TD Asset Management Inc. - MRRS Decision

Headnote

Exemptions from the mutual fund self-dealingprohibitions of clauses 111(2)(a), 111(3) and 118(2)(a) of theSecurities Act (Ontario). Mutual funds allowed to make purchasesand sales of securities of Toronto Dominion Bank, parent companyto the manager of the mutual funds, and to retain those securitiesprovided that a fund governance mechanism is used to overseethe holdings, purchases or sales of these securities for themutual funds and to ensure that such holdings, purchases orsales have been made free from any influence by the TorontoDominion Bank and without taking into account any considerationrelevant to the Toronto Dominion Bank.

Statutes Cited

Securities Act (Ontario), R.S.O. 1990 c. S.5,as am., 111(2)(a), 111(3) and 118(2)(a).

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN,

ONTARIO, QUEBEC, NOVA SCOTIAAND

NEWFOUNDLAND AND LABRADOR

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

TD ASSET MANAGEMENT INC. ("TDAM")

TD CANADIAN T-BILL FUND

TD CANADIAN MONEY MARKET FUND

TD PREMIUM MONEY MARKET FUND

TD US MONEY MARKET FUND

TD HIGH YIELD INCOME FUND

TD CANADIAN BOND FUND

TD SHORT TERM BOND FUND

TD MORTGAGE FUND

TD GLOBAL RSP FUND

TD REAL RETURN BOND FUND

TD MONTHLY INCOME FUND

TD BALANCED FUND

TD BALANCED GROWTH FUND

TD BALANCED INCOME FUND

TD GLOBAL ASSET ALLOCATIONFUND

TD DIVIDEND GROWTH FUND

TD DIVIDEND INCOME FUND

TD CANADIAN VALUE FUND

TD CANADIAN EQUITY FUND

TD CANADIAN BLUE CHIP EQUITYFUND

TD CANADIAN SMALL CAP EQUITYFUND

TD US EQUITY FUND

TD US MID CAP GROWTH FUND

TD US SMALL CAP EQUITY FUND

TD US LARGE CAP VALUE FUND

TD US BLUE CHIP EQUITY FUND

TD US BLUE CHIP EQUITY RSPFUND

TD AMERIGROWTH RSP FUND

TD INTERNATIONAL EQUITY FUND

TD EUROPEAN GROWTH FUND

TD EUROPEAN GROWTH RSP FUND

TD JAPANESE GROWTH FUND

TD ASIAN GROWTH FUND

TD ASIAGROWTH RSP FUND

TD GLOBAL SELECT FUND

TD GLOBAL SELECT RSP FUND

TD INTERNATIONAL GROWTH FUND

TD EMERGING MARKETS FUND

TD EMERGING MARKETS RSP FUND

TD LATIN AMERICAN GROWTH FUND

TD HEALTH SCIENCES FUND

TD HEALTH SCIENCES RSP FUND

TD ENERGY FUND

TD PRECIOUS METALS FUND

TD SCIENCE AND TECHNOLOGYFUND

TD SCIENCE AND TECHNOLOGYRSP FUND

TD ENTERTAINMENT & COMMUNICATIONSFUND

TD ENTERTAINMENT & COMMUNICATIONSRSP FUND

TD RESOURCE FUND

(collectively, "TD MUTUALFUNDS")

