trust on specified conditions, including the conditionsthat both the parent company and its holding company remaina reporting issuer and security holders of the Trust receivethe continuous disclosure documents of the parent company. Becauseof the terms of the Trust, a security holder's return dependsupon the financial condition of the parent company and the holdingcompany and not that of the Trust. Trust offered Trust unitsto the public in order to provide the parent company with acost effective means of raising capital for Canadian insuranceregulatory purposes. No distributions are payable on the Trustunits, if the holding company fails to pay certain dividendsand if distributions are not paid the parent company and itsholding company are prevented from paying dividends on certainof their shares. Trust units are redeemable by the Trust andare exchangeable at the option of the holder for shares of theholding company. Holders of Trust units have no claim or entitlementto the income of the Trust or the assets held by the Trust.

Applicable Ontario Statutory Provisions

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

Applicable Ontario Rules Cited

OSC Rule 51-501- AIF and MD&A.
OSC Rule 52-501- Financial Statements.

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA, ALBERTA,
SASKATCHEWAN, MANITOBA, ONTARIO, QUEBEC,
NOVA SCOTIA AND NEWFOUNDLAND AND LABRADOR

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
CANADA LIFE FINANCIAL CORPORATION,
THE CANADA LIFE ASSURANCE COMPANY AND
CANADA LIFE CAPITAL TRUST

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker", andcollectively the "Decision Makers") in each of theprovinces of Ontario, British Columbia, Alberta, Saskatchewan,Manitoba, Quebec, Nova Scotia and Newfoundland and Labrador(the "Jurisdictions") has received an application(the "Application") from Canada Life Financial Corporation("CLF"), The Canada Life Assurance Company ("CLA")and Canada Life Capital Trust (the "Trust") for adecision, pursuant to the securities legislation of the Jurisdictions(the "Legislation"), that the requirements containedin the Legislation to:

(a) file interim financial statements and auditedannual financial statements (collectively, "Financial Statements")with the Decision Makers and deliver such statements to thesecurity holders of the Trust;

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

(c) file an annual report ("Annual Report")and an information circular with the Decision Maker in Quebecand deliver such report or information circular to the securityholders of the Trust resident in Quebec; and

(d) file under Ontario Securities Commission("OSC") Rule 51-501 AIF and MD&A, section 159of the Regulation to the Securities Act (Quebec) and the SasakatchewanInstrument 51-501, an annual information form ("AIF"),including an annual and interim management's discussion andanalysis ("MD&A") of the financial condition andresults of operation of the Trust and send such MD&A tosecurity holders of the Trust (collectively "the AIF andMD&A Requirements");

shall not apply to the Trust, subject to certainterms and conditions;

AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the OSC is the Principal Regulator for this application;

AND WHEREAS CLF, CLA and the Trust haverepresented to the Decision Makers that:

CLF

1. CLF was incorporated under the InsuranceCompanies Act (Canada) (the 'ICA") on June 21, 1999. CLFcarries on no active business operations and is the holdingcompany for all of the outstanding CLA common shares.

2. The authorized share capital of CLF consistsof an unlimited number of: (i) common shares; and (ii) PreferredShares issuable in series, of which approximately 164,400,000common shares and 6,000,000 Preferred Shares Series B were issuedand outstanding as at December 31, 2001. The CLF common sharesare listed and posted for trading on The Toronto Stock Exchange(the "TSE") and The New York Stock Exchange. The CLFPreferred Shares Series B are listed and posted for tradingon the TSE.

3. CLF is a reporting issuer (or the equivalent)in each of the provinces and territories of Canada and is not,to its knowledge, in default of any requirement of the Legislation.

4. CLF has no material assets or liabilitiesother than the common shares of CLA.

CLA

5. CLA was established on August 21, 1847 andincorporated on April 15, 1849. On November 4, 1999 CLA demutualizedand became a stock life insurance company under Letters Patentof Conversion issued under the ICA.

6. CLA is a reporting issuer (or the equivalent)in each of the provinces and territories of Canada and is not,to its knowledge, in default of any requirement of the Legislation.

7. The authorized share capital of CLA consistsof an unlimited number of: (i) common shares; (ii) Class A Shares;(iii) Class B Shares; (iv) Class C Shares; (v) Class D Shares;(vi) Class E Shares; and (vii) Class F Shares (the Class A Sharesthrough the Class F Shares being collectively referred to asthe "CLA Preferred Shares"). CLF holds all of theoutstanding common shares of CLA.

