Manulife Financial Capital Trust II (Re), 2009 CanLII 46177

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions - Exemption granted to a trust from continuous disclosure requirements under National Instrument 51-102 Continuous Disclosure Obligations and certification obligations under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, subject to certain conditions - Trust established for purpose of effecting offerings of trust securities in order to provide issuer with a cost-effective means of raising capital for Canadian insurance regulatory purposes - Trust became reporting issuer upon filing a prospectus offering trust securities -Without relief, trust would have to comply with continuous disclosure and certification requirements - Given the nature, terms and conditions of the trust securities and various covenants of MLI and MFC in connection with the prospectus offering, the meaningful information to public holders of trust securities is information with respect to MLI and MFC, rather than the trust.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations

National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings

August 21, 2009

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the “Jurisdiction”)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF MANULIFE FINANCIAL CAPITAL TRUST II (the “Trust”), THE MANUFACTURERS LIFE INSURANCE COMPANY (“MLI”) AND Manulife Financial Corporation (“MFC” and, together with the Trust and MLI, the “Filers”)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers for a decision (the “Exemption Sought”) under the securities legislation of the Jurisdiction of the principal regulator (the “Legislation”) that the requirements contained in the Legislation to:

(a) (i) file interim financial statements and audited annual financial statements and deliver same to the security holders of the Trust pursuant to sections 4.1, 4.3 and 4.6 of National Instrument 51-102 — Continuous Disclosure Obligations (“NI 51-102”);

(ii) file interim and annual management’s discussion and analysis (“MD&A”) and deliver same to the security holders of the Trust pursuant to sections 5.1 and 5.6 of NI 51-102;

(iii) file an annual information form pursuant to section 6.1 of NI 51-102; and

(iv) comply with any other requirements of NI 51-102

(collectively defined as the “Continuous Disclosure Obligations”); and

(b) file interim and annual certificates (collectively the “Officers’ Certificates”) pursuant to Parts 4, 5 and 6 of National Instrument 52-109 — Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”) (the “Certification Obligations”)

shall not apply to the Trust, subject to certain conditions.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 — Passport System (“MI 11-102”) is intended to be relied upon in each of the provinces and territories other than Ontario.

Interpretation

Terms defined in National Instrument 14-101 — Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

In this decision,

“Prospectus” means the final short form prospectus of the Trust and MLI dated July 6, 2009 in respect of the Offering (as defined below).

Representations

This decision is based on the following facts represented by the Filers:

MFC

1. MFC was incorporated under the Insurance Companies Act (Canada) (the “ICA”) on April 26, 1999. On September 23, 1999, in connection with the demutualization of MLI, MFC became the sole shareholder of MLI. MFC’s head office is located at 200 Bloor Street East, Toronto, Ontario, M4W 1E5.

2. The authorized share capital of MFC consists of: (i) an unlimited number of common shares; (ii) an unlimited number of Class A Shares, issuable in series; (iii) an unlimited number of Class 1 Shares, issuable in series; and (iv) an unlimited number of Class B Shares, issuable in series.

3. MFC is a publicly traded company on the Toronto Stock Exchange, the New York Stock Exchange, the Stock Exchange of Hong Kong Limited and the Philippine Stock Exchange.

4. MFC is a reporting issuer in each province and territory of Canada (each, a “Reporting Jurisdiction” and collectively, the “Reporting Jurisdictions”) and is not, to its knowledge, in default of its reporting issuer obligations under the securities legislation of any of the Reporting Jurisdictions.

MLI

5. MLI is an insurance company under the ICA and is regulated by the Superintendent of Financial Institutions (Canada) (the “Superintendent”). The head office of MLI is located at 200 Bloor Street East, Toronto, Ontario, M4W 1E5.

6. The authorized share capital of MLI consists of: (i) an unlimited number of common shares; (ii) an unlimited number of Class A Shares, issuable in series; (iii) an unlimited number of Class 1 Shares, issuable in series; and (iv) an unlimited number of Class B Shares, issuable in series. MFC holds all of the issued and outstanding shares of MLI.

7. MLI is a reporting issuer in the Reporting Jurisdictions and is not, to its knowledge, in default of its reporting issuer obligations under the securities legislation of any of the Reporting Jurisdictions.

