Securities Law & Instruments



NATIONAL INSTRUMENT 81-102 - MUTUAL FUNDS

PART 1 DEFINITIONS AND APPLICATION
1.1 Definitions
1.2 Application

PART 2 INVESTMENTS
2.1 Investment Restrictions
2.2 Investment Practices
2.3 Transactions in Permitted Derivatives

PART 3 NEW MUTUAL FUND
3.1 Initial Investment in a New Mutual Fund
3.2 Prohibition Against Reimbursement of Organization Costs

PART 4 CONFLICTS OF INTEREST
4.1 Prohibited Investments
4.2 Self-Dealing
4.3 Liability and Indemnification

PART 5 APPROVALS FOR AND DISCLOSURE OF CERTAIN CHANGES
5.1 Matters Requiring Securityholder Approval
5.2 Approval of Securityholders
5.3 Circumstances in Which Approval of Securityholders Not Required
5.4 Formalities Concerning Meetings of Securityholders
5.5 Prior Approval of Securities Regulatory Authority
5.6 Content of Application
5.7 Relief from Certain Regulatory Requirements
5.8 Significant Changes

PART 6 CUSTODIANSHIP OF PORTFOLIO ASSETS
6.1 General
6.2 Requirements for Acting as Custodian or Sub-Custodian for Assets Held in Canada
6.3 Requirements for Acting as Sub-Custodian for Assets Held outside Canada
6.4 Contents of Custodian and Sub-Custodian Agreements
6.5 Holding of Portfolio Assets
6.6 Standard of Care
6.7 Review and Compliance Reports
6.8 Custodial Provisions relating to Derivatives
6.9 Separate Account for Paying Expenses

PART 7 INCENTIVE FEES
7.1 Incentive Fees
7.2 Multiple Portfolio Advisers

PART 8 CONTRACTUAL PLANS
8.1 Contractual Plans

PART 9 SALE OF SECURITIES OF A MUTUAL FUND
9.1 Transmission and Receipt of Purchase Orders
9.2 Acceptance of Purchase Orders
9.3 Issue Price of Securities
9.4 Delivery of Funds and Settlement

PART 10 REDEMPTION OF SECURITIES OF A MUTUAL FUND
10.1 Requirements for Redemptions
10.2 Transmission and Receipt of Redemption Orders
10.3 Redemption Price of Securities
10.4 Payment of Redemption Price
10.5 Failure to Complete Redemption Order
10.6 Suspension of Redemptions

PART 11 COMMINGLING OF MONEY
11.1 Principal Distributors
11.2 Participating Dealers
11.3 Exemption
11.4 Funds to Retain Character as Trust Funds
11.5 Right of Inspection

PART 12 COMPLIANCE REPORTS
12.1 Compliance Reports

PART 13 CALCULATION OF NET ASSET VALUE
13.1 Frequency and Currency of Calculation of Net Asset Value
13.2 Portfolio Transactions
13.3 Capital Transactions
13.4 Valuation of Restricted Securities
13.5 Valuation of Permitted Derivatives

PART 14 RECORD DATE
14.1 Record Date

PART 15 SALES COMMUNICATIONS AND PROHIBITED REPRESENTATIONS
15.1 Ability to Make Sales Communications
15.2 General Requirements for Sales Communications
15.3 Disclosure Regarding Distribution
15.4 Performance Data
15.5 Calculation of Standard Performance Data
15.6 Warnings
15.7 Sales Communications During the Waiting Period
15.8 Prohibited Representations

PART 16 PROSPECTUS DISCLOSURE AND FILING REQUIREMENTS
16.1 Derivatives Disclosure
16.2 Summary of Fees, Charges and Expenses
16.3 Rights of Securityholders
16.4 Certificate of the Mutual Fund
16.5 Certificate of the Manager of a Mutual Fund
16.6 Conflicts of Interest
16.7 Money Market Funds
16.8 Exemptions and Approvals
16.9 Other Disclosure Requirements

PART 17 DISCLOSURE OF MANAGEMENT FEE ARRANGEMENTS
17.1 Management Fees Payable Directly by Securityholders
17.2 Management Fee Rebate or Distribution Programs

PART 18 FINANCIAL STATEMENT REQUIREMENTS
18.1 Information About Permitted Derivatives
18.2 Additional Disclosure Requirements
18.3 Approval of Financial Statements

PART 19 REGISTER OF SECURITYHOLDERS
19.1 Maintenance of a Register
19.2 Availability of Register

PART 20 EXEMPTIONS AND APPROVALS
20.1 Exemption
20.2 Evidence of Exemption or Approval
20.3 Exemption or Approval under Prior Policy

PART 21 TRANSITIONAL
21.1 Effective Date
21.2 Prospectus Disclosure

APPENDIX A - Clearing Corporations for the Purpose of Subsection 2.3(7) - Derivative Counterparty Exposure Limits

APPENDIX B-1, APPENDIX B-2 and APPENDIX B-3 - Compliance Reports

NATIONAL INSTRUMENT 81-102

MUTUAL FUNDS1

PART 1 DEFINITIONS AND APPLICATION

1.1 Definitions - In this Instrument2

"advertisement" means a sales communication that is published or designed for use on or through a public medium;3

"approved credit rating" means, for a security or instrument, a rating at or above one of the following levels issued by an approved credit rating organization forthat security or instrument if

(a) there has been no announcement by the approved credit rating organization of which the mutual fund or its manager is or ought to be aware that the rating ofthe security or instrument to which the approved credit rating was given may be down-graded to a level that would not be an approved credit rating, and

(b) no approved credit rating organization has rated the security or instrument at a level that is not an approved credit rating:

Approved Credit | Commercial | Long Term

Rating Organization | Paper/Short | Debt

| Term Debt |

CBRS Inc. | A-1 | A

Dominion Bond | R-1-L | A

Rating Service | |

Limited | |

IBCA Limited | A-1 | A

Moody's Investors | P-1 | A2

Service, Inc. | |

Standard & Poor's | A-1 | A

Corporation | |

"approved credit rating organization" means CBRS Inc., Dominion Bond Rating Service Limited, Moody's Investors Service, Inc., Standard & Poor'sCorporation or IBCA Limited;5

"asset allocation service" means an administrative service under which the investment of a person or company in mutual funds to which this Instrument applies isallocated and reallocated among those mutual funds according to an asset allocation strategy;6

"book-based system" means a system for the central handling of securities or equivalent book-based entries under which all securities of a class or seriesdeposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery;7

"cash cover" means cash equivalents or synthetic cash held by a mutual fund that have not been allocated for specific purposes and are available to satisfy theobligations of a mutual fund under section 2.3 for permitted derivatives positions of the mutual fund;8

"cash equivalent" means

(a) cash, or

(b) an evidence of indebtedness that has a remaining term to maturity of 365 days or less and that is issued, or fully and unconditionally guaranteed as to principaland interest, by

(i) the Government of Canada or the government of a jurisdiction9,

(ii) the Government of the United States of America, the government of one of the states of the United States of America, the government of another sovereignstate or a permitted supranational agency, if, in each case, the evidence of indebtedness has an approved credit rating, or

(iii) a Canadian financial institution10, or a financial institution that is not incorporated or organized under the laws of Canada or of a jurisdiction if, in eithercase, evidences of indebtedness of that issuer or guarantor that are rated as short term debt by an approved credit rating organization have an approved creditrating;11

"clearing corporation option" means an option, other than an option on futures, issued by a clearing corporation;12

"clearing corporation" means an organization through which trades in options or standardized futures are cleared and settled;13

"conventional convertible security" means a security of an issuer that is convertible into, or exchangeable for, other securities of the issuer, or of an affiliate of theissuer, if the issuer or the affiliate is not permitted to settle or satisfy its conversion or exchange obligations by a cash payment;14

"conventional warrant or right" means a security issued by a person or company other than a clearing corporation that gives the holder the right to purchasesecurities of the person or company or of an affiliate of the person or company, if neither the person or company nor any of its affiliates is permitted to settle orsatisfy the right by a cash payment;15

"currency cross hedging" means the substitution by a mutual fund of a risk to one currency for a risk to another currency, if neither currency is a currency inwhich the mutual fund determines its net asset value, and the aggregate amount of currency risk to which the mutual fund is exposed is not increased by thesubstitution;16

"custodian" means the institution appointed by a mutual fund to act as custodian of the portfolio assets of the mutual fund;17

"dealer manager" means

(a) a specified dealer that acts as a portfolio adviser,

(b) a portfolio adviser in which a specified dealer, or a partner, director, officer, salesperson or principal shareholder of a specified dealer, directly or indirectly,owns of record or beneficially, or exercises control or direction over, securities carrying more than 10 percent of the total votes attaching to securities of theportfolio adviser, or

(c) a partner, director or officer of a portfolio adviser referred to in paragraph (b);18

"dealer managed mutual fund" means a mutual fund the portfolio adviser of which is a dealer manager;19

"debt-like security" means a security, other than a conventional convertible security or a conventional floating rate debt instrument, that evidences anindebtedness of the issuer if

(a) either

(i) the amount of principal, interest or principal and interest to be paid to the holder is linked in whole or in part by formula to the appreciation or depreciation inthe market price, value or level of one or more underlying interests on a predetermined date or dates, or

(ii) the security provides the holder with a right to convert or exchange the security into or for the underlying interest or to purchase the underlying interest, and

(b) on the date of initial issue the value of the component that is linked to an underlying interest accounts for more than 20 percent of the total market value ofthe security;20

"delta" means a positive or negative number that measures the sensitivity of the market value of an option to changes in the value of the underlying interest of theoption;21

"equivalent debt" means

(a) in relation to an over-the-counter option, forward contract or debt-like security that has a remaining term to maturity of 365 days or less, either

(i) an evidence of indebtedness of approximately the same term as, or a longer term than, the remaining term to maturity of the option, contract or debt-likesecurity, or

(ii) commercial paper

if the evidence of indebtedness or commercial paper ranks equally with, or subordinate to, the claim for payment that may arise under the option, contract ordebt-like security, or

(b) in relation to an over-the-counter option, forward contract or debt-like security that has a remaining term to maturity of greater than 365 days, an evidence ofindebtedness of approximately the same term as, or a longer term than, the remaining term to maturity of the option, contract or debt-like security and that ranksequally with, or subordinate to, the claim for payment that may arise under the option, contract or debt-like security;22

"forward contract" means an agreement, not entered into or traded on a stock exchange or futures exchange or cleared by a clearing corporation, to do one ormore of the following on terms or at a price established by or determinable by reference to the agreement and at or by a time in the future established by ordeterminable by reference to the agreement:

1. Make or take delivery of the underlying interest of the agreement.

2. Settle in cash instead of delivery;23

"futures exchange" means an association or organization operated to provide the facilities necessary for the trading of standardized futures;24

"government security" means an evidence of indebtedness issued, or fully and unconditionally guaranteed as to principal and interest, by any of the Governmentof Canada, the government of a jurisdiction or the Government of the United States of America;25

"guaranteed mortgage" means a mortgage fully and unconditionally guaranteed or insured by the Government of Canada, by the government of a jurisdiction orby an agency of any of these governments;26

"hedging" means the entering into of a transaction, or a series of transactions, and the maintaining of the position or positions resulting from the transaction orseries of transactions, if

(a) the transactions or series of transactions would be regarded as a hedge or hedges under Canadian GAAP27, and the intended effect of the transaction, or theintended cumulative effect of the series of transactions, is to offset or reduce a specific risk associated with all or a portion of an existing investment or positionor group of investments or positions, and which transaction or series of transactions

(i) provides equivalent underlying market exposure that is opposite to the position, or the portion of the position, being hedged,

(ii) has a high degree of negative correlation28 between changes in the value of the investment or position, or group of investments or positions, being hedgedand changes in the value of the instrument or instruments with which the investment or position is hedged, and

(iii) is intended to no more than offset the effect of price changes in the investment or position, or group of investments or positions, being hedged, or

(b) the intended effect of the transaction, or the intended cumulative effect of the series of transactions, is to effect currency cross hedging;29

"illiquid asset" means

(a) a portfolio asset of a mutual fund that may not be readily disposed of through market facilities on which public quotations in common use are widelyavailable, at an amount at least equal to the amount at which the portfolio asset is valued in calculating the net asset value of the mutual fund, or

(b) a restricted security held by a mutual fund, the resale of which is prohibited by a representation, undertaking or agreement by the mutual fund or by thepredecessor in title of the mutual fund;30

"index participation unit" means a unit of interest traded on, and sponsored by, a stock exchange in Canada and issued by a special purpose entity the onlyundertaking of which is to hold the securities that are included in a specified widely published market index in substantially the same proportion as thosesecurities are reflected in the index;31

"investor fees" means all fees, charges and expenses that are or may become payable by a securityholder of a mutual fund in connection with the purchase,conversion, holding, transfer or redemption of securities of the mutual fund;32

"listed" means listed on a stock exchange, traded on an options exchange or futures exchange or quoted on the National Association of Securities DealersAutomated Quotation System;33

"listed warrant" means a listed security, of an issuer other than a clearing corporation, that is a put or call option, a capital share of a subdivided equity security, awarrant or a right;34

"long position" means a position held by a mutual fund, that for

(a) a clearing corporation option, over-the-counter option or listed warrant, entitles the mutual fund to elect to purchase, sell, receive or deliver the underlyinginterest or, instead, pay or receive cash,

(b) a standardized future or forward contract, obliges the mutual fund to accept delivery of the underlying interest or, instead, pay or receive cash,

(c) a call option on futures, entitles the mutual fund to elect to assume a long position in standardized futures, and

(d) a put option on futures, entitles the mutual fund to elect to assume a short position in standardized futures;35

"management expense ratio" means the ratio, expressed as a percentage, of the expenses of a mutual fund to its average net asset value, calculated in accordancewith the simplified prospectus system of the Canadian securities regulatory authorities;36

"manager" means a person or company who has the power and exercises the responsibility to direct the affairs of a mutual fund;37

"money market fund" means a mutual fund that has and intends to continue to have

(a) all of its assets invested in any or all of

(i) cash equivalents,

(ii) evidences of indebtedness, other than cash equivalents, that have remaining terms to maturity of 365 days or less, or

(iii) floating rate evidences of indebtedness not referred to in subparagraph (i) and (ii), if the principal amounts of the obligations will continue to have a marketvalue of approximately par at the time of each change in the rate to be paid to the holders of the evidences of indebtedness,

(b) a portfolio with a dollar-weighted average term to maturity not exceeding 90 days, calculated on the basis that the term of a floating rate obligation is theperiod remaining to the date of the next rate setting,

(c) not less than 95 percent of its assets invested in cash equivalents or evidences of indebtedness denominated in a currency in which the net asset value of themutual fund is calculated, and

(d) not less than 95 percent of its assets invested in

(i) cash equivalents, or

(ii) evidences of indebtedness of issuers the commercial paper of which has an approved credit rating;38

"mortgage" includes a hypothec or another charge on real property;39

"mutual fund conflict of interest investment restrictions" means the provisions of securities legislation that

(a) prohibit a mutual fund from knowingly making or holding an investment in a person or company in which the mutual fund, alone or together with one ormore mutual funds under common management, is a substantial securityholder as defined by securities legislation, or

(b) prohibit the portfolio adviser of the mutual fund, the mutual fund or a responsible person, as defined in securities legislation, from selling portfolio assets ofthe mutual fund to, or purchasing portfolio assets from, another mutual fund under common management;40

