TD Asset Management Inc. et al. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Exemption from subsection 4.1(1) of National Instrument 81-102 Mutual Funds to allow dealer managed mutual funds to invest in corporate debt securities (medium term notes) of an issuer during the prohibition period -- affiliates of the dealer managers acted as an underwriter in connection with the distribution of securities of the issuer.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 4.1(1), 19.1.

September 19, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUEBEC, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR, AND THE

NORTHWEST TERRITORIES, NUNAVUT

AND THE YUKON (the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM ("MRRS")

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

TD ASSET MANAGEMENT INC.,

JONES HEWARD INVESTMENT COUNSEL INC. AND

NATCAN INVESTMENT MANAGEMENT INC.

(the "Applicants")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Applicants (each a "Dealer Manager"), the managers or portfolio advisers or both of the mutual funds named in Appendix "A" (the "Funds" or "Dealer Managed Funds") for a decision under section 19.1 of National Instrument 81-102 Mutual Funds ("NI 81-102") for:

• an exemption from subsection 4.1(1) of NI 81-102 (the "Investment Restriction") to enable the Dealer Managed Funds to invest in medium term notes (the "Securities") of Bell Aliant Regional Communications, Limited Partnership (the "Issuer") during the period of distribution for the Offering (as defined below) (the "Distribution") and the 60-day period following the completion of the Distribution (the "60-Day Period") (the Distribution and the 60-Day Period together, the "Prohibition Period") notwithstanding that the Dealer Managers or their associates or affiliates act or have acted as an underwriter in connection with the new issue (the "Offering") of the Securities to be offered pursuant to a short form base shelf prospectus and a pricing supplement to be filed by the Issuer on or about Thursday, September 14, 2006 and Tuesday, September 19, 2006, respectively in accordance with the securities legislation of each of the Jurisdictions (the "Investment Restriction Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission (the "OSC") 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 meanings in this decision unless they are defined in this decision.

Representations

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

1. Each Dealer Manager is a "dealer manager" with respect to its Dealer Managed Funds, and each Dealer Managed Fund is a "dealer managed fund", as such terms are defined in section 1.1 of NI 81-102.

2. The securities of the Dealer Managed Funds are qualified for distribution in one or more of the provinces and territories of Canada pursuant to simplified prospectuses that have been prepared and filed in accordance with their respective securities legislation.

3. The head offices of each of the Dealer Managers are in Toronto, Ontario.

4. The Issuer filed a preliminary short form base shelf prospectus (the "Preliminary Prospectus") on August 25, 2006 with each of the Decision Makers, for which an MRRS decision document evidencing receipt by the each of the Decision Makers was issued on August 28, 2006.

5. As disclosed in the Preliminary Prospectus, the Issuer was established under the laws of the Province of Manitoba on July 5, 2006. The Issuer was created as part of a plan of arrangement (the "Arrangement") amongst Aliant Inc., BCE Inc. and Bell Canada to form the Bell Aliant Regional Communications Fund (the "Fund") which was completed on July 7, 2006.

6. The Offering is being underwritten, subject to certain terms, by a syndicate which we understand will include TD Securities Inc., BMO Nesbitt Burns Inc. and National Bank Financial Inc. (each a "Related Underwriter", and any other underwriters which are now or may become part of the syndicate, the "Underwriters"). Each Related Underwriter is an affiliate of one or more of the Dealer Managers.

