Investment by the RSP fund in forward contracts issued by related counterpartiesexempted from the requirements of subclause 111(2)(a), 117(1)(a) and (d), and118(2)(a), subject to specified conditions.
Securities Act (Ontario), R.S.O. 1990 c.S.5., as am., 111(2)(a), 113, 117(1)(a),117(1)(d), 117(2), 118(2)(a) and 121(2)(a)(ii).
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
TD ASSET MANAGEMENT INC.
GREEN LINE GLOBAL SELECT RSP FUND
GREEN LINE U.S. BLUE CHIP EQUITY RSP FUND
GREEN LINE SCIENCE & TECHNOLOGY RSP FUND
TD EMERGING MARKETS RSP FUND
TD ENTERTAINMENT & COMMUNICATIONS RSP FUND
and TD HEALTH SCIENCES RSP FUND
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the"Decision Maker") in each of British Columbia, Alberta, Saskatchewan, Ontario, NovaScotia and Newfoundland (the "Jurisdictions") has received an application (the"Application") from TD Asset Management Inc. ("TDAM") in its own capacity and onbehalf of Green Line Global Select RSP Fund, Green Line U.S. Blue Chip Equity RSPFund, Green Line Science & Technology RSP Fund, TD Emerging Markets RSP Fund,TD Entertainment & Communications RSP Fund and TD Health Sciences RSP Fund(individually, a "Green Line RSP Fund" and collectively, the "Green Line RSP Funds")and other mutual funds managed by TDAM after the date of this decision having aninvestment objective or strategy that is linked to the returns of another specified TDAMmutual fund while remaining 100% eligible for registered plans under the Income TaxAct (Canada) (individually, a "Future RSP Fund" and collectively, the "Future RSPFunds", and together with the Green Line RSP Funds, individually, an "RSP Fund" andcollectively, the "RSP Funds") for a decision (the "Decision") pursuant to the securitieslegislation of the Jurisdictions (the "Legislation") that the following requirements andrestrictions contained in the Legislation (the "Requirements") shall not apply in respectof certain investments to be made by the RSP Funds in forward contracts and otherspecified derivatives ("Derivative Contracts") with The Toronto-Dominion Bank ("TDBank") as counterparty:
A. the Requirements prohibiting each RSP Fund from knowingly making or holdingan investment in any person or company who is a substantial securityholder ofthe mutual fund, its management company or distribution company;
B. the Requirements requiring TDAM to file a report relating to a purchase or saleof securities between an RSP Fund and any related person or company; and
C. the Requirements prohibiting TDAM from knowingly causing an RSP Fund toinvest in any person or company in which a director, officer or employee ofTDAM is a director or officer;
AND WHEREAS TDAM is proposing to change the name of each Green LineRSP Fund that has the words "Green Line" in its name (an "Affected Fund") byreplacing the words "Green Line" with the prefix "TD" effective on or about October 10,2000 and notice of the change of name has been mailed to each unitholder of record ofeach Affected Fund;
AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for this Application;
AND WHEREAS TDAM has represented to the Decision Makers as follows:
1. TDAM is a corporation incorporated under the laws of Ontario. TDAM is awholly-owned subsidiary of TD Bank. The registered and head office of TDAM islocated in Ontario.
2. TDAM is, or will be, the manager, trustee, promoter and principal distributor ofthe RSP Funds, respectively, and it is, or will be, the manager, trustee, promoterand principal distributor of the corresponding mutual fund (the "UnderlyingFund") in which each RSP Fund invests its assets both directly and indirectly;
3. Each of the RSP Funds is, or will be, an open-ended mutual fund trustestablished under the laws of Ontario which is, or will be, qualified fordistribution in all Jurisdictions by means of a simplified prospectus and annualinformation form or renewal simplified prospectus and annual information form(collectively, the "Prospectus"). Each RSP Fund is, or will be, a reporting issuerunder the securities laws of each of the provinces and territories of Canada andnone of the Green Line RSP Funds is currently in default of any requirements ofthe Legislation. The Prospectus discloses, or will disclose the relationship thatexists between TDAM, TD Bank and each RSP Fund.
4. Each Underlying Fund is, or will be an open-ended mutual fund trust establishedunder the laws of Ontario which is, or will be qualified for distribution in allJurisdictions by means of a simplified prospectus and annual information form.Each Underlying Fund is, or will be, a reporting issuer under the securities lawsof each of the provinces and territories of Canada and none of the Green LineRSP Funds' Underlying Funds is currently in default of any requirements of theLegislation.
5. Each RSP Fund seeks, or will seek to achieve its investment objective whileensuring that securities of the Fund do not, or will not, constitute "foreignproperty" for registered retirement savings plans ("RRSPs"), including "groupRRSPs" and locked-in retirement accounts, registered retirement income funds,including life income funds, deferred profit sharing plans and registerededucation savings plans (the "Registered Plans").
6. The Prospectus contains, or will contain disclosure with respect to theinvestment objective and investment policies of each RSP Fund. Theinvestment objective of each RSP Fund is, or will be, to achieve long-termcapital appreciation primarily by investing in derivative instruments that permit,or will permit, the RSP Fund to link its performance to its correspondingUnderlying Fund, while ensuring that securities of the RSP Fund do notconstitute "foreign property" for Registered Plans. In order to achieve itsinvestment objective, each RSP Fund uses, or will use, Derivative Contracts toobtain exposure to its corresponding Underlying Fund and it also invests, or willinvest directly in its corresponding Underlying Fund as described in paragraph 8herein.