"mutual fund conflict of interest reporting requirements" means the provisions of securities legislation that require the filing of a report with the securitiesregulatory authority41 in prescribed form that discloses every transaction of purchase or sale of portfolio assets between the mutual fund and any person orcompany in which the mutual fund is prohibited by the mutual fund conflict of interest investment restrictions from making an investment;42

"non-resident adviser" means a portfolio adviser the principal place of business of which is outside of Canada and that is not registered in the jurisdiction in whicha portfolio adviser which it advises is located;43

"option" means an agreement that provides the holder with the right, but not the obligation, to do one or more of the following on terms or at a price establishedby or determinable by reference to the agreement at or by a time established by the agreement:

1. Receive an amount of cash determinable by reference to a specified quantity of the underlying interest of the option.

2. Purchase a specified quantity of the underlying interest of the option.

3. Sell a specified quantity of the underlying interest of the option;44

"option on futures" means an option the underlying interest of which is a standardized future;45

"order receipt office" means, for a mutual fund

(a) the principal office of the mutual fund,

(b) the principal office of the principal distributor of the mutual fund, or

(c) an office to which a purchase order or redemption order for securities of the mutual fund is required or permitted by the mutual fund to be delivered byparticipating dealers or the principal distributor of the mutual fund;46

"over-the-counter-option" means an option that is not traded on an exchange or cleared by a clearing corporation;47

"participating dealer" means a dealer other than the principal distributor that participates in the distribution of securities of a mutual fund;48

"participating fund" means a mutual fund in which an asset allocation service permits investment;49

"performance data" means a rating, ranking, quotation, discussion or analysis regarding an aspect of the investment performance of a mutual fund or an assetallocation service;50

"permitted derivative" means a clearing corporation option, a standardized future, an option on futures, an over-the-counter option, a forward contract, adebt-like security and a listed warrant, of which the underlying interest, in each case, is not a

(a) physical commodity other than gold, or

(b) a derivative of which the underlying interest is a physical commodity other than gold;51

"permitted gold certificate" means a certificate representing gold if the gold is

(a) available for delivery in Canada, free of charge, to or to the order of the holder of the certificate,

(b) of a minimum fineness of 995 parts per 1,000,

(c) held in Canada,

(d) in the form of either bars or wafers, and

(e) fully insured against loss or bankruptcy by an insurance company licensed under the laws of Canada or a jurisdiction;52

"permitted supranational agency" means the International Bank for Reconstruction and Development, the International Finance Corporation, the Inter-AmericanDevelopment Bank, the Asian Development Bank, the Caribbean Development Bank, the European Bank for Reconstruction and Development and any personprescribed under paragraph 206(1)(g) of the ITA;53

"physical commodity", means, in an original or processed state, an agricultural product, forest product, product of the sea, mineral, metal, hydrocarbon fuelproduct, precious stone or other gem;54

"portfolio adviser" means a person or company that provides investment advice or portfolio management services under a contract with the mutual fund or withthe manager of the mutual fund;55

"portfolio asset" means an asset of a mutual fund;56

"pricing date" means, for the sale of a mutual fund security, the date on which the net asset value per security of the mutual fund is calculated for the purpose ofdetermining the price at which that security is to be issued;57

"principal distributor" means a person or company through whom securities of a mutual fund are distributed under an arrangement with the mutual fund or itsmanager that provides

(a) an exclusive right to distribute the securities of the mutual fund in a particular area, or

(b) a feature that gives or is intended to give the person or company a material competitive advantage over others in the distribution of the securities of themutual fund;58

"public quotation" includes, in the context of the determination of illiquid assets of a mutual fund, any quotation of a price for a fixed income security madethrough the inter-dealer bond market;59

"report to securityholders" means a report that includes annual or interim financial statements and that is delivered to securityholders of a mutual fund;60

"restricted security" means a security, other than a permitted derivative, the resale of which is restricted or limited by a representation, undertaking or agreementby the mutual fund or by the mutual fund's predecessor in title, or by law;61

"sales communication" means a communication by a mutual fund or asset allocation service, its promoter, manager, portfolio adviser, principal distributor,participating dealer or a person or company providing services to the mutual fund or asset allocation service, that

(a) is made

(i) to a securityholder of the mutual fund or participant in the asset allocation service, or

(ii) to a person or company that is not a securityholder of the mutual fund or participant in the asset allocation service, to induce the purchase of securities of themutual fund or the use of the asset allocation service, and

(b) is not contained in a preliminary prospectus, preliminary simplified prospectus, preliminary annual information form, simplified prospectus or annualinformation form;62

"short position" means a position held by a mutual fund that, for

(a) a clearing corporation option, over-the-counter option or listed warrant, obliges the mutual fund, at the election of another, to purchase, sell, receive ordeliver the underlying interest, or, instead, pay or receive cash,

(b) a standardized future or forward contract, obliges the mutual fund, at the election of another, to deliver the underlying interest or, instead, pay or receivecash,

(c) a call option on futures, obliges the mutual fund, at the election of another, to assume a short position in standardized futures, and

(d) a put option on futures, obliges the mutual fund, at the election of another, to assume a long position in standardized futures;63

"significant change" means

(a) a change in the business, operations or affairs of a mutual fund that would reasonably be expected to cause

(i) a reasonable investor to consider the change to be important in determining whether to purchase securities of the mutual fund, or

(ii) a reasonable securityholder to consider the change to be important in determining whether to continue to hold securities of the mutual fund, or

(b) a decision to implement a change referred to in paragraph (a) made by senior management of the mutual fund or by senior management of the manager of themutual fund who believe that confirmation of the decision by the board of directors of the mutual fund or the board of directors of the manager of the mutualfund is probable;64

"special warrant" means a security that, by its terms or the terms of an accompanying contractual obligation, entitles or requires the holder to acquire anothersecurity without payment of material additional consideration and obliges the issuer of the special warrant or the other security to undertake efforts to file aprospectus to qualify the distribution of the other security;65

"specified asset-backed security" means a security that

(a) is primarily serviced by the cashflows of a discrete pool of financial assets that by their terms convert into cash within a finite time together with any rights orassets designed to assure the servicing or timely distribution of proceeds to the securityholders, and

(b) by its terms entitles an investor in that security to a return of the investment of that investor at or by a time established by or determinable by reference to theagreement, except as a result of losses incurred on, or the non-performance of, the financial assets;66

"specified dealer" means a dealer other than a dealer whose activities as a dealer are restricted by the terms of its registration to one or both of

(a) acting solely in respect of mutual fund securities, or

(b) acting solely in respect of transactions in which a person or company registered in the category of limited market dealer in a jurisdiction is permitted toengage;67

"specified derivative" means an instrument, agreement or security, the market price, value or payment obligations of which are derived from, referenced to, orbased on an underlying interest, other than

(a) a conventional convertible security,

(b) a specified asset-backed security,

(c) an index participation unit,

(d) a government or corporate strip bond,

(e) a listed equity dividend share of a subdivided equity or fixed income security,

(f) a conventional warrant or right, or

(g) a special warrant;68

"standard investment restrictions and practices" means the investment restrictions and practices set out in sections 2.1, 2.2 and 4.2;69

"standardized future" means an agreement traded on a futures exchange pursuant to standardized conditions contained in the by-laws, rules or regulations of thefutures exchange, and cleared by a clearing corporation, to do one or more of the following at a price established by or determinable by reference to theagreement and at or by a time established by or determinable by reference to the agreement:

1. Make or take delivery of the underlying interest of the agreement.

2. Settle in cash instead of delivery;70

"sub-custodian" means, for a mutual fund, a person to whom custodial authority has been delegated in accordance with subsection 6.1 by either the custodian ofthe mutual fund or another sub-custodian of the mutual fund;71

"synthetic cash" means a position that in aggregate provides the holder with the economic equivalent of the return on a banker's acceptance accepted by a banklisted in Schedule I of the Bank Act (Canada) and that consists of

(a) a long position in a portfolio of shares and a short position in a standardized future of which the underlying interest consists of a stock index, if

(i) there is a high degree of positive correlation between changes in the value of the portfolio of shares and changes in the value of the stock index, and

(ii) the ratio between the value of the portfolio of shares and the standardized future is such that, for any change in the value of one, a change of similarmagnitude occurs in the value of the other, or

(b) a long position in the evidences of indebtedness issued, or fully and unconditionally guaranteed as to principal and interest, by any of the Government ofCanada or the government of a jurisdiction and a short position in a standardized future of which the underlying interest consists of evidences of indebtedness ofthe same issuer and same term to maturity, if

(i) there is a high degree of positive correlation between changes in the value of the portfolio of evidences of indebtedness and changes in the value of thestandardized future, and

(ii) the ratio between the value of the evidences of indebtedness and the standardized future is such that, for any change in the value of one, a change of similarmagnitude occurs in the value of the other;72

"timely disclosure requirements" means the requirements in securities legislation73 for a reporting issuer to file a press release and a report when a materialchange occurs in the affairs of the reporting issuer74;

"underlying interest" means, for a specified derivative, the security, commodity, financial instrument, currency, interest rate, foreign exchanges rate, economicindicator, index, basket, agreement or benchmark of any other financial reference, interest or variable, and, if applicable, the relationship between any of theforegoing, from, to or on which the market price, value or payment obligation of the specified derivative is derived, referenced or based;75 and

"underlying market exposure" means, for a position in

(a) an option, the quantity of the underlying interest of the option position multiplied by the market value of one unit of the underlying interest, multiplied, inturn, by the delta of the option, or

(b) a standardized future or forward contract, the quantity of the underlying interest of the position multiplied by the current market value of one unit of theunderlying interest.76

1.2 Application

(1) This Instrument applies to

(a) a mutual fund that offers or has offered securities pursuant to a prospectus or simplified prospectus for so long as the mutual fund remains a reporting issuer;and

(b) a person or company in respect of activities pertaining to a mutual fund referred to in paragraph (a).77

(2) Each section, part, class or series of a class of securities of a mutual fund that is referable to a separate portfolio of assets is considered to be a separatemutual fund for purposes of this Instrument.78

PART 2 INVESTMENTS

2.1 Investment Restrictions79

(1) A mutual fund shall not

(a) purchase a security, other than a government security, if, immediately after the purchase, more than 10 percent of the net80 assets of the mutual fund, takenat market value at the time of the purchase, would be invested in securities of that issuer;

(b) purchase a security of an issuer, other than a government security, unlisted permitted derivative or guaranteed mortgage, if, immediately after the purchase,the mutual fund would hold more than 10 percent of a class or series of a class of securities of the issuer;81

(c) purchase real estate;

(d) purchase a mortgage other than a guaranteed mortgage;

(e) purchase a guaranteed mortgage if, immediately after the purchase, more than 10 percent of the net82 assets of the mutual fund, taken at market value at thetime of the purchase, would consist of guaranteed mortgages;83

(f) purchase an illiquid asset if, immediately after the purchase, more than 10 percent of the net assets of the mutual fund, taken at market value at the time of thepurchase, would consist of illiquid assets;

(g) have invested, for an unbroken period of 30 days or more, more than 10 percent of its net assets, taken at market value, in illiquid assets;84

(h) purchase a security for the purpose of exercising control or management of the issuer of the security;

(i) purchase a gold certificate other than a permitted gold certificate;

(j) purchase gold or a permitted gold certificate if, immediately after the purchase, more than 10 percent of the net85 assets of the mutual fund, taken at marketvalue at the time of the purchase, would consist of gold and permitted gold certificates;86

(k) purchase or sell a specified derivative, other than a permitted derivative in compliance with section 2.3;

(l) except to the extent permitted by paragraphs (i) and (j), purchase or sell a physical commodity; or

(m) purchase a security of another mutual fund, other than an index participation unit, unless

(i) immediately after the purchase, not more than 10 percent of the net assets of the mutual fund, taken at market value at the time of the purchase, would beinvested in securities of other mutual funds,

(ii) there is no duplication of management fees and sales charges between the mutual funds and this is described in the prospectus or simplified prospectus of themutual fund, and

(iii) either

(A) the other mutual fund is qualified for sale under a prospectus or simplified prospectus in the jurisdictions in which the securities of the mutual fund arequalified for sale under a prospectus or simplified prospectus,87 or

(B) the other mutual fund was established with the approval of the government of a foreign jurisdiction88, and the only way that the mutual fund may invest inthe securities of issuers of that foreign jurisdiction is through a mutual fund so established, and there is disclosure in the prospectus or simplified prospectus ofthe mutual fund of the risk factors that may be associated with the investment in that foreign jurisdiction.89

(2) In calculating its holdings in connection with the restrictions contained in subsection (1), a mutual fund shall aggregate

(a) its direct holding of a portfolio asset other than a permitted derivative; and

(b) the underlying market exposure to the portfolio asset for all permitted derivatives held by the mutual fund for non-hedging purposes of which the portfolioasset referred to in paragraph (a) is an underlying interest.90

(3) Despite subsection (2), if the underlying interest of a permitted derivative position of a mutual fund is a stock or bond index, the mutual fund shall not includein the calculation referred to in subsection (2) a security or instrument that is a component of, but that represents less than 10 percent of, the stock or bondindex.91

(4) In calculating the holdings of a mutual fund in connection with a restriction contained in paragraph (1)(a) or (b), the mutual fund shall assume the exercise ofspecial warrants held by it.92

(5) Despite paragraph (1)(a), a mutual fund may purchase a security issued by a clearing corporation even if, immediately after the purchase, more than 10percent of the assets of the mutual fund would be invested in securities issued by that clearing corporation.93

(6) Paragraph (1)(b) does not apply to the purchase by the mutual fund of an evidence of indebtedness of an issuer that has a remaining term to maturity of 365days or less if, immediately after the purchase, the mutual fund would hold 10 percent or less of all evidences of indebtedness of that issuer that have a remainingterm to maturity of 365 days or less.94

2.2 Investment Practices95 - A mutual fund shall not

(a) borrow money or provide for the creation of any encumbrance on its portfolio assets unless

(i) the transaction is a temporary measure to accommodate requests for the redemption of securities of the mutual fund while the mutual fund effects an orderlyliquidation of portfolio assets, and, after giving effect to the transaction, the outstanding amount of all borrowings of the mutual fund does not exceed fivepercent of the net assets of the mutual fund taken at market value at the time of the borrowing,

(ii) the encumbrance is required to enable the mutual fund to post margin to effect a transaction described in section 2.3, or

(iii) the encumbrance secures a claim for the fees and expenses of the custodian or a sub-custodian of the mutual fund for services rendered in that capacity aspermitted by subsection 6.4(3);96

(b) purchase securities on margin, unless permitted by sections 2.3 or 6.8;

(c) sell securities short, unless permitted by section 2.3;

(d) purchase a security, other than a permitted derivative, that by its terms may require the mutual fund to make a contribution in addition to the payment of thepurchase price;

(e) engage in the business of underwriting securities or marketing to the public securities of any other issuer;

(f) lend money or portfolio assets other than money;

(g) acquire an interest in a loan syndication or loan participation;97

(h) guarantee securities or obligations of a person or company; or

(i) purchase securities other than through market facilities through which these securities are normally bought and sold unless the purchase price approximatesthe prevailing market price or is negotiated on an arm's length basis.