8. MFC has guaranteed certain obligations of MLI in order to rationalize the securities reporting obligations of MFC and MLI (the “MFC Guarantees”). The MFC Guarantees included: (i) a subordinated guarantee of MLI’s Class A Shares, Class 1 Shares and Class B Shares (the “MFC Preferred Share Guarantee”); (ii) a full and unconditional subordinated guarantee of MLI’s $550 million of outstanding 6.24% subordinated debentures due February 16, 2016; and (iii) a full and unconditional guarantee of MLI’s obligations under the annuities which provided the cash flows to service the $200 million of 5.390% annuity-backed notes due March 12, 2007 and the $200 million of 4.551% annuity-backed notes due November 12, 2008 issued by Maritime Life Canadian Funding. The annuity-backed notes were repaid on maturity.

9. As a result of the MFC Guarantees, MLI received an exemption dated January 22, 2007 (the “2007 MLI Order”) from the securities regulatory authority in each province and territory other than Yukon, Northwest Territories, Nunavut and Prince Edward Island from the requirements to file certain continuous disclosure materials. For so long as the terms and conditions of the 2007 MLI Order are satisfied, MLI is not required to file the following documents required by NI 51-102: (i) audited annual or unaudited interim financial statements; (ii) annual or interim MD&A; (iii) an annual information form; (iv) press releases and material change reports in the case of material changes that are also material changes in the affairs of MFC; and (v) other material contracts. MLI prepares and files annual financial statements prepared in accordance with Canadian generally accepted accounting principles and certain comparative financial information of MLI is filed by MFC on a quarterly basis. MLI has filed a notice on SEDAR indicating that it is relying on the continuous disclosure filings of MFC and setting out where those documents can be found for viewing in electronic format. MFC makes available to holders of MLI securities on an ongoing basis MFC’s audited annual financial statements and unaudited interim financial statements (including MD&A thereon) and other MFC continuous disclosure materials.

The Trust

10. The Trust is a trust established under the laws of Ontario by Computershare Trust Company of Canada, as trustee (the “Trustee”) pursuant to a declaration of trust dated as of June 12, 2009, as amended and restated on July 10, 2009 and as it may be further amended, restated and supplemented from time to time (the “Declaration of Trust”).

11. The Trust’s head office is located at 200 Bloor Street East, Toronto, Ontario, M4W 1E5. The Trust has a financial year end of December 31.

12. The Trust completed an initial public offering (the “Offering”) of 7.405% Manulife Financial Trust II Notes - Series 1 due December 31, 2108 (the “MaCS II - Series 1”) in the Reporting Jurisdictions on July 10, 2009 and may, from time to time, issue further series of notes substantially similar to the MaCS II - Series 1 (collectively with the MaCS II - Series 1, the “MaCS II Notes”). As a result of the Offering, the capital of the Trust consists of: (i) MaCS II - Series 1; and (ii) voting trust units (“Voting Trust Units”). All of the outstanding Voting Trust Units are held by MLI.

13. As a result of having obtained a receipt for the Prospectus in respect of the Offering, the Trust is a reporting issuer in the Reporting Jurisdictions. The Trust is not, to its knowledge, in default of its reporting issuer obligations under the securities legislation of any of the Reporting Jurisdictions.

14. The Trust is a single purpose vehicle established for the purpose of effecting offerings of securities, including MaCS II - Series 1 and Voting Trust Units (collectively, the “Trust Securities”), in order to provide MLI with a cost effective means of raising capital for Canadian insurance regulatory purposes by means of: (i) creating and selling the Trust Securities; and (ii) acquiring and holding assets, which will consist primarily of a senior unsecured debenture of MLI (the “MLI Debenture”) and other eligible assets specified in the Prospectus (collectively, the “Trust Assets”). The Trust Assets will generate income for the payment of principal, interest, the redemption price, if any, and any other amounts, in respect of the Trust’s debt securities, including the MaCS II - Series 1. The Trust will not carry on any operating activity other than in connection with offerings of Trust Securities and in connection with the Trust Assets.

MaCS II - Series 1

15. From the date of issue until December 31, 2108, the Trust will pay interest on the MaCS II - Series 1 in equal (subject to the reset of the interest rate and except for the first interest payment) semi-annual instalments on June 30 and December 31 of each year (each an “Interest Payment Date”). Starting on December 31, 2019, and on every fifth anniversary of such date thereafter until December 31, 2104 (each such date, an “Interest Reset Date”), the interest rate on the MaCS II - Series 1 will be reset at an interest rate per annum equal to the Government of Canada Yield (as defined in the Prospectus) plus 5.00%.

