Securities Law & Instruments

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- subdivided offering -- in connection with offering of Class C preferred shares -- the prohibitions contained in the Legislation against trading in portfolio shares by persons or companies having information concerning the trading programs of mutual funds shall not apply to administrator with respect to certain principal trades with the issuer in securities comprising the Issuer's portfolio -- issuer's portfolio consisting of shares of five Canadian banks and three Canadian insurance companies.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 119, 121(2)(a)(ii).

December 11, 2009

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

BIG 8 SPLIT INC.

(the "Filer")

AND

TD SECURITIES INC.

("TD Securities")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for a decision that the prohibitions contained in Section 119 of the Securities Act (Ontario) (the "OSA") against trading in portfolio shares by persons or companies having information concerning the trading programs of mutual funds shall not apply to TD Securities in connection with Principal Sales and Principal Purchases (each defined below) with respect to the public offering (the "Offering") of class C preferred shares (the "Class C Preferred Shares") of the Filer (the "Exemption Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

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

(b) the Filer has provided notice that section 4.7(1) of Multinational Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in the jurisdictions of Alberta, Saskatchewan, Nova Scotia and Newfoundland and Labrador.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 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 was incorporated under the Business Corporations Act (Ontario) on June 26, 2003 and became a reporting issuer under the OSA by filing a final prospectus dated August 28, 2003 relating to an initial public offering of class A capital shares (the "Capital Shares") and class A preferred shares completed on September 3, 2003.

2. The authorized capital of the Filer consists of an unlimited number of Capital Shares, an unlimited number of Class A preferred shares, an unlimited number of Class B, Class C and Class D preferred shares issuable in series, an unlimited number of Class B, Class C and Class D capital shares issuable in series, and an unlimited number of Class E voting shares ("Class E Shares").

3. Currently there are 1,204,980 Capital Shares and 1,204,980 Class B preferred shares, Series 1 (the "Class B Preferred Shares") issued and outstanding.

4. The Filer is offering Class C Preferred Shares and Capital Shares pursuant to a final prospectus (the "Prospectus"). Immediately prior to closing of the Offering, the Filer intends to pay a dividend in Capital Shares to holders of Capital Shares (the "Share Dividend"). As a result, and in order to maintain the same number of Capital Shares and preferred shares of all classes outstanding, the Filer is offering a greater number of Class C Preferred Shares than Capital Shares. However, after giving effect to this Offering and the Share Dividend, there will be an equal number of Capital Shares and preferred shares of the Filer outstanding.

5. The Filer filed the Prospectus in each of the provinces of Canada on December 8, 2009 (SEDAR Project No. 1489705).

6. The Capital Shares and the Class B Preferred Shares will continue to be listed and posted for trading on The Toronto Stock Exchange (the "TSX"). The TSX has conditionally approved the listing of the Class C Preferred Shares and the additional Capital Shares.

7. The Class E Shares are the only voting shares in the capital of the Filer. There are currently 100 Class E Shares issued and outstanding. All of the issued and outstanding Class E Shares are owned by Big 8 Split Trust, a trust established for holders from time to time of preferred shares and Capital Shares of the Filer.

8. The Capital Shares and Class C Preferred Shares may be surrendered for retraction at any time in the manner described in the Prospectus.

9. The Filer has a board of directors (the "Board of Directors") which currently consists of five directors, three of which are independent directors who are not employees of TD Securities. Also, the offices of President/Chief Executive Officer and Chief Financial Officer/Secretary of the Filer are held by employees of TD Securities.

10. The Filer is a passive investment company whose principal investment objective is to invest in a portfolio of common shares (the "Portfolio Shares") of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, The Toronto-Dominion Bank, Great-West Lifeco Inc., Manulife Financial Corporation and Sun Life Financial Inc. (collectively, the "Financial Institutions") in order to generate fixed cumulative preferential distributions for holders of the Filer's Class B Preferred Shares and Class C Preferred Shares, and to allow the holders of the Filer's Capital Shares to participate in the capital appreciation of the Portfolio Shares after payment of administrative and operating expenses of the Filer. It will be the policy of the Board of Directors to pay dividends on the Capital Shares in an amount equal to the dividends received by the Filer on the Portfolio Shares minus the distributions payable on the Class B Preferred Shares and Class C Preferred Shares and all administrative and operating expenses of the Filer.

11. Class C Preferred Share distributions will be funded from the dividends received on the Portfolio Shares. If necessary, any shortfall in the distributions on the Class C Preferred Shares will be funded by proceeds from the sale of Portfolio Shares.

12. The record date for the payment of Class C Preferred Share distributions, Capital Share dividends or other distributions of the Filer will be set in accordance with the applicable requirements of the TSX.

13. Any outstanding Capital Shares and preferred shares will be redeemed by the Filer on December 15, 2013.

14. The Filer is considered to be a mutual fund, as defined in the Legislation. Since the Filer does not operate as a conventional mutual fund, it is making an application for a waiver from certain requirements of National Instrument 81-102 -- Mutual Funds.

15. The policy of the Filer is to maintain a fixed portfolio and not engage in trading except in limited circumstances, including to fund retractions of preferred shares and Capital Shares.

16. The Portfolio Shares are listed and traded on the TSX.

17. The Filer is not, and will not upon the completion of the Offering be, an insider of the Financial Institutions within the meaning of the Legislation.

