BNS Split Corp. II and Scotia Capital Inc.

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- subdivided offering -- 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 the administrator with respect to certain principal trades with the issuer in securities comprising the Issuer's portfolio -- Issuer's portfolio consisting of shares of the Bank of Nova Scotia.

Applicable Legislative Provisions

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

September 14, 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

BNS SPLIT CORP. II

(the "Filer")

AND

SCOTIA CAPITAL INC.

("Scotia Capital")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer and Scotia Capital for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for an exemption from the principal trading prohibitions (the "Exemption Sought") pursuant to Section 119 of the Securities Act (Ontario) (the "OSA") and the corresponding provisions in the provincial securities legislation of each of the Provinces of Alberta, Saskatchewan, Newfoundland and Labrador, and Nova Scotia prohibiting trading in portfolio shares by persons or companies having information concerning the trading programs of mutual funds (the "Principal Trading Prohibitions") shall not apply to Scotia Capital in connection with Principal Purchases (defined below) with respect to the public offering (the "Offering") of Class B Preferred Shares, Series 1 (the "Series 1 Preferred Shares") of the Filer.

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 February 28, 2005 and became a reporting issuer under the OSA by filing a final prospectus dated September 15, 2005 relating to an initial public offering of Class A Capital Shares and Class A Preferred Shares. The Filer's head office is located in Toronto, Ontario. The Filer is not in default of securities legislation in a jurisdiction of a province of Canada.

2. On April 29, 2010, holders of Class A Capital Shares approved a share capital reorganization (the "Reorganization"). The Reorganization will permit holders of Class A Capital Shares to extend their investment in the Filer beyond the redemption date of for an additional 5 years. The Reorganization also provides holders of Class A Capital Shares with a special right of retraction (the "Special Retraction Right") to replace the originally scheduled final redemption. Under the Reorganization, holders of Class A Capital Shares who do not wish to extend their investment may choose to have their shares redeemed on September 22, 2010. If the Reorganization is not implemented, the Special Retraction Right will not become effective and the Class A Capital Shares will be redeemed by the Filer on September 22, 2010 in accordance with their terms.

3. The authorized capital of the Filer consists of an unlimited number of Class A Capital Shares, an unlimited number of Class A Preferred Shares, an unlimited number of Class B, C, D and E capital shares issuable in series, un unlimited number of Class B, C, D and E preferred shares issuable in series, an unlimited number of Class J Shares and Class S Shares. As at June 1, 2010 an aggregate of 3,583,858 Class A Capital Shares, 1,791,929 Class A Preferred Shares, 150 Class J Shares and 100 Class S Shares issued and outstanding. All of the Class A Preferred Shares will be redeemed by the Filer on September 22, 2010 in accordance with their terms and the Class A Capital Shares whose holders have elected to exercise the Special Retraction Right will also be redeemed.

4. The Series 1 Preferred Shares are being offered in order to maintain the leveraged "split share" structure of the Filer and will be issued on or about September 22, 2010 (the "Offering") such that there will be twice the number of Class A Capital Shares as Class A Preferred Shares outstanding on and after the expected closing date of September 22, 2010.

5. The Filer filed the Preliminary Prospectus in each of the provinces of Canada on August 11, 2010 (SEDAR Project No. 1617649).

6. The Filer will make the Offering to the public pursuant to a final prospectus (the "Final Prospectus").

7. The Class A Capital Shares will continue to be listed and posted for trading on The Toronto Stock Exchange (the "TSX") and it is expected that the Series 1 Preferred Shares will be listed and posted for trading on the TSX. An application requesting conditional listing approval has been made by the Filer to the TSX.

8. The Class J Shares are the only voting shares in the capital of the Filer. There are currently, and will be at the time of filing the Final Prospectus relating to the Offering, 150 Class J Shares issued and outstanding. All of the issued and outstanding Class J Shares are owned by BNS Split II Holdings Corp. and one-third of the common shares of BNS Split II Holdings Corp. is owned by each of the three independent directors of the Filer.

9. The Class A Capital Shares and Series 1 Preferred Shares may be surrendered for retraction at any time in the manner described in the Preliminary Prospectus.

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

11. The primary undertaking of the Filer is to invest in a portfolio of common shares (the "BNS Shares") of The Bank of Nova Scotia in order to generate fixed cumulative preferential distributions for the holders of the Filer's Series 1 Preferred Shares and to enable the holders of the Filer's Class A Capital Shares to participate in any capital appreciation in the BNS Shares. The BNS Shares will be the only material assets of the Filer.

