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 calculation and payment of redemptions in connection with offering of Class C preferred shares -- 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. 10.3, 10.4(1).

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.

DECISION

Background

The principal regulator in the Jurisdiction has received an application from Big 8 Split Inc. (the "Filer") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for relief from the following sections of National Instrument 81-102 Mutual Funds ("NI 81-102") with respect to the class C preferred shares (the "Class C Preferred Shares") proposed to be issued by the Filer as described in a prospectus dated December 8, 2009 (the "Prospectus"):

(a) 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; and

(b) 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

("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 June 26, 2003 and completed an initial public offering of capital shares ("Capital Shares") and preferred shares on September 3, 2003.

2. Currently there are 1,204,980 Capital Shares and 1,204,980 Class B Preferred Shares issued and outstanding.

3. The Filer is offering Class C Preferred Shares and Capital Shares pursuant to the Prospectus (the "Offering"). Immediately prior to closing of the Offering, the Filer intends to declare and 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.

4. 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.

5. The Filer is a passive investment company whose principal investment objective is to invest in a portfolio (the "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. 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 of the Filer 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.

6. The net proceeds from the Offering will be used by the Filer to fund the purchase of additional Portfolio Shares. Holders of Class B Preferred Shares, Class C Preferred Shares and Capital Shares will have no voting rights with respect to the Portfolio Shares.

7. 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.

8. Class B Preferred Share distributions and 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 B Preferred Shares and Class C Preferred Shares will be funded by proceeds from the sale of Portfolio Shares.

9. The record date for the payment of Class B Preferred Share and 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.

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

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

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

(b) subsection 10.4(1) -- to permit the Filer to pay the retraction price for the Class C Preferred Shares on the Retraction Payment Date, as defined in the Prospectus.

"Vera Nunes"
Assistant Manager, Investment Funds Branch
Ontario Securities Commission