CIBC Asset Management Inc. et al. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Exemption from subsection 4.1(1) of National Instrument 81-102 Mutual Funds to allow dealer managed mutual funds to invest in securities of an issuer during the prohibition period -- affililiate of the dealer manager acted as an underwriter in connection with the distribution of securities of the issuer.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 4.1(1), 19.1.

March 20, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUEBEC,

NEW BRUNSWICK, NOVA SCOTIA, PRINCE EDWARD

ISLAND, NEWFOUNDLAND AND LABRADOR,

AND THE NORTHWEST TERRITORIES, NUNAVUT

AND THE YUKON (the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM ("MRRS")

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

CIBC ASSET MANAGEMENT INC.,

CIBC GLOBAL ASSET MANAGEMENT INC.,

SCOTIA CASSELS INVESTMENT COUNSEL LIMITED,

JONES HEWARD INVESTMENT COUNSEL INC.,

TD ASSET MANAGEMENT INC. and

RBC ASSET MANAGEMENT INC. (the "Applicants")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Applicants (or "Dealer Managers"), the managers or portfolio advisers or both of the mutual funds named in Appendix "A" (the "Funds" or "Dealer Managed Funds") for a decision under section 19.1 of National Instrument 81-102 Mutual Funds ("NI 81-102") for:

• an exemption from subsection 4.1(1) of NI 81-102 (the "Investment Restriction") to enable the Dealer Managed Funds to invest in shares of common stock (the "Shares") of Tim Hortons Inc. (the "Issuer") during the period of distribution for the Offering (as defined below) (the "Distribution") and the 60-day period following the completion of the Distribution (the "60-Day Period") (the Distribution and the 60-Day Period together, the "Prohibition Period") notwithstanding that the Dealer Managers or their associates or affiliates act or have acted as an underwriter in connection with the initial public offering (the "Offering") of the Shares offered pursuant to a final base prep prospectus together with a supplemental prep prospectus containing certain additional information, to be filed by the Issuer in accordance with the securities legislation of each of the Jurisdictions (the "Investment Restriction Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission (the "OSC") is the principal regulator for this application, and

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

It is the responsibility of each of the Decision Makers to make a global assessment of the risks involved in granting exemptive relief from the Investment Restriction in relation to the specific facts of each application.

Interpretation

Defined terms contained in National Instrument 14-101 -- Definitions have the same meanings in this decision unless they are defined in this decision.

Representations

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

1. Each Dealer Manager is a "dealer manager" with respect to the Dealer Managed Funds, and each Dealer Managed Fund is a "dealer managed fund", as such terms are defined in section 1.1 of NI 81-102.

2. The securities of the Dealer Managed Funds are qualified for distribution in one or more of the provinces and territories of Canada pursuant to simplified prospectuses that have been prepared and filed in accordance with their respective securities legislation.

3. The head office of each of the Dealer Managers except for CIBC Global Asset Management Inc., is in Toronto, Ontario. The head office of CIBC Global Asset Management Inc. is in Montreal, Quebec.

4. The Issuer filed a second amended and restated preliminary base prep prospectus (the "Preliminary Prospectus") dated March 3, 2006 with each of the Decision Makers, for which an MRRS decision document evidencing receipt by the each of the Decision Makers was issued on March 3, 2006. The Offering will also be a publicly marketed Offering in the United States.

5. The Offering is being underwritten, subject to certain terms, by an underwriting syndicate that includes RBC Dominion Securities, CIBC World Markets Inc., Scotia Capital Inc., BMO Nesbitt Burns Inc. and TD Securities Inc. (each a "Related Underwriter" and collectively, the "Related Underwriters"), J.P. Morgan Securities Canada Inc. and Merill Lynch Canada Inc. (together with the Related Underwriters, and any other underwriters which are now or may become part of the syndicate prior to closing, the "Underwriters"). Each Related Underwriter is an affiliate of one or more of the Dealer Managers.

6. According to the Preliminary Prospectus, the Offering is expected to be for 29 million Shares and the initial offering price for the Shares is estimated to be between $21.00 and $23.00 per share. As a result, the gross proceeds of the Offering are expected to be between approximately $609 million and $667 million depending on the final offering price for the Shares. In addition, according to the Preliminary Prospectus, the Underwriters will be granted an over-allotment option (the "Over-Allotment Option") to purchase an amount equal to a percentage of the Shares issued in the Offering which may be exercised within 30 days following closing (the "Closing"), which is expected to occur on March 29, 2006. According to the Preliminary Prospectus, the Over-Allotment Option is expected to be for an amount equal to up to approximately 15% of the number of Shares offered in the Offering. If the Over-Allotment Option is exercised in full, the gross proceeds of the Offering are expected to be increased by between approximately $91.3 million and $108 million.

