Headnote

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions - Top funds proposing to invest a portion of their net assets in underlying commodity pools - Investment not complying with requirements of paragraph 2.5(2)(a) of NI 81-102 - Top funds unable to rely on statutory exemption in subsection 2.5(7) of NI 81-102 providing relief from mutual fund conflict of interest investment restrictions and mutual fund conflict of interest reporting requirements - Top funds may, either alone or together with other related mutual funds, become substantial security holders of the underlying commodity pools - Substantial security holder of manager of top funds may make a seed capital investment in an underlying commodity pool which would represent a significant interest in that commodity pool - Manager of top funds or affiliate may have common officers and directors with underlying commodity pool - Top funds exempted from mutual fund conflict of interest investment restrictions and manager of top funds exempted from mutual fund conflict of interest reporting requirements, subject to compliance with certain conditions - Securities Act (Ontario).

Applicable Legislative Provisions

Securities Act,R.S.O. 1990, c.S.5, as am., sections 111(2)(b), 111(2)(c)(ii), 111(3), 113, 117(1)(a), 117(1)(d), 117(2), 118(2)(a) and 121(2)(a)(ii).

Rules Cited

National Instrument 81-102 Mutual Funds, sections 2.5 and 2.5(7).

May 16, 2008

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 JOVFUNDS MANAGEMENT INC. (the Filer)

AND

IN THE MATTER OF JOV TALISMAN FUND

JOV DIVERSIFIED MONTHLY INCOME FUND

JOV LEON FRAZER BALANCED FUND

JOV NORTH AMERICAN MOMENTUM FUND

JOV LEON FRAZER DIVIDEND FUND

JOV BETAPRO SHORT-TERM INCOME FUND

JOV WINSLOW GLOBAL GREEN GROWTH FUND (together, the Existing Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on its behalf and on behalf of the Existing Funds and such other mutual funds as the Filer or an affiliate of the Filer may establish in the future (together with the Existing Funds, the JovFunds) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting:

1. the JovFunds from:

(a) the investment restriction in paragraph 111(2)(b) of the Securities Act (Ontario) (the Act) which prohibits a mutual fund from knowingly making an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial security holder;

(b) the investment restriction in clause 111(2)(c)(ii) of the Act which prohibits a mutual fund from knowingly making an investment in an issuer in which any person or company who is a substantial security holder of the mutual fund, its management company or its distribution company, has a significant interest;

(c) the investment restriction in subsection 111(3) of the Act which prohibits a mutual fund, its management company or its distribution company from knowingly holding an investment described in paragraphs (a) or (b) above; and

(d) the investment restriction in clause 118(2)(a) of the Act which prohibits a portfolio manager from knowingly causing any investment portfolio managed by it from investing in any issuer in which a responsible person or an associate of a responsible person is an officer or a director unless the specific fact is disclosed to the client and the written consent to the investment is obtained before the purchase (this paragraph (d) together with paragraphs (a), (b) and (c) above are together referred to in this decision as the Mutual Fund Conflict of Interest Investment Restrictions); and

2. the Filer from the management company reporting requirement in paragraphs 117(1)(a) and 117(1)(d) of the Act which require that a management company file a report of every transaction of purchase or sale of securities between a mutual fund it manages and any related person or company, and any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, the mutual fund is a joint participant with one or more of its related persons or companies (the Mutual Fund Conflict of Interest Reporting Requirements, and together with the exemption sought from the Mutual Fund Conflict of Interest Investment Restrictions, the Exemption Sought)

in connection with investments by the JovFunds in securities of the Horizons BetaPro ETFs (HBP ETFs) and Horizons BetaPro Funds (the HBP Funds, and together with the HBP ETFs and such other similar funds established by BetaPro Management Inc. (BetaPro) in the future, each a HBP Pool). The existing HBP Pools are listed in Schedule A of this decision.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:

(i) the Ontario Securities Commission is the principal regulator for this application; and

(ii) the Filer 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 British Columbia, Alberta, Saskatchewan, Québec, Nova Scotia and New Brunswick (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in the Act, 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:

Existing Decision

1. The Filer and the JovFunds previously obtained relief from the Jurisdictions on March 4, 2008 from the requirements of paragraph 2.5(2)(a) of National Instrument 81-102 Mutual Funds (NI 81-102) to enable each JovFund to invest up to 10% of its net assets, in aggregate at the time of purchase, in securities of the HBP Pools, subject to certain conditions (the Existing Decision).

JovFunds

2. The Filer, a corporation incorporated under the laws of Ontario, acts, or will act, as the trustee and manager of each JovFund. JovInvestment Management Inc. (the Portfolio Manager) acts, or will act, as portfolio manager for the JovFunds. The Filer and the Portfolio Manager are indirect, wholly-owned subsidiaries of Jovian Capital Corporation (Jovian).

3. Each JovFund is, and will be, a mutual fund organized under the laws of Ontario and is, and will be, a reporting issuer under the laws of some or all of the Jurisdictions.

4. Securities of each JovFund are, and will be, distributed pursuant to a prospectus that has been filed with and receipted by the securities regulatory authorities in the applicable Jurisdictions.

5. Each JovFund may purchase securities of other investment funds, including the HBP Pools, to gain exposure to markets or investments which may otherwise not be easily and economically available to that JovFund, or where insufficient diversification would result from any other stock-specific investment strategy.

BetaPro

6. BetaPro, a corporation incorporated under the laws of Canada, acts, or will act as, the trustee and manager of each HBP Pool. Jovian currently owns 45% of the issued and outstanding shares of BetaPro and this is expected to increase to 60% in the near future.

