Star Hedge Managers Corp.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from National Instrument 81-106 Investment Fund Continuous Disclosure to permit an investment fund that uses specified derivatives to calculate its NAV on a monthly basis subject to certain conditions -- additional condition added to decision document requiring the fund to calculate its NAV on a bi-weekly basis if the reporting by an underlying hedge fund becomes more frequent.

Applicable Legislative Provisions

National Instrument 81-106 Investment Fund Continuous Disclosure, s. 14.2(3)(b).

August 6, 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

STAR HEDGE MANAGERS CORP.

(the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation") for relief from Section 14.2(3)(b) of National Instrument 81-106 ("NI 81-106"), which requires the net asset value ("NAV") of an investment fund that uses specified derivatives (as such term is defined in National Instrument 81-102) to be calculated at least once every business day (the "Exemption").

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

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

(b) the Filer has provided notice that section 4.7(1) of Multinational Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in the jurisdictions of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut.

Interpretation

Defined terms contained 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:

1. The Filer is an investment fund incorporated under the laws of the Province of Ontario. BMO Nesbitt Burns Inc. (the "Administrator") is the administrator of the Filer. The principal office of the Filer and the Administrator is located at 1 First Canadian Place, 100 King Street West, 3rd Floor, P.O. Box 150, Toronto, Ontario M5X 1H3.

2. The Filer has been created to provide investors with long-term capital growth by investing in a portfolio (the "Portfolio") consisting of private investment funds or portfolios managed by three of Canada's leading portfolio managers: Rohit Sehgal of Dynamic Funds, Eric Sprott of Sprott Asset Management Inc. and Normand Lamarche of Front Street Investment Management Inc.

3. The Portfolio will initially consist of approximately equal investments in Dynamic Power Hedge Fund managed by Rohit Sehgal (the "Dynamic Fund"), Sprott Hedge Fund L.P. II managed by Eric Sprott (the "Sprott Fund") and a separate account managed by Norman Lamarche (the "Front Street Managed Account"). The Front Street Managed Account will employ investment strategies used by Front Street Resource Hedge Fund Ltd. and Front Street Special Opportunities Canadian Fund Ltd.

4. The Filer may establish a revolving credit facility which will be used by the Filer for general working capital purposes in an amount not exceeding 5% of the NAV. Borrowings under the revolving credit facility will be made in the discretion of the Administrator.

5. The Dynamic Fund, the Sprott Fund and the Front Street Managed Account may from time to time employ leverage. The Dynamic Fund may utilize leverage to a maximum of 100% in the aggregate (at the time of leverage) of the Dynamic Fund's NAV. There is no prescribed limit in the amount of leverage that may be used by the Sprott Fund. The Front Street Managed Account is not permitted to use borrowings but may short sell and buy options in accordance with the Filer's investment strategy.

6. Although the Filer will be a mutual fund corporation for purposes of the Income Tax Act (Canada), it will not be a mutual fund for purposes of securities legislation and its operation will differ from that of a conventional mutual fund as follows:

(a) The Filer does not intend to continuously offer Units once the Filer is out of primary distribution.

(b) The Class A Shares are expected to be listed and posted for trading on the Toronto Stock Exchange (the "TSX"). As a result, holders of Class A Shares (the "Shareholders") will not have to rely solely on the redemption features of the Class A Shares (as described in the Preliminary Prospectus) in order to provide liquidity for their investment.

7. Class A Shares may be surrendered at any time for redemption by the Filer. The Class A Shares will be redeemable at the option of Shareholders on a monthly basis at a price computed by reference to the market price of the Class A Shares. Commencing in 2009, the Units will also be redeemable once annually at a price computed by reference to the NAV of the Filer.

8. The Sprott Fund will report its NAV to the Filer monthly and the Dynamic Fund will report its NAV to the Filer weekly in accordance with the terms of the Filer's investment in the units of such funds.

9. The basic and diluted NAV and NAV per Class A Share of each class will be made available at no cost on a monthly basis on a website established for such purpose.

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 relating to investment fund continuous disclosure is granted provided that:

(a) the NAV calculation is available to the public upon request; and

(b) the public has access to a website for this purpose;

for so long as:

(c) the Class A Shares are listed on the TSX;

(d) the Filer calculates its NAV at least monthly; and

(e) if the Sprott Fund reports its NAV to the Filer more frequently than once monthly, the Filer will calculate its NAV at least bi-weekly.