2.3 Transactions in Permitted Derivatives98

(1) A mutual fund may, for hedging purposes, use permitted derivatives without regard to the restrictions contained in sections 2.1 and 2.2 and subsection (2).99

(2) A mutual fund shall not, for non-hedging purposes

(a) purchase a clearing corporation option, over-the-counter option, option on futures, listed warrant or debt-like security that has an options component, unless,immediately after the purchase, not more than 10 percent of the net assets of the mutual fund, taken at market value at the time of the purchase, would consist ofthose instruments held for non- hedging purposes;

(b) write a clearing corporation call option or over-the-counter call option unless, as long as the position remains open, the mutual fund holds

(i) an equivalent quantity of the underlying interest of the option,

(ii) a right or obligation, expiring on or after the expiry date of the option,100 to acquire an equivalent quantity of the underlying interest of the option, and cashcover in an amount that together with margin on account for the position is not less than the amount, if any, by which the strike price of the right or obligation toacquire the underlying interest exceeds the strike price of the option, or

(iii) a combination of the positions referred to in subparagraphs (i) and (ii);

(c) write a clearing corporation put option or over-the-counter put option, unless, as long as the position remains open, the mutual fund holds

(i) a right or obligation, expiring on or after the expiry date of the option,101 to sell an equivalent quantity of the underlying interest of the option, and cashcover in an amount that together with margin on account for the positions is not less than the amount, if any, by which the strike price of the option exceeds thestrike price of the right or obligation to sell the underlying interest,

(ii) cash cover in an amount that, together with margin on account for the option position, is not less than the strike price of the option, or

(iii) a combination of the positions referred to in subparagraphs (i) and (ii);

(d) open or maintain a long position in a standardized future, forward contract or debt-like security that has a component that is a long position in a forwardcontract, unless the mutual fund holds cash cover in an amount that, together with margin on account for the permitted derivative and the market value of thepermitted derivative, is not less than, on a daily marked-to-market basis, the underlying market exposure of the permitted derivative; or

(e) open or maintain a short position in a standardized future or forward contract, unless the mutual fund holds

(i) an equivalent quantity of the underlying interest of the future or contract, or

(ii) a right or obligation to acquire an equivalent quantity of the underlying interest of the future or contract and cash cover together with margin on account forthe position in an amount that is not less than the amount, if any, by which the strike price of the right or obligation to acquire the underlying interest exceeds theforward price of the contract, or

(iii) a combination of the positions referred to in subparagraphs (i) and (ii).

(3) Despite subsection (2), a mutual fund shall not purchase an over-the-counter option or enter into a forward contract unless

(a) the option or contract has a remaining term to maturity of three years or less, and, at the time of the transaction, the option or contract or equivalent debt ofthe issuer of the option or contract, or of a person or company that has fully and unconditionally guaranteed the obligations of the issuer in respect of the optionor contract, has an approved credit rating; or

(b) the option or contract has a remaining term to maturity of three years or more but not exceeding five years and, at the time of the transaction

(i) the option or contract provides the mutual fund with a right, at its election, to eliminate its exposure under the option or contract no later than three yearsafter the mutual fund has purchased the option or contract, and

(ii) the option or contract, or equivalent debt of the other party, or of a person or company that has fully and unconditionally guaranteed the obligations of theother party in respect of the option or contract, has, at the time of the transaction, an approved credit rating.102

(4) If the credit rating of an over-the-counter option or forward contract, or the credit rating of the equivalent debt of the issuer or guarantor of the option orcontract, falls below the level of approved credit rating while the option or contract is held by a mutual fund, the mutual fund shall take the steps that arereasonably required to close out its position in the option or contract in an orderly fashion.103

(5) Despite any other provisions contained in this section, a mutual fund may enter into a trade to close out all or part of a position in a permitted derivative, inwhich case the cash cover held to cover the underlying market exposure of the part of the position that is closed may be released.104

(6) The amount of cash cover represented by a synthetic cash position on any date is the notional principal value of a banker's acceptance then being accepted bya bank listed in Schedule I of the Bank Act (Canada) that would produce the same annualized return as the synthetic cash position is then producing.105

(7) The aggregate marked-to-market value of permitted derivatives positions106 held by a mutual fund with any one counterparty other than a clearingcorporation listed in Appendix A shall not exceed, for an unbroken period of 30 days or more, 10 percent of the net assets of the mutual fund.107

(8) If the portfolio adviser of a mutual fund receives advice from a non-resident adviser concerning the use of clearing corporation options, over-the-counteroptions, standardized futures or options on futures by the mutual fund, the mutual fund shall not invest in or use any of those types of permitted derivativesunless

(a) the obligations and duties of the non-resident adviser are set out in a written agreement with the portfolio adviser; and

(b) the portfolio adviser contractually agrees with the mutual fund to be responsible for the advice received from the non-resident adviser.108

(9) A mutual fund shall not begin using permitted derivatives unless

(a) its prospectus or simplified prospectus, or an amendment to its prospectus or simplified prospectus, contains the disclosure required by section 16.1; and

(b) the mutual fund has provided to its securityholders, not less than 60 days before it begins using permitted derivatives, written notice that discloses its intent tobegin using permitted derivatives and that contains the disclosure required by paragraph (a).

(10) A mutual fund is not required to provide the notice referred to in paragraph (9)(b) if each prospectus or simplified prospectus of the mutual fund since itsinception has contained the disclosure required by paragraph (9)(a).109

PART 3 NEW MUTUAL FUNDS

3.1 Initial Investment in a New Mutual Fund

(1) No person or company shall file a prospectus or simplified prospectus for a mutual fund unless

(a) an investment of at least $150,000 in securities of the mutual fund has been made before the time of filing by

(i) the manager, portfolio adviser, promoter or sponsor of the mutual fund,

(ii) the directors, officers or shareholders of any of the manager, the portfolio adviser, the promoter or the sponsor of the mutual fund, or

(iii) a combination of the persons and companies referred to subparagraphs (i) and (ii); or

(b) the prospectus or simplified prospectus of the mutual fund provides that the mutual fund will not issue securities unless subscriptions aggregating not lessthan $500,000 have been received from investors other than the persons and companies referred to in paragraph (a).

(2) A mutual fund shall not redeem a security issued upon an investment in the mutual fund referred to in paragraph (1)(a) until $500,000 has been received frompersons or companies other than the persons and companies referred to in paragraph (1)(a).110

3.2 Prohibition Against Reimbursement of Organization Costs - None of the costs of incorporation, formation or initial organization of a mutual fund, or of thepreparation and filing of the preliminary prospectus or preliminary simplified prospectus and preliminary annual information form and initial prospectus orsimplified prospectus and annual information form of the mutual fund shall be borne by the mutual fund or its securityholders.111

PART 4 CONFLICTS OF INTEREST112

4.1 Prohibited Investments - A dealer managed mutual fund shall not knowingly make an investment in a class or series of a class of securities of an issuer, otherthan those issued or fully and unconditionally guaranteed by the Government of Canada or the government of a jurisdiction

(a) for which a person or company who is a dealer manager of the mutual fund, or an associate or affiliate of a dealer manager of the mutual fund, has acted or isacting as an underwriter in the distribution of securities of the applicable class or series of a class of securities of the issuer, except as a member of the sellinggroup distributing five percent or less of the securities underwritten, during, or for a period of at least 60 days after the end of, the distribution of theunderwritten securities to the public; or

(b) of which a partner, director, officer or employee of a person or company that is a dealer manager of the mutual fund, or a partner, director, officer oremployee of an affiliate or associate of the dealer manager, is an officer or director, unless the partner, director, officer or employee

(i) does not participate in the formulation of investment decisions made on behalf of the dealer managed mutual fund,

(ii) does not have access before implementation to information as to investment decisions made on behalf of the dealer managed mutual fund, and

(iii) does not influence, other than through research, statistical and other reports generally available to clients, the investment decisions made on behalf of thedealer managed mutual fund.113

4.2 Self-Dealing - A mutual fund shall not purchase a security114 from, or sell a security to, one of the following persons, if that person would be selling to themutual fund, or purchasing from the mutual fund, as principal:

1. The manager, portfolio adviser or trustee of a mutual fund.

2. A director or officer of the mutual fund or of the manager, portfolio adviser or trustee of the mutual fund.

3. An associate or affiliate of a person or company referred to in paragraph 1 or 2.

4. An entity, having fewer than 100 securityholders of record, of which a director or officer of the mutual fund or a director or officer of the manager or portfolioadviser115 of the mutual fund is a director, officer or securityholder.116

4.3 Liability and Indemnification117

(1) An agreement between a mutual fund or the manager of a mutual fund and a person or company for the provision of services to the mutual fund shall notpurport to relieve the person or company from liability to the mutual fund or to a securityholder of the mutual fund for a loss suffered by the mutual fund thatarises out of an action or inaction of that person or company, unless

(a) the action or inaction did not constitute negligence or wilful misconduct by the person or company; and

(b) the person or company, in good faith, determined that the action or inaction was in the best interests of the mutual fund.

(2) A mutual fund may indemnify a person or company providing services to it against legal fees, judgments and amounts paid in settlement, actually andreasonably incurred by that person or company in connection with services provided by that person or company to the mutual fund, if

(a) those fees, judgments and amounts were not incurred as a result of negligence or wilful misconduct on the part of the person or company; and

(b) the person or company, in good faith, determined that the action or inaction that caused the payment of the fees, judgments and amounts paid in settlementwas in the best interests of the mutual fund.

(3) A mutual fund shall not incur the cost of that portion of liability insurance that insures a person or company for a liability as to which that person or companyis prohibited from being indemnified under this section.

PART 5 APPROVALS FOR AND DISCLOSURE OF CERTAIN CHANGES118

5.1 Matters Requiring Securityholder Approval

(1) The prior approval of the securityholders of a mutual fund, given as provided in section 5.2, is required before

(a) the mutual fund amends, enters into or becomes subject to, a new contract, if as a result, the basis of the calculation of the fees or expenses that are chargedto the mutual fund is changed in a way that could result in an increase in charges to the mutual fund;

(b) the manager of the mutual fund is changed, unless the new manager is an affiliate of the current manager;

(c) the fundamental investment objectives of the mutual fund are changed;

(d) the auditors of the mutual fund are changed;

(e) the mutual fund decreases the frequency of the calculation of its net asset value;

(f) the mutual fund is amalgamated or merged with one or more other mutual funds, or undertakes a reorganization or transfer of assets, if the transaction resultsin the securityholders of the mutual fund becoming securityholders in another mutual fund;119 or

(g) a change involving the mutual fund is made that is required by the constating documents or an agreement of the mutual fund to be submitted to a vote of thesecurityholders of the mutual fund.120

(2) No person or company that is a manager of a mutual fund may continue to act as manager of the mutual fund following a direct or indirect change of controlof the person or company unless the approval of securityholders of the mutual fund has been obtained to the change of control.121

5.2 Approval of Securityholders

(1) Unless a greater majority is required by the constating documents of the mutual fund, the laws applicable to the mutual fund or an applicable agreement, theapproval of the securityholders of the mutual fund to a matter referred to in section 5.1 shall be given by a resolution passed at a meeting or meetings of thesecurityholders of the mutual fund duly called and held to consider the matter by at least a majority of the votes cast.122

(2) Despite section 5.1 and subsection (1), if the constating documents of the mutual fund so provide, the holders of securities of a class or series of a class ofsecurities of a mutual fund shall not be entitled to vote on a matter referred to in section 5.1 if they, as holders of the class or series of a class, are not affected bythe action referred to in section 5.1.

(3) Despite subsection (1), the holders of securities of a class or series of a class of securities of a mutual fund shall vote separately as a class or series of a classon a matter referred to in section 5.1 if that class or series of a class is affected by the action referred to in section 5.1 in a manner different from holders ofsecurities of other classes or series of a class.123

5.3 Circumstances in Which Approval of Securityholders Not Required

(1) Despite paragraph 5.1(1)(a), the approval of securityholders of a mutual fund is not required to be obtained for a change referred to in paragraph 5.1(1)(a)

(a) if

(i) the parties to the contract referred to in paragraph 5.1(1)(a) deal at arm's length with each other in respect of the contract,

(ii) the prospectus or simplified prospectus of the mutual fund discloses that, although the approval of securityholders will not be obtained before making thechanges, securityholders will be given written notice at least 60 days before the effective date of the change that is to be made that could result in an increase incharges to the mutual fund, and

(iii) the notice referred to in subparagraph (ii) is actually given; or

(b) if

(i) the mutual fund is permitted by this Instrument to be described as a "no-load" fund,

(ii) the prospectus or simplified prospectus of the mutual fund discloses that securityholders will be given written notice at least 60 days before the effective dateof a change that is to be made that could result in an increase in charges to the mutual fund, and

(iii) the notice referred to in subparagraph (ii) is actually given.124

5.4 Formalities Concerning Meetings of Securityholders

(1) A meeting of securityholders of a mutual fund called to consider any matter referred to in section 5.1 shall be called on written notice given not less than 21days before the date of the meeting.125

(2) The notice referred to in subsection (1) shall contain or be accompanied by a statement that includes

(a) a description of the change or transaction proposed to be made or to take place and, if the matter is one referred to in paragraph 5.1(1)(a), the effect that thechange would have had on the management expense ratio of the mutual fund had the change been in force throughout the mutual fund's last completed financialyear;

(b) the date of the proposed implementation of the change or transaction; and

(c) all other information and documents necessary to comply with the applicable proxy solicitation requirements for the meeting.126

5.5 Prior Approval of Securities Regulatory Authority

(1) The prior approval of the securities regulatory authority is required before

(a) the manager of a mutual fund is changed, unless the new manager is an affiliate of the current manager;

(b) an amalgamation or merger of a mutual fund with one or more other mutual funds, or a reorganization or transfer of assets of a mutual fund, is implemented,if the transaction results in the securityholders of the mutual fund becoming securityholders in another mutual fund;127 or

(c) a change of the custodian of a mutual fund is implemented, if there has been or will be, in connection with the change, a change of the type referred to inparagraph (a).128

(2) Despite paragraph (1)(b), the prior approval of the securities regulatory authority is not required to implement a transaction referred to in that paragraph if

(a) the mutual fund is being reorganized or merged with, or its assets are being transferred to, another mutual fund to which this Instrument applies, that

(i) is managed by the manager, or an affiliate of the manager, of the mutual fund,

(ii) has substantially similar investment objectives, investment strategies, valuation procedures and fee structure as the mutual fund,

(iii) is not in default of any requirement of securities legislation,

(iv) has a current prospectus or simplified prospectus in the local jurisdiction, and

(v) unless the mutual fund is a corporation and the transaction involves its securityholders becoming securityholders of a newly-established trust, has a net assetvalue on the effective date of the transaction that is greater than the net asset value of the mutual fund;

(b) the transaction is a "qualifying exchange" within the meaning of section 132.2 of the ITA;

(c) the transaction contemplates the wind-up of the mutual fund as soon as reasonably possible following the transaction;

(d) the portfolio assets of the mutual fund to be acquired by the other mutual fund as part of the transaction

(i) may be acquired by the other mutual fund in compliance with this Instrument, and

(ii) are acceptable to the portfolio adviser of the other mutual fund and consistent with the other mutual fund's investment objectives;

(e) the transaction is approved by the securityholders of the mutual fund in accordance with paragraph 5.1(1)(f);

(f) the materials sent to securityholders of the mutual fund in connection with the approval under paragraph 5.1(1)(f) include

