Toronto-Dominion Bank and TD Capital Trust III

Decision

Headnote

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

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations.

Multilateral Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings.

November 13, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(THE "JURISDICTION")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

THE TORONTO-DOMINION BANK (THE "BANK")

AND TD CAPITAL TRUST III (THE "TRUST" AND,

TOGETHER WITH THE BANK, THE "FILERS")

 

DECISION

Background

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

(a)

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

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

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

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

(collectively, the "Continuous Disclosure Obligations"); and

(b) file interim and annual certificates (collectively the "Officers' Certificates") pursuant to Parts 2 and 3 of Multilateral Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings ("MI 52-109"), which is expected to be replaced by National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filing effective December 15, 2008 (the "Certification Obligations"),

shall not apply to the Trust.

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

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

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

Interpretation

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

"Bank Act" means the Bank Act (Canada);

"Prospectus" means the short form prospectus of the Bank and the Trust dated September 8, 2008 in respect of the Offering (as defined below); and

"Tax Act" means the Income Tax Act (Canada).

Representations

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

The Bank

1. The Bank is a Schedule 1 chartered bank subject to the provisions of the Bank Act. The head office of the Bank is located at P.O. Box 1, Toronto-Dominion Centre, Toronto, Ontario M5K 1A2.

2. The authorized share capital of the Bank consists of an unlimited number of: (i) common shares ("Bank Common Shares"); and (ii) Class A First Preferred Shares ("Bank Preferred Shares"), issuable in series.

3. The Bank Common Shares are listed and posted for trading on the Toronto Stock Exchange, the New York Stock Exchange and the Tokyo Stock Exchange.

4. The Bank is a reporting issuer in each province and territory of Canada and is not in default of any requirement of the securities legislation in such jurisdictions.

The Trust

5. The Trust is a closed-end trust established under the laws of the Province of Ontario, pursuant to an amended and restated declaration of trust dated September 17, 2008, as may be amended, restated and supplemented from time to time. The Trust's head and registered office is located at c/o The Toronto-Dominion Bank, Toronto Dominion Bank Tower, Toronto-Dominion Centre, Toronto, Ontario, M5K 1A2.

6. The Trust completed an initial public offering (the "Offering") of trust capital securities ("Trust Capital Securities") in each of the provinces and territories of Canada on September 17, 2008 and may, from time to time, issue further series of Trust Capital Securities. The first series of Trust Capital Securities were designated as TD Capital Trust III Securities -- Series 2008 ("TD CaTS III"). As a result of the Offering, the capital of the Trust consists of TD CaTS III and special trust securities, issuable in series (the "Special Trust Securities; and, collectively with the TD CaTS III, the "Trust Securities"). All of the Special Trust Securities are held, directly or indirectly, by the Bank.

7. The Trust has been established for the purpose of effecting offerings of Trust Securities in order to provide the Bank with a cost-effective means of raising capital for Canadian bank regulatory purposes by means of: (i) creating and selling the Trust Securities; and (ii) acquiring and holding assets, which may consist of (a) residential mortgages (which may include CMHC insured first mortgages on residential property situated in Canada or such other first mortgages (or interests therein whether on a pooled basis or otherwise) on residential property situated in Canada, including, without limitation, conventional first mortgages, privately insured residential mortgages or lines of credit secured by first mortgages on residential property situated in Canada, the debtor of which in each case is an individual resident in Canada for purposes of the Tax Act and so long as, in all cases, they are Eligible Investments (as defined below)), (b) undivided co-ownership interests in one or more pools of residential mortgages situated in Canada, (c) certain mortgage-backed securities in respect of residential property situated in Canada; and (d) to the extent that the assets of the Trust are not invested in the assets referred to above in (a), (b) or (c), money and certain debt obligations that are qualified investments under the Tax Act for trusts governed by certain deferred income plans ("Eligible Investments" and collectively with items (a), (b) and (c), the "Trust Assets"). The Trust Assets will generate income for distribution to holders of Trust Securities. The Trust does not, and will not, carry on any operating activity other than in connection with offerings of Trust Securities and in connection with the Trust Assets.