7. According to the Preliminary Prospectus, offerings of medium term notes are expected to be for up to an aggregate principal amount of $3,000,000,000, which the Issuer may offer and issue from time to time with maturities of not less than one year. The securities are issuable in minimum denominations of $5,000 and multiples of $1,000 thereafter. The securities will be issued pursuant to the provisions of a trust indenture between the Issuer, Bell Aliant Regional Communications Inc., 6583458 Canada Inc., Bell Aliant Regional Communication Holdings Inc., Bell Aliant Holdings Trust and CIBC Mellon Trust Company, as trustee. The securities will be unsecured, will rank pari passu with all other unsecured and unsubordinated indebtedness incurred by the Issuer and will be issued at rates of interest or prices determined by the Issuer from time to time based on a number of factors, including advice from the Underwriters. The securities are guaranteed by Bell Aliant Regional Communications Inc., 6583458 Canada Inc., the Issuer, Bell Aliant Regional Communications Holdings Inc. and Bell Aliant Holdings Trust. The Underwriters, when purchasing as principals, may over-allot or effect a transaction intended to fix or stabilize the price of the securities at a level above that which might otherwise prevail in the open market.Such a transaction, if commenced, may be discontinued at any time.

8. The net proceeds to the Issuer from the issue of the Securities offered will be the issue price thereof less any commission paid and the expenses incurred in connection therewith. Such net proceeds cannot be estimated, as the amount thereof will depend on the extent to which securities are issued. The net proceeds will be used to pay down amounts owing under the Issuer's Credit Facility (defined below) or, if no such amounts are owing at such time, may be added to the general funds of the Issuer and made available for general corporate and working capital purposes, to finance acquisitions and to finance additions to property, plant and equipment or for the retirement of other debt (which debt was incurred by the Issuer for similar purposes). All expenses incurred in connection with the creation of the Issuer's medium term note program, any offerings and related commissions will be paid out of the Issuer's general funds. The Issuer may issue debt instruments and incur additional indebtedness otherwise than through the issue of Securities pursuant to the Offering.

9. Pursuant to a dealer agreement (the "Underwriting Agreement") the Issuer and the Underwriters will enter into in respect of the Offering prior to the Issuer filing the Prospectus, the Underwriters are authorized, as agents of the Issuer, for such purpose only, to solicit offers from time to time to purchase securities (including Securities) in each of the provinces of Canada, directly and through other investment dealers. The Issuer may also select other dealers from time to time to offer the securities. The rate of commission payable in connection with sales by the Underwriters of securities shall be as determined from time to time by mutual agreement among the Issuer and the Underwriters and will be set forth in the applicable supplement to the Prospectus.

10. According to the Preliminary Prospectus, there is presently no market through which the Securities may be sold and the Issuer does not intend to apply for listing of any of the Securities on any securities exchange or automated quotation system.

11. The Preliminary Prospectus does not disclose that the Issuer is a "related issuer" as defined in National Instrument 33-105 -- Underwriting Conflicts ("NI 33-105").

12. According to the Preliminary Prospectus, the Issuer may be a "connected issuer" as defined in NI 33-105 of the Related Underwriters for the reasons set forth in the Preliminary Prospectus. As disclosed in the Preliminary Prospectus, these reasons include that BMO Nesbitt Burns Inc., CIBC World Markets Inc., TD Securities Inc., National Bank Financial Inc., RBC Dominion Securities Inc., Scotia Capital Inc. and Desjardins Securities Inc. are affiliates of lenders to Bell Aliant under a $3.5 billion unsecured credit facility, which has been used by the Issuer to finance the Arrangement and will be used to refinance existing long term debt, support the Issuer's commercial paper program and for working capital purposes (the "Credit Facility"). Consequently, Bell Aliant Inc. may be considered to be a "connected issuer" of such Underwriters for the purposes of applicable Canadian securities legislation. Approximately $1.72 billion is currently drawn under the Credit Facility. Bell Aliant Inc. is in compliance with its covenants and other obligations under the Credit Facility. Under the terms of the Credit Facility, Bell Aliant Inc. is required to use the proceeds from the issuance of Securities to permanently repay certain of the non-revolving term facilities. None of the lenders under the Credit Facility had any involvement in the decision to distribute the Securities and the determination of the terms and conditions of the offering of the Securities were and will be made through negotiations between Bell Aliant Inc. and the underwriters. The Underwriters have not and will not benefit in any manner from the offering of Securities other than through payment of their percentage share of the Underwriters' commission.

