University of Toronto Asset Management Corporation et al.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions-- relief granted from the mutual fund conflict of interest restrictions in the Securities Act (Ontario) to allow pooled funds to make and hold an investment from time to time in more than 20% of the outstanding voting securities of an underlying fund -- relief subject to certain conditions.

Applicable Legislative Provisions

Securities Act (Ontario), R.S.O. 1990. c. S.5, as am., ss. 111(2)(b), 111(3), 113.

August 21, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

UNIVERSITY OF TORONTO ASSET MANAGEMENT CORPORATION

(UTAM or the Filer)

AND

IN THE MATTER OF

UTAM CANADIAN EQUITY FUND, UTAM US EQUITY FUND,

UTAM INTERNATIONAL EQUITY FUND, UTAM CANADIAN CREDIT FUND, AND

UTAM CANADIAN FIXED INCOME FUND

(the Initial Top Funds) and any other similar investment fund that is not a reporting issuer

under the Securities Act (Ontario) (the Act), which will be established,

advised and managed by the Filer (the Future Top Funds,

together with the Initial Top Funds, the Top Funds and individually a Top Fund)

ORDER

Background

The principal regulator in the Jurisdiction has received an application from the Filer, on its behalf and on behalf of the Top Funds, for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Top Funds from the following provisions of the Act to permit a Top Fund, alone or together with one or more other Top Funds, to make and hold an investment from time to time that is more than 20% of the outstanding voting securities of an Underlying Fund, as defined below (the Exemption Sought):

(a) paragraph 111(2)(b) which prohibits a mutual fund from knowingly making an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial security holder; and

(b) subsection 111(3) which prohibits a mutual fund, its management company or its distribution company from knowingly holding an investment described in paragraph (a) above.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning if used in this decision, unless otherwise defined.

Representations

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

The Filer

1. The Filer is a corporation that was incorporated by letters patent on April 25, 2000 by The Governing Council of the University of Toronto (the UofT) under the Corporations Act (Ontario), and operates out of its head office in Toronto, Ontario.

2. The principal objectives of the Filer, pursuant to discretionary investment management agreements with the pension and endowment funds of the UofT, are to create added value by providing both current and future financial resources for the pension and endowment funds of UofT that will contribute to globally recognized education and research. In the future, UTAM may consider acting as an adviser for other similar entities (with the pension and endowment funds of the UofT, the Clients).

3. The Filer is the investment fund manager and portfolio manager of the Initial Top Funds and will be the investment fund manager and portfolio manger of any Future Top Funds.

4. State Street Trust Company Canada is the trustee of the Initial Top Funds and will be the trustee of any Future Top Funds.

5. The Filer is currently registered with the Commission as an investment fund manager and as a portfolio manager.

6. The Filer is not, and does not intend to become, a reporting issuer in any jurisdiction of Canada.

7. Neither the Filer nor any of the Initial Top Funds is in default of securities legislation in any jurisdiction of Canada.

Top Funds

8. Each Top Fund is, or will be, an open-ended unincorporated trust formed under the laws of Ontario by a master trust agreement and a supplemental trust agreement.

9. Each Top Fund is, or will be, a "mutual fund in Ontario" for purposes of the Act.

10. No Top Fund is, or will be, a reporting issuer in any jurisdiction of Canada.

11. Each Top Fund may invest all, or a portion, of its assets in securities of an Underlying Fund (the Fund-on-Fund Structure). Subject to obtaining the Exemption Sought, each Top Fund may, alone or together with one or more other Top Funds, make and hold an investment from time to time that is more than 20% of the outstanding voting securities of an Underlying Fund.

12. Securities of each Top Fund are, and will be, sold pursuant to available prospectus exemptions in accordance with National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106).

13. Units of the Top Funds are, or will be, redeemable on a monthly basis.

Underlying Funds

14. Each Underlying Fund is, or will be, an investment fund managed by a third party manager that is arm's length to the Filer and UofT and the securities of which are, or will be, sold to a Top Fund pursuant to a prospectus, or available prospectus exemptions in accordance with NI 45-106 (each an Underlying Fund).

15. Each Underlying Fund has, or will have, its own investment objectives, strategies and investment restrictions.

16. To the best of the knowledge of the Filer, none of the Underlying Funds is in default of securities legislation in any jurisdiction of Canada.

Fund-on-Fund Investing

17. The Filer believes that the Fund-on-Fund Structure provides an efficient and cost-effective manner of pursuing portfolio diversification on behalf of the Top Funds, rather than through the direct purchase of the portfolio securities of the Underlying Funds or the use of managed accounts with various fund managers/portfolio managers of the Underlying Funds (which should yield the same results, but with greater administrative cost to both the Top Funds and the fund managers/portfolio managers of the Underlying Funds). In addition, in certain situations, the Filer may only be able to gain access to certain investment strategies by investing in the securities of an Underlying Fund.

18. The Fund-on-Fund Structure will also allow Top Funds to have access to a larger variety of investments than would otherwise be available.

