By James Langton

(January 8 – 11:40 ET) – TD Securities is looking to launch a new product designed to play off Nortel Networks Corp.’s prominence in the Canadian market.

The new mutual fund, NT2 Corp., has filed a preliminary prospectus with regulators.

The fund’s investment strategy and objectives will be to offer holders of its preferred shares with fixed, cumulative quarterly cash distributions, with redemption of their initial investment in 2011. The distributions payable on the preferred shares will consist of ordinary dividends and capital gains dividends and may also include non-taxable returns of capital.

Holders of capital shares will receive the return of their initial investment plus a pro rata share of the fund’s so-called Nortel Portfolio, consisting of Nortel common shares. The fund will also write covered call and put options on Nortel to hedge risk.

To achieve its capital repayment objectives, the fund will enter into a forward purchase and sale agreement with TD Global Finance. Under the agreement TDGF will cover the redemption of initial investments at the redemption date in exchange for the equity securities (the Fixed Portfolio) that the fund will acquire. TD Bank will guarantee the obligations of TDGF.

TD Securities Inc. will administer the fund and will retain Brenton Reef Capital Inc. as sub-advisor to implement and execute any option writing. The fund will be responsible for all of its operating expenses.

TDSI will receive 0.40% of the Net Asset Value for its efforts, paid monthly. Brenton Reef Capital is not currently registered under the Securities Act as an advisor but intends to apply immediately for registration. The sub-advisor will be paid out of the administration fee.

Brenton Reef Capital was formed in 1997 as a developer and manager of structured investment products and it participates in the ongoing implementation of option strategies for, three publicly traded trusts: the New Millennium Technology Trust, the Triax CaRTS Trust and the Triax CaRTS Technology Trust.

Its officers who will be providing advisory services to the fund are Robert Kidd, managing director, and Philip Gow, managing director.

Kidd has worked in the investment industry for six years: as an investment advisor for Nesbitt Burns Inc. from 1995, and as a managing director of Brenton Reef Capital since 1997.

Gow has worked in the investment industry for eight years. He has been an investment counsel/portfolio manager for Triax Asset Management Inc. since 1998 and a managing director of Brenton Reef Capital since 1997.