(i) a circular that, in addition to other requirements prescribed by law, describes the proposed transaction and the mutual fund into which the mutual fund will bemerged or reorganized, the federal income tax considerations for the mutual funds participating in the transaction and their securityholders, and, if the mutualfund is a corporation and the transaction involves its shareholders becoming securityholders of a mutual fund that is established as a trust, a description of thematerial differences between being a securityholder of a corporation and being a securityholder of a trust,

(ii) the current simplified prospectus and the most recent annual and interim financial statements that have been made public for the mutual fund into which themutual fund will be merged or reorganized, and

(iii) a statement that securityholders may obtain an annual information form for the mutual fund into which the mutual fund will be merged or reorganized bycontacting that mutual fund at a specified address or telephone number;

(g) the mutual fund has complied with section 5.8 of this Instrument in connection with the making of the decision to proceed with the transaction by the boardof directors of the manager of the mutual fund or of the mutual fund;

(h) the mutual funds participating in the transaction bear none of the costs and expenses associated with the transaction; and

(i) securityholders of the mutual fund continue to have the right to redeem units of the mutual fund up to the close of business on the business day immediatelybefore the effective date of the transaction.129

(3) A mutual fund that has continued after a transaction described in paragraph 5.5(1)(b) shall, if the audit report accompanying its audited financial statementsfor its first completed financial year after the transaction contains a reservation in respect of the value of the portfolio assets acquired by the mutual fund in thetransaction, send a copy of those financial statements to each person or company that was a securityholder of a mutual fund that was terminated as a result of thetransaction, but that is not a securityholder of the mutual fund.130

(4) No person or company, or an affiliate or associate of that person or company, may act as manager of a mutual fund if that person or company, or an affiliateor associate of that person or company, has acquired control of a manager of the mutual fund unless the approval of the securities regulatory authority has beenobtained for the change in control.131

5.6 Content of Application132 - An application for an approval required under section 5.5 shall contain

(a) if the application is required by paragraph 5.5(1)(a) or subsection (4)

(i) details of the proposed transaction that will result in a change of the manager or a change in control of the manager,

(ii) details of the proposed new manager or the person or company proposing to acquire control of the manager,

(iii) as applicable, the names, residence addresses and birthdates of

(A) all proposed new directors or officers of the manager,

(B) all directors or officers of the person or company proposing to acquire control of the manager,

(C) any proposed new individual trustee of the fund, and

(D) any new officers or directors of the mutual fund,

(iv) all information necessary to permit the securities regulatory authority to conduct security checks on the individuals referred to in subparagraph (iii),

(v) sufficient information to establish the integrity and experience133 of the persons or companies referred to in subparagraphs (ii) and (iii), and

(vi) details of how the proposed transaction will affect the management and administration of the mutual fund;

(b) if the application is required by paragraph 5.5(1)(b)

(i) details of the proposed transaction that will result in securityholders of a mutual fund becoming securityholders of another mutual fund,

(ii) details of the total annual returns of the mutual funds for each of the previous five years,

(iii) a description of the differences between the investment objectives, investment strategies, valuation procedures and fee structure of the mutual fundsparticipating in the transaction and any other material differences between the mutual funds, and

(iv) a description of those elements of the proposed transaction that would not be in compliance with subsection 5.5(2) and an explanation for the differences;

(c) if the application is required by paragraph 5.5(1)(c), sufficient information to establish that the proposed custodial arrangements will be in compliance withPart 6;

(d) if the application relates to a matter that would constitute a material change or significant change for the mutual fund, a draft of an amendment to theprospectus or simplified prospectus of the mutual fund reflecting the change; and

(e) if the matter is one that requires the approval of securityholders, a copy of all materials sent to securityholders in connection with a securityholders' meeting,and confirmation that the approval has been obtained or will be obtained before the change is implemented.134

5.7 Relief from Certain Regulatory Requirements

(1) The mutual fund conflict of interest investment restrictions and the mutual fund conflict of interest reporting requirements do not apply to a transactionreferred to in paragraph 5.5(1)(b) if the approval of the securities regulatory authority has been given to the transaction.

(2) The mutual fund conflict of interest investment restrictions and the mutual fund conflict of interest reporting requirements do not apply to a transaction of thetype referred to in subsection 5.5(2).135

5.8 Significant Changes - Upon the occurrence of a significant change with respect to the mutual fund, it shall

(a) comply with the timely disclosure requirements in connection with the significant change as if the significant change were a material change in the affairs ofthe mutual fund; and

(b) file an amendment to its prospectus or simplified prospectus that discloses the significant change in accordance with the requirements of securities legislationas if the amendment was required to be filed under securities legislation.136

PART 6 CUSTODIANSHIP OF PORTFOLIO ASSETS137

6.1 General138

(1) Except as provided in sections 6.8 and 6.9, all portfolio assets of a mutual fund shall be held under the custodianship of one custodian that satisfies therequirements of section 6.2.139

(2) Except as provided in subsection 6.5(3) and sections 6.8 and 6.9, all portfolio assets of a mutual fund shall be held

(a) in Canada by the custodian or a sub-custodian of the mutual fund;140 or

(b) outside Canada by the custodian or a sub-custodian of the mutual fund, if appropriate to facilitate portfolio transactions of the mutual fund outside Canada.

(3) The custodian or a sub-custodian of the mutual fund may delegate custodial authority to hold portfolio assets of the mutual fund to one or moresub-custodians, if, for each delegation

(a) written consent to the delegation has been provided by the mutual fund and, if the delegation is by a sub-custodian, the custodian of the mutual fund;141

(b) the sub-custodian to whom custodial authority is to be delegated satisfies the requirements of section 6.2 or 6.3, as applicable;

(c) the arrangements under which custodial authority is delegated are such that the mutual fund may enforce rights directly, or require the custodian or asub-custodian to enforce rights on behalf of the mutual fund, against the portfolio assets to be held by the person or company to whom the custodial authority isdelegated; and

(d) the delegation is otherwise in compliance with this Instrument.142

6.2 Requirements for Acting as Custodian or Sub-Custodian for Assets Held in Canada143 - The custodian of a mutual fund, and a sub-custodian of a mutualfund that is to hold portfolio assets of the mutual fund in Canada, shall be one of the following:

1. A bank listed in Schedule I or II of the Bank Act (Canada).

2. A trust company that is incorporated under the laws of Canada or a jurisdiction and licensed or registered under the laws of Canada or a jurisdiction, and thathas shareholders' equity, as reported in its most recent audited financial statements that have been made public, of not less than $10,000,000.

3. A company that is incorporated under the laws of Canada or of a jurisdiction and that is a wholly-owned subsidiary of an institution referred to in paragraphs 1or 2 if

(a) the company has shareholders' equity, as reported in its most recent audited financial statements that have been made public, of not less than $10,000,000; or

(b) all of the custodial obligations of the company in respect of that mutual fund are fully and unconditionally guaranteed by the institution.144

6.3 Requirements for Acting as Sub-Custodian for Assets Held outside Canada - A sub-custodian of a mutual fund that is to hold portfolio assets of the mutualfund outside of Canada shall be one of the following:

1. An entity referred to in section 6.2.

2. An entity that

(a) is incorporated or organized under the laws of a country, or a political subdivision of a country, other than Canada;

(b) is regulated as a banking institution or trust company by the government, or an agency of the government, of the country under whose laws it is incorporatedor organized or political subdivision of that country; and

(c) has shareholders' equity, as reported in its most recent audited financial statements that have been made public, of not less than the equivalent of$100,000,000.

3. A wholly owned subsidiary of an entity referred to in paragraphs 1 or 2 if

(a) the subsidiary has shareholders' equity, as reported in its most recent audited financial statements that have been made public, of not less than the equivalentof $100,000,000; or

(b) all of the custodial obligations of the subsidiary in respect of that mutual fund are fully and unconditionally guaranteed by the entity referred to in paragraphs1 or 2.145

6.4 Contents of Custodian and Sub-Custodian Agreements

(1) All custodian agreements and sub-custodian agreements of a mutual fund shall provide for the matters relating to

(a) the requirements concerning the location of portfolio assets contained in subsection 6.1(2);

(b) the delegation of custodial authority required by subsection 6.1(3);

(c) the method of holding portfolio assets required by section 6.5 and subsection 6.8(4);

(d) the standard of care and responsibility for loss required by section 6.6; and

(e) the review and compliance reports required by section 6.7.

(2) A sub-custodian agreement concerning the portfolio assets of a mutual fund shall provide for the safekeeping of portfolio assets on terms consistent with thecustodian agreement of the mutual fund.146

(3) No custodian agreement or sub-custodian agreement concerning the portfolio assets of a mutual fund shall

(a) provide for the creation of any encumbrance on the portfolio assets of the mutual fund except for a good faith claim for payment of the fees and expenses ofthe custodian or sub-custodian for acting in that capacity; or

(b) contain a provision that would require the payment of a fee to the custodian or sub-custodian for the transfer of the beneficial ownership of portfolio assets ofthe mutual fund.147

(4) The mutual fund shall deliver an originally signed or notarially certified copy of the custodian agreement and any sub-custodian agreements of the mutualfund to the securities regulatory authority upon request.148

6.5 Holding of Portfolio Assets

(1) Except as provided in subsections (2) and (3) and sections 6.8 and 6.9, portfolio assets of a mutual fund not registered in the name of the mutual fund shall beregistered in the name of the custodian or a sub-custodian of the mutual fund or any of their respective nominees with an account number or other designation inthe records of the custodian or sub-custodian or the applicable nominee sufficient to establish that the beneficial ownership of the portfolio assets is vested in themutual fund.149

(2) Portfolio assets of a mutual fund issued in bearer form shall be designated or segregated by the custodian or a sub-custodian of the mutual fund or theapplicable nominee so as to establish that the beneficial ownership of the property is vested in the mutual fund.150

(3) A custodian or sub-custodian of a mutual fund may arrange for the deposit of portfolio assets of the mutual fund with, and their delivery to, a depository orclearing agency that is authorized to operate a book-based system.151

(4) The custodian or sub-custodian of a mutual fund arranging for the deposit of portfolio assets of a mutual fund with, and their delivery to, a depository orclearing agency that is authorized to operate a book-based system shall ensure that the records of either the participant in the book-based system or the custodianor a sub-custodian of the mutual fund or their respective nominees establish that the beneficial ownership of the portfolio assets is vested in the mutual fund.152

6.6 Standard of Care

(1) The custodian and each sub-custodian of a mutual fund, in carrying out their duties concerning the safekeeping of, and dealing with, the portfolio assets ofthe mutual fund shall exercise at least the same degree of care as they exercise with respect to their own property of a similar kind.153

(2) The custodian and each sub-custodian of a mutual fund shall assume the entire responsibility for loss occasioned because of the negligence of or wrongful actof their respective employees, directors or officers.154

6.7 Review and Compliance Reports

(1) The custodian of a mutual fund shall, on a periodic basis not less frequently than annually

(a) review the custodian agreement and all sub-custodian agreements of the mutual fund to determine if those agreements are in compliance with this Part;

(b) make reasonable enquiry as to whether each sub-custodian satisfies the applicable requirements of section 6.2 or 6.3; and

(c) make or cause to be made any changes that may be necessary to ensure that

(i) the custodian and sub-custodian agreements are in compliance with this Part; and

(ii) there is no sub-custodian of the mutual fund that does not satisfy the applicable requirements of sections 6.2 or 6.3.155

(2) The custodian of a mutual fund shall, not more than 60 days after the end of each financial year of the mutual fund, advise the mutual fund in writing

(a) of the names and addresses of all sub-custodians of the mutual fund;

(b) whether the custodian and sub-custodian agreements are in compliance with this Part; and

(c) whether, to the best of the knowledge and belief of the custodian, each sub-custodian satisfies the applicable requirements of section 6.2 or 6.3.156

(3) A copy of the report referred to in subsection (2) shall be delivered by or on behalf of the mutual fund to the securities regulatory authority within 30 daysafter the filing of the annual financial statements of the mutual fund.157

6.8 Custodial Provisions relating to Derivatives

(1) A mutual fund may deposit portfolio assets as margin for transactions in Canada involving clearing corporation options, options on futures or standardizedfutures with a dealer that is a member of an SRO158 that is a participating member of CIPF159 if the amount of initial margin so deposited does not, whenaggregated with the amount of margin already held by the dealer on behalf of the mutual fund, exceed 10 percent of the net assets of the mutual fund, taken atmarket value as at the time of deposit.

(2) A mutual fund may deposit portfolio assets with a dealer as margin for transactions outside Canada involving clearing corporation options, options on futuresor standardized futures if

(a) in the case of standardized futures and options on futures, the dealer is a member of a futures exchange or, in the case of clearing corporation options, is amember of a stock exchange, and, as a result in either case, is subject to a regulatory audit;

(b) the dealer through which the trades have been effected and through which margin has been deposited holds the margin in segregated safekeeping such that itwould not be available to satisfy the claims of any creditor of the dealer;

(c) the dealer has a net worth, determined from its most recent audited financial statements that have been made public, in excess of the equivalent of $50 million;and

(d) the amount of initial margin so deposited does not, when aggregated with the amount of margin already held by the dealer on behalf of the mutual fund,exceed 10 percent of the net assets of the mutual fund, taken at market value as at the time of deposit.160

(3) A mutual fund may deposit portfolio assets with its counterparty as collateral in over-the-counter options or forward contracts transactions.161

(4) A person or company holding portfolio assets of a mutual fund deposited in accordance with this section shall ensure that its records establish that thebeneficial ownership of the portfolio assets is vested in the mutual fund.

6.9 Separate Account for Paying Expenses - A mutual fund may deposit money in Canada with an institution referred to in paragraphs 1 or 2 of section 6.2 tofacilitate the payment of regular operating expenses of the mutual fund.162

PART 7 INCENTIVE FEES

7.1 Incentive Fees - A mutual fund shall not pay, or enter into arrangements that would require it to pay, a fee that is determined by the performance of themutual fund, unless

(a) the fee is calculated with reference to a benchmark or index that is

(i) based on securities or instruments that could be purchased by the mutual fund in conformity with its investment objectives,

(ii) available to persons or companies other than the mutual fund and persons providing services to it, and

(iii) a total return benchmark or index;

(b) the payment of the fee is based upon a comparison of the cumulative total return of the mutual fund against the cumulative total percentage increase ordecrease of the benchmark or index for the period that began immediately after the last period for which the performance fee was paid; and

(c) the method of calculation of the fees and details of the composition of the benchmark or index are described in the prospectus or simplified prospectus of themutual fund.163

7.2 Multiple Portfolio Advisers - Section 7.1 applies to fees payable to a portfolio adviser of a mutual fund that has more than one portfolio adviser, if the feesare calculated on the basis of the performance of the portfolio assets under management by that portfolio adviser, as if those portfolio assets were a separatemutual fund.164

PART 8 CONTRACTUAL PLANS

8.1 Contractual Plans - No securities of a mutual fund shall be sold by way of a contractual plan unless

(a) the contractual plan was established, and its terms described in a prospectus or simplified prospectus that was filed with the securities regulatory authority,before the date that this Instrument came into force;

(b) there have been no changes made to the contractual plan or the rights of securityholders under the contractual plan since the date that this Instrument cameinto force; and

(c) the contractual plan has continued to be operated in the same manner after the date that this Instrument came into force as it was on that date.165

PART 9 SALE OF SECURITIES OF A MUTUAL FUND166

9.1 Transmission and Receipt of Purchase Orders

(1) Each purchase order for securities of a mutual fund received by a participating dealer at its principal office or by the principal distributor of the mutual fund atan office that is not an order receipt office of the mutual fund shall, on the day the order is received, be sent by same day or next day courier, same day or nextday priority post, telephone or electronic means, without charge to the person or company placing the order or to the mutual fund, to an order receipt office ofthe mutual fund.167

(2) Each purchase order for securities of a mutual fund received by a participating dealer at an office that is not its principal office shall, on the day the order isreceived, be sent by same day or next day courier, same day or next day priority post, telephone or electronic means, without charge to the person or companyplacing the order or to the mutual fund, to the principal office of the participating dealer.168

(3) Despite subsections (1) and (2), a purchase order for securities of a mutual fund received at an office referred to in those subsections after normal businesshours on a business day or on a day that is not a business day may be transmitted, in the manner and to the place required by those subsections, on the nextbusiness day.