13. Despite the affiliation between the Dealer Managers and the Related Underwriters, each Dealer Manager operates independently of its Related Underwriter. In particular, the investment banking and related dealer activities of the Related Underwriters and the investment portfolio management activities of each of their respective Dealer Managers are separated by "ethical" walls. Accordingly, no information flows from one to the other concerning their respective business operations or activities generally, except in the following or similar circumstances:

(a) in respect of compliance matters (for example, each Dealer Manager and its Related Underwriter may communicate to enable the Dealer Manager to maintain up to date restricted-issuer lists to ensure that the Dealer Manager complies with applicable securities laws); and

(b) each Dealer Manager and its Related Underwriter may share general market information such as discussion on general economic conditions, bank rates, etc.

14. The Dealer Managed Funds are not required or obligated to purchase any Securities during the Prohibition Period.

15. Each Dealer Manager may cause its Dealer Managed Funds to invest in the Securities during the Prohibition Period. Any purchase of the Securities by a Dealer Managed Fund will be consistent with the investment objectives of that Dealer Managed Fund and represent the business judgment of the Dealer Manager for that Dealer Managed Fund uninfluenced by considerations other than the best interests of the Dealer Managed Fund or in fact be in the best interests of the Dealer Managed Fund.

16. To the extent that the same portfolio manager or team of portfolio managers of a Dealer Manager manages two or more Dealer Managed Funds and other client accounts that are managed on a discretionary basis (the "Managed Accounts"), the Securities purchased for them will be allocated:

(a) in accordance with the allocation factors or criteria stated in the written policies or procedures put in place by the Dealer Manager for its Dealer Managed Funds and Managed Accounts, and

(b) taking into account the amount of cash available to each Dealer Managed Fund for investment.

17. Except as described above, each Dealer Manager has not been involved in the work of its Related Underwriter and each Related Underwriter has not been and will not be involved in the decisions of its Dealer Manager as to whether such Dealer Manager's Dealer Managed Funds will purchase Securities during the Prohibition Period.

18. There will be an independent committee (the "Independent Committee") appointed in respect of each Dealer Manager's Dealer Managed Funds to review such Dealer Managed Funds' investments in the Securities during the Prohibition Period.

19. The Independent Committee will have at least three members and every member must be independent. A member of the Independent Committee is not independent if the member has a direct or indirect material relationship with its Dealer Manager, the Dealer Managed Funds, or any affiliate or associate thereof. For the purpose of this Decision, a material relationship means a relationship which could, in the view of a reasonable person, reasonably interfere with the exercise of the member's independent judgment regarding conflicts of interest facing the Dealer Manager.

20. The members of the Independent Committee will exercise their powers and discharge their duties honestly, in good faith, and in the best interests of investors in the respective Dealer Managed Funds and, in so doing, exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances.

21. Each Dealer Manager, in respect of its Dealer Managed Funds, will notify a member of staff in the Investment Funds Branch of the Ontario Securities Commission, in writing of any SEDAR Report (as defined below) filed on SEDAR, as soon as practicable after the filing of such a report, and the notice shall include the SEDAR project number of the SEDAR Report and the date on which it was filed.

Decision

Each of the Decision Makers has assessed the conflict of interest risks associated with granting an exemption in this instance from the Investment Restriction and is satisfied that, at the time this Decision is granted, the potential risks are sufficiently mitigated.

