A variation of a prior order to permit investmentsby Top Funds in securities of Underlying Funds for a specifiedpurpose - exempted from the reporting requirements and self-dealingprohibitions of clauses 111(2)(b), 111(3) and clause 117(1)(a)and (d).
Securities Act (Ontario), R.S.O. c. S.5, asam., 111(2)(b), 111(3), 117(1)(a), and 117(1)(d).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN
ONTARIO, NOVA SCOTIA, AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
TD ASSET MANAGEMENT INC.
THE TD MANAGED ASSETS PROGRAMPORTFOLIOS
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatoryauthority or regulator (collectively, the Decision Makers")in each of the provinces of British Columbia, Alberta, Saskatchewan,Ontario, Nova Scotia and Newfoundland and Labrador (collectively,the "Jurisdictions") has received an application fromTD Asset Management Inc. ("TDAM") for a decision byeach Decision Maker (collectively, the "Decision")under the securities legislation of the Jurisdictions (the "Legislation")revoking and replacing the MRRS Decision Document dated November29, 2001 entitled In the Matter of TD Asset Management Inc.and The TD Managed Assets Program Portfolios (the "ExistingDecision Document") which decided that the Applicable Requirements(as defined below) did not apply to TDAM or the TD Managed AssetsProgram Portfolios (as defined in Schedule "A", collectively,the "Existing Top Funds") and other mutual funds managedby TDAM after the date of the Existing Decision Document thatwill have an investment objective to invest substantially allof their assets in other mutual funds (individually, a "FutureTop Fund" and together with the Existing Top Funds, the"Top Funds"), as the case may be, in respect of certaininvestments to be made by the Top Funds in units of a mutualfund managed by TDAM or a person or company unrelated to TDAM(together, the "Existing Underlying Funds") and futuremutual funds managed by TDAM or a person or company unrelatedto TDAM (the "Future Underlying Funds" and collectivelywith the Existing Underlying Funds, the "Underlying Funds");
AND WHEREAS TDAM, as manager of the TopFunds, has requested a Decision that the following provisionsof the Legislation (the "Applicable Requirements")shall not apply to TDAM or the Top Funds, as the case may be,in respect of certain investments to be made from time to timeby a Top Fund in securities of an Underlying Fund:
1. the restrictions contained in the Legislationprohibiting a mutual fund from knowingly making or holdingan investment in a person or company in which the mutual fund,alone or together with one or more related mutual funds, isa substantial securityholder; and
2. the requirements contained in the Legislationrequiring a management company, or in British Columbia, amutual fund manager, to file a report relating to a purchaseor sale of securities between the mutual fund and any relatedperson or company, or any transaction in which, by arrangementother than an arrangement relating to insider trading in portfoliosecurities, the mutual fund is a joint participant with oneor more of its related persons or companies;
AND WHEREAS under the Mutual RelianceReview System ("MRRS") for Exemptive Relief Applications(the "System"), the Ontario Securities Commissionis the principal regulator for this application;
AND WHEREAS unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 - Definitions;
AND WHEREAS TDAM has represented to theDecision Makers as follows:
1. TDAM is a corporation incorporated underthe laws of Ontario and is a wholly-owned subsidiary of TheToronto-Dominion Bank ("TD Bank") and is the manageror will be the manager of the Top Funds and the TD UnderlyingFunds (collectively, the "TD Funds" and "TDUnderlying Funds" being Underlying Funds that are orwill be managed by TDAM).
2. TDAM's head office is located in Toronto,Ontario. TDAM is registered as an investment counsel and portfoliomanager or their equivalent in all provinces and territoriesother than Prince Edward Island, as a mutual fund dealer inQuebec, as a limited market dealer in Ontario and Newfoundlandand Labrador, and as a commodity trading manager under theCommodity Futures Act (Ontario).
3. Each of the TD Funds is or will be an open-endedmutual fund trust or mutual fund corporation established underthe laws of Ontario or Canada, as the case may be. Units ofeach of the TD Funds are or will be qualified for distributionin all of the provinces and territories of Canada pursuantto a simplified prospectus and annual information form filedwith and accepted by the Decision Makers.