8. As a result of the Offering, the Trust is now a reporting issuer in each of the provinces and territories of Canada (the "Reporting Jurisdictions"). The Trust is not, to the best of its knowledge, in default of any requirement of the securities legislation in the Reporting Jurisdictions.

TD CaTS III

9. Holders of TD CaTS III will be entitled to receive fixed, non-cumulative, indicated cash distributions (each, an "Indicated Distribution") on the last day of June and December in each year. Each payment date for the Indicated Distribution in respect of the TD CaTS III (a "Distribution Date") will be either a "Regular Distribution Date" or a "Distribution Diversion Date". A Distribution Date will be a "Distribution Diversion Date" with the result that the Indicated Distribution will not be paid in respect of the TD CaTS III but, instead, the Trust will pay the net distributable funds of the Trust to the Bank as holder of the Special Trust Securities if: (i) the Bank has failed in the Reference Dividend Declaration Month, as described in the Prospectus, to declare regular dividends on the Bank Preferred Shares of any series; or (ii) if no Bank Preferred Shares are then outstanding, the Bank has failed in the Reference Dividend Declaration Month, as described in the Prospectus, to declare regular dividends on the Bank Common Shares. In all other cases, a Distribution Date will be a Regular Distribution Date, in which case holders of TD CaTS III will be entitled to receive the Indicated Distribution and the Bank, as holder of the Special Trust Securities will be entitled to receive the net distributable income, if any, of the Trust remaining after payment of the Indicated Distribution. The Bank Preferred Shares and the Bank Common Shares are hereinafter collectively referred to as the "Bank Dividend Restricted Shares".

10. Under a share exchange trust agreement ("Share Exchange Agreement") entered into between the Bank, the Trust and CIBC Mellon Trust Company, as exchange trustee, the Bank has agreed, for the benefit of the holders of TD CaTS III, that in the event that the Trust fails on any Regular Distribution Date to pay the Indicated Distribution on the TD CaTS III in full, the Bank will not declare dividends of any kind on the Bank Dividend Restricted Shares until the Dividend Declaration Resumption Month, as described in the Prospectus, unless the Trust first pays such Indicated Distribution (or the unpaid portion thereof) to holders of TD CaTS III (the "Dividend Stopper Undertaking"). Accordingly, it is in the interest of the Bank to ensure, to the extent within its control, that the Trust complies with the obligation to pay the Indicated Distribution on each Regular Distribution Date so as to avoid triggering the Dividend Stopper Undertaking.

11. The TD CaTS III will be automatically exchanged, without the consent of the holder, for a new series of newly issued Bank Preferred Shares upon the occurrence of certain stated events relating to the solvency of the Bank or actions taken by the Superintendent of Financial Institutions (the "Superintendent") in respect of the Bank.

12. The Trust may, subject to regulatory approval, at its option, on December 31, 2013 and on each Distribution Date thereafter, redeem the TD CaTS III without the consent of the holders thereof. The price payable in respect of any such redemption will include an early redemption compensation component together with any unpaid Indicated Distribution thereon (such price being the "Early Redemption Price") in the event of a redemption prior to December 31, 2018. The price payable in all other cases will be an amount equal to the original issue price per TD CaTS III together with any unpaid Indicated Distribution thereon (the "Redemption Price").

13. Upon the occurrence of certain regulatory or tax events affecting the Bank or the Trust (each a "Special Event") prior to December 31, 2013, the Trust may, at its option, without consent of the holders of the TD CaTS III but subject to regulatory approval, redeem all but not less than all of the TD CaTS III at the Early Redemption Price.

14. The Bank has covenanted that it will maintain direct or indirect ownership of 100% of the outstanding Special Trust Securities.

15. As long as any TD CaTS III are outstanding and are held by any person other than the Bank, or an affiliate of the Bank, the Trust may only be terminated with the approval of the Bank as the holder, directly or indirectly, of the Special Trust Securities and with the approval of the Superintendent: (i) upon the occurrence of a Special Event prior to December 31, 2013; or (ii) for any reason on December 31, 2013 or any other Distribution Date thereafter. Holders of each series of outstanding Trust Securities will rank pari passu in the distribution of the property of the Trust in the event of a termination of the Trust after the discharge of any creditor claims. As long as any TD CaTS III are outstanding and held by any person other than the Bank, or an affiliate thereof, the Bank will not approve the termination of the Trust unless the Trust has sufficient funds to pay the Early Redemption Price or the Redemption Price, as applicable.