16. Pursuant to an assignment, set-off and trust agreement entered into among the Trust, MLI, MFC and CIBC Mellon Trust Company as indenture trustee, dated July 10, 2009 (the “Assignment and Set-Off Agreement”), MLI and MFC have agreed, for the benefit of the holders of the MaCS II - Series 1, that if (i) MLI elects, at its sole option, prior to the commencement of the interest period ending on the day preceding the relevant Interest Payment Date, that holders of MaCS II - Series 1 invest interest payable on the MaCS II - Series 1 on the relevant Interest Payment Date in a new series of Class 1 Shares of MLI (the “MLI Deferral Preferred Shares”), or (ii) for whatever reason, interest is not paid in full in cash on the MaCS II - Series 1 on any Interest Payment Date (in the case of either (i) or (ii), an “Other Deferral Event”), (a) MLI will not declare or pay cash dividends on any MLI Public Preferred Shares (as defined below), or (b) if no MLI Public Preferred Shares are outstanding, MFC will not declare or pay cash dividends on any of its preferred shares or common shares (collectively, the “MFC Dividend Restricted Shares”), and (c) in cases where clause (a) applies, neither MFC nor any subsidiary of MFC may make any payment to holders of MLI Public Preferred Shares in respect of dividends not declared or paid by MLI, and neither MFC nor any subsidiary of MFC may purchase any MLI Public Preferred Shares, or, in cases where clause (b) applies, neither MFC nor any subsidiary of MFC may make any payment to holders of MFC Dividend Restricted Shares in respect of dividends not declared or paid by MFC, and neither MFC nor any subsidiary of MFC may purchase any MFC Dividend Restricted Shares, provided that any subsidiary of MFC whose primary business is dealing in securities may purchase MLI Public Preferred Shares or MFC Dividend Restricted Shares in certain limited circumstances as permitted in the ICA or the regulations thereunder, in any case until the sixth month following the relevant Interest Payment Date (the “Dividend Stopper Undertaking”). Accordingly, it is in the interest of MLI and MFC to ensure, to the extent within their control, that the Trust pays the interest in cash on the MaCS II - Series 1 on each Interest Payment Date so as to avoid triggering the Dividend Stopper Undertaking. “MLI Public Preferred Shares” means, at any time, preferred shares of MLI which, at that time: (i) have been issued to the public (excluding any preferred shares of MLI held beneficially by affiliates of MLI); (ii) are listed on a recognized stock exchange; and (iii) have an aggregate liquidation entitlement of at least $200 million, provided, however, if, at any time, there is more than one class of MLI Public Preferred Shares outstanding, then the most senior class or classes of outstanding MLI Public Preferred Shares shall, for all purposes, be the MLI Public Preferred Shares.

17. On each Interest Payment Date on which a Deferral Event (as defined below) has occurred, holders of MaCS II - Series 1 will be required to invest interest payable on the MaCS II - Series 1 in MLI Deferral Preferred Shares. A “Deferral Event” means: (i) an Other Deferral Event, or (ii) MLI has failed to declare cash dividends on its Class A Shares Series 1 or, if any MLI Public Preferred Shares are outstanding, MLI has failed to declare cash dividends on any of its MLI Public Preferred Shares in accordance with their respective terms, in either case, in the last 90 days preceding the commencement of the interest period ending on the day preceding the relevant Interest Payment Date.

18. The MLI Deferral Preferred Shares will pay quarterly non-cumulative preferential cash dividends, as and when declared by the board of directors of MLI (the “Board of Directors”), subject to the provisions of the ICA, at the Perpetual Preferred Share Rate (as defined in the Prospectus), subject to any withholding tax.

19. Prior to the issuance of any MLI Deferral Preferred Shares in respect of a Deferral Event, MLI will not, without the prior approval of the Superintendent and the prior approval of the holders of the MaCS II - Series 1, amend any terms attaching to such MLI Deferral Preferred Shares, provided that the prior approval of the holders of MaCS II - Series 1 will not be required in the case of amendments relating to the Class 1 Shares of MLI as a class.

