TD Asset Management Inc. and TD Private Canadian Strategic Opportunities Fund - MRRS Decision

MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications- exemption from unitholder approval requirement in clause 5.1(c) of NI 81-102- mutual fund permitted to change its investment objective without seeking unitholder approval - -- all unitholders of the fund have entered into separately managed account agreements giving full discretionary authority to portfolio manager- convening of unitholder meeting represents unnecessary cost and inconvenience to filer, the mutual fund and the unitholders.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, clause 5.1(c).

June 20, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO,

QUÉBEC, NEW BRUNSWICK, NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR, YUKON TERRITORY, NORTHWEST

TERRITORIES AND NUNAVUT TERRITORY

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

TD ASSET MANAGEMENT INC. (the Filer)

AND

IN THE MATTER OF

TD PRIVATE CANADIAN STRATEGIC OPPORTUNITIES FUND

(the Fund)

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer, on behalf of the Fund, for a decision (the Requested Relief) under the securities legislation of the Jurisdictions (the Legislation) exempting the Fund from the requirement contained in clause 5.1(c) of National Instrument 81-102 Mutual Funds (NI 81-102) requiring a mutual fund to obtain approval of its securityholders before changing the fundamental investment objective of the Fund;

Under the Mutual Reliance Review System for Exemptive Relief Applications:

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

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

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

1. The Filer is a corporation amalgamated under the Business Corporations Act (Ontario). It is a wholly-owned subsidiary of The Toronto-Dominion Bank, a bank listed in Schedule I to the Bank Act (Canada).

2. The Filer is registered as an investment counsel and portfolio manager or their equivalent in all provinces and territories of Canada, as a limited market dealer under the Securities Act (Ontario) (the Ontario Act) and the Securities Act (Newfoundland and Labrador) (the Newfoundland Act), and as a commodity trading manager under the Commodity Futures Act (Ontario).

3. The Filer conducts an investment management business which offers passive, quantitative, enhanced and active portfolio management services to a large and diversified client base. As part of its portfolio management business, the Filer is the manager, principal distributor and promoter of the Fund which is one of the TD Private Funds qualified for sale by means of simplified prospectuses and annual information forms that have been prepared and filed in accordance with the securities legislation of all provinces and territories of Canada. The Fund is a no-load mutual fund within the meaning ascribed thereto in NI 81-102.

4. TD Waterhouse Private Investment Counsel Inc. (TDWPIC) is a corporation that was incorporated under the Canada Business Corporations Act. It is a wholly-owned subsidiary of the Filer and is registered as an investment counsel and portfolio manager or their equivalent in all provinces and territories of Canada and as a limited market dealer under the Ontario Act and the Newfoundland Act.

5. TDWPIC utilizes model portfolios, which include mutual funds managed by the Filer, to provide customized investment management strategies to clients having $300,000 or more of investable assets who grant TDWPIC the authority under a separately managed account (SMA) agreement to manage their assets on a discretionary basis. Client SMA's that are managed by TDWPIC are charged an annual fee that is based upon a percentage of assets under management.

6. TDWPIC currently uses, among other things, the TD Private Funds as an investment vehicle for the assets of many of the SMA's in order to reduce the cost of administering such accounts so that the Filer's individually managed account services can be offered to individuals who could not otherwise gain access to such services.

7. As the Fund is a connected issuer to the Filer and TDWPIC, each SMA client has consented to TDWPIC investing client monies held in an SMA in units of the Fund.

8. All of the Fund's unitholder's are clients of TDWPIC and have all entered into SMA agreements giving TDWPIC full authority to invest assets held in their SMA's.

9. Prior to February 16, 2006 the sub-advisor to the Fund was KBSH Capital Management Inc. Effective February 16, 2006 the Filer retained Highstreet Asset Management Inc. (Highstreet) as a sub-advisor to the Fund.

10. The Filer and TDWPIC, after consultation with Highstreet, have determined that it is appropriate to change the fundamental investment objective of the Fund from:

"The fundamental investment objective is to earn an above-average rate of return over a complete market cycle by investing primarily in small to mid-capitalization stocks based in Canada. The Fund may also hold equity stocks of small to mid-capitalization stocks of non-Canadian based companies. Additionally, the Fund may opportunistically invest in large-cap Canadian equity securities when such securities are deemed attractive. At no time will large-cap issues account for the majority of the Fund's assets"

to

"The fundamental investment objective is to earn an above average rate of return over a complete market cycle by investing primarily in small to mid-capitalization equity securities based in Canada and large-cap Canadian equity securities when such securities are deemed attractive. The Fund may also hold equity securities of small to mid capitalization stocks of non-Canadian based companies. At no time will large-cap issues account for the majority of the Fund's assets."

11. TDAM and TDWPIC believe that this change is in the best interests of the Fund's unitholders.

12. Clause 5.1(c) of NI 81-102 requires that unitholder approval be obtained for any change to the fundamental investment objective to the Fund. The Filer and TDWPIC believe that, in the circumstances, a unitholder meeting convened for the purpose of obtaining unitholder approval to change the fundamental investment objective of the Fund is not desirable and represents an unnecessary cost and inconvenience to the Filer, TDWPIC, the Fund and unitholders.

13. Unlike an investor that holds units outside of an SMA, the unitholders of the Fund have not participated in the investment decision to acquire units of the Fund apart from the consent requirement mentioned in paragraph 7 above. Instead, the unitholders of the Fund are relying entirely on TDWPIC to make investment decisions for them and, in these circumstances, the change of a fundamental investment objective is analogous to the unitholder changing from one TD Private Fund to another, which change does not require unitholder approval but which change would, for tax purposes, be a disposition.

14. Provided the requested relief is granted, the Declaration of Trust governing the Fund does not require unitholder approval in order for TDAM to change the fundamental investment objective of the Fund provided the Filer believes the change to be not materially adverse to unitholders. The Filer believes the change of the fundamental investment objective is in the best interests of the Fund's unitholders.

15. If the requested relief is granted, the Filer proposes to amend the prospectus and annual information form, issue a press release and file a material change report announcing the change.

16. The proposed change of the fundamental investment objective is neutral to the unitholders of the Fund from a fee and expense perspective.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met. The decision of the Decision Makers under the Legislation is that the Requested Relief is granted.

SEDAR Project No. 944037

"Leslie Byberg"
Manager, Investment Funds Branch