TD Asset Management Inc. and Emerald Canadian Balanced Fund

Headnote

Exemptions granted from various provisions of securities legislation to permit fund onfund structure whereby top fund will invest in underlying funds based solely on a"consensus asset mix" determined by a independent third party survey, updated on aperiodic basis. Previous orders relating to fund on fund structure revoked.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c.s.5, as amended, ss. 101, 104(2)(c), 111(2)(b), 111(3),113, 117(1)(a) and (d), 118(2)(a), 121(2)(a)(ii), 144

Rules Cited

National Instrument 81-102 - Mutual Funds

WHEREAS the local securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Saskatchewan, Ontario, Quebec, Nova Scotiaand Newfoundland (the "Jurisdictions") has received an application from TD AssetManagement Inc. ("TDAM") on behalf of the Emerald Canadian Balanced Fund (the"Balanced Fund") for a decision pursuant to the securities legislation of the Jurisdictions(the "Legislation"): (i) to revoke certain Existing Orders (as that term is defined inrepresentation 10) relating to the Balanced Fund; and (ii) that the requirements of theLegislation that:

(a) a mutual fund which is a security holder of a reporting issuer issue and file a pressrelease and file a report where its aggregate holdings of securities of the reportingissuer exceed 10% of the outstanding securities of the reporting issuer;

(b) a mutual fund shall not knowingly make or hold an investment in a person orcompany in which the mutual fund, alone or together with one or more relatedmutual funds, is a substantial securityholder;

(c) a management company file a report relating to a purchase and sale of securitiesbetween the mutual fund and any related person or company, or any transaction inwhich, by arrangement, other than an arrangement relating to insider trading inportfolio securities, the mutual fund is a joint participant with one or more of itsrelated persons or companies;

(d) a portfolio manager shall not knowingly cause an investment portfolio managed byit to invest in any issuer in which a responsible person is an officer or directorunless the specific fact is disclosed to the client and the written consent of the clientto the investment is obtained before the purchase (other than in British Columbiawhere no consent is required);

(the foregoing collectively, the "Requirements") shall not apply in respect of investmentsby the Balanced Fund in the Emerald Canadian Short Term Fund, the Emerald CanadianEquity Fund, the Emerald Canadian Bond Fund, the Emerald U.S. Market Fund and theEmerald International Equity Fund (collectively, the "Underlying Funds");

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System") the Ontario Securities Commission (the "OSC") is theprincipal regulator for this application;

AND WHEREAS it has been represented by TDAM to the Decision Makers that:

1. TDAM is a registrant, registered as a mutual fund dealer and as an investmentcounsel and portfolio manager under the Act.

2. TDAM is the trustee, manager, principal distributor and a promoter of the BalancedFund and the Underlying Funds (collectively, the "Emerald Pooled Funds") with itshead office located in Ontario.

3. TDAM is a wholly-owned subsidiary of The Toronto-Dominion Bank.

4. Each of the Emerald Pooled Funds is an open-ended mutual fund establishedunder the laws of Ontario by a Declaration of Trust.

5. Each of the Emerald Pooled Funds is a reporting issuer and, to the best of theknowledge information and belief of TDAM, no Fund is in default of any requirementof the Legislation.

6. A simplified prospectus and an annual information form in respect of Class A Unitsand Class B Units of each Emerald Pooled Fund were filed in each of the provincesand territories of Canada in July, 1999, and receipts therefor were obtained.

7. The Emerald Pooled Funds have been established specifically to serviceinstitutional investors and the purchase of Class A Units and Class B Units of theFunds is therefore restricted.

8. On July 25, 1997, TDAM obtained an order (the "Ontario Order") of the OSCexempting the Balanced Fund from item (b) of the Requirements under theLegislation of Ontario with respect to the purchase of Class B Units of theUnderlying Funds under certain terms and conditions set out in the Ontario Order.Similar relief (the "Other Orders") was obtained from the Decision Makers otherthan the Decision Maker in Saskatchewan.

9. Also in July, 1997 TDAM obtained approval under National Policy No. 39 for theBalanced Fund to invest in the Underlying Funds. This approval was evidenced bythe receipt issued for the simplified prospectus.

10. The Ontario Order and the Other Orders (collectively, the "Existing Orders") containthe following, as well as other, conditions:

(a) The Balanced Fund must determine the fixed percentages of its assets(exclusive of cash and cash equivalents) which may be invested in thespecified Underlying Funds and, in fixing such percentages, the BalancedFund must provide that such percentages may vary above and below suchfixed percentages by no more than 2.5% (the "Permitted Percentages");

(b) The prospectus of the Emerald Pooled Funds must disclose the PermittedPercentages in which the Balanced Fund may invest in the UnderlyingFunds; and

(c) The Permitted Percentages which are disclosed in the prospectus may notbe changed unless the prospectus is amended or a new prospectus is filedand the securityholders of the Balanced Fund have either been given atleast 60 days notice of the change in the Permitted Percentages or the priorapproval of the securityholders has been given to the change in thePermitted Percentages at a meeting of securityholders of the Balanced Fundcalled for that purpose.

11. One of the tools which TDAM currently uses to determine the percentage of theBalanced Fund which should be invested in each of the Underlying Funds is data(the "Third Party Percentages") relating to a "consensus asset mix" which ispublished by an independent third party (the "Third Party") following an asset mixsurvey (the "Third Party Survey") by the Third Party of approximately 25 managersof Canadian pooled pension portfolios.

12. Subsequent to the receipt of the relief granted in this decision TDAM intends toinvest the assets of the Balanced Fund principally in Class B Units of the otherFunds solely in accordance with the Third Party Percentages.