(4) A mutual fund is deemed to have received a purchase order for securities of the mutual fund when the order is received at an order receipt office of themutual fund.

(5) Despite subsection (4), a mutual fund may provide that a purchase order for securities of the mutual fund received at an order receipt office of the mutualfund after a specified time on a business day or on a day that is not a business day will be considered to be received by the mutual fund on the next business dayfollowing the day of actual receipt.169

9.2 Acceptance of Purchase Orders - A mutual fund may reserve the right to reject a purchase order for the purchase of securities of the mutual fund if

(a) the decision to reject the order is made no later than the second business day after receipt by the mutual fund of the order;

(b) upon rejection of the order, all monies received with the order are refunded immediately; and

(c) the prospectus or simplified prospectus of the mutual fund states that the right to reject a purchase order for securities of the mutual fund is reserved andreflects the requirements of paragraphs (a) and (b).170

9.3 Issue Price of Securities - The issue price of a security of a mutual fund to which a purchase order pertains shall be the net asset value per security of thatclass, or series of a class, next determined after the receipt by the mutual fund of the order, and shall not be based upon any net asset value calculated beforereceipt by the mutual fund of the order.171

9.4 Delivery of Funds and Settlement

(1) A principal distributor or participating dealer shall forward any monies received for payment of the issue price of securities of a mutual fund to an orderreceipt office of the mutual fund

(a) so that the monies arrive at the order receipt office by the close of business on the day after receipt by the principal distributor or participating dealer, if themonies were received before the close of business on the second business day after the pricing date for those securities; or

(b) so that the monies arrive at the order receipt office before the close of business on the date of receipt by the principal distributor or participating dealer, if themonies were received on the third business day after the pricing date for those securities.172

(2) Payment of the issue price of securities to which a purchase order pertains shall be made to the mutual fund on or before the third business day after thepricing date173 for the securities by

(a) a payment of cash in a currency in which the net asset value of the mutual fund is calculated; or

(b) good delivery of securities if

(i) the mutual fund would at the time of payment be permitted to purchase those securities,

(ii) the securities are acceptable to the portfolio adviser of the mutual fund and consistent with the mutual fund's investment objectives, and

(iii) the value of the securities is at least equal to the issue price of the securities of the mutual fund for which they are payment, valued as if the securities wereportfolio assets of the mutual fund.174

(3) If payment of the issue price of securities of a mutual fund is made by the good delivery of securities as contemplated by paragraph (2)(b), the statement ofportfolio transactions next prepared by the mutual fund shall include a note providing details of the securities so delivered.

(4) If payment of the issue price of the securities of a mutual fund to which a purchase order pertains is not made on or before the third business day after thepricing date

(a) the mutual fund shall redeem the securities to which the purchase order pertains as if it had received an order for the redemption of the securities immediatelybefore the close of business on the third business day after the pricing date; and

(b) the amount of the redemption proceeds derived from the redemption shall be applied to reduce the amount owing to the mutual fund on the purchase of thesecurities.175

(5) The amount, if any, by which the redemption proceeds referred to in subsection (4) exceeds the issue price of the securities shall belong to the mutualfund.176

(6) If the amount of the redemption proceeds referred to in subsection (4) is less than the issue price of the securities

(a) if the mutual fund has a principal distributor, the principal distributor shall pay immediately to the mutual fund the amount of the deficiency; or

(b) if the mutual fund does not have a principal distributor, the participating dealer that delivered the relevant purchase order to the mutual fund shall payimmediately to the mutual fund the amount of the deficiency.177

PART 10 REDEMPTION OF SECURITIES OF A MUTUAL FUND

10.1 Requirements for Redemptions

(1) No mutual fund shall pay redemption proceeds unless

 

(a) if the security of the mutual fund to be redeemed is represented by a certificate, the mutual fund has received the certificate or appropriate indemnities inconnection with a lost certificate; and

(b) either

(i) the mutual fund has received a written redemption order, duly completed and executed by or on behalf of the securityholder, or

(ii) the mutual fund permits the making of redemption orders by telephone or electronic means by, or on behalf of, a securityholder who has made priorarrangements with the mutual fund in that regard and the relevant redemption order is made in compliance with those arrangements.178

(2) A mutual fund may establish reasonable requirements applicable to securityholders who wish to have the mutual fund redeem securities, not contrary to thisInstrument, as to procedures to be followed and documents to be delivered

(a) by the time of delivery of a redemption order to an order receipt office of the mutual fund; or

(b) by the time of payment of redemption proceeds.

(3) Securityholders of a mutual fund shall be provided at least annually with a statement outlining the requirements referred to in subsection (1) and establishedby the mutual fund under subsection (2), and containing

(a) detailed reference to all documentation required for redemption;

(b) detailed instructions on the manner in which documentation is to be delivered to participating dealers or the mutual fund;

(c) a description of all other procedural or communication requirements; and

(d) an explanation of the impact of timing requirements.179

(4) The statement referred to in subsection (3) is not required to be separately provided, in any year, if the requirements are described in the mutual fund's annualfinancial statements or annual report, or in a prospectus or simplified prospectus that is sent to all securityholders in that year.

10.2 Transmission and Receipt of Redemption Orders

(1) Each redemption order for securities of a mutual fund received by a participating dealer at its principal office or by the principal distributor of the mutual fundat an office that is not an order receipt office of the mutual fund shall, on the day the order is received, be sent by same day or next day courier, same day or nextday priority post, telephone or electronic means, without charge to the relevant securityholder or to the mutual fund, to an order receipt office of the mutualfund.180

(2) Each redemption order for securities of a mutual fund received by a participating dealer at an office that is not its principal office shall, on the day the order isreceived, be sent by same day or next day courier, same day or next day priority post, telephone or electronic means, without charge to the relevantsecurityholder or to the mutual fund, to the principal office of the participating dealer.

(3) Despite subsections (1) and (2), a redemption order for securities of a mutual fund received at an office referred to in those subsections after normal businesshours on a business day may be sent, in the manner and to the place required by those subsections, on the next business day.

(4) A mutual fund is deemed to have received a redemption order for securities of the mutual fund when the order is received at an order receipt office of themutual fund and any requirements of the mutual fund established under paragraph 10.1(2)(a) have been satisfied.181

(5) If a mutual fund determines that its requirements established under paragraph 10.1(2)(a) have not been satisfied, the mutual fund shall notify thesecurityholder making the redemption order, by the end of the business day following the delivery to the mutual fund of the incomplete redemption order, that itsrequirements established under paragraph 10.1(2)(a) have not been satisfied and shall specify procedures still to be followed or the documents still to be deliveredby that securityholder.

(6) Despite subsection (4), a mutual fund may provide that orders for the redemption of securities that are received at an order receipt office of the mutual fundafter a specified time on a business day or on a day that is not a business day will be considered to be received by the mutual fund on the next business dayfollowing the day of actual receipt.182

10.3 Redemption Price of Securities - The redemption price of a security of a mutual fund to which a redemption order pertains shall be the net asset value of asecurity of that class, or series of a class, next determined after the receipt by the mutual fund of the order and shall not be based upon any net asset value of themutual fund calculated before receipt by the mutual fund of the order.183

10.4 Payment of Redemption Price

(1) Subject to subsection 10.1(1) and to compliance with any requirements established by the mutual fund under paragraph 10.1(2)(b), a mutual fund shall paythe redemption price for securities that are the subject of a redemption order

(a) within three business days after the date of calculation of the net asset value used in establishing the redemption price; or

(b) if payment of the redemption price was not made at the time referred to in paragraph (a) because a requirement established under paragraph 10.1(2)(b) or arequirement of subsection 10.1(1) had not been satisfied, within three business days of

(i) the satisfaction of the relevant requirement, or

(ii) the decision by the mutual fund to waive the requirement, if the requirement was a requirement established under paragraph 10.1(2)(b).184

(2) The redemption price of a security, less any applicable investor fees, shall be paid to or to the order of the registered holder of the security.185

(3) A mutual fund shall pay the redemption price of a security

(a) in the currency in which the net asset value of the redeemed security was denominated; or

(b) with the prior written consent of the securityholder, by making good delivery to the securityholder of portfolio assets, the value of which is equal to theamount at which those portfolio assets were valued in calculating the net asset value used to establish the redemption price.186

(4) If payment of the redemption price of securities of a mutual fund is made in specie as contemplated by paragraph (3)(b), the statement of portfoliotransactions next prepared by the mutual fund shall include a note describing the portfolio assets delivered to the securityholder and the value assigned to theportfolio assets.187

(5) If the redemption price of a security is to be paid in money, a mutual fund is deemed to have made payment

(a) when the mutual fund, its manager or principal distributor has mailed a cheque or transmitted funds in the required amount to or to the order of the registeredholder of the securities; or

(b) if the securityholder has requested that redemption proceeds be delivered in a currency other than that permitted in subsection (3), when the mutual fund hasdelivered the redemption proceeds to the manager or principal distributor of the mutual fund for conversion into that currency and delivery forthwith to thesecurityholder.188

10.5 Failure to Complete Redemption Order

(1) If a requirement of a mutual fund referred to in subsection 10.1(1) or established under paragraph 10.1(2)(b) has not been satisfied on or before the close ofbusiness on the tenth business day after the date of the redemption of the relevant securities, and, in the case of a requirement established under paragraph10.1(2)(b), the mutual fund does not waive satisfaction of the requirement, the mutual fund shall

(a) issue, to the person or company that immediately before the redemption held the securities that were redeemed, a number of securities equal to the number ofsecurities that were redeemed, as if the mutual fund had received from the person or company on the tenth business day after the redemption, and acceptedimmediately before the close of business on the tenth business day after the redemption, an order for the purchase of that number of securities; and

(b) apply the amount of the redemption proceeds to the payment of the issue price of the securities.

(2) If the amount of the issue price of the securities referred to in subsection (1) is less than the redemption proceeds, the difference shall belong to the mutualfund.

(3) If the amount of the issue price of the securities referred to in subsection (1) exceeds the redemption proceeds

(a) if the mutual fund has a principal distributor, the principal distributor shall pay immediately to the mutual fund the amount of the deficiency;

(b) if the mutual fund does not have a principal distributor, the participating dealer that delivered the relevant redemption order to the mutual fund shall payimmediately to the mutual fund the amount of the deficiency; or

(c) if the mutual fund has no principal distributor and no dealer delivered the relevant redemption order to the mutual fund, the manager of the mutual fund shallpay immediately to the mutual fund the amount of the deficiency.189

10.6 Suspension of Redemptions

(1) A mutual fund may suspend the right of securityholders to request that the mutual fund redeem securities for the whole or any part of a period during whichnormal trading is suspended on a stock exchange, options exchange or futures exchange within or outside Canada on which securities are listed and traded, or onwhich permitted derivatives are traded, if those securities or permitted derivatives represent more than 50 percent by value or underlying market exposure of thetotal assets of the mutual fund without allowance for liabilities and if those securities or permitted derivatives are not traded on any other exchange thatrepresents a reasonably practical alternative for the mutual fund.190

(2) A mutual fund that has an obligation to pay the redemption price for securities that have been redeemed in accordance with subsection 10.4(1) may postponepayment during a period in which the right of securityholders to request redemption of their securities is suspended, whether that suspension was made undersubsection 10.6(1) or pursuant to a consent of the securities regulatory authority.191

(3) A mutual fund that applies under Part 20 of this Instrument for an exemption from the operation of this Instrument to permit a suspension of the right ofsecurityholders to request that the mutual fund redeem securities in circumstances other than as permitted under subsection (1) shall

(a) make that application to the securities regulatory authority or regulator192 in the jurisdiction in which the head office or registered office of the mutual fundis situate; and

(b) concurrently file a copy of the application so made with the securities regulatory authority or the regulator in the local jurisdiction if the head office orregistered office of the mutual fund is not situated in the local jurisdiction.

(4) The securities regulatory authority or regulator receiving a copy of an application under paragraph (3)(b) shall, if the securities regulatory authority orregulator in the jurisdiction in which the head office or registered office of the mutual fund is situate has granted an exemption, be deemed to have consented tothe granting of an exemption applied for as provided in subsection (3) unless the securities regulatory authority or regulator has notified the mutual fund to thecontrary by the close of business on the business day immediately following the day on which the copy of that application was received.193

(5) A mutual fund shall not accept a purchase order for securities of the mutual fund during a period in which it is exercising rights under subsection (1) orpursuant to an exemption contemplated by subsection (3).194

PART 11 COMMINGLING OF MONEY

11.1 Principal Distributors

(1) Monies received by a principal distributor of a mutual fund for investment in, or upon the redemption of, securities of the mutual fund, or upon thedistribution of assets of the mutual fund, shall, until disbursed as permitted by subsection (3)

(a) be separately accounted for and be deposited in an interest-bearing trust account or trust accounts; and

(b) not be commingled with the assets of, or held by, the principal distributor except for monies received for the sale or upon the redemption of other mutualfund securities.195

(2) Except as permitted by subsection (3), the principal distributor shall not use any of the monies referred to in subsection (1) to finance its own or any otheroperations in any way.196

(3) The principal distributor may withdraw monies from the trust account or trust accounts referred to in paragraph (1)(a) to

(a) remit to the mutual fund the amount or, if subsection (5) applies, the net amount, to be invested in the securities of the mutual fund;

(b) remit to the relevant persons or companies redemption or distribution proceeds being paid on behalf of the mutual fund; or

(c) pay investor fees to which a person or company may be entitled.197

(4) All interest earned on money held in a trust account referred to in paragraph (1)(a), less applicable bank charges, shall be paid to the mutual fund, or pro rataamong each of the mutual funds whose monies are held in that trust account, no less frequently than monthly.198

(5) The principal distributor may net the proceeds of redemption of securities of a mutual fund or amounts held for distributions to be paid on behalf of themutual fund held in the trust account, from amounts held in the trust account for investment in the mutual fund, in making payments to the mutual fund.199

11.2 Participating Dealers

(1) Monies received by a participating dealer for investment in, or upon the redemption of, securities of a mutual fund, or upon the distribution of assets of amutual fund, shall, until disbursed as permitted by subsection (3)

(a) be separately accounted for and shall be deposited in an interest-bearing trust account or trust accounts; and

(b) not be commingled with the assets of, or held by, the participating dealer except for monies received for the sale or upon the redemption of other mutual fundsecurities.200

(2) Except as permitted by subsection (3), the participating dealer shall not use any of the monies referred to subsection (1) to finance its own or any otheroperations in any way.201

(3) A participating dealer may withdraw monies from the trust account or trust accounts referred to in paragraph (1)(a) to

(a) remit to the mutual fund or the principal distributor of the mutual fund the net amount to be invested in the securities of the mutual fund;

