Friedberg Asset Allocation Fund and Toronto Trust Management Ltd.

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- a commodity pool subject to National Instrument 81-104 Commodity Pools granted exemptions from National Instrument 81-102 Mutual Funds to engage in short selling of securities up to 25% of net assets, subject to certain conditions and requirements.

Rules Cited

National Instrument 81-102 Mutual Funds, ss. 2.6(a) and (c), 6.1(1), 19.1.

National Instrument 81-104 Commodity Pools.

May 13, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

FRIEDBERG ASSET ALLOCATION FUND

(the "Fund")

AND

TORONTO TRUST MANAGEMENT LTD.

(the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction (the "principal regulator") has received an application from the Filer, on behalf of the Fund, for a decision under the securities legislation of the Jurisdiction (the "Legislation") pursuant to section 19.1 of National Instrument 81-102 Mutual Funds ("NI 81-102") that notwithstanding sections 2.6(a), 2.6(c) and 6.1(1) of NI 81 102, the Fund be permitted to sell securities short with the aggregate market value of all securities sold by the Fund not exceeding 25% of the net assets of the Fund on a daily marked to market basis, provide a security interest over the Fund's assets in connection with such short sales and deposit Fund assets with Borrowing Agents (as defined below under the heading "Representations") (the "Requested Relief").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

1. the Ontario Securities Commission is the principal regulator for this application; and

2. the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of the remaining provinces and territories of Canada except Quebec.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

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

1. The Fund will be an open-end mutual fund trust established under the laws of Ontario.

2. The Fund will be a "commodity pool" for purposes of National Instrument 81-104 Commodity Pools ("NI 81-104") and its units will be offered pursuant to a long form prospectus, as required by NI 81-104. The Fund has filed its preliminary prospectus, with the Canadian Securities Administrators in all provinces and territories of Canada except Quebec, as SEDAR project no. 01402240.

3. The Fund is to be a multi-strategy fund whose investment objective is to seek significant total investment returns, consisting of a combination of interest income, dividend income, currency gains and capital appreciation by investing in the following five discrete groups of investments: (i) equity securities generally, (ii) fixed income securities generally; (iii) commodity forwards and futures contracts, options thereon and other over-the-counter traded derivative instruments ("Commodity Futures Instruments") and commodities; (iv) equity and fixed income securities of real estate companies; and (v) cash and cash equivalents (as such term is defined in NI 81-102) ("Money Instruments").

The Fund will make use of currency futures and forwards (and options thereon) ("Currency Futures Instruments") only for hedging purposes or to change the currency exposure of a particular security thereby producing a synthetic security, while it will use Commodity Futures Instruments also to seek to gain from such investments. The Fund will use Commodity Futures Instruments, but only as a substitute for holding spot physical commodities, and in no case will the Fund use leverage (determined as at the time of acquiring a position in a derivative) to acquire an exposure in Currency Futures Instruments and Commodity Futures Instruments in excess of the Fund's net assets.

In order to seek to achieve the Fund's investment objective, the Fund's portfolio manager will allocate the Fund's capital among the five asset classes in the respective proportions which it believes optimal from time to time. There are no fixed percentage ranges for allocating the Fund's assets among the five classes, and the Fund's portfolio manager may determine that all or most of the Fund's assets should be allocated to only certain (or only one) of such asset classes.

4. Although the Fund will be a "commodity pool" for purposes of NI 81-104, a significant portion of the assets of the Fund may be invested in securities rather than Currency Futures Instruments and Commodity Futures Instruments. As such, while Section 2.1 of NI 81-104 provides exemptions from certain investment restrictions in NI 81-102 in respect of Currency Futures Instruments and Commodity Futures Instruments such that the Requested Relief is not required in respect of the Fund's investments in Currency Futures Instruments and Commodity Futures Instruments, the Manager is requesting the Requested Relief to permit the Fund to engage in limited short selling of securities.

5. The investment practices of the Fund will comply in all respects with the requirements of Part 2 of NI 81-102 except (i) for the Requested Relief; and (ii) in respect of investing in Currency Futures Instruments and Commodity Futures Instruments based on the exemptions provided in NI 81-104 as described above.

6. The following additional restrictions will be adopted in respect of the Fund's trading in derivatives:

(a) the underlying value of the Fund's aggregate derivatives position (determined as at the time of acquiring a position in a derivative), other than derivatives positions entered into for hedging purposes, will not exceed the value of the Fund's holdings of Money Instruments;

(b) other than its trading in Commodity Futures Instruments, the Fund will not engage in short selling in any of the investment groups except for hedging (for these purposes, hedging of a long position in equity securities of an issuer meaning the taking of a short position in either the securities of such issuer or securities of another issuer otherwise correlated in terms of industry, market or other specific exposure factor); and

(c) the Fund will not use leverage (determined as at the time of acquiring a position in a derivative) to acquire an exposure to Commodity Futures Instruments and Currency Futures Instruments in excess of the Fund's net assets.

