Stonehouse

IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, C.S.5, as amended (the "Act")

AND

IN THE MATTER OF STONEHOUSE CAPITAL MANAGEMENT INC.

RULING
(Subsection 74(1) and Section 147 of the Act
and Section 233 of the Regulation)

UPON the application of Stonehouse Capital Management Inc. (the "Applicant"), the investment manager of The Stonehouse Fund L.P. (the "Partnership"), to the Ontario Securities Commission (the "Commission") for (i) a ruling pursuant to subsection 74(1) of the Act that certain trades in units of the Partnership or of Other Funds (as defined below) to existing holders of units of the Partnership or of the Other Funds are not subject to sections 25 and 53 of the Act; (ii) an order pursuant to section 147 of the Act that trades in units of the Partnership or of the Other Funds are not subject to subsection 72(3) of the Act, provided that a Form 45-501F1 of the Commission and the prescribed fee are filed within 30 days of each financial year end; and (iii) an order pursuant to section 233 of the Regulation exempting the Applicant from certain of the conflict of interest requirements (namely, clause 224(1)(a) and sections 223, 226, 227 and 228 of the Regulation) in respect of distributions of the units of the Partnership or of the Other Funds;

AND UPON considering the application and the recommendation of the staff of the Commission;

AND UPON the Applicant having represented to the Commission that:

1.The Applicant is a corporation incorporated under the laws of the Province of Ontario for the purpose of engaging in the business of advising with respect to securities. The Applicant has been engaged to provide investment advisory services to the Partnership and is responsible for the investment management of the Partnership’s assets.

2.The Partnership was formed under the laws of Ontario by filing a Declaration of Limited Partnership under the Limited Partnerships Act (Ontario) on August 14, 2000.

3.Stonehouse GenPar Ltd., a corporation incorporated under the laws of the Province of Ontario, is the generalpartner of the Partnership and is responsible for the administrative management of the Partnership on a day-to-day basis. Stonehouse GenPar Ltd. is an affiliate of the Applicant.

4.The Applicant is registered under the Act as an adviser in the categories of "investment counsel" and "portfolio manager" and as a dealer in the category of "limited market dealer" and is not in default under requirements therein.

5.In order to service its discretionary account clients, the Applicant makes available units of ownership ("Units") in the Partnership and may make available from time to time Units in other limited partnerships or pooled fund trusts to be established and managed by the Applicant (the "Other Funds"). The Applicant will be responsible for the investment management of the assets of the Other Funds.

6.The Applicant coordinates the distribution of Units of the Partnership and will co-ordinate the distribution of Units of the Other Funds.

7.The distribution of Units of the Partnership and the Other Funds is subject to sections 25 and 53 of the Act (the "Registration and Prospectus Requirements").

8.None of the Partnership or the Other Funds is or expects to become a "reporting issuer" as such term is defined in subsection 1(1) of the Act.

9.The Partnership is, and each of the Other funds will be, required by its constating documents to deliver to holders of its Units ("Unitholders") audited annual financial statements and unaudited quarterly financial statements.

10.Units of the Partnership and the Other Funds will not be offered by prospectus. However, an offering memorandum (containing rights of action and rescission as required under the Act) will be delivered to prospective investors in respect of the Partnership and may be delivered to prospective investors in respect of the Other Funds.

11.The assets in the Partnership or Other Funds will be invested from time to time based on objectives, policies and restrictions of each of the Partnership and the Other Funds as set out in their respective constating documents and described in any offering memorandum delivered to prospective investors in respect of the Partnership and the Other Funds.

12.Units of the Partnership and the Other Funds will be distributed on a continuous basis and will be offered to residents in Ontario through the Applicant.

13.Units of the Partnership are not, and Units of the Other Funds may not be, redeemable upon demand by the Unitholder but, if a redemption request is made and approved by Stonehouse GenPar Ltd. (or in the case of the Other Funds, by the manager or general partner, as the case may be), Units would be redeemed at their net asset value on a valuation date determined in accordance with the limited partnership agreement or the trust agreement, as the case may be, of each of the Partnership and the Other Funds. The Partnership has, and the Other Funds may have, additional restrictions on the right to redeem.

