Arrow Hedge Partners Inc. - s. 147 and s. 6.1 of OSC Rule 13-502

Headnote

Item F(1) of Appendix C of OSC Rule 13-502 Fees -- exemption for pooled funds from paying an activity fee of $5,500 in connection with an application brought under subsection 147 of the Act, provided an activity fee be paid on the basis that the application be treated as an application for other regulatory relief under item F(3) of Appendix C of the Rule.

Rules Cited

Ontario Securities Commission Rule 13-502, Fees, (2003) 26 OSCB 891.

Securities Act, R.S.O. 1990, c. s.5 as am., ss. 77(2), 78(1), 79(1), 147.

BY FACSIMILE

March 3, 2005

Attention: Dawn V. Scott

Dear Sirs and Mesdames:

By letter dated February 15, 2005 (the "Application"), you applied on behalf of Arrow Hedge Partners Inc. ("Arrow"), the manager and trustee of the existing Pooled Funds listed in Schedule A (collectively, the "Existing Pooled Funds") and any other pooled funds established and managed by Arrow from time to time (collectively with the Existing Pooled Funds, the "Pooled Funds"), to the Ontario Securities Commission (the "Commission") under section 147 of the Securities Act (Ontario) (the "Act") for relief from subsection 79(1) of the Act, which requires every mutual fund in Ontario to deliver interim and comparative annual financial statements (the "Financial Statements") to registered and beneficial holders of its units (the "Securityholders").

By same date and cover, you additionally applied to the securities regulatory authority in Ontario (the "Decision Maker") on behalf of Arrow for an exemption, pursuant to subsection 6.1 of Rule 13-502, from the requirement to pay an activity fee of $5,500 in connection with the Application in accordance with Item F(1) of Appendix C of the Rule, on the condition that fees be paid on the basis that the Application be treated as an application for other regulatory relief under Item F(3) of Appendix C of Rule 13-502 (the "Fee Exemption").

Item F of Appendix C of Rule 13-502 specifies the activity fee applicable for applications for discretionary relief. Item F(1) specifies that applications under section 147 of the Act pay an activity fee of $5,500, whereas Item F(3) specifies that applications for other regulatory relief pay an activity fee of $1,500.

From our view of the Application and other information communicated to staff, we understand the relevant facts and representations to be as follows:

1. Arrow is a corporation organized under the laws of Ontario with its head office in the Province of Ontario. Arrow is or will be, the manager of the Pooled Funds.

2. Arrow is registered with the Commission as an adviser in the categories of investment counsel, portfolio manager and commodity trading manager, and as a dealer in the category of limited market dealer.

3. The Pooled Funds are, or will be, open-end mutual fund trusts established under the laws of Ontario. The Pooled Funds will not be reporting issuers in any province or territory of Canada. Units of the Pooled Funds are, or will be, distributed in each of the provinces and territories of Canada without a prospectus pursuant to exemptions from the registration and prospectus delivery requirements of applicable securities legislation.

4. Each of the Pooled Funds fits within the definition of "mutual fund in Ontario" in section 1(1) of the Act. As a result, each Pooled Fund is, or will be required to deliver annually to each Securityholder annual financial statements within 140 days of its financial year end, and interim financial statements within 60 days of the date which they are made up, pursuant to subsection 79(1) of the Act. The financial year end of each Existing Pooled Fund is December 31.

5. By Order dated August 29, 2003, the Commission exempted the Pooled Funds from the requirement to file with the Commission interim financial statements under section 77(2) of the Act and comparative financial statements under section 78(1) of the Act (the "Decision"). This exemption was granted by the Commission under section 147 of the Act.

6. The Canadian securities administrators have published for comment proposed National Instrument 81-106 ("NI 81-106"), which, among other things, in Section 2.11 would permit a Pooled Fund not to deliver Financial Statements to those of its Securityholders who do not request them, if the Pooled Fund initially sent to its registered Securityholders a request form under which the Securityholder may request, at no cost to the Securityholder, to receive the Pooled Fund's Financial Statements for the financial year.

7. In the Application, Arrow and the Pooled Funds have requested under section 147 of the Act relief from the requirement to deliver comparative annual financial statements and interim financial statements (collectively, the "Finanical Statements") of the Pooled Funds to registered and beneficial owners who hold units of the Pooled Funds ("Securityholders") prescribed by section 79(1) of the Act unless they have requested to receive them (the "Delivery Requirement"). The activity fee associated with the Application is $5,500 in accordance with Item F(1) of Appendix C of Rule 13-502.

8. If the Existing Pooled Funds were reporting issuers, and accordingly were seeking the same relief under Section 80 of the Act, rather than under Section 147 of the Act, the fee for that application would be $1,500 in accordance with Item F(3) of Appendix C to Rule 13-502. Therefore, it would be appropriate for the fee for this application to be reduced to $1,500 in accordance with Item F(3) of Appendix C of Rule 13-502.

Decision

This letter confirms that, based on the information provided in the Application, and the facts and representations above, and for the purposes described in the Application, the Decision Maker hereby exempts Arrow and the Pooled Funds from:

i) paying an activity fee of $5,500 in connection with the Application for relief from the Delivery Requirement, provided that Arrow and the Pooled Funds pay an activity fee on the basis that the Application be treated as an application for other regulatory relief under Item F(3) of Appendix C to Rule 13-502; and

ii) paying an activity fee of $1,500 in connection with the Fee Exemption application, in accordance with Item F(3) of Appendix C to Rule 13-502.

Yours truly,

SCHEDULE "A"

The Existing Pooled Funds