7. With respect to the Requested Relief, the following is proposed:

(a) each short sale made by the Fund will be subject to compliance with the investment objective of the Fund;

(b) in order to effect short sales of securities, the Fund will borrow securities from either its custodian or a dealer (in either case, the "Borrowing Agent"), which Borrowing Agent may be acting either as principal for its own account or as agent for other lenders of securities;

(c) the Fund will implement the following controls when conducting short sales of securities:

(i) securities will be sold short for cash, with the Fund assuming the obligation to return to the Borrowing Agent the securities borrowed to effect the short sale;

(ii) the short sales will be effected through market facilities through which the securities sold short are normally bought and sold;

(iii) the Fund will receive cash for securities sold short within normal trading settlement periods for the market in which the short sale is effected;

(iv) the securities sold short will be liquid securities that:

A. are listed and posted for trading on a stock exchange, and

1. the issuer of the security has a market capitalization of not less than CDN$300 million, or the equivalent thereof, of such security at the time the short sale is effected; or

2. the investment advisor has pre-arranged to borrow for the purposes of such short sale; or

B. are bonds, debentures or other evidences of indebtedness of or guaranteed by the Government of Canada or any province or territory of Canada or the Government of the United States of America;

(v) at the time securities of a particular issuer are sold short:

A. the aggregate market value of all securities of that issuer sold short by the Fund will not exceed 2% of the net assets of the Fund; and

B. the Fund will place a "stop-loss" order with a dealer to immediately purchase for the Fund an equal number of the same securities if the trading price of the securities exceeds 120% (or such lesser percentage as the Manager may determine) of the price at which the securities were sold short;

(vi) the Fund will deposit Fund assets with the Borrowing Agent as security in connection with the short sale transaction;

(vii) the Fund will keep proper books and records of all short sales and Fund assets deposited with Borrowing Agents as security;

(viii) the Fund will develop written policies and procedures for the conduct of short sales;

(ix) the Fund will provide disclosure in its prospectus as to: (A) short selling, (B) how the Fund engages in short selling, (C) the risks associated with short selling, and (D) in the investment strategy section of the prospectus, the Fund's strategy and the Requested Relief; and

(x) the Fund will provide disclosure in its prospectus of the following information:

A. that there are written policies and procedures in place that set out the objectives and goals for short selling and the risk management procedures applicable to short selling;

B. who is responsible for setting and reviewing the policies and procedures referred to in the preceding paragraph, how often the policies and procedures are reviewed, and the extent and nature of the involvement of the board of directors or trustee in the risk management process;

C. the trading limits and other controls on short selling and who is responsible for authorizing the trading and placing limits or other controls on the trading;

D. whether there are individuals or groups that monitor the risks independent of those who trade; and

E. whether risk measurement procedures or simulations are used to test the portfolio under stress conditions.

Decision

The principal regulator is satisfied that the Requested Relief meets the test contained in the Legislation for the principal regulator to make the following decision. The decision of the principal regulator under the Legislation is that the Requested Relief is granted; provided that:

(a) the aggregate market value of all securities sold short by the Fund does not exceed 25% of the net assets of the Fund on a daily marked-to-market basis;

(b) the Fund holds "cash cover" (as defined in NI 81-102) in an amount, including the Fund assets deposited with Borrowing Agents as security in connection with short sale transactions, that is at least 150% of the aggregate market value of all securities sold short by the Fund on a daily marked-to-market basis;

(c) no proceeds from short sales of securities by the Fund are used by the Fund to purchase long positions in securities other than cash cover;

(d) the Fund maintains appropriate internal controls regarding its short sales, including written policies and procedures, risk management controls and proper books and records;

(e) any short sale made by the Fund is subject to compliance with the investment objective of the Fund;

(f) for short sale transactions in Canada, every dealer that holds Fund assets as security in connection with short sale transactions by the Fund shall be a registered dealer in Canada and a member of a self-regulatory organization that is a participating member of the Canadian Investor Protection Fund;

(g) for short sale transactions outside of Canada, every dealer that holds Fund assets as security in connection with short sale transactions by the Fund shall:

(i) be a member of a stock exchange and, as a result, be subject to a regulatory audit; and

(ii) have a net worth in excess of the equivalent of CDN$50 million determined from its most recent audited financial statements that have been made public;

(h) except where the Borrowing Agent is the Fund's custodian or a sub-custodian thereof, when the Fund deposits Fund assets with a Borrowing Agent as security in connection with a short sale transaction, the amount of Fund assets deposited with the Borrowing Agent does not, when aggregated with the amount of Fund assets already held by the Borrowing Agent as security for outstanding short sale transactions of the Fund, exceed 10% of the net assets of the Fund, taken at market value as at the time of the deposit;

(i) the security interest provided by the Fund over any of its assets that is required to enable the Fund to effect short sale transactions is made in accordance with industry practice for that type of transaction and relates only to obligations arising under such short sale transactions; and

(j) prior to conducting any short sales of securities, the Fund discloses in its prospectus the following information:

(i) that there are written policies and procedures in place that set out the objectives and goals for short selling and the risk management procedures applicable to short selling;

(ii) who is responsible for setting and reviewing the policies and procedures referred to in the preceding paragraph, how often the policies and procedures are reviewed, and the extent and nature of the involvement of the board of directors or trustee in the risk management process;

(iii) the trading limits and other controls on short selling and who is responsible for authorizing the trading and placing limits or other controls on the trading;

(iv) whether there are individuals or groups that monitor the risks independent of those who trade; and

(v) whether risk measurement procedures or simulations are used to test the portfolio under stress conditions.