13. In accordance with the Existing Orders, Unitholders of the Balanced Fund will begiven 60 days prior notice of the date (the "Effective Date") that TDAM intends tocommence management of the Balanced Fund exclusively in accordance with theThird Party Percentages and the simplified prospectus will be amended to disclosethe Effective Date.

14. The Third Party provides the Third Party Percentages, as to the consensus assetmix of the Canadian pooled pension portfolios determined as the result of the ThirdParty Survey, to TDAM on a quarterly basis. TDAM will revise the Balanced Fund'sinvestments in the Underlying Funds in accordance with the Third PartyPercentages within 5 valuation days after receiving the Third Party Percentages,but no other adjustments to the portfolio will be made.

15. TDAM will make investments by the Balanced Fund in the Underlying Funds, as theresult of net sales of units of the Balanced Fund, on the basis that they reflect themost recently received Third party Percentages, as represented in the portfolio onthe date of the investment.

16. Absent the relief sought in this application, the Legislation and the Existing Ordershave the effect of possibly requiring the Balanced Fund and TDAM to file reportsin respect of purchases and sales of units of the Underlying Funds by the BalancedFund and possibly prohibiting investments in the Underlying Funds in accordancewith the Third Party Percentages.

AND WHEREAS pursuant to the System this MRRS Decision Document evidencesthe decision of each Decision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained inthe Legislation that provides the Decision Maker with the jurisdiction to make the Decisionhas been met;

THE DECISION of the Decision Makers pursuant to the Legislation is that theExisting Orders are hereby revoked;

AND FURTHER IT IS THE DECISION of the Decision Makers pursuant to theLegislation that the Requirements of the Legislation shall not apply to the Balanced Fundin respect of its investments in the Underlying Funds, provided that:

a. this Decision Document will terminate on the first anniversary date following thepublication in final form of any legislation or rule of the Decision Makers whichdeals with the matters in section 2.5 of NI 81-102;

b. the investment by the Balanced Fund in an Underlying Fund is, in the opinion ofTDAM, a proper investment for the Balanced Fund having regard to its investmentobjectives;

c. the Balanced Fund and an Underlying Fund in which it invests are under commonmanagement and the securities of all of the Emerald Pooled Funds are offered forsale pursuant to a prospectus;

d. the prospectus of the Emerald Pooled Funds discloses that the percentages of theassets of the Balanced Fund which may be invested in the Underlying Funds willbe based solely on the Third Party Percentages, adopted quarterly from the resultsof the Third Party Survey;

e. the prospectus of the Emerald Pooled Funds describes in general terms theparameters of the Third Party Survey which must be relied upon;

f. the assets of the Balanced Fund that are invested in the Underlying Funds areadjusted quarterly no later than the fifth valuation date of the Balanced Fundfollowing the receipt of the Third Party Percentage, but no other adjustments to theportfolio are made;

g. investments by the Balanced Fund in the Underlying Funds, as the result of netsales of units of the Balanced Fund are made on the basis that they reflect the mostrecently received Third Party Percentages, as represented in the portfolio on thedate of the investment;

h. unitholders of the Balanced Fund are given 60 days prior notice of the EffectiveDate and the prospectus is amended to disclose the Effective Date;

i. unitholders of the Balanced Fund are given 60 days prior notice in the event thatthe criteria of the Third Party Survey or the basis for the calculation of the ThirdParty Percentages relied on by TDAM are to be changed in any material respectand the prospectus is amended to reflect any such change;

j. there are compatible dates for the calculation of the net asset value of the BalancedFund and of the Underlying Funds for the purpose of the issue and redemption ofthe securities of such mutual funds;

k. in the event of the provision of any notice to holders of Class B Units of anUnderlying Fund in respect of a matter for which notice is required by theDeclaration of Trust of the Underlying Fund or by the laws applicable to theUnderlying Fund, such notice will also be delivered to the unitholders of theBalanced Fund. All voting rights attached to the Class B Units of the UnderlyingFund which are owned by the Balanced Fund will be passed through to theunitholders of the Balanced Fund. In the event that a unitholders' meeting is calledfor an Underlying Fund, all of the disclosure and notice material prepared inconnection with such meeting will be provided to the unitholders of the BalancedFund and such unitholders will be entitled to direct the trustee of the Balanced Fundto vote their pro rata share of the balanced Fund's holdings of Class B Units in theUnderlying Fund in accordance with their direction. The trustee of the BalancedFund will not be permitted to vote the Balanced Fund's holdings in the UnderlyingFund except to the extent the unitholders of the Balanced Fund so direct;

l. no management fees are payable by the Balanced Fund in respect of its holdingsof Class B Units of any of the Underlying Funds;

m. no sales charges are payable by the Balanced Fund in respect of a purchase ofClass B Units of any of the Underlying Funds;

n. no redemption fees or other charges are charged by an Underlying Fund in respectof the redemption by the Balanced Fund of securities of the Underlying Fund ownedby the Balanced Fund;

o. no fees or charges of any sort are paid by the Balanced Fund or by an UnderlyingFund or by the manager or principal distributor of the Balanced Fund or of anUnderlying Fund or by an affiliate or associate of any of the foregoing entities toanyone in respect of the investment by the Balanced Fund in an Underlying Fund;

p. the annual and semi-annual financial statements of the Balanced Fund includeappropriate summary disclosure regarding each Underlying Fund in which itinvests; and

q. copies of the prospectus and annual and semi-annual financial statements relatingto each Underlying Fund may be obtained upon request by a securityholder of theBalanced Fund and this fact is disclosed in the prospectus.

April 10^th, 2000.

"Howard I. Wetston"     "Robert W. Davis"