14.The minimum initial investment (the "Initial Investment") in Units of the Partnership or Other Funds by an investor resident in Ontario will not be less than $150,000.

15.The Initial Investment will be made in reliance upon the registration and prospectus exemptions contained in paragraph 35(1)5 and paragraph 72(1)(d) of the Act, as amended by Rule 45-501 of the Commission entitled "Exempt Distributions".

16.Following an Initial Investment in the Partnership or Other Funds by an investor, it is proposed that Unitholders be permitted to acquire additional Units (the "Additional Units") of the Partnership or Other Funds with an aggregate acquisition cost of less than $150,000 by either:

(a) automatically reinvesting distributions or dividends otherwise receivable by the Unitholder which are attributable to outstanding Units, unless otherwise requested by the Unitholder; or

(b) subscribing and paying for Additional Units.

17.The Applicant acts in a similar capacity with respect to Units, and will act in a similar capacity with respect to Additional Units, as does a mutual fund dealer or fully registered dealer with respect to associated mutual fund securities.

18.The Applicant is subject to the conflict of interest provisions of clause 224(1)(a) and sections 223, 226, 227 and 228 of the Regulation.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS RULED, pursuant to subsection 74(1) of the Act, that trades by the Applicant on behalf of the Partnership or one of the Other Funds of Additional Units in the Partnership or such Other Fund to Unitholders resident in Ontario, as described in paragraph 16 above, are not subject to sections 25 and 53 of the Act, provided that:

1.the Ruling will terminate upon the publication in final form by the Commission of a rule regarding trades in securities of pooled funds;

2.at the time of the acquisition of Additional Units of the Partnership or such Other Fund, the Unitholder who made the Initial Investment in the Partnership or such Other Fund of at least $150,000 then owns Units of the Partnership or such Other Fund, as the case may be, having an aggregate purchase price or net asset value of not less than $150,000;

3.at the time of the acquisition of Additional Units of the Partnership or such Other Fund, the Applicant or any party assisting the Applicant in selling the Units is registered under the Act as a dealer in the appropriate category, and such registration is in good standing; and

4.the first trade in Additional Units acquired pursuant to this ruling shall be a distribution unless such trade is made in accordance with subsection 72(4) of the Act as modified by subsection 2.18(3) of Commission Rule 45-501, as if such Additional Units had been acquired pursuant to an exemption referred to in subsection 72(4) of the Act.

IT IS FURTHER RULED, pursuant to section 147 of the Act, that trades in Units of the Partnership or the Other Funds are not subject to subsection 72(3) of the Act, provided that:

1.within 30 days after each financial year end of the Partnership and the Other Funds, the Applicant files a report in accordance with Form 45-501F1 of the Commission in respect of trades in Units of the Partnership or the Other Funds during such financial year; and

2.within 30 days after each financial year end of the Partnership and the Other Funds, the Applicant remits the applicable fee on behalf of the Partnership or such Other Funds, as the case may be.

IT IS ORDERED pursuant to section 233 of the Regulation, that the Applicant is (i) exempt from clause 224(1)(a) and sections 223, 226 and 228 of the Regulation in respect of distributions of Units and Additional Units of the Partnership and the Other Funds, provided that the Order shall terminate 90 days after the publication in final form by the Commission of a rule regarding underwriting conflicts and limited market dealers; and (ii) exempt from the requirements of section 227 of the Regulation in respect of distributions of Units of the Partnership and the Other Funds, provided that the Applicant, before acquiring discretionary authority, secures the specific and informed written consent of the client to the exercise of the discretionary authority in respect of Units of the Partnership and the Other Funds.

December 12th, 2000


"Howard I. Wetson""J.A. Geller"