7. As disclosed in the Preliminary Prospectus, the Issuer is a Delaware corporation and intends, prior to the completion of the Offering, to merge into a newly-formed Ohio corporation named Tim Hortons Inc. The Issuer is at the time of the merger and shall continue to be until the completion of the Offering, a subsidiary of Wendy's International, Inc. ("Wendy's"). The Issuer is the largest quick service restaurant ("QSR") chain in Canada based on systemwide food sales and number of restaurants open. According to the Canadian Restaurant and Foodservices Association and Statistics Canada, the Issuer's system in 2004 represented 22.6% of the $14.0 billion QSR segment of the Canadian foodservice industry based on sales dollars, almost 25% larger than the Issuer's largest competitor.

8. According to the Preliminary Prospectus, the net proceeds of the Offering will be used, together with estimated borrowings of US$960 million under a term loan agreement that the Issuer intends to enter into prior to the Offering, to pay US$960 million of indebtedness, together with accrued interest, owed to Wendy's under a previously issued US$960 million promissory note (the "Promissory Note"). The terms of the Issuer's proposed US$960 million term loan agreement have not yet been finalized.

9. Pursuant to an underwriting agreement (the "Underwriting Agreement") the Issuer and the Underwriters will enter into in respect of the Offering prior to the Issuer filing the final prospectus for the Offering, the Issuer will agree to sell to the Underwriters, and the Underwriters will agree to purchase, as principals, all of the Shares offered under the Offering.

10. According to the Preliminary Prospectus, there is presently no market through which the Shares may be sold and purchasers may not be able to resell the Shares purchased. However, according to the Preliminary Prospectus the Issuer has applied to have the Shares listed on the Toronto Stock Exchange (the "TSX") and has received conditional approval to have the Shares listed on the TSX under the symbol "THI" and has applied for listing of the Shares on the New York Stock Exchange ("NYSE") under the same symbol.

11. The Preliminary Prospectus does not disclose that the Issuer is a "related issuer" as defined in National Instrument 33-105 -- Underwriting Conflicts ("NI 33-105").

12. According to the Preliminary Prospectus, the Issuer may be a "connected issuer" as defined in NI 33-105 of the Related Underwriters for the reasons set forth in the Preliminary Prospectus. As disclosed in the Preliminary Prospectus, these reasons include the fact that the Related Underwriters and certain of the other Underwriters are affiliates of banks that will be lenders to one of the Issuer's subsidiaries in the aggregate amount of $385 million under Canadian credit facilities, $60 million under a U.S. revolving credit facility and $200 million under a bridge loan facility (the "Credit Facilities"). According to the Preliminary Prospectus, the Issuer does not intend to use any of the proceeds of the Offering to repay any of the amounts that will be outstanding on Closing under the Credit Facilities. The Issuer will use the $500 million of borrowings under the Credit Facilities to repay obligations owed to Wendy's under the Promissory Note. None of the proceeds used by Wendy's upon repayment of the Promissory Note from the proceeds of the Offering will be used by Wendy's to repay any debt owing under Wendy's credit facility with a bank that is an affiliate of J.P. Morgan Securities Canada Inc. or to repay commercial paper issued under Wendy's ongoing commercial paper arrangement for which an affiliate of Goldman Sachs Canada Inc. acts as a dealer.

13. According to the Preliminary Prospectus the decision to issue the Shares and the details of the Offering were made through negotiations between the Issuer, Wendy's and the Underwriters. According to the Preliminary Prospectus, the bank affiliates of Goldman Sachs Canada Inc., RBC Dominion Securities Inc., J.P. Morgan Securities Canada inc., Scotia Capital Inc., BMO Nesbitt Burns Inc., CIBC World Markets Inc., and TD Securities Inc. (the "Related Bank Affiliates") did not have any involvement in such decision or determination but have been advised of the terms of the Offering. As a consequence of the Offering the Related Underwriters will receive their proportionate share of the underwriters' fee.