TD MANAGED INCOME PORTFOLIO

TD MANAGED INCOME & MODERATEGROWTH PORTFOLIO

TD MANAGED BALANCED GROWTHPORTFOLIO

TD MANAGED AGGRESSIVE GROWTHPORTFOLIO

TD MANAGED MAXIMUM EQUITYGROWTH PORTFOLIO

TD MANAGED INCOME RSP PORTFOLIO

TD MANAGED INCOME & MODERATEGROWTH RSP PORTFOLIO

TD MANAGED BALANCED GROWTHRSP PORTFOLIO

TD MANAGED AGGRESSIVE GROWTHRSP PORTFOLIO

TD MANAGED MAXIMUM EQUITYGROWTH RSP PORTFOLIO

TD FUNDSMART MANAGED INCOMEPORTFOLIO

TD FUNDSMART MANAGED INCOME& MODERATE GROWTH PORTFOLIO

TD FUNDSMART MANAGED BALANCEDGROWTH PORTFOLIO

TD FUNDSMART MANAGED AGGRESSIVEGROWTH PORTFOLIO

TD FUNDSMART MANAGED MAXIMUMEQUITY GROWTH PORTFOLIO

TD FUNDSMART MANAGED INCOMERSP PORTFOLIO

TD FUNDSMART MANAGED INCOME& MODERATE GROWTH RSP PORTFOLIO

TD FUNDSMART MANAGED BALANCEDGROWTH RSP PORTFOLIO

TD FUNDSMART MANAGED AGGRESSIVEGROWTH RSP PORTFOLIO

TD FUNDSMART MANAGED MAXIMUMEQUITY GROWTH RSP PORTFOLIO

TD MANAGED INDEX INCOME PORTFOLIO

TD MANAGED INDEX INCOME &MODERATE GROWTH PORTFOLIO

TD MANAGED INDEX BALANCEDGROWTH PORTFOLIO

TD MANAGED INDEX AGGRESSIVEGROWTH PORTFOLIO

TD MANAGED INDEX MAXIMUM EQUITYGROWTH PORTFOLIO

TD MANAGED INDEX INCOME RSPPORTFOLIO

TD MANAGED INDEX INCOME &MODERATE GROWTH RSP PORTFOLIO

TD MANAGED INDEX BALANCEDGROWTH RSP PORTFOLIO

TD MANAGED INDEX AGGRESSIVEGROWTH RSP PORTFOLIO

TD MANAGED INDEX MAXIMUM EQUITYGROWTH RSP PORTFOLIO

(collectively, "TD MAPPortfolios")

TD PRIVATE CANADIAN BOND INCOMEFUND

TD PRIVATE U.S. EQUITY GROWTHFUND

TD PRIVATE CANADIAN BOND RETURNFUND

TD PRIVATE U.S. EQUITY INCOMEFUND

TD PRIVATE CANADIAN CORPORATEBOND FUND

TD PRIVATE RSP U.S. EQUITYFUND

TD PRIVATE NORTH AMERICANEQUITY GROWTH FUND

TD PRIVATE SMALL/MID-CAP EQUITYFUND

TD PRIVATE NORTH AMERICANEQUITY INCOME FUND

TD PRIVATE INTERNATIONAL EQUITYFUND

TD PRIVATE CANADIAN EQUITYGROWTH FUND

TD PRIVATE RSP INTERNATIONALEQUITY FUND

TD PRIVATE CANADIAN STRATEGICOPPORTUNITIES FUND

TD PRIVATE CANADIAN DIVIDENDFUND

TD PRIVATE GLOBAL STRATEGICOPPORTUNITIES FUND

(collectively, "TD PRIVATEFUNDS")

EMERALD CANADIAN SHORT TERMINVESTMENT FUND

EMERALD CANADIAN BALANCEDFUND

(collectively, "EMERALDPOOLED FUNDS")

MRRS DECISION DOCUMENT

WHEREAS TDAM has made an applicationto the local securities regulatory authority or regulator (the"Decision Maker") in each of the provinces of BritishColumbia, Alberta, Saskatchewan, Ontario, Québec, NovaScotia and Newfoundland and Labrador (the "Jurisdictions")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that the followingprovisions do not apply so as to prevent the TD Mutual Funds,the TD MAP Portfolios, the TD Private Funds and the EmeraldPooled Funds (collectively, the "Current Funds") aswell as such other funds within the three groups of CurrentFunds as TDAM may establish and advise from time to time (the"Future Funds") (the Current Funds and Future Fundsbeing hereinafter referred to individually as a "Fund"and collectively as the "Funds") from investing in,or continuing to hold an investment in, securities of The Toronto-DominionBank ("TD Bank"):

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

(b) the provision prohibiting a mutual fundfrom knowingly making or holding an investment in an issuerin which a substantial security holder of the mutual fund,its management company or its distribution company has asignificant interest; and

(c) the provision prohibiting a portfoliomanager from knowingly causing an investment portfolio managedby it to invest in any issuer in which a responsible personor an associate of a responsible person is an officer ordirector unless the specific fact is disclosed to the clientand the written consent of the client to the investmentis obtained before the purchase.