20. The MaCS II - Series 1, including accrued and unpaid interest thereon, will be exchanged automatically, without the consent of the holder thereof, for newly issued Class 1 Shares Series 1 of MLI (“MLI Exchange Preferred Shares”) if: (i) an application for a winding-up order in respect of MLI pursuant to the Winding-Up and Restructuring Act (Canada) is filed by the Attorney General of Canada or a winding-up order in respect of MLI pursuant to that Act is granted by a court; (ii) the Superintendent advises MLI in writing that the Superintendent has taken control of MLI or its assets pursuant to the ICA; (iii) the Superintendent advises MLI in writing that the Superintendent is of the opinion that MLI has a net Tier 1 capital ratio of less than 75% or an MCCSR ratio of less than 120%; (iv) the Board of Directors advises the Superintendent in writing that MLI has a net Tier 1 capital ratio of less than 75% or an MCCSR ratio of less than 120%; or (v) the Superintendent directs MLI pursuant to the ICA to increase its capital or provide additional liquidity and MLI elects to cause the Automatic Exchange as a consequence of the issuance of such direction or MLI does not comply with such direction to the satisfaction of the Superintendent within the time specified therein (the “Automatic Exchange”).

21. Pursuant to a share exchange agreement among MLI, MFC, the Trust and CIBC Mellon Trust Company as exchange trustee (the “Exchange Trustee”) dated July 10, 2009 (the “Share Exchange Agreement”), MLI has granted to the Exchange Trustee, for the benefit of the holders of MaCS II - Series 1, the right to exchange MaCS II – Series 1 for MLI Exchange Preferred Shares upon an Automatic Exchange and the Exchange Trustee on behalf of the holders of MaCS II – Series 1 has granted to MLI the right to exchange MaCS II – Series 1 for MLI Exchange Preferred Shares upon an Automatic Exchange. Pursuant to the Share Exchange Agreement, MLI has covenanted to take or refrain from taking certain actions so as to ensure that holders of MaCS II – Series 1 will receive the benefit of the Automatic Exchange, including obtaining the requisite approval of holders of the MaCS II – Series 1 for any amendment to the provisions of the MLI Exchange Preferred Shares (other than any amendments relating to the Class 1 Shares of MLI as a class).

22. The MLI Exchange Preferred Shares will pay quarterly non-cumulative preferential cash dividends, as and when declared by the Board of Directors, subject to the provisions of the ICA, at the Perpetual Preferred Share Rate (as defined in the Prospectus), subject to any applicable withholding tax.

23. If the MaCS II – Series 1 have not been exchanged for MLI Exchange Preferred Shares pursuant to the Automatic Exchange, MLI will not, without the prior approval of the Superintendent and the prior approval of the holders of the MaCS II – Series 1, amend any terms attaching to the MLI Exchange Preferred Shares, provided that the prior approval of the holders of MaCS II – Series 1 will not be required in the case of amendments relating to the Class 1 Shares of MLI as a class.

24. The MFC Preferred Share Guarantee will apply to preferred shares of MLI outstanding from time to time, including the Class 1 Shares of MLI issuable upon a Deferral Event or an Automatic Exchange. In circumstances where MFC is not the subject of a winding-up order, the MFC Preferred Share Guarantee will entitle the holder to receive payment from MFC within 15 days of any failure by MLI to pay a declared dividend or to pay the redemption price for such shares and, in the case of any amount remaining unpaid with respect to the preference of the preferred shares of MLI upon a winding-up of MLI, within 15 days of the later of the date of the final distribution of property of MLI to its creditors and the date of the final distribution of surplus of MLI, if any, to its shareholders. In circumstances where MFC is the subject of a winding-up order, the MFC Preferred Share Guarantee will entitle the holder to receive payment from MFC within 15 days of the determination of the final distribution of surplus of MFC, if any, to MFC’s shareholders. Claims under the MFC Preferred Share Guarantee will be subordinate to all outstanding indebtedness and liabilities of MFC unless otherwise provided by the terms of the instrument creating or evidencing any such liability. In the event that a failure to pay declared dividends, the redemption price or the liquidation preference of MLI preferred shares occurs at a time when MFC is subject to a winding-up order, the MFC Preferred Share Guarantee has been structured so that the amount payable by MFC under the MFC Preferred Share Guarantee will be subject to reduction such that the claims of holders of the respective class of preferred shares of MLI under the MFC Preferred Share Guarantee will, in effect, rank equally with the claims of holders of the respective class of preferred shares of MFC to any surplus assets of MFC remaining for distribution. Otherwise the MFC Preferred Share Guarantee would negatively impact the capital treatment of preferred shares of MLI for insurance regulatory purposes.