14. Despite the affiliation between the Dealer Managers and the Related Underwriters, each Dealer Manager operates independently of its Related Underwriter. In particular, the investment banking and related dealer activities of the Related Underwriters and the investment portfolio management activities of each of their respective Dealer Managers are separated by "ethical" walls. Accordingly, no information flows from one to the other concerning their respective business operations or activities generally, except in the following or similar circumstances:

(a) in respect of compliance matters (for example, each Dealer Manager and its Related Underwriter may communicate to enable the Dealer Manager to maintain up to date restricted-issuer lists to ensure that the Dealer Manager complies with applicable securities laws); and

(b) each Dealer Manager and its Related Underwriter may share general market information such as discussion on general economic conditions, bank rates, etc.

15. The Dealer Managed Funds are not required or obligated to purchase any Shares during the Prohibition Period.

16. Each Dealer Manager may cause its Dealer Managed Funds to invest in the Shares during the Prohibition Period. Any purchase of the Shares will be consistent with the investment objectives of the Dealer Managed Funds and represent the business judgment of the Dealer Manager for its Dealer Managed Funds uninfluenced by considerations other than the best interests of the Dealer Managed Fund or in fact be in the best interests of the Dealer Managed Fund.

17. To the extent that the same portfolio manager or team of portfolio managers of a Dealer Manager manages two or more Dealer Managed Funds and other client accounts that are managed on a discretionary basis (the "Managed Accounts"), the Shares purchased for them will be allocated:

(a) in accordance with the allocation factors or criteria stated in the written policies or procedures put in place by the Dealer Manager for its Dealer Managed Funds and Managed Accounts, and

(b) taking into account the amount of cash available to each Dealer Managed Fund for investment.

18. There will be an independent committee (the "Independent Committee") appointed in respect of each Dealer Manager's Dealer Managed Funds to review such Dealer Managed Funds' investments in the Shares during the Prohibition Period.

19. The Independent Committee will have at least three members and every member must be independent. A member of the Independent Committee is not independent if the member has a direct or indirect material relationship with its Dealer Manager, the Dealer Managed Funds, or any affiliate or associate thereof. For the purpose of this Decision, a material relationship means a relationship which could, in the view of a reasonable person, reasonably interfere with the exercise of the member's independent judgment regarding conflicts of interest facing the Dealer Manager.

20. The members of the Independent Committee will exercise their powers and discharge their duties honestly, in good faith, and in the best interests of investors in their respective Dealer Managed Funds and, in so doing, exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances.

21. Each Dealer Manager, in respect of its Dealer Managed Funds, will notify a member of staff in the Investment Funds Branch of the Ontario Securities Commission, in writing of any SEDAR Report (as defined below) filed on SEDAR, as soon as practicable after the filing of such a report, and the notice shall include the SEDAR project number of the SEDAR Report and the date on which it was filed.

22. Except as described in paragraph 14, above, each Dealer Manager has not been involved in the work of its Related Underwriter and each Related Underwriter has not been and will not be involved in the decisions of its Dealer Manager as to whether such Dealer Manager's Dealer Managed Funds will purchase Shares during the Prohibition Period.

Decision

Each of the Decision Makers has assessed the conflict of interest risks associated with granting an exemption in this instance from the Investment Restriction and is satisfied that, at the time this Decision is granted, the potential risks are sufficiently mitigated.

Each of the Decision Makers is satisfied that the test contained in NI 81-102 that provides the Decision Maker with the jurisdiction to make the Decision has been met.

The Decision of the Decision Makers under the Legislation is that the Requested Relief is granted, notwithstanding that the Related Underwriters act or have acted as underwriters in the Offering provided that, in respect of each Dealer Manager and its Dealer Managed Funds, independent of any of the other Applicants and their Dealer Managed Funds, the following conditions are satisfied:

I. At the time of each purchase of Shares (a "Purchase") by a Dealer Managed Fund pursuant to this Decision, the following conditions are satisfied:

(a) the Purchase

(i) represents the business judgment of the Dealer Manager uninfluenced by considerations other than the best interests of the Dealer Managed Fund, or

(ii) is, in fact, in the best interests of the Dealer Managed Fund;

(b) the Purchase is consistent with, or is necessary to meet, the investment objective of the Dealer Managed Fund as disclosed in its simplified prospectus; and

(c) the Dealer Managed Fund does not place the order to purchase, on a principal or agency basis, with its Related Underwriter;

II. Prior to effecting any Purchase pursuant to this Decision, the Dealer Managed Fund has in place written policies or procedures to ensure that,

(a) there is compliance with the conditions of this Decision; and

(b) in connection with any Purchase,

(i) there are stated factors or criteria for allocating the Shares purchased for two or more Dealer Managed Funds and other Managed Accounts, and

