Securities Law & Instruments


Hedge funds exempted from requirements to filestatements of investment portfolio and statements of portfoliotransactions provided disclosure given to investors.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am.,s. 147.

Regulations Cited

Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., s. 89(1) and s. 92(1).



R.S.O. 1990, CHAPTER S.5,AS AMENDED (the "Act")




(the "Regulation")










(Subsections 89(1)(b), 89(1)(c),92(1)(c) and 92(1)(d) of the Regulation)

UPON the application of TD Asset ManagementInc. ("TDAM") and the Emerald Canadian Equity MarketNeutral Fund, Emerald U.S. Equity Market Neutral Fund, EmeraldNorth American Equity Long/Short Fund and other future Emeraldhedge funds managed by TDAM and operated on substantially thesame basis as such funds (each a "Fund", and collectivelythe "Funds"), to the Ontario Securities Commission(the "Commission") for an order pursuant to section147 of the Act that the Funds be exempted from filing with theCommission the statements of investment portfolio and statementsof portfolio transactions pursuant to subsections 89(1)(b),89(1)(c), 92(1)(c) and 92(1)(d) of the Regulation (collectivelythe "Portfolio Disclosure") that must be includedwith the interim and annual and annual financial statementsof the Funds.

AND UPON considering the applicationand the recommendation of the staff of the Commission;

AND UPON TDAM having represented to theCommission as follows:

1. TDAM is a corporation amalgamated underthe Business Corporations Act (Ontario). TDAM is inthe business of portfolio management and investment counselling.TDAM is a wholly-owned subsidiary of The Toronto-DominionBank (the "Bank").

2. The Funds are being established by TDAMas investment vehicles through which sophisticated investorscan participate in hedging and arbitrage investment opportunities.

3. Each of the Funds will be created underOntario law by a trust agreement (the "Trust Agreement")between TDAM, as manager of the Fund, and The Canada TrustCompany (the "Trustee"), as trustee of the Fund.The Trustee is a wholly-owned subsidiary of the Bank.

4. The interest of each beneficiary (a "Unitholder")of a Fund will be described by reference to units (the "Units")of the Fund. Each Fund will be authorized to issue an unlimitednumber of units of the Fund. There will be three series ofUnits of each Fund, the terms of which will be identical exceptthat the following items may differ depending on the series:the initial sales charge, if any, paid by a Unitholder inconnection with a purchase of Units; the management fee paidby a Fund to TDAM; and the performance fee, if any, paid bya Unitholder to TDAM. Subject to the differences in managementand performance fees based on the series of Units held, aholder of a Unit will be entitled to participate equally withall other holders of Units in the distribution of net incomeand net taxable capital gains realized by the Fund and, onliquidation, to participate equally in the distribution ofassets of the Fund remaining after satisfaction of outstandingliabilities.

5. The Units of the Funds will be sold inreliance on exemptions from the prospectus requirements ofapplicable Canadian securities laws. TDAM will be sellingthe Units of the Funds in each of the provinces of Canadaon the basis of the appropriate broker or dealer registrationor in reliance on exemptions from the registration requirementsof applicable Canadian securities laws except for certainseries of Units of the Funds which will be sold by registereddealers other than TDAM. It is expected that Units will besold to institutional investors and high net worth individualswho qualify as "accredited investors" in Ontarioor who purchase Units with an aggregate acquisition cost ofat least $150,000, pursuant to sections 2.3 and 2.12 of OntarioSecurities Rule 45-501 - Exempt Distributions ("OSC Rule45-501"), respectively, and pursuant to similar exemptionsin other Canadian provinces. In offering the Funds, TDAM willimpose a minimum purchase requirement of at least $100,000in the case of individuals and at least $1,000,000 for institutionsor any higher minimum purchase thresholds required by applicableCanadian securities laws. It is expected that Units will alsobe sold to portfolio managers and other employees of TDAMand its affiliates (the "TD Employees") who qualifyas "consultants" under Ontario Securities CommissionRule 45-503 - Trades to Employees, Executives and Consultantsor as accredited investors under OSC Rule 45-501. It is expectedthat the TD Employees will purchase Units of the Funds inorder to align the interests of the TD Employees with theinvestors in the Funds. TD Employees will be subject to aminimum purchase requirement of at least $25,000.

6. The terms of the Units of each Fund willbe described in an offering circular that will be filed withprovincial securities regulators to the extent required byapplicable Canadian securities laws. The offering circularwill disclose that the Portfolio Disclosure will not be availablethrough SEDAR.

7. The Funds will not be subject to the requirementsof National Instrument 81-101 - Mutual Fund Prospectus Disclosurenor National Instrument 81-102 - Mutual Funds.

8. No series of Units of any Fund will belisted on any stock exchange.

9. The Funds will meet the definition of a"mutual fund in Ontario" as defined in section 1(1)of the Act and will thus be required to file interim financialstatements under section 77(2) of the Act and annual financialstatements under section 78(1) of the Act (collectively, the"Financial Statements").

10. Pursuant to sections 89(1)(b) and 89(1)(c)of the Regulation with respect to interim financial statementsand sections 92(1)(c) and 92(1)(d) of the Regulation withrespect to annual financial statements, the Portfolio Disclosuremust be included with the interim and annual financial statementsof each of the Funds for or as at the end of the applicableperiod.

11. The Financial Statements, including thePortfolio Disclosure, must be filed with the Commission throughSEDAR and thus become publicly available.

12. As such, the Portfolio Disclosure willnecessarily reveal key proprietary information regarding thespecific strategies and positions developed by the portfoliomanagers of each of the Funds.

13. At the time of their initial investmentin a Fund, Unitholders will be asked to sign a confidentialityagreement in which they will agree to not provide the PortfolioDisclosure to third parties and in which they will acknowledgethat the Portfolio Disclosure will not be available on SEDAR.Unitholders will only be permitted to provide the PortfolioDisclosure to their advisors if their advisors have also signeda similar confidentiality agreement.

14. In addition to receiving the FinancialStatements, including the Portfolio Disclosure, Unitholderswill be provided with a quarterly risk report outlining variousapplicable risk measurements such as correlation, leverageand standard deviation relevant to the Fund (the "BaseReport"). The Funds will file with the Commission throughSEDAR the Base Report delivered to Unitholders at the timeof filing the Financial Statements.

15. In addition, Unitholders will be advisedthat Section 5900 Audit of Control Processes in respect ofeach Fund will be completed at least once a year (the "AuditReport"). The Audit Report will be available to Unitholdersor the Commission on a confidential basis upon request.

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS ORDERED, pursuant to subsection147 of the Act, that the Funds be exempted from the requirementsin sections 89(1)(b), 89(1)(c), 92(1)(c) and 92(1)(d) of theRegulation to file the Portfolio Disclosure with the Commissionprovided that:

1. The Funds will prepare and deliver to Unitholdersthe Financial Statements, including the Portfolio Disclosure,in the form and for the periods required under the Act andthe Regulation;

2. The Funds will file the Base Report andthe Financial Statements, excluding the Portfolio Disclosure,with the Commission through SEDAR;

3. The Funds will provide the Portfolio Disclosureand the Audit Report on a confidential basis to the Commissionimmediately upon the request of the Commission; and

4. In all other aspects, the Funds will complywith the requirements in Ontario securities law for financialstatements.

March 7, 2003.

"Robert L. Shirriff"                    "TheresaMcLeod"