8. CLA obtained decision documents dated July8, 1999, June 14, 2001, September 8, 2000 and June 13, 2001("CLA Decision Documents") under which the requirementsto file and deliver interim and annual financial statementsand MD&A, and file an AIF, an annual filing in lieu of amanagement information circular and an annual report in Quebec,shall no apply to CLA, subject to certain conditions, includingthat CLF makes all applicable continuous disclosure filings,that CLA remains a direct or indirect wholly-owned subsidiaryof CLF and that CLF have no material assets or liabilities otherthan its holding of shares in CLF.
The Trust

9. The Trust is an open-end trust establishedunder the laws of the Province of Ontario by The Canada TrustCompany ("Trustee"), as trustee, under a declarationof trust made as of February 6, 2002, (the "Declarationof Trust").

10. The outstanding securities of the Trustconsist of: (i) Special Trust Securities (the "SpecialTrust Securities"); (ii) Canada Life Capital Securities- Series A ("CliCS-Series A"); and (iii) Canada LifeCapital Securities - Series B ("CliCS-Series B" and,collectively with the CLiCS-Series A, the "CLiCS").The Special Trust Securities and the CLiCS are collectivelyreferred to herein as the "Trust Securities". TheCliCS and the Special Trust Securities are not quoted or listedon any exchange or organized market.

11. The Trust was established solely for thepurpose of effecting a public offering of CLiCS (the "Offering")and possible future offerings of securities in order to provideCLA (and indirectly, CLF) with a cost effective means of raisingcapital for Canadian insurance company regulatory purposes bymeans of: (i) creating and selling the Trust Securities; and(ii) acquiring and holding assets, which consist primarily oftwo debentures issued by CLA (the "CLA Debentures").The CLA Debentures will generate income for distribution toholders of the Trust Securities. The Trust does not and willnot carry on any operating activity other than in connectionwith the Offering and any future offerings.

12. The Trust is a reporting issuer, or theequivalent, in each of the Jurisdictions as a result of thefiling of a final prospectus in connection with the Offeringdated March 7, 2002 (the "Prospectus") and the issuanceof a final MRRS Decision Document in relation to the Prospectus.

CLiCS

13. The Trust distributed CliCS in the Jurisdictionsunder the Prospectus. The Trust also issued and sold 1,000 SpecialTrust Securities, which are voting securities of the Trust,to CLA in connection with the Offering.

14. Holders of CLiCS are entitled to receivefixed, semi-annual non-cumulative distributions (each, an "IndicatedYield") on the basis described below ("Distributions").Each semi-annual payment date for the Indicated Yield in respectof the CLiCS (a "Distribution Date") will be eithera "Regular Distribution Date" or a "DistributionDiversion Date". A Distribution Date will be a DistributionDiversion Date, with the result that the Indicated Yield willnot be paid in respect of the CLiCS but, instead, the Trustwill pay the net distributable funds of the Trust to the holderof Special Trust Securities, if: (i) CLA has failed in the perioddescribed in the Prospectus to declare regular quarterly dividends("Dividends") on its Class A Shares Series 1 in accordancewith their terms; or (ii) if "Public Preferred Shares"of CLA are then outstanding, CLA has failed to declare Dividendson such Public Preferred Shares. In all other cases, a DistributionDate will be a Regular Distribution Date, in which case holdersof CLiCS will be entitled to receive the Indicated Yield. "PublicPreferred Shares" of CLA means CLA Preferred Shares which:(i) have been issued to the public (excluding any CLA Preferredshares held beneficially by affiliates of CLA); (ii) are listedon a recognized stock exchange; and (iii) have an aggregateliquidation entitlement of at least $100 million provided, however,that if there is more than one class of Public Preferred Sharesoutstanding, then the most senior class or classes of outstandingPublic Preferred Shares shall, for all purposes, be the PublicPreferred Shares.