The Offering

18. The net proceeds from the Offering will be used by the Filer to fund the purchase of additional Portfolio Shares.

19. The Prospectus discloses selected financial information and dividend and trading history of the Portfolio Shares.

20. As discussed above, the TSX has conditionally approved the listing of the Class C Preferred Shares and additional Capital Shares on the TSX and all of the Capital Shares and preferred shares outstanding will be redeemed by the Filer on December 15, 2013.

TD Securities

21. TD Securities was incorporated under the laws of the Province of Ontario and is a direct, wholly-owned subsidiary of The Toronto-Dominion Bank. TD Securities is registered under the Legislation as a dealer in the categories of "broker" and "investment dealer" and is a member of the Investment Industry Regulatory Organization of Canada and a participant in the TSX.

22. Pursuant to an agency agreement made between the Filer and TD Securities and other agents appointed by the Filer (the "Agents"), the Filer appointed the Agents, as its agents, to offer the Capital Shares and the Class C Preferred Shares of the Filer on a best efforts basis and the Prospectus qualifying the Offering contains a certificate signed by the Agents, in accordance with the Legislation.

23. Pursuant to an administration agreement between TD Sponsored Companies Inc. ("TD SCI"), a wholly-owned subsidiary of TD Securities, and the Filer, the Filer retained TD SCI to administer the ongoing operations of the Filer and will pay TD SCI a monthly fee of 1/12 of 0.25% of the market value of the Portfolio Shares held by the Filer from and after December 15, 2008.

24. TD SCI and TD Securities' economic interest in the Filer and in the material transactions involving the Filer are disclosed in the Prospectus under the heading "Interests of Management and Others in Material Transactions" and include the following:

(a) agency fees with respect to the Offering;

(b) commissions in respect of the disposition of Portfolio Shares to fund a redemption, retraction or purchase for cancellation of the Capital Shares and preferred shares;

(c) interest and reimbursement of expenses, in connection with any acquisition of Portfolio Shares; and

(d) amounts in connection with Principal Sales and Principal Purchases (as described below).

The Principal Trades

25. Through TD Securities, the Filer may purchase Portfolio Shares in the market on commercial terms or from non-related parties with whom TD Securities and the Filer deal at arm's length. Subject to regulatory approval, certain of such Portfolio Shares may also be purchased from TD Securities, as principal (the "Principal Sales").

26. TD Securities may receive commissions not exceeding normal market rates in respect of its purchase of Portfolio Shares, as agent on behalf of the Filer, and the Filer will pay any carrying costs or other expenses incurred by TD Securities, on behalf of the Filer, in connection with its purchase of Portfolio Shares, as agent on behalf of the Filer. In respect of any Principal Sales made to the Filer by TD Securities as principal, TD Securities may realize a financial benefit to the extent that the proceeds received from the Filer exceed the aggregate cost to TD Securities of such Portfolio Shares. Similarly, the proceeds received from the Filer may be less than the aggregate cost to TD Securities of the Portfolio Shares and TD Securities may realize a financial loss.

27. The Prospectus discloses that any Principal Sales will be made in accordance with the rules of the applicable stock exchange and the price paid to TD Securities (inclusive of all transaction costs, if any) will not be greater than the price which would have been paid (inclusive of all transaction costs, if any) if the acquisition had been made through the facilities of the principal stock exchange on which the Portfolio Shares are listed and posted for trading at the time of the purchase from TD Securities.

28. TD Securities will not receive any commissions from the Filer in connection with the Principal Sales and all Principal Sales will be approved by the independent directors of the Filer. In carrying out the Principal Sales, TD Securities will deal fairly, honestly and in good faith with the Filer.

29. TD Securities may sell Portfolio Shares to fund retractions of Capital Shares, Class B Preferred Shares and Class C Preferred Shares prior to the Redemption Date and upon liquidation of the Portfolio Shares in connection with the final redemption of Capital Shares and Class C Preferred Shares on the Redemption Date. These sales will be made by TD Securities as agent on behalf of the Filer, but in certain circumstances, such as where a small number of Capital Shares, Class B Preferred Shares and Class C Preferred Shares have been surrendered for retraction, TD Securities may purchase Portfolio Shares as principal (the "Principal Purchases") subject to receipt of all regulatory approvals.

30. In connection with any Principal Purchases, TD Securities will comply with the rules, procedures and policies of the applicable stock exchange of which they are members and in accordance with orders obtained from all applicable securities regulatory authorities. The Prospectus discloses that TD Securities may realize a gain or loss on the resale of such securities.

31. TD Securities will take reasonable steps, such as soliciting bids from other market participants or such other steps as TD Securities, in its discretion, considers appropriate after taking into account prevailing market conditions and other relevant factors, to enable the Filer to obtain the best price reasonably available for the Portfolio Shares so long as the price obtained (net of all transaction costs, if any) by the Filer from TD Securities is at least as advantageous to the Filer as the price which is available (net of all transaction costs, if any) through the facilities of the applicable stock exchange at the time of the trade.

32. TD Securities will not receive any commissions from the Filer in connection with Principal Purchases and, in carrying out the Principal Purchases, TD Securities shall deal fairly, honestly and in good faith with the Filer.

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.

"Carol S. Perry"
Commissioner
Ontario Securities Commission
 
"C. Wesley M. Scott"
Commissioner
Ontario Securities Commission