O'Leary Funds Management LP et al.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from section 2.1 of NI 81-101 to permit bottom fund in an exchange-traded two-tier structure to file a long form prospectus using Form 41-101F2 rather than a simplified prospectus using Form 81-101F1; units of both the top fund and the bottom fund to be qualified by long form prospectus; bottom fund will issue one unit to the manager and become subject to NI 81-102.

Applicable Legislative Provisions

National Instrument 81-101 Mutual Fund Prospectus Disclosure, ss. 2.1, 6.1.

[TRANSLATION]

May 28, 2010

Background

The principal regulator in the Jurisdiction has received an application from the Bottom Fund for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") exempting it from Section 2.1 of National Instrument 81-101 -- Mutual Fund Distributions ("NI 81-101") to permit the Bottom Fund to qualify its units for distribution by long form prospectus using Form 41-101F2 prescribed under National Instrument 41-101 -- General Prospectus Requirements ("NI 41-101") rather than by simplified prospectus using Form 81- 101F1 prescribed under NI 81-101 (the "Requested Relief").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Autorité des marchés financiers is the principal regulator for this application, and

(b) the Bottom Fund has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 -- Passport System ("MI 11-102") is intended to be relied upon in the Province of Québec.

Interpretation

Terms defined 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 Manager and the Funds:

1. The Manager is the manager of the Funds. The head office of the Manager is located in Québec. The Manager and the Funds are not in default of securities legislation in any jurisdiction. The Manager will retain Stanton Asset Management Inc. (the "Portfolio Advisor") to provide investment advisory services to the Funds.

2. The Bottom Fund is a mutual fund trust governed by the laws of the Province of Ontario.

3. The Bottom Fund is authorized to issue an unlimited number of units of a single class of transferable, redeemable (at their net asset value) units. The units of the Bottom Fund will not be listed on an exchange.

4. The Bottom Fund filed a preliminary prospectus dated April 27, 2010 (the "Preliminary Prospectus") on SEDAR in the Provinces of Ontario and Québec in accordance with National Instrument 41-101. The Bottom Fund intends to file and obtain a receipt for a final prospectus (the "Final Prospectus").

5. Pursuant to the Final Prospectus, the Bottom Fund proposes to distribute one unit to the Manager, which unit may be redeemed in the future. No other units will be distributed under the Final Prospectus.

6. Units may be redeemed for a redemption price per unit equal to the net asset value per unit as at any business day, subject to the Manager's right to suspend redemptions in certain circumstances.

7. The Bottom Fund's investment objective is to preserve capital and promote capital appreciation by investing in a portfolio comprised primarily of publicly-traded debt securities of global issuers.

8. The Top Fund is an investment trust governed by the laws of the Province of Ontario.

9. The Top Fund filed a preliminary long form prospectus dated April 23, 2010 on SEDAR in all jurisdictions in Canada and intends to file and obtain a receipt for a final long form prospectus for the distribution of its units (the "offering"). The Toronto Stock Exchange has conditionally approved the listing of the units of the Top Fund.

10. It is intended that on or about August 1, 2011, the Top Fund will automatically convert (the "Conversion") to a mutual fund and delist its units. After the conversion, the units will become redeemable daily at their net asset value. After the Conversion, the Manager intends to file a simplified prospectus to qualify the units of the Top Fund for continuous distribution.

11. The Top Fund will invest the net proceeds of the Offering in a portfolio of common shares of Canadian public companies (the "Common Share Portfolio"). The Top Fund will then enter into a forward agreement (the "Forward Agreement") with a Canadian chartered bank or an affiliate of a Canadian chartered bank whose obligations are guaranteed by a Canadian chartered bank (the "Counterparty"), pursuant to which the Counterparty will agree to pay to the Fund on a date which is expected to be no more than 5 years after the closing of the Offering and which will be disclosed in the final prospectus (the "Forward Termination Date") as the purchase price for the Common Share Portfolio, an amount based on the value of the units of the Bottom Fund or on the value of a notional portfolio managed by the Portfolio Advisor and comprised primarily of publicly traded debt securities of global issuers. The Top Fund will partially settle the Forward Agreement prior to the Forward Termination Date in order to fund (i) monthly distributions to unitholders, (ii) redemptions of units by the unitholders from time to time, and (iii) payment of expenses of the Top Fund.

12. Following the Conversion, the Top Fund will become a mutual fund subject to, and will operate in compliance with NI 81-102. To comply with the provisions of NI 81-102 respecting investments in other mutual funds, the Bottom Fund wishes to attract the application of NI 81-102. To that end, the Bottom Fund proposes to issue one unit to the Manager pursuant to the Final Prospectus, which may be redeemed in the future.

13. The Bottom Fund is a mutual fund under securities legislation subject to NI 81-101 and NI 81-102. However, the distribution operations of the Bottom Fund will differ from those of a conventional mutual fund. Unlike a conventional mutual fund, the Bottom Fund does not intend to distribute units on a continuous basis under the Final Prospectus. The Bottom Fund will only issue one unit to the Manager under the Final Prospectus; no other units of the Bottom Fund will be distributed under the Final Prospectus.

14. In the absence of being granted the Requested Relief, the Bottom Fund would be required to file a simplified prospectus in the Form prescribed under NI 81-101. The use of a simplified prospectus form to distribute units of the Bottom Fund may create confusion in the investment dealer channel in which units of the Top Fund will be sold and may consequently negatively impact the marketing of the units of the Top Fund.

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 Requested Relief is grant.