Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- 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 discretionary investment management agreements giving full discretionary authority to portfolio manager -- relief from securityholder approval not to be considered a precedent -- relief granted based on specific facts in application for one-time non-recurring change to investment objective of fund.

Applicable Legislative Provisions

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

April 14, 2010

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

TD ASSET MANAGEMENT INC. AND

TD WATERHOUSE PRIVATE INVESTMENT COUNSEL INC.

(the Filers)

AND

IN THE MATTER OF

TD PRIVATE SMALL/MID-CAP EQUITY FUND

(the Fund)

DECISION

Background

The principal regulator in the Jurisdiction received an application (the Application) from the Filers on behalf of the Fund for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Fund from clause 5.1(c) of National Instrument 81-102 Mutual Funds (NI 81-102) requiring a mutual fund to obtain the prior approval of its securityholders before the fundamental investment objective of the mutual fund is changed (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(a) the Ontario Securities Commission is the principal regulator for the Application; and

(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 -- Definitions, MI 11-102 or NI 81-102 have the same meanings if used in this decision, unless otherwise defined.

Representations

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

1. TD Asset Management Inc. (TDAM) 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). Its head office is located in Toronto, Ontario.

2. TDAM is registered as:

(a) a portfolio manager, or their equivalent, under the securities legislation of all provinces and territories of Canada;

(b) a mutual fund dealer under the Securities Act (Nova Scotia);

(c) an exempt market dealer under the Securities Act (Ontario) (the OSA) and the Securities Act (Newfoundland and Labrador) (the NLSA); and

(d) a commodity trading manager under the Commodity Futures Act (Ontario).

3. TDAM conducts an investment management business offering passive, quantitative, enhanced and active portfolio management services to a large and diversified client base. As at December 31, 2009 TDAM and its affiliates had assets under management in excess of $14 billion. As part of its portfolio management business, TDAM is the trustee, manager and promoter of the Fund which is part of the TD Private Funds. The TD Private Funds are qualified for sale by means of a simplified prospectus and an annual information form 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 of NI 81-102.

4. TD Waterhouse Private Investment Counsel Inc. (TDW PIC) is a corporation incorporated under the Canada Business Corporations Act. It is a wholly-owned subsidiary of TDAM. Its head office is located in Toronto, Ontario.

5. TDW PIC is registered as a portfolio manager or their equivalent under the Legislation of all provinces and territories of Canada and as an exempt market dealer under the OSA and the NLSA.

6. TDW PIC utilizes model portfolios, which include mutual funds managed by TDAM, to provide customized investment strategies to clients (PIC Clients) who have $1,000,000 or more of investable assets and have entered into an investment management agreement with TDW PIC (the PIC Agreement) to manage their assets on a discretionary basis. PIC Client accounts are charged an annual fee that is based upon a percentage of assets under management.

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

8. As the Fund is a connected issuer to TDAM and TDW PIC, each PIC Client has consented to TDW PIC investing client monies held in an account with TDW PIC in units of the Fund.

9. All of the Fund's unitholders are PIC Clients and have entered into PIC Agreements giving TDW PIC full discretionary authority to invest assets held in their accounts.

10. TDAM and TDW PIC 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, exceed those of a blended broad market index, net of withholding tax, of U.S. and Canadian small to medium capitalization stocks.

With the main focus on growth through capital appreciation, the Fund invests primarily in publicly traded and readily marketable stocks of U.S. and Canadian corporations which are listed on stock exchanges or trading on quotation systems in the U.S. or Canada.

to:

The fundamental investment objective is to seek to achieve long-term capital growth by investing the majority of its assets in, or obtaining exposure to, equity securities of medium capitalization issuers in the United States. The Fund may also invest in, or obtain exposure to, equity securities of small capitalization issuers in the United States.

11. TDAM and TDW PIC also propose to change the name of the Fund to "TD Private US. Mid-Cap Equity Fund".

12. Connor, Clark & Lunn Investment Management Ltd. will no longer be a sub-advisor to the Fund.

13. These changes in the Fund's fundamental investment objective are being proposed as TDAM and TDW PIC believe the investment opportunities in securities of mid-capitalization issuers are significantly higher in the U.S. than in Canada due to the size of the U.S. market, which may also provide better opportunities for diversification across industry sectors. Consequently, TDAM and TDW PIC seek to broaden the current investment objective to enable the Fund to better achieve its growth objectives. TDAM and TDW PIC believe that this change is in the best interests of the Fund's unitholders.

14. Section 5.1(c) of NI 81-102 requires that the prior approval of the Fund's unitholders be obtained for any change to the fundamental investment objective of the Fund. TDAM and TDW PIC 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 expense and inconvenience to TDAM, TDW PIC, the Fund and the Fund's unitholders.

15. Unlike an investor that holds units outside of a discretionary managed account, the unitholders of the Fund have not participated in the investment decision to acquire units of the Fund apart from the consent requirements mentioned in paragraph 8 above. Instead, the unitholders of the Fund are relying entirely on TDW PIC to make investment decisions for them and, in those 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.

16. Provided the Exemption Sought is granted, the Fund's Trust Indenture does not require unitholder approval in order for TDAM to change the fundamental investment objective of the Fund, provided TDAM believes the change is not materially adverse to unitholders. TDAM believes the change of the fundamental investment objective is in the best interests of the Fund's unitholders.

17. If the Exemption Sought is granted, TDAM proposes to amend the Fund's investment objective in the simplified prospectus as part of its upcoming renewal of the TD Private Funds' simplified prospectus and annual information form, issue a press release and file a material change report announcing the change.

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

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator is that the Exemption Sought is granted.

"Rhonda Goldberg"
Manager, Investment Funds Branch
Ontario Securities Commission