Securities Law & Instruments

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemptive relief granted to an exchange traded fund from certain mutual fund requirements and restrictions on; investments, calculation and payment of redemptions, preparation of compliance reports, and date of record for payment of distributions -- Since investors will generally buy and sell units through the TSX, there are adequate protections and it would not be prejudicial to investors -- National Instrument 81-102 -- Mutual Funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.1(1), 10.3, 10.4(1), 12.1(1), 14.1, 19.1.

October 27, 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 SPLIT INC.

DECISION

Background

The principal regulator in the Jurisdiction has received an application from TD Split Inc. (the "Filer") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") under National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions for relief from the following sections of National Instrument 81-102 Mutual Funds ("NI 81-102") with respect to the class C preferred shares, series 1 (the "Preferred Shares") and class C capital shares, series 1 (the "Capital Shares") proposed to be issued by the Filer as described in a preliminary prospectus dated September 27, 2010 (the "Preliminary Prospectus"):

(a) subsection 2.1(1), which prohibits a mutual fund from purchasing a security of an issuer if, immediately after the transaction, more than 10 percent of the net assets of the mutual fund, taken at market value at the time of the transaction, would be invested in securities of the issuer;

(b) section 10.3, which requires that the redemption price of a security of a mutual fund to which a redemption order pertains shall be the net asset value of a security of that class, or series of class, next determined after the receipt by the mutual fund of the order;

(c) subsection 10.4(1), which requires that a mutual fund shall pay the redemption price for securities that are the subject of a redemption order within three business days after the date of calculation of the net asset value per security used in establishing the redemption price;

(d) subsection 12.1(1), which requires a mutual fund that does not have a principal distributor to complete and file a compliance report, and accompanying letter of the auditor, in the form and within the time period mandated by subsection 12.1(1); and

(e) section 14.1, which requires that the record date for determining the right of securityholders of a mutual fund to receive a dividend or distribution by the mutual fund shall be calculated in accordance with section 14.1

("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 British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, 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 July 31, 2000 and completed an initial public offering of class A capital shares ("Class A Capital Shares") and class A preferred shares ("Class A Preferred Shares") on September 7, 2000.

2. The registered and head offices of the Filer and its investment fund manager are in Toronto, Ontario.

3. All of the Class A Preferred Shares and Class A Capital Shares were redeemed by the Filer on November 15, 2005 in accordance with their terms. On November 15, 2005, the Filer completed a $95,699,824 public offering through the issuance of 1,700,000 class B preferred shares (the "Class B Preferred Shares") at $28.10 per share and 1,700,000 class B capital shares (the "Class B Capital Shares") at $31.16 per share in order to maintain the leveraged "split share" structure of the Filer such that there would be an equal number of Class B Preferred Shares and Class B Capital Shares outstanding after that offering.

4. Currently there are 712,861 Class B Capital Shares and 712,861 Class B Preferred Shares issued and outstanding.

5. The Filer is offering Preferred Shares and Capital Shares pursuant to the Preliminary Prospectus (the "Offering"). The Filer will make the Offering to the public pursuant to a final prospectus in respect of which the Preliminary Prospectus has already been filed.

6. The Class B Capital Shares and the Class B Preferred Shares will be delisted from trading on The Toronto Stock Exchange (the "TSX") and the Capital Shares and Preferred Shares are expected to be listed and posted for trading on the TSX on November 15, 2005. Pursuant to the provisions attaching to the Class B Capital Shares and Class B Preferred Shares, all the issued and outstanding Class B Capital Shares and Class B Preferred Shares will be redeemed by the Filer on November 15, 2010 in accordance with their terms. An application requesting conditional listing approval has been made by the Filer to the TSX.

7. The Filer is a passive investment company whose principal investment objective is to invest in a portfolio of common shares (the "TD Bank Shares") of The Toronto-Dominion Bank in order to generate fixed cumulative preferential distributions for holders of the Filer's Preferred Shares and to allow the holders of the Filer's Capital Shares to participate in the capital appreciation of the TD Bank Shares after payment of administrative and operating expenses of the Filer. It will be the policy of the Board of Directors of the Filer to pay dividends on the Capital Shares in an amount equal to the dividends received by the Filer on the TD Bank Shares minus the distributions payable on the Preferred Shares and all administrative and operating expenses of the Filer.

8. The net proceeds from the Offering will be used by the Filer to fund the purchase of additional TD Bank Shares. Holders of Preferred Shares and Capital Shares will have no voting rights with respect to the TD Bank Shares.

9. 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.

10. Preferred Share distributions will be funded from the dividends received on the TD Bank Shares. If necessary, any shortfall in the distributions on the Preferred Shares will be funded by proceeds from the sale of TD Bank Shares.

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

12. The Capital Shares and Preferred Shares may be surrendered for retraction at any time. Retraction payments for Capital Shares and Preferred Shares will be made on the Retraction Payment Date (as defined in the Preliminary Prospectus) provided the Capital Shares and the Preferred Shares have been surrendered for retraction at least 10 business days prior to the Retraction Payment Date (as defined in the Preliminary Prospectus). While the Filer's Unit Value (as defined in the Preliminary Prospectus) is calculated weekly, the retraction price for the Capital Shares and the Preferred Shares will be determined based on the Unit Value in effect as at the Valuation Date (as defined in the Preliminary Prospectus).

13. Any outstanding Capital Shares or Preferred Shares will be redeemed by the Filer on November 15, 2015.

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 as follows:

(a) subsection 2.1(1) -- to enable the Filer to invest all of its net assets in the TD Bank Shares, provided that the Filer does not become an insider of The Toronto-Dominion Bank as a result of such investment;

(b) section 10.3 -- to permit the Filer to calculate the retraction price for the Capital Shares and Preferred Shares in the manner described in the Preliminary Prospectus and on the applicable Valuation Date as defined in the Preliminary Prospectus;

(c) subsection 10.4(1) -- to permit the Filer to pay the retraction price for the Capital Shares and Preferred Shares on the Retraction Payment Date, as defined in the Preliminary Prospectus;

(d) subsection 12.1(1) -- to relieve the Filer from the requirement to file the prescribed compliance reports; and

(e) section 14.1 -- to relieve the Filer from the requirement relating to the record date for the payment of dividends or other distributions on the Capital Shares and Preferred Shares, provided that it complies with the applicable requirements of the TSX.

"Darren McKall"
Assistant Manager, Investment Funds
Ontario Securities Commission