19. An investment by a Top Fund in the securities of an Underlying Fund will increase the asset base of the Underlying Fund, enabling the Underlying Fund to further diversify its investment portfolio to the benefit of all of its investors. The larger asset base will also benefit investors in the Underlying Fund by allowing more favourable pricing and transaction costs on portfolio trades, increasing access to investments where there is a minimum subscription or purchase amount, and economies of scale through greater administrative efficiency.

20. The Top Funds are, or will be, "related mutual funds" for purposes of the Act. The amounts invested from time to time in an Underlying Fund by a Top Fund, either alone or together with other Top Funds, may exceed 20% of the outstanding voting securities of the Underlying Fund. As a result each Top Fund, either alone or together with other Top Funds, will be a "substantial securityholder" of such Underlying Fund for the purposes of the Act.

21. In the absence of the Exemption Sought, the Top Funds would be constrained by paragraph 111(2)(b) and subsection 111(3) of the Act in terms of the degree to which they could implement the Fund-on-Fund Structure.

22. Any investment by a Top Fund in an Underlying Fund will be aligned with the investment objectives, investment strategy, risk profile and other principal terms of the Top Fund. The weighting of the investment by a Top Fund in an Underlying Fund will be reviewed and adjusted by the Filer as necessary to ensure that the weighting continues to be appropriate for the Top Fund's investment objectives.

23. The Top Funds currently do not use an offering memorandum or similar document as the pension and endowment funds of the UofT do not require such documentation. UTAM manages the assets of the pension and endowment funds of the UofT pursuant to an investment management agreement. The pension and endowment funds of the UofT, as the only existing investors in the Top Funds, will be advised in writing about the disclosure contemplated in paragraph (f) of the decision set forth below before the Top Funds begin to rely on the decision. UTAM may also manage the assets of other Clients in the future pursuant to an investment management agreement which will contain the disclosure contemplated in paragraph (f) of the decision set forth below.

24. Each of the Top Funds will prepare annual financial statements and interim unaudited financial statements in accordance with National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) and will otherwise comply with the requirements of NI 81-106 applicable to them. The holdings by a Top Fund of securities of an Underlying Fund will be disclosed in the financial statements.

25. Unitholders of a Top Fund will receive, on request and free of charge, a copy of any prospectus, offering memorandum or other similar document prepared and used and the audited financial statements and interim financial statements of any Underlying Fund in which the Top Fund invests.

26. The Underlying Funds will typically invest in equity securities, fixed income securities and other types of permitted investments, which will generally be liquid. It is not expected that any of the Underlying Funds will typically hold illiquid investments as part of their investment strategy. However, certain Underlying Funds may have restrictions or delays with respect to redemptions in order to allow adequate time to dispose of portfolio holdings needed to fund redemptions.

27. Securities of the Underlying Funds are typically redeemable on a daily or monthly basis, and are occasionally redeemable on a quarterly basis. As the Top Funds are managed using a long-term investment horizon, the Top Funds are able in accordance with their investment objectives to adequately plan when they want to sell a particular investment such that the Top Funds do not anticipate any problems redeeming the securities of an Underlying Fund, regardless of whether or not the securities of the Underlying Fund can be redeemed on a daily, monthly or quarterly basis.

28. A Top Fund's investments in the Underlying Funds will represent the business judgment of responsible persons uninfluenced by considerations other than the best interests of the Top Funds.

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 under the Legislation is that the Exemption Sought is granted provided that:

(a) units of a Top Fund are only distributed in Canada pursuant to exemptions from the prospectus requirement in accordance with NI 45-106;

(b) the investment by a Top Fund in securities of an Underlying Fund is compatible with the fundamental investment objectives of the Top Fund;

(c) no management fees or incentive fees are payable by a Top Fund that, to a reasonable person, will duplicate a fee payable by the Underlying Fund for the same service;

(d) no sales or redemption fees are payable by a Top Fund in relation to its purchases or redemptions of securities of an Underlying Fund that, to a reasonable person, would duplicate a fee payable by an investor in the Top Fund;

(e) a Top Fund will not purchase or hold securities of an Underlying Fund unless:

(i) at the time of the purchase of securities of the Underlying Fund, the Underlying Fund holds no more than 10% of the market value of its net assets in securities of other mutual funds, or

(ii) the Underlying Fund:

(A) links its performance to the performance of one other mutual fund (i.e., a clone fund),

(B) purchases or holds securities of a "money market fund" as defined by National Instrument 81-102 Mutual Funds (NI 81-102), or

(C) purchases or holds securities that are "index participation units" as defined by NI 81-102 and issued by a mutual fund.

(f) Each investor who is not currently an investor in a Top Fund will be provided, in the offering memorandum or similar document of a Top Fund, or, if no offering memorandum or similar document is used, in another document, with the following disclosure:

(i) that the Top Fund may purchase securities of an Underlying Fund;

(ii) the approximate or maximum percentage of net assets of the Top Fund that may be invested in securities of the Underlying Funds; and

(iii) the process or criteria used to select Underlying Funds.

(g) Each investor who is currently an investor in a Top Fund will be advised in writing about the disclosure contemplated in paragraph (f) of the decision set forth above before the Top Funds begin to rely on the decision.