Blumont Capital Corporation et al.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund reorganization -- Approval required because transaction does not meet the criteria for pre-approval -- NI 81-104 fund merging with a NI 81-102 fund -- Funds have differing investment objectives, and merger conducted on a taxable basis -- Securityholders provided with timely and adequate disclosure regarding the merger.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.6(1)(a), 5.6(1)(b).

September 10, 2012

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

BLUMONT CAPITAL CORPORATION

(the Filer)

AND

IN THE MATTER OF EXEMPLAR YIELD FUND

(the Continuing Fund)

AND

EXEMPLAR MARKET NEUTRAL PORTFOLIO

(the Terminating Fund)

DECISION

Background

The principal regulator in Ontario has received an application from the Filer on behalf of the Terminating Fund and the Continuing Fund (each individually referred to herein as a Fund and together the Funds) for a decision under the securities legislation of Ontario granting approval, pursuant to section 5.5(1)(b) of National Instrument 81-102 Mutual Funds (NI 81-102) of the proposed merger (the Merger) of the Terminating Fund into the Continuing Fund (the Approval Sought).

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

1. the Ontario Securities Commission (the OSC) is the principal regulator for this application; and,

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

Interpretation

Terms defined in NI 81-102, 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:

The Filer and Fund Information

1. The Filer is a corporation governed by the laws of Ontario. The Filer is registered under the Securities Act (Ontario) as an exempt market dealer, investment fund manager, mutual fund dealer and portfolio manager. The Filer is the manager of the Terminating Fund and the manager and trustee of the Continuing Fund.

2. The head office of the Filer is located at 70 University Avenue, Suite 1200, Toronto, Ontario M5J 2M4.

3. The Terminating Fund was launched on May 27, 2011 and represents one class of mutual fund shares of Exemplar Portfolios Ltd. (the Corporation). The Corporation is a mutual fund corporation incorporated under the laws of the province of Ontario.

4. The Continuing Fund was launched on May 31, 2012 and is a mutual fund trust governed by a declaration of trust.

5. The Terminating Fund and the Continuing Fund are reporting issuers (or the equivalent) under the securities legislation (the Legislation) of each Jurisdiction and are not in default of any of the requirements of the Legislation.

6. The Terminating Fund currently distributes its securities in all the Jurisdictions pursuant to a long form prospectus dated April 24, 2012 (the Terminating Fund Prospectus).

7. The Continuing Fund currently distributes its securities in all of the Jurisdictions pursuant to a simplified prospectus, annual information form and fund facts dated May 31, 2012 (the Continuing Fund Documents).

8. The Terminating Fund's investment objective is to provide superior absolute returns and be positively correlated to short-term interest rates.

9. The Continuing Fund's investment objective is to provide consistent and tax efficient monthly income and capital appreciation by investing in a diversified portfolio primarily consisting of Canadian equity, global equity, Canadian corporate bonds, income trusts and real estate investment trusts.

10. The Filer is not in default of the securities legislation in any province or territory of Canada.

Details of the Merger

11. The proposed Merger was announced in:

(a) a press release dated July 11, 2012;

(b) material change reports dated July 19, 2012; and

(c) amendments to the Terminating Fund Prospectus and Continuing Fund Documents dated July 19, 2012,

each of which has been filed on SEDAR.

12. The specific steps to implement the Merger are described below. The result of the Merger will be that investors in the Terminating Fund will cease to be shareholders in the Terminating Fund and will become unitholders in the Continuing Fund.

13. The proposed Merger will be structured as follows:

(a) The value of the Terminating Fund's portfolio and other assets will be determined at the close of business on the effective date of the Merger, which is expected to be on or about September 14, 2011 (the Effective Date).

(b) The Continuing Fund will acquire all or substantially all of the investment portfolio and the assets of the Terminating Fund in exchange for units of the Continuing Fund having an aggregate net asset value equal to the value of the investment portfolio and assets acquired.

(c) The Continuing Fund will not assume the Terminating Fund's liabilities and the Terminating Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the date of the Merger.

(d) If necessary, the Terminating Fund will declare, pay and automatically reinvest a dividend of net capital gains and income (if any).

(e) The shares of the Terminating Fund will be redeemed at their net asset value and paid for with units of a corresponding class of the Continuing Fund (as described in paragraph 11 below) having an equal aggregate net asset value as of the Effective Date. Such units will be distributed to shareholders of the Terminating Fund on a pro rata basis in exchange for their shares in the Terminating Fund.

(f) As soon as reasonably practicable after the Effective Date, the articles of the Corporation will be amended in order to delete the class of shares of the Corporation represented by the Terminating Fund, thereby winding up the Terminating Fund.

14. If the Merger is approved, Shareholders of the Terminating Fund will receive units of an equivalent class of the Continuing Fund, as shown opposite in the table below:

Terminating Fund	Continuing Fund
Series A shares	Series A units
Series F shares	Series F units
Series B shares	Series A units
Series G shares	Series F units
Series L shares	Series L units

15. Although Series I shares are currently offered under the Terminating Fund Prospectus, there are currently no Series I shareholders in the Terminating Fund.