Each of the Decision Makers is satisfied that the test contained in NI 81-102 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 Investment Restriction Relief is granted, notwithstanding that the Related Underwriters act or have acted as underwriters in the Offering provided that, in respect of each Dealer Manager and its Dealer Managed Funds, independent of any of the other Applicants and their Dealer Managed Funds, the following conditions are satisfied:

I. At the time of each purchase of Securities (a "Purchase") by a Dealer Managed Fund pursuant to this Decision, the following conditions are satisfied:

(a) the Purchase

(i) represents the business judgment of the Dealer Manager uninfluenced by considerations other than the best interests of the Dealer Managed Fund, or

(ii) is, in fact, in the best interests of the Dealer Managed Fund;

(b) the Purchase is consistent with, or is necessary to meet, the investment objective of the Dealer Managed Fund as disclosed in its simplified prospectus; and

(c) the Dealer Managed Fund does not place the order to purchase, on a principal or agency basis, with its Related Underwriter;

II. Prior to effecting any Purchase pursuant to this Decision, the Dealer Managed Fund has in place written policies or procedures to ensure that,

(a) there is compliance with the conditions of this Decision; and

(b) in connection with any Purchase,

(i) there are stated factors or criteria for allocating the Securities purchased for two or more Dealer Managed Funds and other Managed Accounts, and

(ii) there is full documentation of the reasons for any allocation to a Dealer Managed Fund or Managed Account that departs from the stated allocation factors or criteria;

III. The Dealer Manager does not accept solicitation by its Related Underwriter for the Purchase of Securities for the Dealer Managed Funds;

IV. The Related Underwriter does not purchase Securities in the Offering for its own account except Securities sold by the Related Underwriter on Closing;

V. The Dealer Managed Fund has an Independent Committee to review the Dealer Managed Funds' investments in the Securities during the Prohibition Period;

VI. The Independent Committee has a written mandate describing its duties and standard of care which, at a minimum, sets out the applicable conditions of this Decision;

VII. The members of the Independent Committee exercise their powers and discharge their duties honestly, in good faith, and in the best interests of investors in the Dealer Managed Funds and, in so doing, exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances;

VIII. The Dealer Managed Fund does not relieve the members of the Independent Committee from liability for loss that arises out of a failure to satisfy the standard of care set out in paragraph VII above;

IX. The Dealer Managed Fund does not incur the cost of any portion of liability insurance that insures a member of the Independent Committee for a liability for loss that arises out of a failure to satisfy the standard of care set out in paragraph VII above;

X. The cost of any indemnification or insurance coverage paid for by the Dealer Manager, any portfolio manager of the Dealer Managed Funds, or any associate or affiliate of the Dealer Manager or any portfolio manager of the Dealer Managed Funds to indemnify or insure the members of the Independent Committee in respect of a loss that arises out of a failure to satisfy the standard of care set out in paragraph VII above is not paid either directly or indirectly by the Dealer Managed Funds;

XI. The Dealer Manager files a certified report on SEDAR (the "SEDAR Report") in respect of each Dealer Managed Fund, no later than 30 days after the end of the Prohibition Period, that contains a certification by the Dealer Manager that contains:

(a) the following particulars of each Purchase:

(i) the number of Securities purchased by the Dealer Managed Funds of the Dealer Manager;

(ii) the date of the Purchase and purchase price;

(iii) whether it is known whether any underwriter or syndicate member has engaged in market stabilization activities in respect of the Securities;

(iv) if the Securities were purchased for two or more Dealer Managed Funds and other Managed Accounts of the Dealer Manager, the aggregate amount so purchased and the percentage of such aggregate amount that was allocated to each Dealer Managed Fund; and

(v) the dealer from whom the Dealer Managed Fund purchased the Securities and the fees or commissions, if any, paid by the Dealer Managed Fund in respect of such Purchase;

(b) a certification by the Dealer Manager that the Purchase:

(i) was made free from any influence by the Related Underwriter or any affiliate or associate thereof and without taking into account any consideration relevant to the Related Underwriter or any a associate or affiliate thereof; and

(ii) represented the business judgment of the Dealer Manager uninfluenced by considerations other than the best interest of the Dealer Managed Fund, or

(iii) was, in fact, in the best interests of the Dealer Managed Fund;

(c) confirmation of the existence of the Independent Committee to review the Purchase of the Securities by the Dealer Managed Funds, the names of the members of the Independent Committee, the fact that they meet the independence requirements set forth in this Decision, and whether and how they were compensated for their review;