15. Under Share Exchange Agreements enteredinto among CLF, CLA, the Trust and a party acting as ExchangeTrustee (the "Share Exchange Agreements"), CLF andCLA have agreed, for the benefit of the holders of CLiCS, thatin the event that the Trust fails on any Regular DistributionDate to pay the Indicated Yield on the CLiCS in full: (i) CLAwill not declare or pay Dividends on the Public Preferred Shares;or (ii) if no Public Preferred Shares are then outstanding,CLF will not declare or pay Dividends on any of its preferredshares or on its common shares, in each case, until a specifiedperiod of time has elapsed, unless the Trust first pays suchIndicated Yield (or the unpaid portion thereof) to holders ofCLiCS. Accordingly, it is in the interest of CLA and CLF toensure, to the extent within their control, that the Trust complieswith its obligation to pay the Indicated Yield on each RegularDistribution Date.
16. Under the terms of the CLiCS and the Share Exchange Agreement,the CLiCS may be exchanged, at the option of the holders ofCLiCS, for newly issued CLA Class A Shares Series 2 (in thecase of the CLiCS-Series A) and newly issued CLA Class A SharesSeries 4 (in the case of the CLiCS-Series B). The CLiCS willbe automatically exchanged, without the consent of the holder,for CLA Class A Shares Series 3 (in the case of the CLiCS-SeriesA) or CLA Class A Shares Series 5 (in the case of the CLiCS-SeriesB) upon the occurrence of certain stated events relating tothe solvency of CLA or actions taken by the Superintendent ofFinancial Institutions (the "Superintendent") in respectof CLA (the "Automatic Exchange").

17. The terms of the CLA Class A Shares Series2, Series 3, Series 4 and Series 5 each provide, among otherthings, that such shares are exchangeable at the option of theholder for Common Shares of CLF at certain times and in certaincircumstances, but in any event the CLA Class A Shares Series2 and Series 3 are not exchangeable into CLF common shares untilDecember 31, 2012 and the CLA Class A Shares Series 4 and Series5 are not exchangeable into CLF common shares until December31, 2032. These exchange rights are not operative at any timethat an event giving rise to the Automatic Exchange in respectof the CLiCS has occurred and is continuing.

18. The Trust may, subject to regulatory approval,on June 30, 2007 and on any Distribution Date thereafter, redeemthe CLiCS. The price payable in respect of any such redemptionwill include an early redemption compensation component (suchprice being the "Early Redemption Price") in the eventof a redemption of CLiCS-Series A prior to June 30, 2012 ora redemption of CLiCS-Series B prior to June 30, 2032 (in eithercase, the "Early Redemption Date"). The price payablein all other cases will be $1,000 per CLiCS together with anyunpaid Indicated Yield thereon (the "Redemption Price").

19. Upon the occurrence of certain regulatoryor tax events affecting CLA or the Trust, the Trust may, subjectto regulatory approval, redeem at any time all but not lessthan all of the CLiCS at the Early Redemption Price (if theCLiCS are redeemed prior to the applicable Early RedemptionDate) and at the Redemption Price (if the CLiCS are redeemedon or after the applicable Early Redemption Date).

20. CLA and CLF have covenanted, under theShare Exchange Agreements, that CLA or its affiliates will maintainownership, directly or indirectly, of 100% of the outstandingSpecial Trust Securities. As a result, the financial resultsof the Trust will be consolidated with those of CLA. Since allof the outstanding common shares of CLA are held by CLF, thefinancial results of CLA are consolidated with those of CLF.Subject to regulatory approval, the CLiCS will constitute Tier1 Capital of CLA.

21. As long as any CLiCS are outstanding, theTrust may only be terminated with the approval of the holderof Special Trust Securities and with the approval of the Superintendent:(i) upon the occurrence of a Special Event prior to June 30,2007; or (ii) for any reason on June 30, 2007 or any DistributionDate thereafter. Holders of Trust Securities rank pari passuin the distribution of the property of the Trust in the eventof a termination of the Trust, after the discharge of any creditorclaims. As long as any CLiCS are outstanding, neither CLA norCLF will approve the termination of the Trust unless the Trusthas sufficient funds to pay the Early Redemption Price in thecase of a termination prior to the applicable Early RedemptionDate, or the Redemption Price in the case of any other termination.

22. As set forth in the Declaration of Trust,the CLiCS are non voting except in limited circumstances andSpecial Trust Securities entitle the holders to vote.

23. Except to the extent that the Distributionsare payable to CLiCS holders and, other than in the event oftermination of the Trust (as set forth in the Declaration ofTrust), CLiCS holders have no claim or entitlement to the incomeof the Trust or the assets held by the Trust.

24. Under an Administration Agreement enteredinto between the Trustee and CLA, the Trustee will delegateto CLA certain of its obligations in relation to the administrationof the Trust. CLA, as administrative agent, will provide adviceand counsel with respect to the administration of the day-to-dayoperations of the Trust and other matters as may be requestedby the Trustee from time to time.

25. The Trust has not requested relief forthe purposes of filing a short form prospectus pursuant to NationalInstrument 44-101 - Short Form Prospectus Distributions ("NI44-101") (including, without limitation, any relief whichwould allow the Trust to use CLF's AIF as a current AIF of theTrust) and no such relief is provided by this Decision Documentfrom any of the requirements of NI 44-101.

