Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications- exemption from unitholder approval requirement in clause 5.1(c) of NI 81-102- mutual fund permitted to change its investment objective without seeking unitholder approval - -- all unitholders of the fund have entered into separately managed account agreements giving full discretionary authority to portfolio manager- convening of unitholder meeting represents unnecessary cost and inconvenience to filer, the mutual fund and the unitholders.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.1(c), 19.1.

March 6, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUÉBEC, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND,

NEWFOUNDLAND AND LABRADOR, YUKON TERRITORY,

NORTHWEST TERRITORIES AND NUNAVUT TERRITORY

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

TD ASSET MANAGEMENT INC.

(the Filer)

AND

IN THE MATTER OF

TD PRIVATE CANADIAN DIVIDEND FUND

(the Fund)

 

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 Filer, on behalf of the Fund, for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Fund from the requirement contained in clause 5.1(c) of National Instrument 81-102 Mutual Funds (NI 81-102) requiring a mutual fund to obtain approval of its securityholders before changing the fundamental investment objective of the Fund (the Requested Relief).

Under the Mutual Reliance Review System for Exemptive Relief Applications

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

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

Interpretation

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

Representations

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

1. The Filer is a corporation amalgamated under the Business Corporations Act (Ontario). It is a wholly-owned subsidiary of The Toronto-Dominion Bank, a bank listed in Schedule I to the Bank Act (Canada).

2. The Filer is registered as an investment counsel and portfolio manager or their equivalent in all provinces and territories of Canada, as a limited market dealer under the Securities Act (Ontario) (the Ontario Act) and the Securities Act (Newfoundland and Labrador) (the Newfoundland Act), and as a commodity trading manager under the Commodity Futures Act (Ontario).

3. The Filer conducts an investment management business which offers passive, quantitative, enhanced and active portfolio management services to a large and diversified client base. As part of its portfolio management business, the Filer is the manager, principal distributor and promoter of the Fund, which is one of the TD Private Funds qualified for sale by means of simplified prospectuses and annual information forms that have been prepared and filed in accordance with the securities legislation of all provinces and territories of Canada. The Fund is a no-load mutual fund within the meaning ascribed thereto in NI 81-102.

4. TD Waterhouse Private Investment Counsel Inc. (TDWPIC) is a corporation that was incorporated under the Canada Business Corporations Act. It is a wholly-owned subsidiary of the Filer and is registered as an investment counsel and portfolio manager or their equivalent in all provinces and territories of Canada and as a limited market dealer under the Ontario Act and the Newfoundland Act.

5. TDWPIC utilizes model portfolios, which include mutual funds managed by the Filer, to provide customized investment management strategies to clients having $500,000 or more of investable assets who grant TDWPIC the authority under a client account agreement to manage their assets on a discretionary basis. Client accounts that are managed by TDWPIC are charged an annual fee that is based upon a percentage of assets under management.

6. TDWPIC currently uses, among other things, the TD Private Funds as an investment vehicle for the assets of many of the accounts in order to reduce the cost of administering such accounts so that the Filer's individually managed account services can be offered to individuals who could not otherwise gain access to such services.

7. As the Fund is a connected issuer to the Filer and TDWPIC, each client has consented to TDWPIC investing client monies held in an account in units of the Fund.

8. All of the Fund's unitholder's are clients of TDWPIC and all unitholders have entered into a TDWPIC client agreement giving full discretionary authority to TDWPIC to invest assets held in the account.

9. The Filer and TDWPIC have determined that it is appropriate to change the fundamental investment objective of the Fund from:

"The fundamental investment objective is to achieve rates of total return that, over the longer term, on an after-tax basis, exceed those of a mid-term index of Canadian government bonds.

The Fund invests primarily in high-quality and marketable preferred share issues of Canadian financial institutions, utilities, and other corporations, and high-yield common shares of Canadian corporations. The Fund focuses on generating a high and secure level of dividend income from the securities, while employing a limited degree of trading activity and/or interest rate anticipation to preserve capital value."

to

"The fundamental investment objective is to achieve rates of total return that, over the longer term, on an after-tax basis, exceed those of a mid-term index of Canadian government bonds.

The Fund invests primarily in dividend and income paying securities, including but not limited to high-yield common shares of Canadian corporations, high-quality and marketable preferred share issues of Canadian financial institutions, utilities, and other corporations, income trusts and Canadian dollar denominated bonds. The Fund focuses on generating a stable level of distributions from the securities, while employing a limited degree of trading activity and/or interest rate anticipation to preserve capital value."

10. The Filer and TDWPIC believe that this change is in the best interests of the Fund's unitholders.

11. Clause 5.1(c) of NI 81-102 requires that unitholder approval be obtained for any change to the fundamental investment objective of the Fund. The Filer and TDWPIC believe that, in the circumstances, a unitholder meeting convened for the purpose of obtaining unitholder approval to change the fundamental investment objective of the Fund is not desirable and represents an unnecessary cost and inconvenience to the Filer, TDWPIC, the Fund and unitholders.

12. Unlike an investor that holds units outside of a TDWPIC account, the unitholders of the Fund have not participated in the investment decision to acquire units of the Fund apart from the consent requirement mentioned in paragraph 7 above. Instead, the unitholders of the Fund are relying entirely on TDWPIC to make investment decisions for them and, in these circumstances, the change of a fundamental investment objective is analogous to the unitholder changing from one TD Private Fund to another, which change does not require unitholder approval but which change would, for tax purposes, be a disposition.

13. Provided the Requested Relief is granted, the trust indenture governing the Fund does not require unitholder approval in order for the Filer to change the fundamental investment objective of the Fund.

14. If the Requested Relief is granted, the Filer proposes to amend the Fund's simplified prospectus and annual information form, issue a press release and file a material change report announcing the change.

15. The proposed change of the fundamental investment objective is neutral to the unitholders of the Fund from a fee and expense perspective.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation 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.

"Leslie Byberg"
Manager, Investment Funds Branch
Ontario Securities Commission