16. In the opinion of the Filer, the Merger will be beneficial to securityholders of the Fund for the following reasons:

(a) The management fees of the Continuing Fund are lower than those of the Terminating Fund.

(b) The Continuing Fund does not charge a performance fee.

(c) Due to its investment strategies, it is anticipated that the Continuing Fund will receive regular income and foreign dividend payments. Due to the different tax rules that apply to mutual funds trusts (such as the Continuing Fund) and mutual fund corporations (such as the Terminating Fund), it is more tax efficient for the Continuing Fund to operate in a mutual fund trust structure as ordinary income and foreign dividends may be flowed through a mutual fund trust.

(d) The Continuing Fund is structured as a mutual fund trust governed by NI 81-102, whereas the Terminating Fund is structured as a commodity pool governed by National Instrument 81-104 Commodity Pools (NI 81-104). In general, commodity pools have less regulation and can be exposed to greater risk. Securityholders may therefore be exposed to less risk in the Continuing Fund.

(e) The Continuing Fund will have a greater level of assets which is expected to allow for: increased portfolio diversification opportunities; greater liquidity of investments; and increased economies of scale for operating expenses.

(f) The Merger will eliminate the administrative and regulatory costs of operating the Terminating Fund as a separate mutual fund, which because of its small size, may no longer be economically viable to operate on a stand-alone basis.

17. As required by National Instrument 81-107 -- Independent Review Committee for Investment Funds, the Filer presented the terms of the Merger to the independent review committee of the Funds (the IRC) for its review. The IRC determined that the decision of the Filer to complete the Merger:

(a) has been proposed by the Filer free from any influence by an entity related to the Filer and without taking into account any consideration relevant to an entity related to the Filer;

(b) represents the business judgement of the Filer uninfluenced by considerations other than the best interest of the Terminating Fund and the Continuing Fund;

(c) is in compliance with the Filer's written policies and procedures relating to the Merger; and

(d) achieves a fair and reasonable result for the Terminating Fund and the Continuing Fund.

18. The Filer convened a special meeting (each, a Meeting and, collectively, the Meetings) of the securityholders of each Fund in order to seek the approval of the securityholders to complete the Merger, as required by subsections 5.1(f) of NI 81-102 and 5.1(g) of NI 81-102. The Meetings were held on September 7, 2012, and the securityholders of each Fund approved the Merger. In connection with the Meetings, the Filer sent to such securityholders a management information circular (the "Circular"), a supplement to the management information circular (the "Supplement"), a related form of proxy and in the case of the Terminating Fund shareholders, the fund facts of the Continuing Fund (collectively, the Meeting Materials). The Meeting Materials sent to the securityholders included all the materials specified per section 5.6(1)(f) of NI 81-102.

19. If all required approvals for a Merger are obtained, it is intended that the Merger will occur after the close of business on the Effective Date. The Filer therefore anticipates that each shareholder of the Terminating Fund will become a unitholder of the Continuing Fund after the close of business on the Effective Date. The Terminating Fund will be wound-up as soon as reasonably possible following the Merger.

20. The cost of effecting the Merger (consisting primarily of proxy solicitation, printing, mailing, legal and regulatory fees) will be borne by the Filer.

21. The right of the shareholders of the Terminating Fund to redeem or switch their shares of the Terminating Fund will cease as of the close of business on the day prior to the Effective Date. Shareholders of the Terminating Fund will subsequently be able to redeem, in the ordinary course, the units of the Continuing Fund that they will acquire upon the Merger. Shareholders of the Terminating Fund with pre-authorized contribution plans and automatic withdrawal plans will have their plans automatically switched over to the Continuing Fund unless the Manager receives notice to the contrary. Purchases of, and switches to, shares of the Terminating Fund were suspended on July 19, 2012.

22. In the opinion of the Filer the Merger satisfies all of the criteria for pre-approved reorganizations and transfers set forth in section 5.6(1) of NI 81-102 except that:

(a) the Merger will not be implemented as either a "qualifying exchange" within the meaning of section 132.2 of the Income Tax Act (Canada) (the Tax Act) or a tax-deferred transaction under section 85(1), 85.1(1), 86(1) or 87(1) of the Tax Act (in each case, a Prescribed Rollover). The Merger will be implemented on a taxable basis as a corporate fund cannot be merged into a trust fund on a non-taxable basis. Consequently, the Merger will not meet the criteria for pre-approved reorganizations and transfers under subsection 5.6(1)(b) of NI 81-102; and

(b) In the opinion of the Filer, a reasonable person may not consider the investment objective of the Terminating Fund to be substantially similar to the investment objective of the Continuing Fund. Accordingly, such Merger may not meet the criteria for pre-approved reorganizations and transfers under subsection 5.6(1)(a)(ii) of NI 81-102.

23. The Circular and Supplement provided:

(a) a summary of the anticipated tax implications to securityholders of the Terminating Fund and the Continuing Fund; and

(b) a comparison of the investment objectives, investment strategies and other material differences of the Funds.

Decision

The principal regulator is satisfied that the decision meets the test set out in the securities legislation of Ontario for the principal regulator to make the decision.

The decision of the principal regulator under the securities legislation of Ontario is that the Approval Sought is granted.