Securities Law & Instruments


Relief from certain self-dealing prohibitionsto permit mutual funds to passively track target securitiesmarket indices.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as amended,s. 111(2)(a), 111(2)(c)(ii), 111(3), 118(1).















WHEREAS the Canadian securities regulatoryauthority or regulator (the "Decision Makers") ineach of British Columbia, Alberta, Saskatchewan, Ontario, NovaScotia and Newfoundland and Labrador (the "Jurisdictions")has received an application from Clarica Diversico Ltd. ("Diversico"),in its capacity as manager of Clarica Canadian Equity IndexFund (the "Fund"), for a decision pursuant to thesecurities legislation of the Jurisdictions (the "Legislation")that the following restrictions (together, the "InvestmentRestrictions") contained in the Legislation shall not applyin respect of investments made by the Fund in securities ofC.I. Fund Management Inc. ("CIX"):

1. the restriction prohibiting a mutual fundfrom knowingly making or holding an investment in any personor company who is a substantial security holder of the mutualfund, its management company or distribution company;

2. the restrictions prohibiting a mutual fundfrom knowingly making or holding an investment in an issuerin which any person or company who is a substantial securityholder of the mutual fund, its management company or its distributioncompany has a significant interest; and

3. the restriction prohibiting a portfoliomanager from knowingly causing an investment portfolio managedby it to invest in any issuer in which a responsible personor an associate of a responsible person is an officer or directorunless the specific fact is disclosed to the client and writtenconsent of the client to the investment is obtained beforethe purchase.

AND WHEREAS pursuant to the Mutual RelianceReview System ("MRRS") for Exemptive Relief Applications(the "System"), the Ontario Securities Commissionis the principal regulator for this application;

AND WHEREAS Diversico has representedto the Decision Makers as follows:

1. The Fund is an open-end mutual fund trustestablished under the laws of Ontario. Units of the Fund arequalified for distribution in each of the Jurisdictions pursuantto a simplified prospectus and annual information form datedDecember 18, 2001, as amended. The Fund is a reporting issuerunder the securities legislation of each of the Jurisdictions.

2. The Fund is an "index mutual fund"as defined in National Instrument 81-102 Mutual Funds. Theinvestment objective of the Fund is to provide long-term growthof capital by tracking the performance of a specified Canadianequity index, currently being the S&P/TSX Composite Index(the "Target Index"), by investing mainly in securitiesthat are included in the Target Index in substantially thesame proportion to the securities in the Target Index.

3. Pursuant to a purchase agreement datedMay 22, 2002 between CIX, Sun Life Financial Services of CanadaInc. ("SLFS") and others, CIX acquired all of theissued and outstanding shares of Diversico. In return, SLFSacquired approximately a 30% indirect interest in CIX. Theforegoing transactions are referred to collectively as the"Transaction".

4. Further to completion of the Transactionon July 25, 2002:

(a) Diversico became a wholly-owned subsidiaryof CIX;

(b) CI Mutual Funds Inc. ("CIMF"),a wholly-owned subsidiary of CIX, has replaced its sistercompany, Diversico, as manager of the Fund. CIX is a "substantialsecurity holder" (as such term is defined under theLegislation) of CIMF;

(c) SLFS, through its ownership of 30% ofthe outstanding shares of CIX, is a "substantial securityholder" (as such term is defined under the Legislation)of CIX and, indirectly, of CIMF;

(d) SLFS has a direct or indirect "significantinterest" (as such term is defined under the Legislation)in CIX.

5. TD Asset Management Inc. ("TDAM")is the portfolio adviser to the Fund. It is anticipated thatCIMF may replace TDAM as the portfolio adviser to the Fund.TDAM and CIMF are each hereinafter referenced to mean the"Portfolio Adviser".

6. CIX and CIMF share common directors andofficers. As such, CIMF and the directors and officers whichit shares with CIX would be "responsible persons"(as such term is defined under the Legislation).

7. CIX is a reporting issuer under the securitieslegislation of each of the provinces of Canada. The commonshares of CIX are listed and posted for trading on The TorontoStock Exchange.

8. Among the securities comprising the TargetIndex of the Fund are common shares of CIX.

9. The portfolio of the Fund is not activelymanaged. All purchases and sales of portfolio securities ofthe Fund are determined by the composition of the Target Indexand the weightings therein of the constituent securities.The number of securities in which the Fund actually investsfrom time to time depends upon the size and value of the assetsof the Fund and the composition of the Target Index. The portfolioof the Fund is periodically rebalanced to track its TargetIndex as closely as possible while minimizing trading costs.

10. In order to track its Target Index followingcompletion of the Transaction, the Fund must hold securitiesin CIX and may need to acquire additional securities of CIXin the future, contrary to the Investment Restrictions.

11. The deviation from the Investment Restrictionswill not be the result of any active decision of CIMF or thePortfolio Adviser to increase the investment of the Fund inany particular issuer, but rather an indirect consequenceof carrying out the investment objective of the Fund to matchthe performance of the Target Index.

12. The investments by the Fund in commonshares of CIX represent the business judgment of responsiblepersons uninfluenced by considerations other than the bestinterests of the Fund.

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

AND WHEREAS the Decision Makers are satisfiedthat the test contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision havebeen met;

THE DECISION of the Decision Makers pursuantto the Legislation is that the Investment Restrictions do notapply to the investment, or the holding of an investment, bythe Fund in securities of CIX;

PROVIDED THAT the portion of the Fund'sassets invested in securities of CIX is determined accordingto the Fund's investment objective of tracking the performanceof its Target Index by investing mainly in securities that areincluded in the Target Index in substantially the same proportionto the securities in the Target Index, and not pursuant to thediscretion of CIMF or the Portfolio Adviser of the Fund.

August 8, 2002.

"Howard I. Wetston"                    "RobertW. Korthals"