(d) a certification by each member of the Independent Committee that after reasonable inquiry the member formed the opinion that the policies and procedures referred to in Condition II(a) above are adequate and effective to ensure compliance with this Decision and that the decision made on behalf of each Dealer Managed Fund by the Dealer Manager to purchase Securities for the Dealer Managed Funds and each Purchase by the Dealer Managed Fund:

(i) was made in compliance with the conditions of this Decision;

(ii) was made by the Dealer Manager free from any influence by the Related Underwriter or any affiliate or associate thereof and without taking into account any consideration relevant to the Related Underwriter or any associate or affiliate thereof; and

(iii) represented the business judgment of the Dealer Manager uninfluenced by considerations other than the best interests of the Dealer Managed Fund, or

(iv) was, in fact, in the best interests of the Dealer Managed Fund.

XII. The Independent Committee advises the Decision Makers in writing of:

(a) any determination by it that the condition set out in paragraph XI(d) has not been satisfied with respect to any Purchase of the Securities by a Dealer Managed Fund;

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

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

(d) any action taken, or proposed to be taken, by the Dealer Manager or a portfolio manager of a Dealer Managed Fund, in response to the determinations referred to above.

XIII. For Purchases of Securities during the Distribution only, the Dealer Manager:

(a) expresses an interest to purchase on behalf of Dealer Managed Funds and Managed Accounts a fixed number of Securities (the "Fixed Number") to an Underwriter other than its Related Underwriter;

(b) agrees to purchase the Fixed Number or such lesser amount as has been allocated to the Dealer Manager no more than five (5) business days after the final prospectus has been filed;

(c) does not place an order with an underwriter of the Offering to purchase an additional number of Securities under the Offering prior to the completion of the Distribution, provided that if the Dealer Manager was allocated less than the Fixed Number at the time the final prospectus was filed for the purposes of the Closing, the Dealer Manager may place an additional order for such number of additional Securities equal to the difference between the Fixed Number and the number of Securities allotted to the Dealer Manager at the time of the final prospectus in the event the Underwriters exercise the over-allotment option; and

XIV. For Purchases of Securities during the 60-Day Period only, an underwriter provides to the Dealer Manager written confirmation that the "dealer restricted period" in respect of the Offering, as defined in Ontario Securities Commission Rule 48-501, Trading During Distributions, Formal Bids and Share Exchange Transactions, has ended.

APPENDIX "A"

BMO Mutual Funds (consolidated)

BMO Asset Allocation Fund

BMO Bond Fund

TD Private Funds

TD Private Canadian Bond Income Fund

TD Private Canadian Bond Return Fund

TD Private Canadian Corporate Bond Fund

TD Mutual Funds -- Advisor and F-Series

TD Canadian Bond Fund

TD Short Term Bond Fund

TD Corporate Bond Capital Yield Fund

TD Balanced Fund

The Altamira Funds

Altamira Dividend Fund Inc.

Altamira Monthly Income Fund

Altamira Balanced Fund

Altamira Growth&Income Fund

Altamira Income Fund

Altamira Bond Fund

Altamira Global Bond Fund

Altamira Inflation Adjusted Bond Fund

Altamira Short Term Government Bond Fund

National Bank Mutual Funds - 2005

National Bank Monthly Income Fund

National Bank Dividend Fund

National Bank Monthly Equity Income Fund

National Bank Monthly Conservative Income Fund

National Bank Monthly High Income Fund

National Bank Monthly Moderate Income Fund

National Bank Monthly Secure Income Fund

National Bank Bond Fund

National Bank Conservative Diversified Fund

National Bank Moderate Diversified Fund

National Bank Secure Diversified Fund

National Bank Balanced Diversified Fund

National Bank Retirement Balanced Fund

National Bank Protected Funds

National Bank Protected Growth Balanced Fund

National Bank Protected Canadian Bond Fund

National Bank Protected Retirement Balanced Fund