(b) remit to the relevant persons or companies redemption or distribution proceeds being paid on behalf of the mutual fund; or

(c) pay investor fees to which a person or company may be entitled.202

(4) All interest earned on monies held in a trust account referred to in paragraph (1)(a), less applicable bank charges, shall be paid to the mutual fund, or pro rataamong each of the mutual funds whose monies are held in that account, no less frequently than monthly.203

(5) A participating dealer may net the proceeds of redemption of securities of a mutual fund and amounts held for distributions to be paid on behalf of a mutualfund held in the trust account, from amounts held in the trust account for investment in the mutual fund, in making payments to the mutual fund.204

(6) A participating dealer shall permit the mutual fund or the principal distributor, as the case may be, through their respective auditors or other designatedrepresentatives, to examine the books and records of the participating dealer to verify the participating dealer's compliance with this section.205

11.3 Exemption

(1) Sections 11.1 and 11.2 do not apply to members of The Investment Dealers Association of Canada, the Alberta Stock Exchange, The Montreal Exchange,The Toronto Stock Exchange or the Vancouver Stock Exchange.206

(2) A participating dealer referred to in subsection (1) shall permit the mutual fund or the principal distributor, as the case may be, through their respectiveauditors or other designated representatives, to examine the books and records of the participating dealer to verify the participating dealer's compliance with therequirements of its association or exchange which relate to the commingling of money.207

11.4 Funds to Retain Character as Trust Funds - A mutual fund, its trustee, manager and principal distributor shall ensure that adequate contractualarrangements are in place so that all monies that are required by section 11.1 to be held as trust funds by the principal distributor of the mutual fund shall be heldby persons or companies providing services to the mutual fund on similar terms as those required by section 11.1.208

11.5 Right of Inspection - The mutual fund, its trustee, manager and principal distributor shall ensure that all contractual arrangements made between any ofthem and any person or company providing services to the mutual fund permit the representatives of the mutual fund, its manager, trustee, and principaldistributor to examine the books and records of those persons or companies in order to monitor compliance with this Instrument.209

PART 12 COMPLIANCE REPORTS

12.1 Compliance Reports

(1) A mutual fund that does not have a principal distributor shall complete and file, within 120 days after the financial year end of the mutual fund

(a) a report in the form contained in Appendix B-1 describing compliance by the mutual fund during that financial year of the mutual fund with the applicablerequirements of Parts 9, 10 and 11; and

(b) an audit report prepared in accordance with section 5815 of the Handbook by the auditors of the mutual fund.

(2) The principal distributor of a mutual fund shall complete and file, within 90 days after the financial year end of the principal distributor

(a) a report in the form contained in Appendix B-2 describing compliance by the principal distributor during that financial year with the applicable requirementsof Parts 9, 10 and 11; and

(b) an audit report prepared in accordance with section 5815 of the Handbook by the auditors of the mutual fund or of the principal distributor.

(3) Each participating dealer that distributes securities of a mutual fund in a financial year of the participating dealer shall complete and file, within 90 days afterthe end of that financial year

(a) a report in the form contained in Appendix B-3 describing compliance by the participating dealer during that financial year with subsection 9.4(1) and, ifapplicable, the requirements of section 11.2 in respect of its distribution of securities of all mutual funds distributed in that financial year; and

(b) an audit report prepared in accordance with section 5815 of the Handbook by the auditors of the participating dealer.210

PART 13 CALCULATION OF NET ASSET VALUE

13.1 Frequency and Currency of Calculation of Net Asset Value

(1) The net asset value of a mutual fund shall be calculated

(a) if the mutual fund does not invest in, use or hold permitted derivatives, at least once in each week; or

(b) if the mutual fund invests in, uses or holds permitted derivatives, at least once every business day.

(2) Despite subsection (1)(a), a mutual fund that, at the date that this Instrument comes into force, calculates net asset value no less frequently than once a monthmay continue to calculate net asset value at least as frequently.211

(3) The net asset value of a mutual fund shall be calculated in the currency of Canada or in the currency of the United States of America or both.212

13.2 Portfolio Transactions - Each transaction of purchase or sale of a portfolio asset effected by a mutual fund shall be reflected in a calculation of net assetvalue of the mutual fund made not later than the first calculation of net asset value made after the date on which the transaction becomes binding.213

13.3 Capital Transactions - The issue or redemption of a security of a mutual fund shall be reflected in the first calculation of net asset value of the mutual fundmade after the calculation of net asset value used to establish the issue or redemption price.214

13.4 Valuation of Restricted Securities - A mutual fund shall value a restricted security at the lesser of

(a) the value based on reported quotations of that restricted security in common use; and

(b) that percentage of the market value of the securities of the class or series of a class of which the restricted security forms part, the trading of which is notrestricted or limited by any representation, undertaking or agreement or by law, equal to the percentage that the mutual fund's acquisition cost was of the marketvalue of the securities at the time of acquisition, taking into account, if appropriate, the amount of time remaining until restrictions on trading will be lifted.215

13.5 Valuation of Permitted Derivatives - A mutual fund shall value permitted derivatives transactions and positions in accordance with the following principles:

1. A long position in clearing corporation options, options on futures, over-the-counter options, debt-like securities and listed warrants shall be valued at itscurrent market value.

2. For covered clearing corporation options, options on futures and over-the-counter options written by a mutual fund

(a) the premium received by the mutual fund for those permitted derivatives shall be reflected as a deferred credit that shall be valued at an amount equal to thecurrent market value of the clearing corporation option, option on futures or over-the-counter option that would have the effect of closing the position;

(b) any difference resulting from revaluation shall be treated as an unrealized gain or loss on investment;

(c) the deferred credit shall be deducted in calculating the net asset value of the mutual fund; and

(d) any securities that are the subject of a written clearing corporation option or over-the-counter option shall be valued at their current market value.

3. The value of a forward contract shall be the gain or loss on the contract that would be realized if, on the date that valuation is made, the position in theforward contract were to be closed out.

4. The value of a standardized future shall be

(a) if the futures exchange through which the standardized future was issued does not impose daily limits applicable to the standardized future, the gain or loss onthe standardized future that would be realized if, on the date that valuation is made, the position in the standardized future were to be closed out; or

(b) if the futures exchange through which the standardized future was issued imposes daily limits applicable to the standardized future, the current market valueof the underlying interest of the standardized future.

5. Margin paid or deposited on a standardized futures or forward contracts

(a) shall be reflected as an account receivable; and

(b) if not in the form of money, shall be noted as held for margin.216

PART 14 RECORD DATE

14.1 Record Date - The record date for determining the right of securityholders of a mutual fund to receive a right issued by the mutual fund or payment of adividend or distribution by the mutual fund shall either be

(a) the day on which the net asset value per security is determined for the purpose of calculating the amount of the payment of the dividend or distribution or theday on which the right is issued; or

(b) the day on which the net asset value of the mutual fund was calculated that immediately preceded the day referred to in paragraph (a).217

PART 15 SALES COMMUNICATIONS AND PROHIBITED REPRESENTATIONS

15.1 Ability to Make Sales Communications - Sales communications pertaining to a mutual fund may be made by a person or company only in accordance withthis Part.218

15.2 General Requirements for Sales Communications

(1) Despite any other provision of this Part, no sales communication shall

(a) be untrue or misleading; or

(b) include a statement that conflicts with information that is contained in the preliminary prospectus, preliminary simplified prospectus or preliminary annualinformation form or the prospectus, simplified prospectus or annual information form of a mutual fund or in which an asset allocation service is described.219

(2) A sales communication shall not compare the performance of one or more mutual funds or asset allocation services with another mutual fund, asset allocationservice, consumer price, stock, bond or other index, average, guaranteed investment certificate or other certificate of deposit, real estate or investment of anykind, unless

(a) it includes all facts that, if disclosed, would be likely to alter materially the conclusions reasonably drawn or implied by the comparison;

(b) it presents data for each subject of the comparison for the same period or periods;

(c) if differing types of investments or services are compared, it explains clearly any relevant differences in guarantees, fluctuation of principal, income or totalreturn, insurance, tax features and any other factors necessary to make the comparison fair and not misleading; and

(d) if the performance of a mutual fund or asset allocation service is being compared with an index or average, it describes the index or average, points out anymaterial differences between the composition of or calculation of the performance of the index or average and the investment portfolio of the mutual fund orperformance of the asset allocation service and states any other factors necessary to make the comparison fair and not misleading.220

(3) A written sales communication shall bear the name of the person or company that prepared the sales communication, may bear the name of the principaldistributor or participating dealer distributing the sales communication and, except in the case of an advertisement, shall indicate the date of first publication ofthe sales communication.221

(4) All text of a written sales communication shall be at least as large as 8-point type.222

(5) If a written sales communication includes a rate of return or a mathematical table illustrating the potential effect of a compound rate of return, the salescommunication shall contain a statement to the effect that the rate of return or mathematical table is used only to illustrate the effects of the compound growthrate and is not intended to reflect future values of the mutual fund or asset allocation service or returns on investment in the mutual fund or use of the assetallocation service.223

(6) A sales communication shall not refer to a mutual fund as, or imply that it is, a money fund, cash fund or money market fund unless, at the time the salescommunication is used and for each period for which money market fund standard performance data is provided, the mutual fund is and was a money marketfund.224

(7) A sales communication shall not imply that a registered retirement savings plan, registered retirement income fund or registered education savings plan initself, rather than the mutual fund to which the sales communication relates, is an investment.225

(8) A sales communication shall not refer to a credit rating that reflects the credit quality of a mutual fund's portfolio assets unless

(a) the rating is current and prepared by an approved credit rating organization;

(b) there has been no announcement by the approved credit rating organization of which the mutual fund or its manager is or ought to be aware that the creditrating of the security or instrument to which the credit rating was given may be down-graded; and

(c) no approved credit rating organization is currently rating the security or instrument at a lower level.226

15.3 Disclosure Regarding Distribution

(1) No person or company shall describe a mutual fund in a sales communication as a "no-load fund" or use words of like effect if investor fees are payable by aninvestor on a purchase or redemption of securities of the mutual fund to any of the manager, principal distributor or participating dealer of the mutual fund, otherthan

(a) fees and charges related to specific optional services;

(b) for a mutual fund that is not a money market fund, redemption fees on the redemption of securities of the mutual fund that are redeemed within 90 days afterthe purchase of the securities if the existence of the fees is disclosed in the sales communication, or in the prospectus or simplified prospectus of the mutual fund;or

(c) costs that are payable only on the set-up or closing of a securityholder's account and that reflect the administrative costs of establishing or closing the accountif the existence of the costs is disclosed in the sales communication, or in the prospectus or simplified prospectus of the mutual fund.

(2) If a mutual fund is described in a sales communication as "no-load", the sales communication shall indicate the principal distributor or a participating dealerthrough which an investor may purchase the mutual fund on a "no-load" basis.227

(3) A sales communication containing a reference, other than a reference to "no-load" or the disclosure required by paragraphs 15.4(1)(f), (g) or (h), to theexistence or absence of fees or charges shall provide a summary of the types of fees and charges that exist and shall not give undue prominence to the existenceor absence of any particular fee or charge.228

(4) The rate of sales charges or commissions for the sale of securities of a mutual fund or the use of an asset allocation service shall be expressed as a percentageof the amount paid by the purchaser and as a percentage of the net amount invested if a reference is made in a sales communication to sales charges orcommissions.229

15.4 Performance Data

(1) No sales communication pertaining to a mutual fund or asset allocation service shall contain performance data of the mutual fund or asset allocation serviceunless

(a) either

(i) the mutual fund has offered securities under a prospectus or simplified prospectus in a jurisdiction for at least one completed financial year, or the assetallocation service has been operated for at least 12 months and has invested only in participating mutual funds that have offered securities under a prospectus orsimplified prospectus in a jurisdiction for at least one completed financial year, or

(ii) if the sales communication pertains to a mutual fund or asset allocation service that does not satisfy the requirements of subparagraph (i), the salescommunication is sent only to securityholders of the mutual fund or participants in the asset allocation service;230

(b) it also contains standard performance data of the mutual fund or asset allocation service and, in the case of written sales communication, the standardperformance data is presented in type that is at least as prominent as that used to present the other performance data;231

(c) the performance data reflects or includes references to all elements of return;232

(d) the sales communication does not contain performance data for a period that is before the time when the mutual fund offered its securities under a prospectusor simplified prospectus or before the asset allocation service commenced operation;233

(e) if the sales communication is an advertisement, the performance data relates only to

(i) one mutual fund or asset allocation service, or

(ii) mutual funds or asset allocation services that are under common management or administration, or

(iii) the comparison of a mutual fund or asset allocation service with another mutual fund or mutual funds or another asset allocation service or services withsimilar investment objectives or with an index or average;234

(f) if a written sales communication contains standard performance data for a money market fund, it includes, in close proximity to the standard performance data

(i) a description of the specific application of the general assumptions provided in section 15.5 upon which the standard performance data is calculated orincludes disclosure in the following words or to like effect:

"[standard performance data] assumes [assume] reinvestment of distributions only and does [do] not take into account sales, redemption, distribution or optionalcharges or income taxes payable by any securityholder that would have reduced returns", and

(ii) a statement in the following words or to like effect:

"Annualized historical yield[s] is [are] for the seven day period ended on [date] [annualized in the case of effective yield by compounding the seven dayreturn]";235

(g) if the sales communication contains standard performance data for a mutual fund other than a money market fund, it includes a description of the specificapplication of the general assumptions provided in section 15.5 upon which the standard performance data is calculated or includes disclosure in the followingwords or to like effect:

"The indicated rate[s] of return is [are] the historical annual compounded total return[s] including changes in [share or unit] value and reinvestment of all[dividends or distributions] and does [do] not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholderthat would have reduced returns";236

(h) if the sales communication contains standard performance data for an asset allocation service, it includes a description, for both the asset allocation serviceand the participating funds, of the specific application of the general assumptions provided in section 15.5 upon which the standard performance data iscalculated or includes disclosure in the following words or to like effect:

"The indicated rate[s] of return is [are] the historical annual compounded total return[s] assuming the investment strategy recommended by the asset allocationservice is used and after deduction of the fees and charges in respect of the service. These returns are based on the historical annual compounded total returns ofthe participating funds including changes in [share or unit] value and reinvestment of all [dividends or distributions] and does [do] not take into account sales,redemption, distribution or optional charges or income taxes payable by any securityholder in respect of a participating fund that would have reducedreturns";237

(i) if there have been changes during the performance measurement period in the management, investment objectives, portfolio adviser, ownership of themanager, fees and charges, policies concerning the waiving or absorbing of fees and charges, of a mutual fund or asset allocation service, a merger of one mutualfund with another, the acquisition by a mutual fund of the assets of another mutual fund or a change in the characterization of a mutual fund as a money marketfund, that could have materially affected the performance of the mutual fund or asset allocation service, the sales communication contains

(i) summary disclosure of the changes during or after the performance measurement period that could have affected, increased or decreased, as the case may be,the performance had those changes been in effect throughout the period, and

(ii) for a money market fund that during the performance measurement period did not pay or accrue the full amount of any fees and charges of the type describedunder paragraph 15.5(1)1, disclosure of the difference between the full amounts and the amounts actually charged, expressed as an annualized percentage on abasis comparable to current yield;238

(j) if the sales communication is not a report to securityholders and relates to a money market fund, the standard performance data that is given has beencalculated for the most recent seven day period for which it is practicable to calculate the standard performance data taking into account publication deadlines,and this seven day period is not more than 45 days before the date of the appearance or use of the advertisement in which it is included and not more than 45days before the date of first publication of any other sales communication in that it is used;239

(k) if the sales communication is not a report to securityholders and relates to an asset allocation service or to a mutual fund other than a money market fund, thestandard performance data that is given has been calculated for the one, three, five and 10 year periods ending on the same calendar month end that is

(i) not more than 45 days before the date of the appearance or use of the advertisement in which it is included, and

(ii) not more than three months before the date of first publication of any other sales communication in which it is included;240

(l) the standard performance data forming part of a sales communication contained in a report to securityholders has been calculated for a period or periods thatended on the day as of which the balance sheet of the financial statements contained in the report to securityholders was prepared;241

(m) the sales communication clearly identifies the periods for which the performance data is calculated and indicates how more up to date standard performancedata may be obtained;242

(n) the sales communication includes a statement that all performance data represents past performance and is not necessarily indicative of futureperformance;243 and

(o) if the sales communication refers to a performance rating or ranking of a mutual fund or asset allocation service, the rating or ranking is prepared by anindependent organization and standard performance data is provided for any mutual fund or asset allocation service whose rating or ranking is quoted.244

(2) Advertisements broadcast on radio or television shall not contain performance data.245

15.5 Calculation of Standard Performance Data246

(1) The following general assumptions shall be made in the calculation of standard performance data of a mutual fund:

1. Recurring fees and charges that are payable by all securityholders

(a) are accrued or paid in proportion to the length of the performance measurement period;

(b) if structured in a manner that would result in the performance information being dependent upon the size of an investment, are calculated on the basis of aninvestment equal to the greater of $10,000 or the minimum amount that may be invested; and

(c) if the fees and charges are fully negotiable, are calculated on the basis of the average fees paid by an account of the size referred to in paragraph (b).