(ii) there is full documentation of the reasons for any allocation to a Dealer Managed Fund or Managed Account that departs from the stated allocation factors or criteria;

III. The Dealer Manager does not accept solicitation by its Related Underwriter for the Purchase of Shares for the Dealer Managed Funds;

IV. The Related Underwriter does not purchase Shares in the Offering for its own account except Shares sold by the Related Underwriter on Closing;

V. The Dealer Managed Fund has an Independent Committee to review the Dealer Managed Funds' investments in the Shares during the Prohibition Period;

VI. The Independent Committee has a written mandate describing its duties and standard of care which, as a minimum, sets out the applicable conditions of this Decision;

VII. The members of the Independent Committee exercise their powers and discharge their duties honestly, in good faith, and in the best interests of investors in the Dealer Managed Funds and, in so doing, exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances;

VIII. The Dealer Managed Fund does not relieve the members of the Independent Committee from liability for loss that arises out of a failure to satisfy the standard of care set out in paragraph VII above;

IX. The Dealer Managed Fund does not incur the cost of any portion of liability insurance that insures a member of the Independent Committee for a liability for loss that arises out of a failure to satisfy the standard of care set out in paragraph VII above;

X. The cost of any indemnification or insurance coverage paid for by the Dealer Manager, any portfolio manager of the Dealer Managed Funds, or any associate or affiliate of the Dealer Manager or any portfolio manager of the Dealer Managed Funds to indemnify or insure the members of the Independent Committee in respect of a loss that arises out of a failure to satisfy the standard of care set out in paragraph VII above is not paid either directly or indirectly by the Dealer Managed Funds;

XI. The Dealer Manager files a certified report on SEDAR (the "SEDAR Report") in respect of each Dealer Managed Fund, no later than 30 days after the end of the Prohibition Period, that contains a certification by the Dealer Manager that contains:

(a) the following particulars of each Purchase:

(i) the number of Shares purchased by the Dealer Managed Funds of the Dealer Manager;

(ii) the date of the Purchase and purchase price;

(iii) whether it is known whether any underwriter or syndicate member has engaged in market stabilization activities in respect of the Shares;

(iv) if the Shares were purchased for two or more Dealer Managed Funds and other Managed Accounts of the Dealer Manager, the aggregate amount so purchased and the percentage of such aggregate amount that was allocated to each Dealer Managed Fund; and

(v) the dealer from whom the Dealer Managed Fund purchased the Shares and the fees or commissions, if any, paid by the Dealer Managed Fund in respect of such Purchase;

(b) a certification by the Dealer Manager that the Purchase:

(i) was made free from any influence by the Related Underwriter or any affiliate or associate thereof and without taking into account any consideration relevant to the Related Underwriter or any associate or affiliate thereof; and

(ii) represented the business judgment of the Dealer Manager uninfluenced by considerations other than the best interest of the Dealer Managed Fund, or

(iii) was, in fact, in the best interests of the Dealer Managed Fund;

(c) confirmation of the existence of the Independent Committee to review the Purchase of the Shares by the Dealer Managed Funds, the names of the members of the Independent Committee, the fact that they meet the independence requirements set forth in this Decision, and whether and how they were compensated for their review;

(d) a certification by each member of the Independent Committee that after reasonable inquiry the member formed the opinion that the policies and procedures referred to in Condition II(a) above are adequate and effective to ensure compliance with this Decision and that the decision made on behalf of each Dealer Managed Fund by the Dealer Manager to purchase Shares for the Dealer Managed Funds and each Purchase by the Dealer Managed Fund:

(i) was made in compliance with the conditions of this Decision;

(ii) was made by the Dealer Manager free from any influence by the Related Underwriter or any affiliate or associate thereof and without taking into account any consideration relevant to the Related Underwriter or any associate or affiliate thereof; and

(iii) represented the business judgment of the Dealer Manager uninfluenced by considerations other than the best interests of the Dealer Managed Fund, or

(iv) was, in fact, in the best interests of the Dealer Managed Fund.

XII. The Independent Committee advises the Decision Makers in writing of:

(a) any determination by it that the condition set out in paragraph XI(d) has not been satisfied with respect to any Purchase of the Shares by a Dealer Managed Fund;

(b) any determination by it that any other condition of this Decision has not been satisfied;

(c) any action it has taken or proposes to take following the determinations referred to above; and

(d) any action taken, or proposed to be taken, by the Dealer Manager or a portfolio manager of a Dealer Managed Fund, in response to the determinations referred to above.

