TD Asset Management Inc. et al. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- NI 81-102 funds seeking reissuance of prior relief granted to permit in-specie transactions with managed accounts managed by the same manager -- New conditions contemplate IRC review and approval -- standard terms on which prior relief was granted for in-specie transactions are also included as conditions -- conditions conform those as set out in section 9.4(3) and 10.4(4) of NI 81-102.

Applicable Legislative Provisions

Securities Act (Ontario), ss. 118(2)(b),121(2)(a)(ii), 147.

Ontario Regulation 1015, s. 115(6).

May 28, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

(the Legislation)

ALBERTA, SASKATCHEWAN, ONTARIO,

QUEBEC, NEW BRUNSWICK, NOVA SCOTIA

AND NEWFOUNDLAND AND LABRADOR

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

(MRRS)

AND

IN THE MATTER OF

TD ASSET MANAGEMENT INC.

(TDAM )

AND

IN THE MATTER OF

THE EMERALD POOLED FUNDS AND

EMERALD TREASURY MANAGEMENT POOLED FUNDS

listed in Schedule A and any Emerald Pooled Funds or

Emerald Treasury Management Pooled Funds subject to

National Instrument 81-102 -- Mutual Funds (NI 81-102)

that may be established in the future for which

TDAM or an affiliate of TDAM (the Applicant)

acts as the manager and/or portfolio advisor

(the Funds)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (Decision Maker) in each of the Jurisdictions has received an application (the Application) from the Applicant in respect of the Funds and investment portfolios managed by the Applicant or an affiliate of the Applicant (each, a Managed Account) for relief from

(a) the prohibition in the Legislation of the Jurisdictions that prohibits a portfolio manager from knowingly causing any investment portfolio managed by it to purchase or sell the securities of any issuer from or to the account of a responsible person, any associate of a responsible person or the portfolio manager (the Legislative Restriction) and

(b) the prohibition in the Legislation, except in Quebec, that prohibits the purchase or sale of securities in which an investment counsel or any partner, officer or associate of an investment counsel has a direct or indirect beneficial interest from or to any portfolio managed or supervised by the investment counsel (the Regulation Restriction),

in order that the Funds and Managed Accounts may engage in In Specie Transactions as described below (collectively, the Requested Relief).

Under the MRRS,

(a) the Ontario Securities Commission is the principal regulator for the Application, and

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

Interpretation

Terms defined in NI 81-102, National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107) or in the Legislation have the same meaning in this decision.

Representations

This decision is based on the following facts represented by the Applicant in respect of the Funds:

1. The Applicant is or will be the manager, trustee and/or portfolio advisor of the Funds and is or will be registered as an investment counsel and portfolio manager (or the equivalent) in each of the Jurisdictions.

2. Each of the Funds is or will be an open-end mutual fund established under the laws of Ontario. Each Fund is or will be a reporting issuer in the Jurisdictions and is or will be subject to the requirements of NI 81-102.

3. Each Fund has or will have an independent review committee (IRC) established in accordance with the requirements of NI 81-107.

4. The relevant simplified prospectus of the Funds (the Prospectus) discloses or will disclose that in respect of purchases and redemptions of units of the Funds having a net asset value, in the case of the TD Emerald Pooled Funds, of $1 million or more and, in the case of the TD Emerald Treasury Management Pooled Funds, of $5 million or more, or, in either case, of such other amounts as may be stipulated, a unitholder may be required to deliver or receive securities rather than cash (the In Specie Transactions).

5. The In Specie Transactions comply with the provisions of section 9.4(2)(b) of NI 81-102, in the case of a purchase, and section 10.4(3)(b) of NI 81-102, in the case of a redemption, and details of the manner in which In Specie Transactions are conducted are included in the Prospectus.

6. Certain of the Funds have relief in Ontario, Alberta, Nova Scotia and Newfoundland and Labrador (the Prior Relief) from the Legislative Restriction to engage in In Specie Transactions. The Prior Relief is evidenced by decision documents dated April 21, 1992 (Ontario), July 2, 1992 (Alberta), March 6, 1995 (Newfoundland and Labrador), and Nova Scotia (May 13, 1992).

7. Pursuant to the Prior Relief, the Funds referred to in the decision documents granting the Prior Relief are permitted to engage in the In Specie Transactions on terms that are substantially identical to those in sections 9.4(2)(b) and 10.4(3)(b) of NI 81-102.

8. The TD Emerald International Equity Index Fund, established in 1995, the TD Emerald U.S. Market Index Fund and the TD Emerald Global Government Bond Index Fund, established in 1997 and the TD Emerald Treasury Management Pooled Funds, established in 2006, have, inadvertently, relied on the Prior Relief. These Funds are operated with respect to In Specie Transactions on the same basis as the Funds which received the Prior Relief.

9. No relief similar to the Prior Relief was obtained in the Jurisdictions of Saskatchewan, Quebec or New Brunswick.

10. As the Applicant is or will be the portfolio manager of the Funds and the Managed Accounts, it would be considered a "responsible person" under the Legislation. Furthermore, each of the Funds is or will be an "associate" of the Applicant under the Legislation because the Applicant is or will be the trustee of the Funds. Accordingly, the provisions of the Legislative Restriction are applicable in circumstances where the Applicant causes a Managed Account to purchase or sell securities from or to a Fund, since a Fund is an associate of the Applicant.