7. The investment objective of each Underlying Fund is, or will be, achievedthrough investment primarily in foreign securities.
8. As each RSP Fund invests, or will invest, its assets in securities such that itssecurities will be "qualified investments" for Registered Plans and will notconstitute foreign property in a Registered Plan, the direct investment by an RSPFund in its corresponding Underlying Fund is, or will be, made in an amountwhich does not exceed the amount prescribed from time to time as the maximumpermitted amount capable of being made as a foreign property investment underthe Tax Act without the imposition of tax under Part XI of that Act (the "ForeignProperty Maximum"). The amount of direct investment by each RSP Fund willbe adjusted from time to time so that, except for transitional cash, the aggregateof Derivative Contract exposure to, and direct investment in, its Underlying Fundwill equal 100% of the assets of the RSP Fund.
9. TD Bank may, from time to time, invest directly in securities of an UnderlyingFund as a hedge against its obligations under its Derivative Contracts with anRSP Fund ("TD Bank Contracts").
10. TDAM will monitor the pricing and terms of TD Bank Contracts by engaging anindependent internationally recognized accounting firm (the "Contract Auditor")to review and assess the pricing and terms of Derivative Contracts between TDBank and other third party mutual fund groups ("Arm's Length Contracts") whichoffer mutual funds which have investment objectives which are similar to theinvestment objectives of the RSP Funds ("Third Party RSP Funds") and theContract Auditor will compare the pricing and terms of Arm's Length Contractsrespecting Third Party RSP Funds with the proposed pricing and terms of eachTD Bank Contract and it will provide TDAM with an opinion (the "ContractAuditor's Opinion") respecting the relative competitiveness of the pricing andterms of the TD Bank Contract.
11. TDAM will not cause an RSP Fund to enter into a TD Bank Contract unless theContract Auditor's Opinion concludes that the pricing and terms of the TD BankContract is at least as favourable as the pricing and terms of Arm's LengthContracts respecting Third Party RSP Fund that are similar in size to the RSPFunds, the Contract Auditor's Opinion is received and accepted by TDAM'sboard of directors and the board of directors approves the TD Bank Contract.
12. Except to the extent evidenced by this Decision and specific approvals grantedby the Canadian securities administrators ("CSA") pursuant to NationalInstrument 81-102, the investment by each RSP Fund in its correspondingUnderlying Fund or Derivative Contracts have, or will be, been structured tocomply with the investment restrictions of the Legislation and NationalInstrument 81-102.
13. In the absence of this Decision, pursuant to the Legislation, each RSP Fund isprohibited from (a) knowingly making an investment in a person or company whois a substantial securityholder of TDAM; and (b) knowingly holding aninvestment referred to in subsection (a) hereof. As a result, in the absence ofthis Decision, an RSP Fund would be required to divest itself of any investmentsreferred to in subsection (a) herein.
14. In the absence of this Decision, the Legislation requires TDAM to file a report inrespect of each TD Bank Contract.
15. In the absence of this Decision, pursuant to the Legislation, TDAM is prohibitedfrom knowingly causing an RSP Fund to invest in any person or company inwhich a director, officer or employee of TDAM is a director or officer.
16. The investment in TD Bank Contracts by each RSP Fund represents, or willrepresent, the business judgement of responsible persons uninfluenced byconsiderations other than the best interests of the RSP Fund.
AND WHEREAS pursuant to the System this Decision evidences the decision ofeach Decision Maker;
AND WHEREAS each Decision Maker is satisfied that the test contained in theLegislation 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 theRequirements shall not apply in respect of TD Bank Contracts entered into by an RSPFund, provided the RSP Fund's investments in TD Bank Contracts are made inaccordance with the following conditions:
1. the Contract Auditor reviews and assesses the pricing and terms of Arm'sLength Contracts in respect of Third Party RSP Funds that are similar in size tothe RSP Fund and compares such pricing and terms to the pricing and terms ofthe TD Bank Contract;
2. the Contract Auditor provides TDAM with a Contract Auditors Opinion whichconcludes that the pricing and terms of the TD Bank Contract is at least asfavourable as the pricing and terms of such Arm's Length Contracts.
3. TDAM's board of directors approves the TD Bank Contract;
4. the Contract Auditor reconsiders and reassesses the TD Bank Contractwhenever the Prospectus is renewed and whenever it is proposed to amend thepricing and terms of the TD Bank Contract;
5. the Prospectus identifies TD Bank as the counterparty to the TD Bank Contractand discloses the relationship that exists between TDAM, TD Bank and the RSPFund; and
6. the Prospectus describes the Contract Auditor's role of assessing andreassessing the TD Bank Contract for the purpose of ensuring that the pricingand terms of the TD Bank Contract is, and remains, at least as favourable asArm's Length Contracts respecting Third Party RSP Funds that are similar insize to the RSP Fund.
September 15th, 2000.
"J. A. Geller" "Morley P. Carscallen"