Commerce Split Corp. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Subdivided offering exempted from certain requirements of National Instrument 81-102 Mutual Funds since issuer is fundamentally different from a conventional mutual fund.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.1(1), 3.3, 10.3, 10.4(1), 12.1(1), 14.1, 19.1.

January 22, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUÉBEC, NOVA SCOTIA,

NEW BRUNSWICK, NEWFOUNDLAND AND

LABRADOR, AND PRINCE EDWARD ISLAND

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

COMMERCE SPLIT CORP.

(the "Filer")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application (the "Application") from the Filer for a decision under the securities legislation of the Jurisdictions (theLegislation) that exempts the Filer from the following requirements of National Instrument 81-102 - Mutual Funds ("NI 81-102") in connection with the Class A and Priority Equity Shares to be issued by the Filer and described in the preliminary prospectus dated December 14, 2006 (the "Preliminary Prospectus"):

(a) section 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 3.3, which prohibits a mutual fund or its security holders from bearing the costs of the preparation and filing of any prospectus;

(c) 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;

(d) 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;

(e) 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

(f) 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.

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 Filer:

1. The Filer is a mutual fund corporation established under the laws of Ontario. The Filer's manager is Quadravest Inc. (the "Manager"), and its portfolio advisor is Quadravest Capital Management Inc. ("Quadravest"), the Filer's investment manager.

2. The Filer will make an offering (the "Offering") to the public, on a best efforts basis, of Class A Shares and of Priority Equity Shares (collectively, the "Shares") in each of the provinces of Canada.

3. The Class A Shares and the Priority Equity Shares are expected to be listed and posted for trading on the Toronto Stock Exchange (the "TSX"). An application for conditional listing approval has been made by the Filer to the TSX.

4. The expenses incurred in connection with the Offering (the "Expenses of the Offering") will be borne by the Filer provided, however, that such expenses will not exceed 1.5% of the gross proceeds of the Offering.

5. The net proceeds of the Offering will be invested in common shares (the "Bank Shares") of Canadian Imperial Bank of Commerce (the "Bank"). The Bank Shares and any cash held by the Filer will be the only assets of the Filer.

6. The Filer's objectives in respect of its Priority Equity Shares are to provide holders of the Priority Equity Shares with fixed cumulative preferential monthly cash dividends in the amount of $0.04375 per Priority Equity Share to yield 5.25% per annum on the original issue price; and, on or about December 1, 2014 or such other date as the Filer may terminate (the "Termination Date"), to pay such holders of such shares the original issue price of those shares on the Termination Date.

7. In respect of the Class A Shares, the Filer's objectives are to provide holders of Class A Shares with regular monthly cash dividends targeted to be $0.05 per Class A Share to yield 6.0% per annum on the original issue price; and, on or about the Termination Date, to pay holders of Class A Shares at least the original issue price of those shares.

8. The record date for shareholders of the Filer entitled to receive dividends will be established in accordance with the requirements of the TSX from time to time.

9. To supplement the dividends earned on the Portfolio and to reduce risk, the Filer will from time to time write covered call options in respect of all or part of the Bank Shares.

10. The Priority Equity Shares and Class A Shares may be surrendered for retraction at any time and will be retracted on a monthly basis on the last business day of each month (a "Retraction Date"), provided such shares are surrendered for retraction not less than 20 business days prior to the Retraction Date. The Filer will make payment for any shares retracted within 15 business days of the Retraction Date.

11. Under the investment management agreement between the Filer and Quadravest, Quadravest is entitled to a management fee payable monthly in arrears at an annual rate equal to 0.55% of the Filer's Net Asset Value calculated as at the last Valuation Date in each month.

12. It will be the policy of the Filer to hold the Bank Shares and to not engage in any trading of the Bank Shares, except:

(a) to fund retractions or redemptions of Class A Shares and the Priority Equity Shares;

(b) following the receipt of the stock dividends of the Bank Shares;

(c) in the event of a take-over bid for any of the Bank Shares;

(d) if necessary, to fund any shortfall in the distribution on Priority Equity Shares or Class A Shares;

(e) to meet obligations of the Filer in respect of liabilities including extraordinary liabilities; or

(f) certain other limited circumstances including in connection with the Priority Equity Portfolio Protection Plan as described in the Preliminary Prospectus.

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 an exemption is granted from the following requirements of NI 81-102:

(a) section 2.1(1) - to enable the Filer to invest all its net assets in the Bank Shares, provided the Filer does not become an insider of the Bank as a result of such investment.

(b) section 3.3 - to permit the Filer to bear the Expenses of the Offering;

(c) section 10.3 - to permit the Filer to calculate the Priority Equity Share Retraction Price and the Class A Share Retraction Price in the manner described in the Preliminary Prospectus and on the applicable Retraction Date, as defined in the Preliminary Prospectus, following the surrender of Priority Equity Shares and Class A Shares for retraction;

(d) section 10.4(1) - to permit the Filer to pay the Priority Equity Share Retraction Price and the Class A Share Retraction Price on the Retraction Payment Date, as defined in the Preliminary Prospectus;

(e) section 12.1(1) - to relieve the Filer from the requirements to file the prescribed compliance report; and

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