2. There are no fees and charges related to specific optional services.

3. Fees and charges payable by the mutual fund are accrued or paid.

4. Dividends or distributions by the mutual fund are reinvested in the mutual fund at the net asset value per security of the mutual fund on the reinvestment datesduring the performance measurement period.

5. There are no non-recurring fees and charges that are payable by some or all securityholders and no recurring fees and charges that are payable by some but notall securityholders.

6. A complete redemption occurs at the end of the performance measurement period so that the ending redeemable value includes elements of return that havebeen accrued but not yet paid to securityholders.

(2) The following general assumptions shall be made in the calculation of standard performance data of an asset allocation service:

1. Fees and charges that are payable by participants in the asset allocation service

(a) are accrued or paid in proportion to the length of the performance measurement period;

(b) if structured in a manner that would result in the performance information being dependent upon the size of an investment, are calculated on the basis of aninvestment equal to the greater of $10,000 or the minimum amount that may be invested; and

(c) if the fees and charges are fully negotiable, are calculated on the basis of the average fees paid by an account of the size referred to in paragraph (b).

2. There are no fees and charges related to specific optional services.

3. The investment strategy recommended by the asset allocation service is utilized for the performance measurement period.

4. Transfer fees are

(a) accrued or paid;

(b) if structured in a manner that would result in the performance information being dependent upon the size of an investment, calculated on the basis of anaccount equal to the greater of $10,000 or the minimum amount that may be invested; and

(c) if the fees and charges are fully negotiable, calculated on the basis of the average fees paid by an account of the size referred to in paragraph (b).

5. Standard performance data of the asset allocation service shall be based upon the standard performance data of its participating funds.247

6. A complete redemption occurs at the end of the performance measurement period so that the ending redeemable value includes elements of return that havebeen accrued but not yet paid to securityholders.

(3) The calculation of standard performance data shall be based on actual historical performance and the fees and charges payable by the mutual fund andsecurityholders, or the asset allocation service and participants, in effect during the performance measurement period.248

(4) In this Part249

"standard performance data" means

(a) for a money market fund

(i) the current yield, or

(ii) the current yield and effective yield, if any statement of effective yield is no more prominent than the statement of current yield, and

(b) for any mutual fund other than a money market fund, the total return

calculated in each case in accordance with subsections (1), (2) and (3);250

"current yield" means the yield of a money market fund expressed as a percentage and determined by applying the following formula:

current yield = [seven day return x 365/7] x 100;

"effective yield" means the yield of a money market fund expressed as a percentage and determined by applying the following formula:

effective yield = [(seven day return + 1)365/7 - 1] x 100;

"seven day return" means the income yield of an account of a securityholder in a money market fund that is calculated by

(a) determining the net change, exclusive of new subscriptions other than from the reinvestment of distributions or proceeds of redemption of securities of themoney market fund, in the value of the account,

(b) subtracting all fees and charges of the type referred to in paragraph 15.5(1)3 at the end of the seven day period, and

(c) dividing the result by the value of the account at the beginning of the seven day period; and

"total return" means the annual compounded rate of return for a mutual fund for a period that would equate the initial value to the redeemable value at the end ofthe period, expressed as a percentage, and determined by applying the following formula:

total return = [(redeemable value/initial value)(1/N) - 1] x 100

where N = the length of the performance measurement period in years, with a minimum value of 1.

(5) If there are fees and charges of the type described in paragraph 15.5(1)1 relevant to the calculation of redeemable value and initial value of the securities of amutual fund, the redeemable value and initial value of securities of a mutual fund shall be determined by applying assumptions to a hypothetical securityholderaccount.

(6) If there are no fees and charges of the type described in paragraph 15.5(1)1 relevant to a calculation of total return, the calculation of total return for a mutualfund may be simplified by assuming a hypothetical investment of one security of the mutual fund as follows:

(a) "initial value" means the net asset value of one unit or share of a mutual fund at the beginning of the performance measurement period; and

(b) "redeemable value" =

R x (1 + D1/P1) x (1 + D2/P2) x (1 + D3/P3) . . . x (1 + Dn/Pn)

where R = the redemption value of one unit or security of the mutual fund at the end of the performance measurement period,

D = the dividend or distribution amount per security of the mutual fund at the time of each distribution,

P = the dividend or distribution reinvestment price per security of the mutual fund at the time of each distribution, and

n = the number of dividends or distributions during the performance measurement period.251

(7) Standard performance data

(a) for a mutual fund other than a money market fund shall be calculated to the nearest one-tenth of one percent; and

(b) for a money market fund shall be calculated to the nearest one-hundredth of one percent.252

15.6 Warnings253

(1) Sales communications, other than reports to securityholders, of a mutual fund that is not a money market fund, that do not contain performance data shallcontain a warning in the following words or to like effect:

"PLEASE READ the fund's simplified prospectus carefully before investing. Mutual funds are not guaranteed; their values change frequently and pastperformance may or may not be repeated.".

(2) Sales communications, other than reports to securityholders, of a money market fund, that do not contain performance data shall contain a warning in thefollowing words or to like effect:

"PLEASE READ the fund's simplified prospectus carefully before investing. Mutual funds are not guaranteed and their securities are not insured by the CanadaDeposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset valueat a constant amount and past performance may or may not be repeated.".

(3) Sales communications, other than reports to securityholders, of a mutual fund that is not a money market fund, that contain performance data shall contain awarning in the following words or to like effect:

"PLEASE READ the fund's simplified prospectus carefully before investing. Mutual funds are not guaranteed and their values change frequently. Pastperformance shown is to [date], with all income from the fund reinvested, and may or may not be repeated. Sales commissions, other account charges andincome taxes will reduce your actual return.".

(4) Sales communications, other than reports to securityholders, of a money market fund, that contain performance data shall contain a warning in the followingwords or to like effect:

"PLEASE READ the fund's simplified prospectus carefully before investing. Mutual funds are not guaranteed and their securities are not insured by the CanadaDeposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset valueat a constant amount. Past performance shown is to [date], with all income from the fund reinvested, and may or may not be repeated. Sales commissions, otheraccount charges and income taxes will reduce your actual return.".

(5) In addition to the warnings required by subsections (1), (2), (3) or (4), as applicable, a sales communication distributed after the issue of a receipt for apreliminary prospectus or preliminary simplified prospectus of the mutual fund described in the sales communication but before the issue of a receipt for itsprospectus or simplified prospectus shall contain a warning in the following words or to like effect:

"A preliminary simplified prospectus relating to the fund has been filed with certain Canadian securities commissions or similar authorities. You cannot buy[units/shares] of the fund until the relevant securities commissions or similar authorities issue receipts for the simplified prospectus of the fund.".

(6) A mutual fund that files a prospectus rather than a simplified prospectus shall amend the warnings required by this section to refer to a prospectus.

(7) For an asset allocation service, the warnings referred to in this section shall be modified to refer to the prospectuses or simplified prospectuses andperformances of the participating funds.

(8) The warnings referred to in this section shall be communicated in a clear and easily understood manner at the same time as, and through the medium bywhich, the related sales communication is communicated.254

(9) Despite subsections (1), (2), (3), (4) and (5), a sales communication need not contain the warning required by those subsections if the applicable warning, if itwas included, would constitute more than 50 percent of the text of the sales communication or more than 50 percent of the area of a sign.255

15.7 Sales Communications During the Waiting Period - If a sales communication is used after the issue of a receipt for a preliminary prospectus or preliminarysimplified prospectus of the mutual fund described in the sales communication but before the issue of a receipt for its prospectus or simplified prospectus, thesales communication shall only identify the security by indicating

(a) whether the security represents a share in a company or an interest in a non-corporate entity;

(b) the name of the mutual fund and its manager;

(c) briefly, the investment objectives of the mutual fund;

(d) without giving details, whether the security is or will be a qualified investment for a registered retirement savings plan, registered retirement income fund orregistered education savings plan or qualifies or will qualify the holder for special tax treatment; and

(e) any additional information permitted by securities legislation.256

15.8 Prohibited Representations

(1) Securities issued by an unincorporated mutual fund shall be described by a term that is not and does not include the word "shares".257

(2) No communication by a mutual fund or asset allocation service, its promoter, manager, portfolio adviser, principal distributor, participating dealer or a personproviding services to the mutual fund or asset allocation service shall describe a mutual fund as a commodity pool or as a vehicle for investors to participate inthe speculative trading of, or leveraged investment in, derivatives, unless the mutual fund is a commodity pool within the meaning of National Instrument 81-104Commodity Pools.258

PART 16 PROSPECTUS DISCLOSURE AND FILING REQUIREMENTS259

16.1 Derivatives Disclosure - The prospectus or simplified prospectus and annual information form of a mutual fund that is not prohibited by its constatingdocuments from using permitted derivatives and that intends to use permitted derivatives shall describe

(a) how permitted derivatives are or will be used in conjunction with other securities to achieve the mutual fund's investment and risk objectives;

(b) the limits of the mutual fund's use of permitted derivatives; and

(c) the risks associated with any use or intended use by the mutual fund of permitted derivatives and the policies and practices of the mutual fund to managethose risks.260

16.2 Summary of Fees, Charges and Expenses

(1) Despite anything to the contrary contained in the simplified prospectus system of the Canadian securities regulatory authorities, a summary of the fees,charges and expenses payable by the mutual fund or its securityholders and the compensation payable by the mutual fund or its manager to participating dealersshall be provided in a separate section on the back of the front page of the prospectus or simplified prospectus in a tabular form, disclosing separately

(a) a summary of the fees, charges and expenses of the mutual fund;

(b) the management expense ratio of each class or series of a class of securities of the mutual fund for its most recently completed financial year;

(c) a summary of the fees, charges and expenses payable by a securityholder of the mutual fund;

(d) a summary of the fees, charges and expenses involved in purchasing or holding securities of a mutual fund through a registered tax plan such as a registeredretirement savings plan, registered retirement income fund or registered education savings plan if the registered plan or fund is sponsored by the mutual fund; and

(e) a summary of the compensation paid to participating dealers.261

(2) A cross-reference shall be made in the summary of fees, charges and expenses to the location in the prospectus or simplified prospectus of the mutual fundwhere a full discussion of the fees, charges and expenses can be found.

(3) Despite paragraph (1)(c), if at the time a prospectus or simplified prospectus is filed the audited annual financial statements of the mutual fund have not thenbeen filed or delivered to securityholders, the management expense ratio of the mutual fund for the preceding financial year may be given.

16.3 Rights of Securityholders - A prospectus or simplified prospectus of a mutual fund shall describe the right of securityholders to approve the matters set outin section 5.1.262

16.4 Certificate of the Mutual Fund

(1) The certificate in a prospectus or annual information form required to be signed by the mutual fund shall, if the mutual fund is established as a trust, be signed

(a) if any trustee of the mutual fund is an individual, by each individual who is a trustee or by a duly authorized attorney of the individual; or

(b) if any trustee of the mutual fund is a body corporate, by the duly authorized signing officer or officers of the body corporate.

(2) Despite subsection (1), if the declaration of trust or trust agreement establishing the mutual fund delegates the authority to do so, the certificate in aprospectus or annual information form required to be signed by the trustee or trustees of the mutual fund may be signed by the person to whom the authority isdelegated.263

(3) Despite subsections (1) and (2), if the trustee of the mutual fund is also its manager, the certificate referred to in subsection (1) shall indicate that it is beingsigned by the person or company both in its capacity of trustee and in its capacity as manager of the mutual fund and shall be signed in the manner prescribed bysection 16.5.264

16.5 Certificate of the Manager of a Mutual Fund

(1) The prospectus or annual information form of a mutual fund shall contain a certificate of the manager of the mutual fund in the same form as the certificatesigned by the mutual fund.

(2) The certificate referred to in subsection (1) shall, if the manager is a company, be signed by the chief executive officer and the chief financial officer of themanager, and on behalf of the board of directors of the manager by any two directors of the manager other than the chief executive officer or chief financialofficer, duly authorized to sign.

(3) Despite subsection (2), if the manager has only three directors, the certificate required by subsection (1) shall be signed by all of the directors of the manager.

16.6 Conflicts of Interest

(1) A prospectus of a dealer managed mutual fund shall disclose that the fund is a dealer managed mutual fund and that it is subject to the restrictions set out insection 4.1 and shall summarize the provisions of section 4.1.

(2) A simplified prospectus of a dealer managed mutual fund shall disclose that it is a dealer managed mutual fund and that it is subject to the restrictions set outin section 4.1, and shall refer to the annual information form for a summary of these provisions.

(3) The annual information form of a dealer managed mutual fund shall summarize the provisions of section 4.1.

16.7 Money Market Funds

(1) The front page of a prospectus or simplified prospectus of a money market fund shall include a warning in the following words or to like effect:

"Mutual funds are not guaranteed and their securities are not insured by the Canada Deposit Insurance Corporation or by any other government deposit insurer.There can be no assurances that the fund will be able to maintain its net asset value at a constant amount and past performance may not be repeated.".265

(2) No communication relating to a mutual fund shall describe the mutual fund as a money market fund or imply that the mutual fund is a money market fundunless the mutual fund is a money market fund.266

16.8 Exemptions and Approvals - The prospectus or simplified prospectus and annual information form of a mutual fund shall describe all exemptions from, orapprovals under, this Instrument or National Policy Statement No. 39, obtained by the mutual fund that continue to be relied upon by the mutual fund.267

16.9 Other Disclosure Requirements - The prospectus or financial statements of a mutual fund that does not file a prospectus under National Policy StatementNo. 36268 shall include the disclosure required by Items 7(b), 10(a), (c) and (d) and 11(d) of Schedule A, Item 3(b) of Schedule B, the Instructions to Item 10 ofSchedule A and Instructions 2 and 3 to Item 11(d) of Schedule A of that National Instrument.269

PART 17 DISCLOSURE OF MANAGEMENT FEE ARRANGEMENTS270

17.1 Management Fees Payable Directly by Securityholders

(1) If the management fees of a mutual fund are payable directly by a securityholder and vary so that specific disclosure of the amount of the management feescannot be disclosed in the prospectus or simplified prospectus of the mutual fund, or cannot be derived from disclosure in the prospectus or simplifiedprospectus, then the prospectus or simplified prospectus shall provide as much disclosure as is possible about the management fees to be paid by securityholders.

