Split Share Corporations Thomas Herbison Janelle Tibbatts Justina Williams Matt Wood

Agenda Definition of a Split Share Benefits and Risks of this Investment Big 8 Split Inc. Top 10 Split Trust Conclusion –Type of investor

What is a Split Share? Split Share Corporations have a portfolio of common shares in a specific industry or sector “The split share structure allows the risk-reward component of common shares to be broken down into two components and then allocated differently for investors who are more or less risk averse.” (TSX Group) –The capital shares receive leveraged capital gains or losses of the common share –The preferred shares receive the constant dividends of the common share

Benefits of Investing in a Split Share Corporation Allows the investment in a portfolio of a specific industry or sector Qualifies as a mutual fund corporation, thus taxed similar to mutual fund corporations –Preferred shareholders are taxed on their dividends –Common shareholders’ gains are taxed as capital gains Leveraged capital gains Risk of capital loss can be avoided while still earning dividends

Risks of Investing in a Split Share Corporation Leveraged capital losses Market fluctuations for capital shareholders Concentration of portfolio in specific industry No ownership interest Interest Rate Fluctuations Securities Lending Mutual Fund Policies

Big 8 Split Inc.

Holds equal portion (12.5%) of the following companies in its portfolio: –Bank of Montreal –Bank of Nova Scotia –Royal Bank of Canada –Toronto-Dominion Bank –Canadian Imperial Bank of Commerce (CIBC) –Great-West Lifeco Inc. –Manulife Financial Corporation –Sun Life Financial Services of Canada Inc.

Leverage Factor Annual Growth Rate of Common Shares (%) Assumed Unit Value at Redemption Date ($) Capital Share Redemption Price Compound Annual Return on Capital Shares (%) Compound Annual Return on Portfolio Shares

Share Prices Initial Public Offerings (IPOs) –Preferred Shares = $ –Common Shares = $22.92 –Offered 4.5 million shares of each type Redemption Date: December 15, 2008 Current Prices (as of close on Tuesday, January 30, 2007) –Preferred Shares = $23.35 –Common Shares =$53.65 Source: Globe Investor

Administration Fees 0.15% administration fee to TD Securities Interest Income “from time to time” May lend Portfolio Shares to generate additional income

Big 8 Preferred Shares Source: Globe Investor

Big 8 Common Shares Source: Globe Investor

Top 10 Split Trust

Banks Annual Total 5 year returns(%) –BMO –Bank of Nova Scotia –CIBC –National Bank of Canada –RBC –TD Life Insurance Companies - Great-West Lifeco Great-West Lifeco Industrial Alliance Insurance and Financial Services Industrial Alliance Insurance and Financial Services Manulife Financial Corporation Manulife Financial Corporation Sunlife Financial Corporation Sunlife Financial Corporation 9.01 Equally weighted average 14.32

Top 10 Split Trust Equal number of Capital units and Preferred Securities: – –$76,757, (5,859,375 Capital Units) – –$73,242, (5,859,375 Preferred Securities) Together issued as a combined unit, but separately traded on the market. Prices: – –$13.10 per Capital Unit – –$12.50 per Preferred Security Minimum Purchase: – –100 Capital Units or 100 Preferred Securities. Terminates on March 31, 2011

Top 10 Split Trust The Trust will generally invest between 5% and 15% of the Trust’s assets in the securities of each issuer in the Financial Portfolio. Utilizes Derivatives in the form of covered call and put options for additional return in the market or to protect from declines in the individual securities or the portfolio as a whole.

Top 10 Preferred Shares Source: Globe Investor

Top 10 Common Shares Source: Globe Investor

Type of Investor for Split Share Corporations Capital Shares –Risky investors –If you believe an industry is going to do well, you can leverage your gains Preferred Shares –Risk-adverse investors –Receive dividends without the risk of losing capital

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