XIII. For Purchases of Shares during the Distribution only, the Dealer Manager:

(a) expresses an interest to purchase on behalf of Dealer Managed Funds and Managed Accounts a fixed number of Shares (the "Fixed Number") to an Underwriter other than its Related Underwriter;

(b) agrees to purchase the Fixed Number or such lesser amount as has been allocated to the Dealer Manager no more than five (5) business days after the final prospectus has been filed;

(c) does not place an order with an underwriter of the Offering to purchase an additional number of Shares under the Offering prior to the completion of the Distribution, provided that if the Dealer Manager was allocated less than the Fixed Number at the time the final prospectus was filed for the purposes of the Closing, the Dealer Manager may place an additional order for such number of additional Shares equal to the difference between the Fixed Number and the number of Shares allotted to the Dealer Manager at the time of the final prospectus in the event the Underwriters exercise the Over-Allotment Option; and

(d) does not sell Shares purchased by the Dealer Manager under the Offering, prior to the listing of such Shares on the TSX.

XIV. Each Purchase of Shares during the 60-Day Period is made on the TSX or NYSE; and

XV. For Purchases of Shares during the 60-Day Period only, an underwriter provides to the Dealer Manager written confirmation that the "dealer restricted period" in respect of the Offering, as defined in Ontario Securities Commission Rule 48-501, Trading During Distributions, Formal Bids and Share Exchange Transactions, has ended.

APPENDIX "A"

THE MUTUAL FUNDS

Imperial Pools

Imperial Canadian Equity Pool

Imperial Canadian Dividend Income Pool

Imperial Canadian Dividend Pool

Imperial Canadian Income Trust Pool

Renaissance Talvest Mutual Funds

Renaissance Canadian Balanced Fund

Renaissance Canadian Balanced Value Fund

Renaissance Canadian Dividend Income Fund

Renaissance Canadian Growth Fund

Renaissance Canadian Core Value Fund

Renaissance Canadian Income Trust Fund

Renaissance Canadian Income Trust Fund II

Renaissance Canadian Small Cap Fund

Talvest Dividend Fund

Talvest Cdn. Equity Growth Fund

Talvest Cdn. Asset Allocation Fund

Talvest Cdn. Equity Value Fund

Talvest Global Asset Allocation Fund

Talvest Small Cap Cdn. Equity Fund

Talvest Millennium High Income Fund

Talvest Millennium Next Generation fund

CIBC Mutual Funds

CIBC Balanced Fund

CIBC Canadian Emerging Companies Fund

CIBC Core Canadian Equity Fund

CIBC Capital Appreciation Fund

CIBC Dividend Fund

CIBC Financial Companies Fund

Canadian Imperial Equity Fund

CIBC Canadian Small Companies Fund

CIBC Monthly Income Fund

CIBC Diversified Income Fund

Frontiers Pools

Frontiers Canadian Equity Pool

Frontiers Canadian Monthly Income Pool

TD Mutual Funds

TD U.S. Mid-Cap Growth Fund

TD U.S. Small-Cap Equity Fund

TD U.S. Equity Fund

TD Canadian Small-Cap Equity Fund

TD Balanced Fund

TD Canadian Equity Fund

TD Canadian Value Fund

TD Monthly Income Fund

TD Dividend Growth Fund

TD Dividend Income Fund

TD Balanced Growth Fund

TD Balanced Income Fund

TD Canadian Blue Chip Equity Fund

Scotia Mutual Funds

Scotia Canadian Growth Fund

Scotia Canadian Balanced Fund

Scotia Young Investors Fund

Scotia Private Client Mutual Funds

Scotia Canadian Blue Chip Fund

Scotia American Growth Fund

Scotia Cassels North American Equity Fund

BMO Mutual Funds

BMO Equity Fund

BMO Special Equity Fund

BMO Canadian Equity Class

RBC Funds (formerly Royal Mutual Funds)

RBC Canadian Growth Fund

RBC Canadian Equity Fund

RBC Balanced Fund

RBC Balanced Growth Fund

RBC U.S. Equity Fund

RBC U.S. Mid-Cap Equity Fund

RBC Private Pools

RBC Private U.S. Mid Cap Equity Pool

RBC Private U.S. Large Cap Equity Pool

RBC Currency Neutral Funds

RBC U.S. Equity Currency Neutral Fund

RBC U.S. Mid-Cap Equity Currency Neutral Fund