(the provisions of (a), (b) and (c) beingcollectively, the "Investment Restrictions")

AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice 14-101;

AND WHEREAS the Canadian securities administrators("CSA") recently released for comment its conceptproposal 81-402 titled "Striking a New Balance: A Frameworkfor Regulating Mutual Funds and their Managers" whichcontains, among other things, alternatives for mutual fund governance.The comment period ended June 7, 2002. The CSA has not yet developeda definitive model for mutual fund governance.

AND WHEREAS the CSA has a strategy fordealing with important matters on a timely basis even thoughthey may be part of a larger comprehensive policy study by theCSA.

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

AND WHEREAS it has been represented byTDAM to the Decision Makers that:

1. The Funds are, or will be, open-ended mutualfund trusts established, or mutual fund corporations incorporated,under the laws of the Province of Ontario.

2. TDAM is, or will be, the trustee and managerof, and the portfolio adviser to, each of the Funds.

3. The securities of the Funds are, or willbe, offered for sale in all of the provinces and territoriesof Canada and each of the Funds is, or will be, either (i)a reporting issuer under the Legislation that is not on alist of defaulting issuers maintained under the Legislation;or (ii) a mutual fund in Ontario.

4. TD Bank owns 100% of the outstanding commonshares of TDAM.

5. The Current Funds have not yet made anyinvestment in securities of TD Bank.

6. TDAM believes that it would be in the bestinterests of investors in the Funds to be permitted to investin securities of TD Bank, in keeping with the investment objectivesof the Funds, though only up to the limit allowed by applicableLegislation.

7. Although each of the directors, officersand employees of TDAM (the "TDAM Employees"), includingthose who participate in the formulation of, or have accessprior to implementation to, investment decisions made by TDAMon behalf of the Funds, is also a director, officer and/oremployee of TD Bank,

(a) each TDAM Employee works full time forTDAM;

(b) each TDAM Employee is dually employedby both TDAM and TD Bank for the sole purpose of subjectingemployment and pension benefit arrangements for the TDAMEmployees to a single federal regulatory scheme rather thana multiplicity of provincial and territorial regulatoryschemes; and

(c) each TDAM Employee who has access tomaterial information in relation to TD Bank that has notbeen generally disclosed (an "Access Person")is subject to TD Bank's "Trading Windows Policy"which prohibits Access Persons from engaging in any tradingin securities of TD Bank while the trading window is closedand while the Access Person is in possession of undisclosedmaterial information in relation to TD Bank.

8. TDAM will create an Independent ReviewCommittee (the "Independent Committee"), comprisedentirely of individuals who are wholly independent of TDAM,to oversee the holdings, purchases and sales of securitiesof TD Bank by the Funds.

9. The Independent Committee shall reviewthe holdings, purchases and sales of securities of TD Bankto ensure that they have been made free from any influenceby TD Bank and without taking into account any considerationrelevant to TD Bank.

10. The Independent Committee will take intoconsideration the best interests of unitholders of the Fundsand no other factors.

11. The compensation that is payable to membersof the Independent Committee will be allocated among the Fundsin a manner that is considered by the Independent Committeeto be fair and reasonable.

12. Within thirty days of the end of eachmonth in which TDAM purchases or sells securities of TD Bankon behalf of one or more Funds, TDAM shall file the reporton SEDAR contemplated by paragraph (n) below disclosing thename of each Fund that purchased or sold securities of TDBank during the month, the number or amount of TD Bank securitiespurchased or sold by each Fund and the volume weighted averageprice paid or received for the TD Bank securities by eachFund.

