A variation of a prior order to permit the RSPFunds to enter into forward contracts with a related counterparty,or its affiliates, once pricing is reviewed by an independentcommittee or its contract auditor - exempted from the reportingrequirements and self-dealing prohibitions of clauses 111(2)(a)and 111(2)(c)(ii), subsection 111(3), clauses 117(1)(a) and(d), clause 118(2)(a).
Securities Act (Ontario), R.S.O. c. S.5, asam., ss. 111(2)(a), 111(2)(c)(ii), 111(3), 113, 117(1)(a) and(d), 117(2), 118(2)(a), 121(2)(a)(ii) and 144.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN,
ONTARIO, QUEBEC, NOVA SCOTIAAND NEWFOUNDLAND AND LABRADOR
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
TD ASSET MANAGEMENT INC.
TD EMERGING MARKETS RSP FUND
TD ENTERTAINMENT & COMMUNICATIONSRSP FUND
TD EUROPEAN GROWTH RSP FUND
TD GLOBAL SELECT RSP FUND
TD HEALTH SCIENCES RSP FUND
TD SCIENCE & TECHNOLOGYRSP FUND
TD U.S. BLUE CHIP EQUITY RSPFUND
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Ontario, Quebec,Nova Scotia and Newfoundland and Labrador (the "Jurisdictions")has received an application (the "Application") fromTD Asset Management Inc. ("TDAM") in its own capacityand on behalf of TD Emerging Markets RSP Fund, TD Entertainment& Communications RSP Fund, TD European Growth RSP Fund,TD Global Select RSP Fund, TD Health Sciences RSP Fund, TD Science& Technology RSP Fund and TD U.S. Blue Chip Equity RSP Fund(individually, a "TD RSP Fund" and collectively, the"TD RSP Funds") and other mutual funds managed byTDAM after the date of this decision having an investment objectiveor strategy that links its return to the returns of anotherspecified mutual fund while remaining 100% eligible for registeredplans under the Income Tax Act (Canada) (individually,a "Future RSP Fund" and collectively, the "FutureRSP Funds", and together with the TD RSP Funds, individually,an "RSP Fund" and collectively, the "RSP Funds")for a decision (the "Decision") pursuant to the securitieslegislation of the Jurisdictions (the "Legislation")that the following requirements and restrictions contained inthe Legislation (the "Requirements") shall not applyin respect of certain investments to be made by the RSP Fundsin forward contracts and other specified derivatives ("DerivativeContracts") with The Toronto-Dominion Bank ("TD Bank")or any of its affiliates or associates (with TD Bank, each a"Related Counterparty") (such Derivatives Contracts,"TD Contracts") as counterparty:
A. the Requirements prohibiting each RSP Fundfrom knowingly making or holding an investment in any personor company who is a substantial securityholder of the mutualfund, its management company or distribution company;
B. the Requirements prohibiting a mutual fundfrom knowingly making and holding an investment in an issuerin which any person or company who is a substantial securityholder of the mutual fund, its management company or distributioncompany has a significant interest;
C. the Requirements requiring TDAM to filea report relating to a purchase or sale of securities betweenan RSP Fund and any related person or company; and
D. the Requirements prohibiting TDAM fromknowingly causing an RSP Fund to invest in any person or companyin which a director, officer or employee of TDAM is a directoror officer;
AND WHEREAS TDAM has previously receivedrelief for the RSP Funds to enter into forward contracts andother specified derivatives with TD Bank in the MRRS DecisionDocument dated September 15, 2000 (the "Existing DecisionDocument") which relief will be revoked and replaced withthis Decision;
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 TDAM has represented to theDecision Makers as follows:
1. TDAM is a corporation incorporated underthe laws of Ontario. TDAM is a wholly-owned subsidiary ofTD Bank. The registered and head office of TDAM is locatedin Ontario.
2. TDAM is, or will be, the manager and trusteeof the RSP Funds and it is, or will be, the manager and trusteeof the corresponding mutual fund (the "Underlying Fund")in which each RSP Fund invests its assets both directly andindirectly.
3. Each of the RSP Funds is, or will be, anopen-ended mutual fund trust established under the laws ofOntario which is, or will be, qualified for distribution inall Jurisdictions by means of simplified prospectuses andannual information forms (collectively, the "Prospectus").Each RSP Fund is, or will be, a reporting issuer under thesecurities laws of each of the provinces and territories ofCanada and none of the TD RSP Funds is currently in defaultof any requirements of the Legislation. The Prospectus discloses,or will disclose the relationship that exists between TDAM,the Related Counterparty (as applicable) and each RSP Fund.
4. Each Underlying Fund is, or will be anopen-ended mutual fund trust established under the laws ofOntario which is, or will be qualified for distribution inall Jurisdictions by means of simplified prospectuses andannual information forms. Each Underlying Fund is, or willbe, a reporting issuer under the securities laws of each ofthe provinces and territories of Canada and none of the UnderlyingFunds is currently in default of any requirements of the Legislation.
5. Each RSP Fund seeks, or will seek to achieveits investment objective while ensuring that securities ofthe Fund do not, or will not, constitute "foreign property"for tax-deferred retirement savings plans ("RegisteredPlans").
6. The Prospectus contains, or will containdisclosure with respect to the investment objective and investmentpolicies of each RSP Fund. The investment objective of eachRSP Fund is, or will be, to achieve long-term capital appreciationprimarily by investing in derivative instruments that permit,or will permit, the RSP Fund to link its returns to the returnsof its corresponding Underlying Fund, while ensuring thatsecurities of the RSP Fund do not constitute "foreignproperty" for Registered Plans. In order to achieve itsinvestment objective, each RSP Fund uses, or will use, DerivativeContracts to obtain exposure to its corresponding UnderlyingFund and it also invests, or will invest directly in its correspondingUnderlying Fund as described in paragraph 8 herein.