11. The provisions of the Regulation Restriction would be applicable to In Specie Transactions if the acquisition of securities from a managed account as payment for units of a Fund is considered a purchase of such securities by a Fund and if the delivery of securities to a Managed Account as redemption proceeds is considered a sale of such securities by a Fund, since a Fund is an associate of the Applicant.

12. Where the Applicant uses, or may use, its discretionary authority, to cause a managed account to participate in In Specie Transactions with a Fund, the investment management agreement (the IMA) in respect of the Managed Account refers to such transactions and specifically authorizes the Managed Account to participate therein.

13. Securities which are acquired by a Managed Account prior to the Managed Account engaging in an In Specie Transaction to purchase units in a Fund will be acquired for the Managed Account in the same manner as such securities would be acquired for the Managed Account if they were not to be used to purchase units in a Fund.

14. Securities which are received by a Managed Account as proceeds of redemption in an In Specie Transaction following a redemption of units in a Fund will be retained by the Managed Account or disposed of for the Managed Account in the same manner as such securities would be disposed of if they were not received as proceeds of disposition following a redemption of units.

15. Securities which are delivered to the custodian of a Fund or to a Managed Account following a purchase or redemption of units, as the case may be, will be delivered in accordance with industry practice for such a delivery.

16. The Applicant considers that In Specie Transactions are in the best interests of a Managed Account and of a Fund since such transactions ensure that the costs associated with the acquisition and disposition of securities are borne by the unitholder of the Fund who is acquiring or disposing of units of the Fund and not, indirectly, by other unitholders.

17. In Specie Transactions will be reflected in the account statement next prepared for the Managed Account.

18. A Fund will keep written records of In Specie Transactions in a financial year of the Fund, reflecting details of the securities delivered to or by the Fund and the value assigned to such securities, for five years after the end of the financial year.

19. In Specie Transactions constitute a conflict of interest matter such that the requirements of section 5.1 of NI 81-107 are applicable in respect of a Fund.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the Jurisdiction to make the Decision has been met.

The decision of the Decision Makers in Ontario, Alberta, Nova Scotia and Newfoundland and Labrador is that the Prior Relief is revoked.

The decision of the Decision Makers in all Jurisdictions is that the Requested Relief is granted provided that,

(a) in connection with the purchase of units of a Fund by a Managed Account:

(i) the manager of the Fund will obtain the approval of the IRC of a Fund in respect of an In Specie Transaction consistent with section 5.2(2) of NI 81-107;

(ii) the manager of the Fund and the IRC will comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of an In Specie Transaction;

(iii) the Applicant obtains, in the IMA or otherwise, the prior written consent of the relevant Managed Account client before it engages in any In Specie Transaction in connection with the purchase of units of a Fund;

(iv) the Fund would, at the time of payment, be permitted to purchase those securities;

(v) the securities are acceptable to the portfolio advisor of the Fund and consistent with such Fund's investment objective;

(vi) the value of the securities is at least equal to the issue price of the securities of the Fund for which they are payment, valued as if the securities were portfolio assets of that Fund;

(vii) the account statement next prepared for the Managed Account will include a note describing the securities delivered to the Fund and the value assigned to such securities;

(viii) the Fund will keep written records of an In Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered to the Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place; and

(b) in connection with the redemption of units of a Fund by a Managed Account:

(i) the manager of the Fund will obtain the approval of the IRC of a Fund in respect of an In Specie Transaction consistent with section 5.2(2) of NI 81-107;

(ii) the manager of the Fund and the IRC will comply with the requirements of section 5.4 of NI 81-107 for any standing instructions the IRC provides in respect of In Specie Transactions;

(iii) the Applicant obtains, in the IMA or otherwise, the prior written consent of the relevant Managed Account client to the payment of redemption proceeds in the form of an In Specie Transaction;

(iv) the securities are acceptable to the portfolio advisor of the Managed Account and consistent with the Managed Account's investment objective;

(v) the value of the securities is equal to the amount at which those securities were valued in calculating the net asset value per security used to establish the redemption price;

(vi) the holder of the Managed Account has not provided notice to terminate its IMA with TDAM;

(vii) the account statement next prepared for the Managed Account will include a note describing the securities delivered to the Managed Account and the value assigned to such securities;

(viii) the Fund will keep written records of an In Specie Transaction in a financial year of the Fund, reflecting details of the securities delivered by the Fund and the value assigned to such securities, for five years after the end of the financial year, the most recent two years in a reasonably accessible place; and

(c) the Applicant does not receive any compensation in respect of any sale or redemption of units of a Fund) other than redemption fees disclosed in the Prospectus of the Funds) and, in respect of any delivery of securities further to an In Specie Transaction, the only charge paid by the Managed Accounts is the commission charged by the dealer executing the trade.

SCHEDULE A

EXISTING FUNDS

TD EMERALD POOLED FUNDS

TD EMERALD TREASURY MANAGEMENT POOLED FUNDS