25. The MaCS II - Series 1 have been structured to achieve Tier 1 regulatory capital for purposes of the guidelines of the Superintendent.

26. On or after December 31, 2014, the Trust may, at its option, with the prior approval of the Superintendent, on giving not more than 60 nor less than 30 days’ notice to the holders of the MaCS II – Series 1, redeem the MaCS II – Series 1, in whole or in part. The redemption price per $1,000 principal amount of MaCS II – Series 1 redeemed on any day that is not an Interest Reset Date in respect of the MaCS II – Series 1 will be equal to the greater of par and the Canada Yield Price (as defined in the Prospectus), and the redemption price per $1,000 principal amount of MaCS II – Series 1 redeemed on any Interest Reset Date in respect of the MaCS II – Series 1 will be par, together in either case with accrued and unpaid interest to but excluding the date fixed for redemption, subject to any applicable withholding tax.

27. The Trust may, at its option, with the prior approval of the Superintendent, on giving not more than 60 nor less than 30 days’ notice to the holders of MaCS II – Series 1, redeem all (but not less than all) of the MaCS II – Series 1 upon the occurrence of certain regulatory or tax events affecting MLI or the Trust. The redemption price per $1,000 principal amount of the MaCS II – Series 1 will be equal to par, together with accrued and unpaid interest to but excluding the date fixed for redemption, subject to any applicable withholding tax.

28. The MaCS II – Series 1 are direct unsecured obligations of the Trust, ranking at least equally with other subordinated indebtedness of the Trust from time to time issued and outstanding. In the event of the insolvency or winding-up of the Trust, the indebtedness evidenced by MaCS II – Series 1 issued by the Trust will be subordinate in right of payment to the prior payment in full of all other liabilities of the Trust except liabilities which by their terms rank in right of payment equally with or subordinate to indebtedness evidenced by such MaCS II – Series 1.

29. Neither MLI nor MFC will assign or otherwise transfer any of its obligations under the Share Exchange Agreement or the Assignment and Set-Off Agreement, except in the case of a merger, consolidation, amalgamation or reorganization or a sale of substantially all of the assets of MLI or MFC.

30. MLI has covenanted that all of the outstanding Voting Trust Units will be held at all times by MLI.

31. As long as any MaCS II – Series 1 are outstanding and held by any person other than MLI or any of its affiliates, the Trust may only be terminated with the approval of the holder of the Voting Trust Units and with the prior approval of the Superintendent and MLI and MFC will not take any action to cause the termination of the Trust except (i) prior to December 31, 2014 upon the occurrence of certain regulatory or tax events affecting MLI or the Trust or (ii) on or after December 31, 2014 for any reason. The holders of MaCS II – Series 1 will not be entitled to initiate proceedings for the termination of the Trust. So long as any MaCS II – Series 1 are outstanding and held by any person other than MLI or any of its affiliates, neither MLI nor MFC will approve the termination of the Trust unless the Trust has sufficient funds to pay the redemption price of the MaCS II – Series 1.

32. The MaCS II - Series 1 are non-voting except in certain limited circumstances set out in the Declaration of Trust. The Voting Trust Units entitle the holder thereof (i.e. MLI) to vote in respect of certain matters regarding the Trust.

33. Pursuant to an administration agreement dated June 12, 2009, as amended and restated on July 10, 2009 and as it may be further amended and restated from time to time, entered into between the Trustee and MLI, the Trustee has delegated to MLI certain of its obligations in relation to the administration of the Trust. MLI, as administrative agent, will, at the request of the Trustee, administer the day-to-day operations of the Trust and perform such other matters as may be requested by the Trustee from time to time.

34. The Trust may, from time to time, issue further series of MaCS II Notes, the proceeds of which would be used to acquire additional Trust Assets.

35. Because of the terms of the Trust Securities, the Share Exchange Agreement, the Assignment and Set-Off Agreement and the various covenants of MLI and MFC, and given that the MFC Preferred Share Guarantee will apply to the Class 1 Shares of MLI issuable upon the occurrence of an Automatic Exchange or Deferral Event, information about the affairs and financial performance of MLI and MFC, as opposed to that of the Trust, is meaningful to holders of MaCS II - Series 1. MFC and MLI’s filings will provide holders of MaCS II - Series 1 and the general investing public with all information required in order to make an informed decision relating to an investment in MaCS II - Series 1 and any other MaCS II Notes that the Trust may issue from time to time. Information regarding MFC and MLI is relevant both to an investor’s expectation of being paid the principal, interest and redemption price, if any, and any other amount on the MaCS II - Series 1 when due and payable.