16. The TD CaTS III are non-voting except in limited circumstances. The Special Trust Securities entitle the holder thereof (i.e. the Bank or an affiliate of the Bank) to vote in all circumstances.

17. Except to the extent that the Indicated Distribution is payable to holders of TD CaTS III, and other than in the event of a termination of the Trust, holders of TD CaTS III will have no claim or entitlement to the income of the Trust or its assets.

18. Pursuant to an amended and restated administration and advisory agreement between the trustee of the Trust (the "Trustee") and the Bank, the Trustee has delegated to the Bank certain of its duties in relation to the administration of the Trust. The Bank, as administrative agent, provides advice and counsel with respect to management of the assets of the Trust and other matters as may be requested by the Trustee from time to time and administers the day-to-day operations of the Trust.

19. The Trust may, from time to time, issue further series of Trust Capital Securities, the proceeds of which would be used to acquire additional Trust Assets.

20. Because of the terms of the Trust Capital Securities, the Share Exchange Agreement and the various covenants of the Bank, information about the affairs and financial performance of the Bank, as opposed to that of the Trust, is meaningful to holders of Trust Capital Securities. The Bank's filings will provide holders of Trust Capital Securities and the general investing public with all information required in order to make an informed decision relating to an investment in TD CaTS III and any other Trust Capital Securities that the Trust may issue from time to time. Information regarding the Bank is relevant both to an investor's expectation of being paid the principal, Indicated Distribution and Early Redemption Price or Redemption Price, if any, and any other amount on the Trust Capital Securities when due and payable.

Decision

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

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

1. in respect of the Continuous Disclosure Obligations,

(a) the Bank remains a reporting issuer under the Legislation and has filed all continuous disclosure documents it is required to file by the Legislation;

(b) the Bank files with the securities regulatory authority or regulator in each Reporting Jurisdiction, in electronic format under the Trust's SEDAR profile, the continuous disclosure documents referred to in paragraph 1(a) above, at the same time as those documents are required under the Legislation to be filed by the Bank;

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

(d) the Trust sends or causes the Bank to send its interim and audited annual financial statements and interim and annual MD&A, as applicable, to holders of Trust Securities, at the same time and in the same manner as if the holders of Trust Securities were holders of Bank Common Shares;

(e) all outstanding securities of the Trust are either TD CaTS III, additional series of trust units having terms substantially similar to the TD CaTS III (the holders of which will have rights and obligations that are the same in all material respects as the rights and obligations of the holders of the TD CaTS III, with the exception of specific economic terms such as the amount of cash distributions payable by the Trust and redemption dates and prices) or Special Trust Securities;

(f) the Bank is, directly or indirectly, the beneficial owner of all issued and outstanding voting securities of the Trust, including the Special Trust Securities;

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

(h) the Bank, as holder of the Special Trust Securities, will not propose changes to the terms and conditions of any outstanding Trust Capital Securities that would result in Trust Capital Securities being exchangeable for securities other than Bank Preferred Shares;

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

(j) in any circumstances where the TD CaTS III (or any additional series of trust units having terms substantially similar to the TD CaTS III) are voting, the Trust will comply with Part 9 of NI 51-102; and

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

2. in respect of the Certification Obligations,

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

(b) the Trust is and continues to be exempted from the Continuous Disclosure Obligations and the Bank and the Trust are in compliance with the conditions set out in paragraph 1 above; and

(c) the Bank files with the securities regulatory authority or regulator in each Reporting Jurisdiction, in electronic format under the Trust's SEDAR profile, the Officers' Certificates of the Bank at the same time as those documents are required under the Legislation to be filed by the Bank.

3. this decision shall expire 30 days after the date a material adverse change occurs in the representations of the Trust in this decision.

"Jo-Anne Matear"
Assistant Manager, Corporate Finance
Ontario Securities Commission