Securities Law & Instruments

Headnote

Exemptions from the mutual fund self-dealingprohibitions of clauses 111(2)(a) and 111(3) of the SecuritiesAct (Ontario) to allow certain mutual funds to continue to holdsecurities of an issuer that will become a substantial securityholder of the mutual funds' manager pursuant to an acquisitiontransaction. Requirement for the mutual funds to divest thesecurities of the related issuer within 6 months of the closingof the transaction.

Statutes Cited

Securities Act (Ontario), R.S.O. 1990 c. S.5,as am., ss. 111(2)(a) and 111(3).

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO, BRITISH COLUMBIA,
ALBERTA, SASKATCHEWAN,
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
CLARICA CANADIAN GROWTH EQUITY FUND AND
CLARICA BALANCED FUND
(collectively, the "Funds")

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia,and Newfoundland and Labrador (the "Jurisdictions")has received an application from Clarica Diversico Ltd. ("Diversico"),as manager of each of the Funds, for a decision pursuant tothe securities legislation of the Jurisdictions (the "Legislation")that the restrictions contained in the Legislation requiringthat the Funds not knowingly hold an investment in the securitiesof any person or company who is a substantial security holderof the Funds, its management company or distribution company(the "Investment Restrictions") shall not apply inrespect of certain investments held by the Funds in the commonshares of Sun Life Financial Services of Canada Inc. ("SunLife Common Shares").

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this Application;

AND WHEREAS Diversico has representedto the Decision Makers that:

1. Diversico is a corporation amalgamated underthe laws of Canada.

2. Diversico is a direct, wholly-owned subsidiaryof Clarica Life Insurance Company ("Clarica"). Claricais an insurance company incorporated under the Insurance CompaniesAct (Canada) and is a reporting issuer in each of the Jurisdictionsand the common shares of Clarica trade on The Toronto StockExchange.

3. Sun Life Financial Services of Canada Inc.("Sun Life") is a holding company incorporated underthe Insurance Companies Act (Canada) and is a reporting issuerin each of the provinces and territories of Canada. The SunLife Common Shares are listed on the Toronto, New York, Londonand Philippines stock exchanges. To the knowledge of Sun Life,no person or company beneficially owns, directly or indirectly,or exercises control or direction over, more than 10% of thevotes attaching to the Sun Life Common Shares.

4. On December 17, 2001, Clarica and Sun Lifeentered into a transaction agreement (the "TransactionAgreement"), pursuant to which Sun Life agreed to acquireall of the outstanding common shares of Clarica (the "Transaction").The Transaction is proposed to be effected through a reorganizationof Clarica's capital structure to provide for the exchange ofeach of the common shares of Clarica ("Clarica Common Shares"),except those Clarica Common Shares beneficially owned by SunLife as general fund assets, for 1.5135 Sun Life Common Sharesthrough a series of transactions. Subject to the satisfactionof all closing conditions and the receipt of all applicableregulatory approvals, it is anticipated that the Transactionwill be completed during the second quarter of 2002.

5. On closing of the proposed transaction withSun Life, Sun Life will own all of the outstanding common sharesof Clarica and Diversico will be an indirect, wholly-owned subsidiaryof Sun Life.

6. Diversico is the manager of the Funds. Thecustodian of the Funds is Canadian Imperial Bank of Commerce.

7. The Funds are advised by external, arm's-lengththird party portfolio advisors, including AGF Funds Inc., AMIPartners Inc., AIM Funds Management Inc., Brinson Canada Co.,KBSH Capital Management Inc., Mackenzie Financial Corporation,McLean Budden Limited, Natcan Investment Management Inc., PerigeeInvestment Counsel Inc., State Street Research & ManagementCompany and TD Asset Management Inc. McLean Budden Limited isan indirect subsidiary of Sun Life.

8. Each of the Funds is an open-end mutual fundtrust established under the laws of Ontario. The securitiesof the Funds are offered by prospectus in each of the provincesand territories of Canada.

9. Each Fund is a reporting issuer under thesecurities laws of each of the provinces and territories ofCanada. None of the Funds is in default of any requirementsof the Legislation.

10. As at April 1, 2002, the Funds held SunLife Common Shares as follows:

(a) Clarica Canadian Growth Equity Fund held60,700 Sun Life Common Shares, representing approximately 2.1%of the net asset value of such Fund's assets; and

(b) Clarica Balanced Fund held 2,600 Sun LifeCommon Shares, representing approximately 0.5% of the net assetvalue of such Fund's assets.

11. The aggregate number of Sun Life CommonShares which will be held by all of the Funds immediately aftercompletion of the Transaction will represent less than 0.02%of the outstanding Sun Life Common Shares immediately afterthe completion of the Transaction, assuming that the Funds donot sell any of the Sun Life Common Shares held by them priorto completion of the Transaction.

12. The Funds have not made any investment inSun Life Common Shares following the execution of the Agreementand will not make any such purchases in the future unless theAgreement is terminated and the Share Transaction contemplatedby the Agreement is not consummated.

13. At the time it was made, each investmentby the Funds in Sun Life Common Shares represented the businessjudgement of professional independent portfolio advisers uninfluencedby considerations other than the best interests of the securityholdersof the applicable Fund.

14. In the absence of the Decision evidencedby this Decision Document, the Funds would be required to divestthe Sun Life Common Shares immediately on the effective dateof the closing of the Transaction upon Diversico becoming anindirect wholly-owned subsidiary of Sun Life.

AND WHEREAS under the System this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");

AND WHEREAS each Decision Maker is satisfiedthat the test contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision hasbeen met;

THE DECISION of the Decision Makersunder the Legislation is that the Investment Restrictions donot apply so as to prevent the Funds from holding their investmentsin the Sun Life Common Shares beyond the date of completionof the Transaction when Diversico will become an indirect wholly-ownedsubsidiary of Sun Life, provided that:

(a) the Funds do not make any additional purchasesof Sun Life Common Shares;

(b) the Funds divest the Sun Life Common Sharesacquired prior to the Transaction as quickly as is commerciallyreasonable so that no later than six months from the date ofclosing of the Transaction, the Funds do not hold Sun Life CommonShares; and

(c) the Funds do not vote their Sun Life CommonShares at any meeting of holders of Sun Life Common Shares.

May 24, 2002.

"Robert Korthals"      "Harold P. Hands"