(2) If subsection (1) applies, the manager of the mutual fund shall deliver or send or cause to be delivered or sent a separate document specifying themanagement fees payable by that purchaser to the purchaser with the prospectus or simplified prospectus.

(3) If a separate document is required to be delivered or sent to purchasers of securities of a mutual fund under subsection (2), the prospectus or simplifiedprospectus of the mutual fund shall state that a separate document disclosing the specific management fees payable by each purchaser will accompany, and isincorporated by reference into, the prospectus or simplified prospectus.

17.2 Management Fee Rebate or Distribution Programs

(1) The prospectus or simplified prospectus of a mutual fund shall disclose details of all arrangements that are in effect or will be in effect during the currency ofthe prospectus or simplified prospectus that will result, directly or indirectly, in one securityholder in the mutual fund paying as a percentage of thesecurityholder's investment in the mutual fund a management fee that differs from that payable by another securityholder.

(2) The prospectus or simplified prospectus of a mutual fund shall disclose the income tax consequences to the mutual fund and its securityholders of amanagement fee structure that results in one securityholder paying a management fee that differs from another and the annual information form of the mutualfund shall describe a legal opinion on these matters.

(3) A mutual fund shall not adopt a management fee structure that results in any adverse tax consequences to the mutual fund or its securityholders.

PART 18 FINANCIAL STATEMENT REQUIREMENTS

18.1 Information About Permitted Derivatives

(1) Despite anything to the contrary contained in the simplified prospectus system of the Canadian securities regulatory authorities271, a mutual fund shall in thestatement of investment portfolio included in the annual and interim financial statements of the mutual fund, or in the notes to that statement, disclose

(a) for long positions in clearing corporation options, the number of options, the underlying interest, the strike price, the expiration month and year, the cost andthe market value;

(b) for long positions in options on futures, the number of options on futures, the futures contracts that form the underlying interest, the strike price, theexpiration month and year of the option on futures, the delivery month and year of the futures contract that forms the underlying interest of the option on futures,the cost and the market value;

(c) for clearing corporation options written by the mutual fund, the particulars of the deferred credit account, indicating the number of options, the underlyinginterest, the strike price, the expiration month and year, the premium received and the value as determined under section 13.5;

(d) for over-the-counter options purchased by the mutual fund, the number of options, the credit rating of the issuer of the options, whether the rating has fallenbelow the approved credit rating, the underlying interest, the principal amount or quantity of the underlying interest, the strike price, the expiration date, the costand the market value;

(e) for over-the-counter options written by the mutual fund, the particulars of the deferred credit account, indicating the number of options, the underlyinginterest, the principal amount or quantity of the underlying interest, the exercise price, the expiration date, the premium received and the value as determinedunder section 13.5;

(f) for positions in standardized futures, the number of standardized futures, the underlying interest, the price at which the contract was entered into, the deliverymonth and year and the value as determined under section 13.5;

(g) for positions in forward contracts, the number of forward contracts, the credit rating of the counterparty, whether the rating has fallen below the approvedcredit rating level, the underlying interest, the quantity of the underlying interest, the price at which the contract was entered into, the settlement date and thevalue as determined under section 13.5; and

(h) for debt-like securities, the principal amount of the debt, the interest rate, the payment dates, the underlying interest, the principal amount or quantity of theunderlying interest, a description of whether the derivative component is an option or a forward contract with respect to the underlying interest, the strike pricein the case of an options component and the set price in the case of a forward component, and the value as determined under section 13.5.272

(2) If applicable, the statement of investment portfolio included in the annual and interim financial statements of the mutual fund, or the notes to that statement,shall identify by an asterisk or other notation the underlying interest that is being hedged by each position taken by the mutual fund in a permitted derivative.273

18.2 Additional Disclosure Requirements

(1) The annual financial statements of a mutual fund shall

(a) set out in appropriate detail the amounts of all fees, charges and expenses, if any, that have been charged to the mutual fund during each financial yearreported upon in the financial statements;274 and

(b) set out the net asset value per security as at the end of the last completed financial year of the mutual fund and as at the end of each of the four precedingcompleted financial years, or such fewer number of financial years as the mutual fund has been in existence.275

(2) The notes to the annual and interim financial statements of a mutual fund shall disclose

(a) the management expense ratio of each class or series of a class of securities of the mutual fund for each of the last five completed financial years of the mutualfund, or such fewer number of financial years as the mutual fund has been in existence, calculated for periods of less than 12 months as required by NationalPolicy Statement No. 36;276 and

(b) a brief description of the method of calculating the management expense ratio.277

18.3 Approval of Financial Statements

(1) The board of directors of a mutual fund that is a company shall

(a) approve the annual financial statements of the mutual fund that on and after the date the prospectus or the simplified prospectus of the mutual fund is filed areto be delivered to purchasers of its securities with the prospectus or the simplified prospectus; and

(b) authorize two directors of the mutual fund to sign those financial statements to evidence that approval.

(2) The manager or the trustee or trustees of a mutual fund that is a trust, or other person or company authorized to do so by the constating documents of themutual fund, shall

(a) approve the annual financial statements of the mutual fund that on and after the date the prospectus or the simplified prospectus of the mutual fund is filed areto be delivered to purchasers of its securities with the prospectus or the simplified prospectus; and

(b) authorize two appropriate persons to sign those financial statements to evidence that approval.

PART 19 REGISTER OF SECURITYHOLDERS278

19.1 Maintenance of a Register - A mutual fund that is not a company shall maintain, or cause to be maintained, an up to date register of

(a) the names and latest known addresses of each securityholder of the mutual fund;

(b) the number and class or series of a class of securities held by each securityholder of the mutual fund; and

(c) the date and details of each issue and redemption of securities of the mutual fund.

19.2 Availability of Register

(1) A mutual fund that is not a company shall make, or cause to be made, the register referred to in section 19.1 available for inspection free of charge duringnormal business hours at its principal or head office by a securityholder or a representative of a securityholder.

(2) A mutual fund shall, upon written request by a securityholder, provide, or cause to be provided, to the securityholder a copy of the register referred to insection 19.1 if the securityholder

(a) has agreed in writing that the information contained in the register will not be used by the securityholder for any purpose other than attempting to influencethe voting of securityholders of the mutual fund or a matter relating to the administration of the mutual fund; and

(b) has paid a reasonable fee to the mutual fund that does not exceed the reasonable costs to the mutual fund of providing the copy of the register.

PART 20 EXEMPTIONS AND APPROVALS

20.1 Exemption

(1) The regulator or securities regulatory authority may grant an exemption to this Instrument, in whole or in part, subject to such conditions or restrictions asmay be imposed in the exemption.

(2) Despite subsection (1), in Ontario, only the regulator may grant such an exemption.

20.2 Evidence of Exemption or Approval279 - Without limiting the manner in which an exemption under section 20.1, or an approval given under thisInstrument, may be evidenced, the issuance by the regulator of a receipt for a prospectus, simplified prospectus or an amendment to a prospectus or simplifiedprospectus is evidence of the granting of the exemption or approval if

(a) the prospectus, simplified prospectus or the amendment to the prospectus or simplified prospectus discloses details of the matters to which the exemption orapproval relates and discloses that an exemption or approval has been obtained in connection with those matters;

(b) the person or company that sought the exemption or approval sent to the regulator, with the pro forma or preliminary prospectus or pro forma or preliminarysimplified prospectus, or at least ten days before the issuance of the receipt in the case of an amendment

(i) a letter or memorandum describing the matters relating to the exemption or approval and indicating why consideration should be given to the granting of theexemption or approval, and

(ii) a draft of a prospectus, simplified prospectus or amendment to a prospectus or simplified prospectus disclosing the matters referred to in paragraph (a); and

(c) the regulator has not sent written notice to the contrary to the person or company that sought the exemption or approval before, or concurrent with, theissuance of the receipt.

20.3 Exemption or Approval under Prior Policy

(1) Except to the extent that the regulator or securities regulatory authority has, under subsection (4), limited or removed the ability of a mutual fund to relyupon this subsection in connection with a particular matter, a mutual fund that has obtained, from the regulator or securities regulatory authority, an exemptionfrom, or approval under, a provision of National Policy Statement No. 39 before this Instrument came into force is exempt from any substantially similarprovision of this Instrument, if any, on the same conditions, if any, contained in the earlier exemption or approval.

(2) Despite Part 7, a mutual fund that has obtained, from the regulator or securities regulatory authority, approval under National Policy Statement No. 39 to payincentive fees may continue to pay incentive fees on the terms of that approval if disclosure of the method of calculation of the fees and details of thecomposition of the benchmark or index used in calculating the fees are described in the prospectus or simplified prospectus of the mutual fund.

(3) A mutual fund that intends to rely upon subsection (1) shall, at the time of the first filing of its pro forma prospectus or pro forma simplified prospectus afterthis Instrument comes into force, send to the regulator a letter or memorandum containing

(a) a brief description of the nature of the exemption from, or approval under, National Policy Statement No. 39 previously obtained;

(b) the provision in the Instrument that is substantially similar to the provision in National Policy Statement No. 39 from or under which the exemption orapproval was previously obtained; and

(c) the location in the prospectus or simplified prospectus and annual information form of the disclosure required by section 16.8.

(4) The regulator or securities regulatory authority may limit or remove the ability of a mutual fund to rely upon subsection (1) in connection with a particularmatter, subject to such conditions or restrictions as may be imposed by the regulator or securities regulatory authority, if he, she or it considers it in the publicinterest to do so and after giving the mutual fund the opportunity to be heard. 280

PART 21 TRANSITIONAL

21.1 Effective Date - This Instrument comes into force on ..281

21.2 Prospectus Disclosure - The prospectus of a mutual fund for which a receipt is obtained before the date that this Instrument comes into force is notrequired to comply with the specific disclosure requirements of this Instrument.282

NATIONAL INSTRUMENT 81-102

APPENDIX A

Clearing Corporations for the Purpose of Subsection 2.3(7) - Derivative Counterparty Exposure Limits

Options Clearing Corporations

Trans Canada Options Inc.

The Options Clearing Corporation

International Options Clearing Corporation

The Intermarket Clearing Corporation

Futures Exchanges

Australia

Sydney Futures Exchange

Australian Financial Futures Market

Austria

Osterreichische Termin-und Option borse (OTOB - The Austrian Options and Futures Exchange)

Belgium

Belfox CV (Belgium Futures and Options Exchange)

Brazil

Bolsa Brasileira de Futuros

Bolsa de Mercadorias & Futuros

Bolsa de Valores de Rio de Janeiro

Canada

The Winnipeg Commodity Exchange

The Toronto Futures Exchange

The Montreal Exchange

Denmark

Kobenhavus Fondsbors (Copenhagen Stock Exchange)

Garenti fonden for Dankse Optioner og Futures (Guarantee Fund for Danish Options and Futures)

Futop (Copenhagen Stock Exchange)

Finland

Suomen Optionmeklarit Oy (Finnish Options Market)

Oy Suomen Optiopörssi (Finnish Options Exchange)

France

Marché á terme international de France S.A. (MATIF S.A.)

Germany

DTB Deutsche Terminbörse GmbH

Hong Kong

Honk Kong Futures Exchange Limited

Ireland

Irish Futures and Options Exchange

Italy

Milan Italiano Futures Exchange

Japan

Osaka Shoken Torihikisho (Osaka Securities Exchange)

The Tokyo Commodity Exchange for Industry

The Tokyo International Financial Futures Exchange

Tokyo Stock Exchange

Netherlands

EOE-Optiebeurs (European Options Exchange)

Financiele Termijnmarkt Amsterdam N.V.

New Zealand

New Zealand Futures and Options Exchange

Philippines

Manila International Futures Exchange

Singapore

Singapore International Monetary Exchange Limited (SIMEX)

Spain

Meff Renta Fija

Meff Renta Variable

Sweden

OM Stockholm Fondkommission AB

Switzerland

Swiss Options and Financial Futures Exchange (SOFFEX)

United Kingdom

London International Financial Futures and Options Exchange (LIFFE)

OM London

United States

Chicago Board of Trade (CBOT)

Chicago Mercantile Exchange (CME)

Commodity Exchange, Inc. (COMEX)

Financial Instrument Exchange (Finex) a division of the New York Cotton Exchange

Board of Trade of Kansas City, Missouri, Inc.

Mid-America Commodity Exchange

New York Futures Exchange, Inc. (NYFE)

Pacific Stock Exchange

Philadelphia Board of Trade (PBOT)

Twin Cities Board of Trade

NATIONAL INSTRUMENT 81-102

APPENDIX B-1

Compliance Report

TO: [The appropriate Canadian securities regulatory authorities]

FROM: [Name of mutual fund]

RE: Compliance Report on National Instrument 81-102

For the year ended [insert date]

We hereby confirm that we have complied with the requirements of section 9.3, subsections 9.4(3), 9.4(4), 10.1(1), 10.1(3) and 10.2(5), sections 10.3 and 10.4,subsections 10.5(1), 10.5(2) and 10.6(6) and sections 11.4 and 11.5 of National Instrument 81-102 for the year ended [insert date] [except as follows:] [listexceptions, if any].

[NAME of mutual fund]

Signature

Name and office of the person

executing this report

Date

NATIONAL INSTRUMENT 81-102

APPENDIX B-2

Compliance Report

TO: [The appropriate Canadian securities regulatory authorities]

FROM: [Name of principal distributor] (the "Distributor")

RE: Compliance Report on National Instrument 81-102

For the year ended [insert date]

FOR: [Name(s) of the mutual fund (the "Fund[s]")]

We hereby confirm that we have complied with the requirements of subsections 9.1(1) and 9.4(1), paragraph 9.4(6)(a), subsection 10.2(1) and section 11.1 ofNational Instrument 81-102 in respect of the Fund[s] for the year ended [insert date] [except as follows:] [list exceptions, if any].

[NAME of the Distributor]

Signature

Name and office of the person

executing this report

Date

NATIONAL INSTRUMENT 81-102

APPENDIX B-3

Compliance Report

TO: [The appropriate Canadian securities regulatory authorities]

FROM: [Name of participating dealer] (the "Distributor")

RE: Compliance Report on National Instrument 81-102

For the year ended [insert date]

We hereby confirm that we have sold mutual fund securities to which National Instrument 81-102 is applicable. In connection with our activities in distributingthese securities, we have complied with the requirements of subsection 9.4(1) and section 11.2 [subsection 9.4(1) and section 11.3 for participating dealers thatare members of the Investment Dealers Association of Canada or of the Alberta, Montreal, Toronto or Vancouver stock exchanges] of National Instrument81-102 for the year ended [insert date] [except as follows:] [list exceptions, if any].

[NAME of the Distributor]

Signature

Name and office of the person

executing this report

Date