7. The investment objective of each UnderlyingFund is, or will be, achieved through investment primarilyin foreign securities.
8. As each RSP Fund invests, or will invest,its assets in securities such that its securities will be"qualified investments" for Registered Plans andwill not constitute foreign property in a Registered Plan,the direct investment by an RSP Fund in its correspondingUnderlying Fund is, or will be, made in an amount which doesnot exceed the maximum percentage under the foreign propertylimits under the Tax Act (the "Foreign Property Maximum").The amount of direct investment by each RSP Fund will be adjustedfrom time to time so that, except for transitional cash, theaggregate of Derivative Contract exposure to, and direct investmentin, its Underlying Fund will equal 100% of the assets of theRSP Fund.
9. A Related Counterparty may, from time totime, invest directly in securities of an Underlying Fundas a hedge against its obligations under its TD Contractswith an RSP Fund.
10. TDAM will engage an independent internationallyrecognized accounting firm (the "Contract Auditor")or request an independent committee (comprised of individuals,none of whom are directors, officers or employees of TD Bankor its affiliates or associates) (the "Independent Committee')to review and assess the then current pricing and terms ofDerivative Contracts between the Related Counterparties andother third party mutual fund groups ("Arm's Length Contracts")which offer mutual funds which have investment objectiveswhich are similar to the investment objectives of the RSPFunds ("Third Party RSP Funds"). The Contract Auditoror Independent Committee, as applicable, will compare thepricing and terms of Arm's Length Contracts respecting ThirdParty RSP Funds with the proposed pricing and terms of eachTD Contract. The Contract Auditor will provide TDAM with anopinion (the "Contract Auditor's Opinion") or theIndependent Committee will provide its confirmation respectingthe relative competitiveness of the pricing and terms of theTD Contract.
11. TDAM will not cause an RSP Fund to enterinto a TD Contract unless the Contract Auditor's Opinion orIndependent Committee's confirmation concludes that the proposedpricing and terms of the TD Contract are at least as favourableas the pricing and terms of Arm's Length Contracts respectingThird Party RSP Funds that are similar in size to the RSPFunds and the Contract Auditor's Opinion or Independent Committee'sconfirmation is received and accepted by TDAM's board of directors.
12. Except to the extent evidenced by thisDecision and specific approvals granted by the Canadian securitiesadministrators ("CSA") pursuant to National Instrument81-102, the investment by each RSP Fund in its correspondingUnderlying Fund or Derivative Contracts have been, or willbe, structured to comply with the investment restrictionsof the Legislation and National Instrument 81-102.
13. In the absence of this Decision, pursuantto the Legislation, each RSP Fund is prohibited from (a) knowinglymaking an investment in a person or company who is a substantialsecurityholder of TDAM; (b) knowingly making and holding aninvestment in an issuer in which any person or company whois a substantial security holder of the mutual fund, its managementcompany or distribution company has a significant interest;and (c) knowingly holding an investment referred to in subsection(a) or (b) hereof. As a result, in the absence of this Decision,an RSP Fund would be required to divest itself of any investmentsreferred to in subsection (a) or (b) herein.
14. In the absence of this Decision, the Legislationrequires TDAM to file a report in respect of each TD Contract.
15. In the absence of this Decision, pursuantto the Legislation, TDAM is prohibited from knowingly causingan RSP Fund to invest in any person or company in which adirector, officer or employee of TDAM is a director or officer.
16. The investment in TD Contracts by eachRSP Fund represents, or will represent, the business judgementof responsible persons uninfluenced by considerations otherthan the best interests of the RSP Fund.
AND WHEREAS pursuant to the System thisDecision evidences the decision of each Decision Maker;
AND WHEREAS each Decision Maker is satisfiedthat the test contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision hasbeen met;
THE DECISION of the Decision Makers underthe Legislation is that the Existing Decision Document is herebyrevoked; and
THE DECISION of the Decision Makers pursuantto the Legislation is that the Requirements shall not applyin respect of TD Contracts entered into by an RSP Fund, providedthe RSP Fund's investments in TD Contracts are made in accordancewith the following conditions:
1. the Contract Auditor or the IndependentCommittee reviews and assesses the pricing and terms of Arm'sLength Contracts in respect of Third Party RSP Funds thatare similar in size to the RSP Fund and compares such pricingand terms to the proposed pricing and terms of the TD Contract;
2. the Contract Auditor provides TDAM witha Contract Auditors Opinion or the Independent Committee providesits confirmation which concludes that the proposed pricingand terms of the TD Contract are at least as favourable asthe pricing and terms of such Arm's Length Contracts;
3. the Contract Auditor or the IndependentCommittee reconsiders and reassesses the TD Contract wheneverthe Prospectus is renewed and whenever it is proposed to amendthe pricing and terms of the TD Contract;
4. the Prospectus identifies the applicableRelated Counterparty as the counterparty to the TD Contractand discloses the relationship that exists between TDAM, theapplicable Related Counterparty and the RSP Fund;
5. the Prospectus describes the Contract Auditor'sor the Independent Committee's role of assessing and reassessingthe TD Contract for the purpose of ensuring that the pricingand terms of the TD Contract are at least as favourable asthen current Arm's Length Contracts respecting Third PartyRSP Funds that are similar in size to the RSP Fund; and
6. in Quebec, any Future RSP Fund will firstseek the consent of the Commission des Valeurs in Quebec priorto relying on this Decision Document.
October 2, 2003.
"Robert L. Shirriff"
"Paul M. Moore"