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

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers pursuantto the Legislation is that:

1. the Funds are exempt from the InvestmentRestrictions so as to enable the Funds to invest in securitiesof TD Bank; and

2. this Decision, as it relates to the jurisdictionof a Decision Maker, will terminate one year after the publicationin final form of any legislation or rule of that DecisionMaker dealing with mutual fund governance in a manner thatconflicts with or makes inapplicable any provision of thisDecision;

provided that:

(a) TDAM has appointed the Independent Committeeto review the Funds' purchases, sales and continued holdingsof securities of TD Bank;

(b) the Independent Committee has at leastthree members, none of whom is an associate or employeeof (i) TDAM, (ii) any portfolio adviser to the Funds; or(iii) any associate or affiliate of TDAM or a portfolioadviser to the Funds;

(c) the Independent Committee has a writtenmandate describing its duties and standard of care which,as a minimum, sets out the conditions of this Decision;

(d) the members of the Independent Committeeexercise their powers and discharge their duties honestly,in good faith and in the best interests of investors inthe Funds and, in doing so, exercise the degree of care,diligence and skill that a reasonably prudent person wouldexercise in the circumstances;

(e) none of the Funds relieves the membersof the Independent Committee from liability for loss thatarises out of a failure to satisfy the standard of careset out in paragraph (d);

(f) none of the Funds indemnifies the membersof the Independent Committee against legal fees, judgmentsand amounts paid in settlement as a result of a breach ofthe standard of care set out in paragraph (d);

(g) none of the Funds incurs the cost ofany portion of liability insurance that insures a memberof the Independent Committee for a liability for loss thatarises out of a failure to satisfy the standard of careset out in paragraph (d);

(h) the cost of any indemnification or insurancecoverage paid for by TDAM, any portfolio adviser to theFunds, or any associate or affiliate of TDAM or a portfolioadviser to the Funds to indemnify or insure the membersof the Independent Committee in respect of a loss that arisesout of a failure to satisfy the standard of care set outin paragraph (d) is not paid either directly or indirectlyby the Funds;

(i) the Independent Committee reviews theFunds' purchases, sales and continued holdings of securitiesof TD Bank on a regular basis, but not less frequently thanevery three months;

(j) the Independent Committee forms theopinion at any time, after reasonable inquiry, that thedecisions made on behalf of each Fund by TDAM or the Fund'sportfolio adviser to purchase, sell or continue to holdsecurities of TD Bank were and continue to be in the bestinterests of the Fund, and to:

(i) represent the business judgement ofTDAM or the Fund's portfolio adviser, uninfluenced byconsiderations other than the best interests of the Fund;

(ii) have been made free from any influenceby TD Bank and without taking into account any considerationrelevant to TD Bank; and

(iii) not exceed the limitations of theapplicable legislation.

(k) the determination made by the IndependentCommittee pursuant to paragraph (j) is included in detailedwritten minutes provided to TDAM not less frequently thanevery three months;

(l) the Independent Committee advises theDecision Makers in writing of:

(i) any determination by it that the conditionset out in paragraph (j) has not been satisfied with respectto any purchase, sale or holding of securities of TD Bank;

(ii) any determination by it that anyother condition of this Decision has not been satisfied;

(iii) any action it has taken or proposesto take following the determinations referred to above;and

(iv) any action taken, or proposed tobe taken, by TDAM or a portfolio adviser to the Fundsin response to the determinations referred to above;

(m) the existence, purpose, duties and obligationsof the Independent Committee, the names of its members,whether and how they are compensated by the Funds, and thefact that they meet the requirements of the condition setout in paragraph (b) are disclosed:

(i) in a press release issued, and a materialchange report filed, prior to reliance on the Decision;

(ii) in item 12 of Part A of the simplifiedprospectus of the Funds; and

(iii) on TDAM's internet website; and

(n) the reports required to be filed pursuantto the Legislation with respect to every purchase and saleof securities of TD Bank are filed on SEDAR in respect ofthe relevant Fund.

January 10, 2002.

"Howard I. Wetston"                    "TheresaMcLeod"