Securities Law & Instruments

Headnote

Relief from certain mutual fund conflict of interest investment restrictions to permit a mutual fund to invest in securities of a related party -- Proportion of assets to be invested in shares of the related party to be determined based on the proportion that such shares are weighted in the specified target index whose performance the mutual fund seeks to enhance.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as amended, ss. 111(2)(a), 111(3) and 113.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")

AND

IN THE MATTER OF

EMERALD ENHANCED CANADIAN EQUITY POOLED FUND TRUST

AND

EMERALD ENHANCED CANADIAN MARKET CAPPED POOLED FUND TRUST

 

ORDER

(Section 113)

UPON the application (the "Application") of TD Asset Management Inc. ("TDAM") to the Ontario Securities Commission (the "Commission") for an order pursuant to clause (a) of section 113 of the Act that clause 111(2)(a) and subsection 111(3) of the Act do not apply with respect to investments made by the Emerald Enhanced Canadian Equity Pooled Fund Trust (the "Enhanced Equity Fund"), the Emerald Enhanced Canadian Market Capped Pooled Fund Trust (the "Enhanced Capped Fund") and any other enhanced equity funds for which TDAM becomes the manager after the date of this application (collectively, the "Enhanced Funds") in the shares of The Toronto-Dominion Bank (the "Bank").

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON TDAM having represented to the Commission that:

1. TDAM is a registrant, registered as a limited market dealer and as an investment counsel and portfolio manager under the Act.

2. TDAM is the manager of the Enhanced Equity Fund and the Enhanced Capped Fund and may in the future be the manager of other Enhanced Funds.

3. The Canada Trust Company ("Canada Trust") is the trustee of the Enhanced Equity Fund and the Enhanced Capped Fund and Canada Trust or another affiliate of the Bank may in the future be the trustee of other Enhanced Funds.

4. TDAM and Canada Trust are wholly-owned subsidiaries of the Bank.

5. Each of the Enhanced Funds is or will be an open-ended mutual fund established under the laws of Ontario under a Trust Agreement between TDAM and Canada Trust or another affiliate of the Bank or under a Declaration of Trust.

6. Each of the Enhanced Funds is or will be a "mutual fund in Ontario" under the Act.

7. Neither the Enhanced Equity Fund nor the Enhanced Capped Fund is currently a "reporting issuer" under the Act but these Funds and other Enhanced Funds may become "reporting issuers".

8. Units of each of the Enhanced Funds are or will be offered under an exemption from the requirement to file a prospectus under the Act but units of the Enhanced Funds may in the future also be offered under a prospectus filed under the Act.

9. The investment objective of the Enhanced Equity Fund is, over the long term, to enhance the performance of the Fund in relation to the performance of an index or group, determined by TDAM, of approximately three hundred (300) participating securities listed on the Toronto Stock Exchange (the "Canadian Equity Index").

10. The investment objective of the Enhanced Capped Fund is, over the long term, to enhance the performance of the Fund in relation to the performance of the S&P/TSX Capped Composite Index or another index or group, determined by TDAM, of approximately three hundred (300) participating securities of corporations listed on the Toronto Stock Exchange (the "Capped Index"). The maximum relative weight of any security in the Capped Index will be capped in accordance with the criteria of the Capped Index.

11. The investment objective of an Enhanced Fund is or will be to enhance the performance of an index that is or will be a "permitted index" within the meaning of National Instrument 81-102.

12. Securities of the Bank are included in the indices the performance of which the Enhanced Equity Fund and the Enhanced Capped Fund seek to enhance and may be included in the indices the performance of which other Enhanced Funds seek to enhance.

13. Clients of TDAM who purchase units of the Enhanced Funds have entered or will enter into an investment management agreement in which the client specifically consented or will specifically consent to the purchase of securities of the Bank by the Enhanced Funds.

14. The Enhanced Funds will invest in securities, other than shares of the Bank, included in the Canadian Equity Index, the Capped Index or any other relevant index, in accordance with the investment management process used by TDAM in managing the Enhanced Funds but will invest in shares of the Bank on a capitalization weighted basis, whereby the Enhanced Fund will invest in shares of the Bank in substantially the same proportion that such shares are weighted in the index.

15. The investment in shares of the Bank by an Enhanced Fund represents the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Enhanced Fund.

16. In no circumstances will discretion be exercised by TDAM with respect to the proportion of shares of the Bank held in an Enhanced Fund.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED by the Commission pursuant to section 113(a) of the Act that clause 111(2)(a) and subsection 111(3) of the Act do not apply to the Enhanced Funds' investments in securities of the Bank provided that the proportion of an Enhanced Fund's assets to be invested in shares of the Bank is determined on a capitalization weighted basis, whereby the Enhanced Fund invests in shares of the Bank in substantially the same proportion that such shares are weighted in the index and not pursuant to the exercise of discretion by TDAM.

January 30, 2004.

"Theresa McLeod"
"Paul K. Bates"