HBP Pools

7. Each HBP Pool set out in Schedule A, including any similar funds established by BetaPro in the future, is, or will be, a mutual fund organized under the laws of Ontario and is, or will be, a reporting issuer under the laws of some or all of the Jurisdictions.

8. Securities of each HBP ETF are, or will be, listed on the Toronto Stock Exchange. Securities of each HBP Fund are not, or will not be, exchange traded.

9. Each HBP Pool is, or will be, a commodity pool, as such term is defined in subsection 1.1(1) of National Instrument 81-104 Commodity Pools (NI 81-104), in that each HBP Pool has adopted, or will adopt, fundamental investment objectives that permit that HBP Pool to use or invest in financial instruments in a manner that is not permitted under NI 81-102.

10. Each HBP Pool’s investment objective will be to provide daily results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to a multiple or the inverse (opposite) multiple of the daily performance of a “permitted index” as defined in NI 81-102.

11. In order to achieve its investment objective, each HBP Pool will invest in equity securities and/or other financial instruments, including derivatives.

12. The HBP Pools are attractive investments for the JovFunds as they provide an efficient and cost effective means of achieving diversification and exposure that would not otherwise be possible.

13. An investment by a JovFund in units of a HBP Pool will represent the business judgment of responsible persons uninfluenced by considerations other than the best interests of the JovFund.

Fund of Fund Investment

14. An investment by a JovFund in units of a HBP Pool will in each case be made in accordance with the provisions of section 2.5 of NI 81-102, except for the requirement in paragraph 2.5(2)(a) of NI 81-102 that the HBP Pool be subject to NI 81-102 and National Instrument 81-101 Mutual Fund Prospectus Disclosure as the JovFunds have received relief from this provision pursuant to the Existing Decision.

15. If the proposed investment by a JovFund were made in accordance with each of the provisions of section 2.5 of NI 81-102, the Exemption Sought would not be required as subsection 2.5(7) of NI 81-102 provides relief from the Mutual Fund Conflict of Interest Investment Restrictions and the Mutual Fund Conflict of Interest Reporting Requirements to a mutual fund which purchases or holds securities of another mutual fund if the purchase or holding is made in accordance with section 2.5 of NI 81-102.

16. In the absence of an exemption from the Mutual Fund Conflict of Interest Investment Restrictions, each JovFund would be prohibited from knowingly making or holding an investment in a HBP Pool if the JovFund, alone or together with one or more related mutual funds, would be a substantial security holder of the HBP Pool.

17. Furthermore, Jovian may at times have a seed capital investment in a HBP Pool which would represent a significant interest in that fund. As Jovian is a substantial security holder of the Filer, the manager of the JovFunds, the Mutual Fund Conflict of Interest Investment Restrictions would prohibit a JovFund from investing in a HBP Pool at a time where Jovian would hold a significant interest in that fund.

18. In addition, an officer or director of the Filer or BetaPro could, due to Jovian’s ownership interest in the Filer and BetaPro and interest in the HBP Pools, be an officer or director of a HBP Pool. The same could be true of an affiliate of the Filer or BetaPro or Jovian that is a responsible person or an associate of a responsible person of the JovFunds for similar reasons. The Mutual Fund Conflict of Interest Investment Restrictions would prohibit the Portfolio Manager from causing the JovFunds to invest in a HBP Pool where the Filer or BetaPro or Jovian, or an affiliate of those entities, would have common officers and directors with the HBP Pool.

19. In the absence of an exemption from the Mutual Fund Conflict of Interest Reporting Requirements, the Filer would be required to file a report of every transaction by a JovFund involving securities of a HBP Pool, as well as a report of every transaction in which, by arrangement, a JovFund and a HBP Pool would be acting as joint participants.

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 provided that an investment by a JovFund in units of a HBP Pool is made in compliance with the requirements of section 2.5 of NI 81-102, as modified by the Existing Decision.

“Carol S. Perry” “Kevin J. Kelly” (Name)

Commissioner Commissioner (Title)

Ontario Securities Commission Ontario Securities Commission

Schedule A

List of HBP Pools

HBP ETFs

Horizons BetaPro S&P/TSX 60® Bull Plus ETF

Horizons BetaPro S&P/TSX 60® Bear Plus ETF

Horizons BetaPro S&P/TSX® Global Mining Bull Plus ETF

Horizons BetaPro S&P/TSX® Global Mining Bear Plus ETF

Horizons BetaPro COMEX® Gold Bullion Bull Plus ETF

Horizons BetaPro COMEX® Gold Bullion Bear Plus ETF

Horizons BetaPro S&P/TSX Capped Financials Bull Plus ETF

Horizons BetaPro S&P/TSX Capped Financials Bear Plus ETF

Horizons BetaPro S&P/TSX Capped Energy Bull Plus ETF

Horizons BetaPro S&P/TSX Capped Energy Bear Plus ETF

Horizons BetaPro S&P/TSX Global Gold Bull Plus ETF

Horizons BetaPro S&P/TSX Global Gold Bear Plus ETF

HBP Funds

Horizons BetaPro S&P/TSX 60® Bull Plus Fund

Horizons BetaPro S&P/TSX 60® Bear Plus Fund

Horizons BetaPro NASDAQ-100® Bull Plus Fund

Horizons BetaPro NASDAQ-100® Bear Plus Fund

Horizons BetaPro Canadian Bond Bull Plus Fund

Horizons BetaPro Canadian Bond Bear Plus Fund

Horizons BetaPro U.S. Dollar Bull Plus Fund

Horizons BetaPro U.S. Dollar Bear Plus Fund

Horizons BetaPro S&P 500® Bull Plus Fund

Horizons BetaPro S&P 500® Bear Plus Fund

Horizons BetaPro COMEX® Gold Bull Plus Fund

Horizons BetaPro COMEX® Gold Bear Plus Fund