Securities Law & Instruments

Headnote

Section 147 - Issuer exempt from the filingand fee requirements of sections 7.1, 7.3 and 7.5 of OSC Rule45-501 - Exempt Distributions in connection with the writingof over-the-counter call and put options - Purchasers of over-the-counteroptions accredited investors.

Statutes

Securities Act, R.S.O. 1990, c. S.5, as am.,s. 147.

Rules Cited

Ontario Securities Commission Rule 45-501 [Revised]- Exempt Distributions, sections 7.1, 7.3 and 7.5.

IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")

AND

IN THE MATTER OF
KBSH LEADERS TRUST

ORDER
(Section 147 of the Act)

UPON the application of KBSH CapitalManagement Inc. ("KBSH"), in its capacity as managerof KBSH Leaders Trust (the "Trust"), to the OntarioSecurities Commission (the "Commission") for an orderpursuant to section 147 of the Act that the Trust, when relyingon section 2.3 (the "Accredited Investor Exemption")of OSC Rule 45-501 - Exempt Distributions ("Rule 45-501"),be exempted from the requirements in: (i) sections 7.1 and 7.5of Rule 45-501 to file a Form 45-501F1 in connection with thewriting of certain over-the-counter covered call options andcash covered put options (collectively, the "OTC Options");and (ii) section 7.3 of Rule 45-501 to pay the prescribed feein connection with the filing of Form 45-501F1.

AND UPON considering the applicationand the recommendation of the staff of the Commission;

AND UPON KBSH having represented to theCommission as follows:

1. The Trust is an investment trust establishedunder the laws of the Province of Ontario pursuant to a TrustAgreement dated April 26, 2002, between KBSH, in its capacityas manager, and The Royal Trust Company in its capacity as trustee.

2. The authorized capital of the Trust consistsof an unlimited number of transferable, redeemable trust units(the "Units").

3. The Trust is a reporting issuer under theAct by virtue of a prospectus dated April 26, 2002 (the "Prospectus"),which has been filed with and accepted by the Commission andthe securities regulatory authority in each of the other provincesof Canada. The Prospectus qualifies the issuance of a maximumof 4,000,000 Units of the Trust (the "Offering").

4. Conditional listing approval has been obtainedto list the Units on The Toronto Stock Exchange.

5. By virtue of the redemption features attachingto the Units, the Trust is considered a "mutual fund"within the meaning of the Act and other applicable legislation.

6. KBSH is the investment manager of the Trustand is registered under the Act as a dealer in the categoryof limited market dealer and as an adviser in the category ofinvestment counsel and portfolio manager.

7. The Trust's investment objectives are: (i)to provide unitholders with a stable stream of monthly distributionstargeted at $0.2083 per Unit ($2.50 per annum or 10.0% on theoriginal issue price); and (ii) to return at least the originalissue price of the Units ($25.00 per Unit) to unitholders upontermination of the Trust on December 31, 2010.

8. In order to achieve the Trust's investmentobjectives, the Trust will invest 100% of the net proceeds ofthe Offering in a diversified portfolio (the "Portfolio")consisting primarily of U.S. equity securities of large andmid-capitalization companies. A significant portion of the Portfoliowill emphasize companies having a market capitalization of betweenU.S. $5 billion and U.S. $20 billion that are emerging leadersin their industry. The Portfolio may also hold select Canadianand international equity securities. In order to be eligibleinvestments for the Portfolio, equity securities (includingADRs) must be listed for trading on a major North American stockexchange or market and be issued by companies having a marketcapitalization in excess of U.S. $2 billion, if listed solelyin the United States, and U.S. $1 billion, if listed in Canada.

9. The Trust will, from time to time, writecovered call options in respect of all or part of the securitiesin its Portfolio. The investment criteria of the Trust prohibitsthe sale of equity securities subject to an outstanding calloption, and therefore the call options will be covered at alltimes.

10. The Trust may, from time to time, hold aportion of its assets in "cash equivalents" (as thatterm is defined in the Prospectus). The Trust may utilize suchcash equivalents to provide cover in respect of the writingof cash covered put options. Such cash covered put options willonly be written in respect of securities in which the Trustis permitted to invest. Since the Trust must maintain cash equivalentsin an amount at least equal to the aggregate strike price ofall securities underlying the outstanding put options whichit has written, the put options will be "cash covered"at all times.

11. The purchasers of OTC Options written bythe Trust will generally be major Canadian financial and investmentinstitutions and all purchasers of OTC Options will be "accreditedinvestors", as that term is defined in Rule 45-501.

12. The writing of OTC Options by the Trustwill not be used as a means for the Trust to raise new capital.

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

IT IS ORDERED by the Commission, pursuantto section 147 of the Act, that the writing of OTC Options bythe Trust, as contemplated by paragraphs 9 and 10 of this order,when relying on the Accredited Investor Exemption, shall beexempt from the requirements in sections 7.1, 7.3 and 7.5 ofRule 45-501.

May 28, 2002.

"Paul M. Moore"      "Robert L. Shirriff"