4. Each of the TD Funds is or will be a reportingissuer in each of the provinces and territories of Canadaand will not be in default of any of the requirements of theLegislation.
5. As part of its investment objective, eachof the Top Funds invests or will invest a certain fixed percentage(the "Fixed Percentages") of its assets (excludingcash and cash equivalents) in units of specified UnderlyingFunds, subject to a variation of 2.5% above or below the FixedPercentages (the "Permitted Ranges") to accountfor market fluctuations.
6. Certain Top Funds (the "RSP Top Funds")have or will have an objective to limit its holdings in foreignproperty such that its units are or will not be foreign propertyunder Part XI of the Income Tax Act (Canada) (the "TaxAct").
7. TDAM now wishes to revoke and replace theExisting Decision Document so that the RSP Top Funds may investin the Underlying Funds in the same manner as the other TopFunds invest, as described in paragraph 5, on substantiallythe same terms as other "passive" fund-on-fund structures,subject to compliance with restrictions in the Tax Act relatingto holdings of foreign property.
8. Investments of each Top Fund will be madein accordance with the fundamental investment objectives ofthe Top Fund.
9. A Top Fund will not invest in an UnderlyingFund with an investment objective which includes investingdirectly or indirectly in other mutual funds.
10. The simplified prospectus for each ofthe Top Funds will disclose the investment objectives, investmentstrategies, risks and restrictions of the Top Fund and theinvestment objectives and risk factors of the Underlying Funds,the adviser to the Underlying Funds and the Fixed Percentagesand the Permitted Ranges.
11. The investments by the Top Funds in securitiesof the Underlying Funds represent the business judgement of"responsible persons" (as that term in defined inthe Legislation) uninfluenced by considerations other thanthe best interests of the Top Funds.
12. Except to the extent evidenced by thisDecision and specific approvals granted by the Decision Makerspursuant to National Instrument 81-102 - Mutual Funds("NI 81-102"), the investments by each of the TopFunds in the Underlying Funds have been structured to complywith the investment restrictions of the Legislation and NI81-102.
13. In the absence of this Decision, pursuantto the Legislation, each Top Fund is prohibited from knowinglymaking or holding an investment in a person or company inwhich the mutual fund, alone or together with one or morerelated mutual funds, is a substantial security holder. Asa result, in the absence of this Decision, each Top Fund wouldbe required to divest itself of any such investments.
14. In the absence of this Decision, the Legislationrequires TDAM to file a report on every purchase or sale ofsecurities of the Underlying Funds by a Top Fund.
AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(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 underthe Legislation is that the Existing Decision Document is herebyrevoked and replaced with the following Decision with effectas of, and from, the date hereof;
AND THE DECISION of the Decision Makersunder the Legislation is that the Applicable Requirements shallnot apply so as to prevent the Top Funds from making and holdingan investment in securities of the Underlying Funds or requireTDAM to file a report relating to the purchase and sale of suchsecurities;
PROVIDED IN EACH CASE THAT:
1. The 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 matters in section 2.5 of NI 81-102.
2. The Decision shall only apply if, at thetime a Top Fund makes or holds an investment in its UnderlyingFunds, the following conditions are satisfied:
(a) the securities of both the Top Fundand the Underlying Funds are being offered for sale in thejurisdiction of the Decision Maker pursuant to a simplifiedprospectus and annual information form which has been filedand accepted by the Decision Maker;
(b) the investment by the Top Fund in theUnderlying Funds is compatible with the fundamental investmentobjectives of the Top Fund;
(c) the simplified prospectus disclosesthe intent of the Top Fund to invest in securities of theUnderlying Funds, the names of the Underlying Funds, theFixed Percentages and the Permitted Ranges within whichsuch Fixed Percentages may vary;
(d) the investment objective of the TopFund discloses that the Top Fund invests in securities ofother mutual funds;
(e) the Underlying Funds are not mutualfunds whose investment objective includes investing directlyor indirectly in other mutual funds;
(f) the Top Fund invests its assets (exclusiveof cash and cash equivalents) in the Underlying Funds inaccordance with the Fixed Percentages disclosed in the simplifiedprospectus;
(g) the Top Fund's holding of securitiesin the Underlying Funds does not deviate from the PermittedRanges;
(h) subject to condition (j) with respectto the RSP Top Funds, any deviation from the Fixed Percentagesis caused by market fluctuations only;
(i) subject to condition (j) with respectto the RSP Top Funds, if an investment by the Top Fund inany of the Underlying Funds has deviated from the PermittedRanges as a result of market fluctuations, the Top Fund'sinvestment portfolio was re-balanced to comply with theFixed Percentages on the next day on which the net assetvalue was calculated following the deviation;
(j) if, due to the foreign property investmentlimitations under the Tax Act, the RSP Top Fund was precludedfrom purchasing additional securities or re-instating theFixed Percentages in order to comply with condition (i),or the RSP Top Fund was re-balanced in order to comply withthose foreign property investment limitations and such re-balancingrequired the RSP Top Fund to temporarily deviate beyondthe Permitted Ranges, the RSP Top Fund complied with condition(i) as soon as it was possible to do so in compliance withthose foreign property investment limitations;
(k) if the Fixed Percentages and the UnderlyingFunds which are disclosed in the simplified prospectus havebeen changed, either the simplified prospectus has beenamended in accordance with securities legislation to reflectthis significant change, or a new simplified prospectusreflecting the significant change has been filed withinten days thereof, and the securityholders of the Top Fundhave been given at least 60 days' notice of the change;
(l) there are compatible dates for the calculationof the net asset value of the Top Fund and the UnderlyingFunds for the purpose of the issue and redemption of thesecurities of such mutual funds;
(m) no sales charges are payable by theTop Fund in relation to its purchase of securities in theUnderlying Funds;
(n) no redemption fees or other chargesare charged by an Underlying Fund in respect of the redemptionby the Top Fund of securities of the Underlying Fund ownedby the Top Fund;
(o) no fees or charges of any sort are paidby the Top Fund and the Underlying Funds, by their respectivemanagers or principal distributors, or by any affiliateor associate of any of the foregoing entities, to anyonein respect of the Top Fund's purchase, holding or redemptionof the securities of the Underlying Funds other than trailingcommissions paid to TDAM by the Underlying Funds managedby a person or company unrelated to TDAM;
(p) the arrangements between or in respectof the Top Fund and the Underlying Funds are such as toavoid the duplication of management fees;
(q) any notice provided to securityholdersof an Underlying Fund as required by applicable laws orthe constating documents of that Underlying Fund has beendelivered by the Top Fund to its securityholders;
(r) all of the disclosure and notice materialprepared in connection with a meeting of securityholdersof the Underlying Funds and received by the Top Fund hasbeen provided to its securityholders, the securityholdershave been permitted to direct a representative of the TopFund to vote its holdings in the Underlying Fund in accordancewith their direction, and the representative of the TopFund has not voted its holdings in the Underlying Fundsexcept to the extent the securityholders of the Top Fundhave directed;
(s) in addition to receiving the annualand, upon request, the semi-annual financial statements,of the Top Fund, securityholders of the Top Fund have receivedappropriate summary disclosure in respect of the Top Fund'sholdings of securities of the Underlying Funds in the financialstatements of the Top Fund; and
(t) to the extent that the Top Fund andthe Underlying Funds do not use a combined simplified prospectusand annual information form containing disclosure aboutthe Top Fund and the Underlying Funds, copies of the simplifiedprospectus and annual information form of the UnderlyingFunds have been provided upon request to securityholdersof the Top Fund and the right to receive these documentsis disclosed in the prospectus of the Top Fund.
September 26, 2003.
"Robert W. Davis"
"Paul M. Moore"