26. The Trust may, from time to time, issuefurther series of Canada Life Capital Securities, the proceedsof which would be used to acquire additional debentures fromCLA.

27. Because of the terms of the CLiCS, theShare Exchange Agreements and the various covenants CLA andCLF, information about the affairs and financial performanceof CLA and CLF, as opposed to that of the Trust, is meaningfulto holders of CLiCS. Under the CLA Decision Documents, CLA doesnot have to file and deliver interim and annual financial statementsand MD&A nor file an AIF, an annual filing in lieu of amanagement information circular or an annual report as longas CLF makes its continuous disclosure filings on behalf ofCLA on the basis that holders of CLA securities receive adequatedisclosure from the CLF filings. CLF's filings and the deliveryof the same material delivered to shareholders of CLF will provideholders of CLiCS and the general investing public with all informationrequired in order to make an informed decision relating to aninvestment in CLiCS. Information regarding CLF is relevant bothto an investor's expectation of being paid the Indicated Yieldon the CLiCS as well as the return of the investor's principal.

AND WHEREAS pursuant to the System thisMRRS Decision Document evidences the decision of the DecisionMakers (collectively, the "Decision");

AND WHEREAS the Decision Makers aresatisfied that the tests contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decisionhas been met;

THE DECISION of the Decision Makersunder the Legislation is that the requirement contained in theLegislation:

(a) to file Financial Statements with the DecisionMakers and deliver such statements to holders of Trust Securities;

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

(c) to file an Annual Report and an informationcircular with the Decision Maker in Quebec and deliver suchreport or information circular to holders of Trust Securitiesresident in Quebec;

shall not apply to the Trust for so long as:

(i) CLF remains a reporting issuer under theLegislation;

(ii) CLA remains a reporting issuer under theLegislation;

(iii) CLF files with the Decision Makers, inelectronic format under the Trust's SEDAR profile, the documentslisted in clauses (a) to (c) above of this Decision, at thesame time as they are required under the Legislation to filedby CLF;

(iv) the Trust pays all filing fees that wouldotherwise be payable by the Trust in connection with the filingof the documents referred to in clauses (a) to (c) above ofthis Decision;

(v) CLF sends its Financial Statements and AnnualFiling, where applicable, to holders of Trust Securities andits Annual Report to holders of Trust Securities resident inthe Province of Quebec at the same time and in the same manneras if the holders of Trust Securities were holders of CLF commonshares;

(vi) all outstanding securities of the Trustare either CLiCS or Special Trust Securities or are additionalseries of Canada Life Capital Trust Securities where the rightsand obligations (other than the economic terms) of the holdersof such additional securities are the same in all material respectsas the rights and obligations of the holders of the CLiCS atthe date hereof;

(vii) the rights and obligations (other thanthe economic terms thereof) of holders of additional seriesof Canada Life Capital Trust Securities are the same in allmaterial respects as the rights and obligations of the holdersof CLiCS at the date hereof; and

(viii) CLA or its affiliates are the beneficialowners of all Special Trust Securities and CFL or its affliatesare the beneficial owners of all the issued and outstandingvoting shares of CLA.

and provided that this Decision shall expire30 days after:

(A) the date that CLA can no longer rely onthe CLA Decision Documents; or

(B) the date a material adverse change occursin the affairs of the Trust.

May 14, 2002.

"Thresa McLeod"      "Robert L. Shirriff"

 

AND THE FURTHER DECISION of the DecisionMakers in Ontario, Quebec and Saskatchewan is that the AIF andMD&A Requirements shall not apply to the Trust for so longas:

(i) the conditions set out in clauses (i),(ii), (vi), (vii) and (viii) of the Decision above are compliedwith;

(ii) CLF files the AIF and the 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 CLF;

(iii) the Trust pays all filing fees that wouldotherwise be payable by the Trust in connection with the filingof the documents referred to in clauses (a) to (c) above ofthis Decision;

(iv) CLF sends its annual and interim MD&Aand its AIF, as applicable, to holders of Trust Securities atthe same time and in the same manner as if the holders of TrustSecurities were holders of CLF Common Shares;

and provided that this Decision shall expire30 days after:

(A) the date that CLA can no longer rely onthe CLA Decision Documents; or

(B) the date a material adverse change occursin the affairs of the Trust.

May 14, 2002.

"John Hughes"