12. Series 1 Preferred Share distributions will be funded from the dividends received on the BNS Shares. If necessary, any shortfall in the distributions on the Series 1 Preferred Shares will be funded by proceeds from the sale of, or, if determined appropriate by the Board of Directors of the Filer, premiums earned from writing covered call options on, the BNS Shares.

13. The record date for the payment of Series 1 Preferred Share distributions, Class A Capital Share dividends or other distributions of the Filer will be set in accordance with the applicable requirements of the TSX.

14. Any Class A Capital Shares and Series 1 Preferred Shares outstanding on September 22, 2015 will be redeemed by the Filer on such date.

15. 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.

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

(a) to fund retractions or redemptions of Class A Capital Shares and Series 1 Preferred Shares;

(b) following receipt of stock dividends on the BNS Shares;

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

(d) if necessary, to fund any shortfall in the distribution on Series 1 Preferred Shares; or

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

17. The BNS Shares are listed and traded on the TSX.

The Offering

18. The net proceeds of the Offering (after deducting the agents' fees and expenses of the issue), depending upon the number and value of Class A Capital Shares redeemed pursuant to the Special Retraction Right, will be used by the Filer (together with the sale of a portion of the BNS Shares) to fund the redemption of all of the issued and outstanding Class A Preferred Shares of the Filer on September 22, 2010 as well as those Class A Capital Shares being redeemed pursuant to the Special Retraction Right.

19. The Final Prospectus will disclose selected financial information and dividend and trading history of the BNS Shares.

20. As discussed above, application has been made to list the Series 1 Preferred Shares on the TSX and all of the Class A Capital Shares and Series 1 Preferred Shares outstanding on September 22, 2015 will be redeemed by the Filer on such date.

Scotia Capital

21. Scotia Capital was incorporated under the laws of the Province of Ontario and is a direct, wholly-owned subsidiary of The Bank of Nova Scotia. Scotia Capital 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. Scotia Capital is not in default of securities legislation in a jurisdiction of a province of Canada.

22. Pursuant to an agreement (the "Agency Agreement") to be made between the Filer and Scotia Capital, CIBC World Markets Inc., RBC Dominion Securities Inc., National Bank Financial Inc. and TD Securities Inc. (collectively the "Agents"), the Filer will appoint the Agents, as its agents, to offer the Series 1 Preferred Shares of the Filer on a best efforts basis and the Final Prospectus qualifying the Offering will contain a certificate signed by the Agents, in accordance with the Legislation.

23. Pursuant to an administration agreement (the "Administration Agreement") between Scotia Managed Companies Administration Inc. ("Scotia Managed Companies"), a wholly-owned subsidiary of Scotia Capital, and the Filer, the Filer will retain Scotia Managed Companies to administer the ongoing operations of the Filer and will pay Scotia Managed Companies a quarterly fee of 1/4 of 0.25% of the market value of the BNS Shares held by the Filer from and after September 22, 2010.

24. Scotia Managed Companies and Scotia Capital's economic interest in the Filer and in the material transactions involving the Filer are disclosed in the Preliminary Prospectus and will be disclosed in the Final 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) an administration fee under the Administration Agreement;

(c) commissions in respect of the disposition of BNS Shares to fund a redemption, retraction or purchase for cancellation of the Class A Capital Shares and Series 1 Preferred Shares; and

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

The Principal Trades

25. Scotia Capital may sell BNS Shares to fund retractions of Class A Capital Shares and Series 1 Preferred Shares prior to the Redemption Date and upon liquidation of the BNS Shares in connection with the final redemption of Class A Capital Shares and Series 1 Preferred Shares on the Redemption Date. These sales will be made by Scotia Capital as agent on behalf of the Filer, but in certain circumstances, such as where a small number of Class A Capital Shares and Series 1 Preferred Shares have been surrendered for retraction, Scotia Capital may purchase BNS Shares as principal (the "Principal Purchases") subject to receipt of all regulatory approvals.

26. In connection with any Principal Purchases, Scotia Capital 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 Final Prospectus will disclose that Scotia Capital may realize a gain or loss on the resale of such securities.

27. Scotia Capital will take reasonable steps, such as soliciting bids from other market participants or such other steps as Scotia Capital, 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 BNS Shares so long as the price obtained (net of all transaction costs, if any) by the Filer from Scotia Capital 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.

28. Scotia Capital will not receive any commissions from the Filer in connection with Principal Purchases and, in carrying out the Principal Purchases, Scotia Capital 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.