36. MFC has delivered to the Ontario Securities Commission an undertaking (the “Responsible Issuer Undertaking”) confirming that: (i) for so long as MLI and the Trust both qualify for the Exemption Sought, MFC will be considered a “responsible issuer” for purposes of determining MFC’s liability under Part XXIII.1 of the Securities Act (Ontario) as if the MaCS II Notes were an “issuer’s security” of MFC for purposes of such Part; and (ii) for greater certainty, pursuant to the definition of “issuer’s security” in section 138.1 of the Securities Act (Ontario), MLI Deferral Preferred Shares and MLI Exchange Preferred Shares guaranteed by MFC constitute issuer’s securities of MFC for purposes of determining MFC’s liability under Part XXIII.1 of the Securities Act (Ontario). MFC has filed the Responsible Issuer Undertaking on its SEDAR profile.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) in respect of the Continuous Disclosure Obligations:

(i) each of MFC and MLI remain a reporting issuer under the Legislation and has filed all continuous disclosure documents that it is required to file by the Legislation;

(ii) the Trust files a notice indicating that it is relying on the continuous disclosure filings of MFC and MLI listed in paragraph (a)(i) of this Decision and setting out where those documents can be found for viewing in electronic format;

(iii) the Trust pays all filing fees that would otherwise be payable by the Trust in connection with the filing of the continuous disclosure documents under NI 51-102;

(iv) at any time MLI is exempt from filing such documents, the Trust sends, or causes MFC or MLI to send, MFC’s interim and annual financial statements and interim and annual MD&A required by NI 51-102 to holders of the Trust’s debt securities, at the same time and in the same manner as if the holders of the Trust’s debt securities were holders of similar debt securities of MFC;

(v) at any time MLI is not exempt from filing such documents, the Trust sends, or causes MLI to send, MLI’s interim and annual financial statements and interim and annual MD&A required by NI 51-102 to holders of the Trust’s debt securities, at the same time and in the same manner as if the holders of the Trust’s debt securities were holders of similar debt securities of MLI;

(vi) all outstanding securities of the Trust are either MaCS II Notes or Voting Trust Units;

(vii) the rights and obligations of the holders of additional series of MaCS II Notes of the Trust are the same in all material respects as the rights and obligations of the holders of the MaCS II - Series 1, with the exception of economic terms such as the interest payable by the Trust, maturity date and redemption dates and prices;

(viii) MLI remains the direct owner of all of the issued and outstanding voting securities of the Trust, including the Voting Trust Units;

(ix) MFC remains the beneficial owner of all of the issued and outstanding voting securities of MLI;

(x) the Trust does not carry on any operating activity other than in connection with offerings of its securities and the Trust has minimal assets, operations, revenues or cash flows other than those related to the MLI Debenture or the issuance, administration and repayment of the Trust Securities;

(xi) MLI, as holder of the Voting Trust Units, will not propose changes to the terms and conditions of any outstanding MaCS II Notes that would result in MaCS II Notes being exchangeable for securities other than MLI Exchange Preferred Shares;

(xii) the Trust issues a news release and files a material change report in accordance with Part 7 of NI 51-102, as amended, supplemented or replaced from time to time, in respect of any material change in the affairs of the Trust that is not also a material change in the affairs of MFC or MLI;

(xiii) in any circumstances where the MaCS II - Series 1 (or any additional series of MaCS II Notes) are voting, the Trust will comply with Part 9 of NI 51-102; and

(xiv) the Trust complies with Parts 4A, 4B, 11 and 12 of NI 51-102.

(b) in respect of the Certification Obligations:

(i) the Trust is not required to, and does not, file its own interim filings and annual filings (as those terms are defined in NI 52-109); and

(ii) the Trust is and continues to be exempted from the Continuous Disclosure Obligations and MFC, MLI and the Trust are in compliance with the conditions set out in paragraph (a) of this Decision.

(c) this decision shall expire 30 days after the date that a material adverse change occurs in the representations of MFC, MLI or the Trust in this decision.

“Michael Brown”

Michael Brown

Assistant Manger, Corporate Finance

Ontario Securities Commission