Securities Law & Instruments


MRRS Exemptions granted from the mutual fund conflict of interest investment restrictions and reporting requirements of the Securities Act (Ontario) to permit a fund of fund structure.

Applicable Statutes

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 111(2)(b), 111(3), 113, 117(1)(a), 117(1)(d), and 117(2).

May 3, 2005





YUKON AND NUNAVUT (the Jurisdictions)










(individually, a Fund and collectively, the Funds)




The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer and the Funds for a decision pursuant to the securities legislation of the Jurisdictions (the Legislation) for the following relief (the Requested Relief) in respect of the Funds' investments in the Underlying Funds (defined herein):

(a) an exemption from the requirements in the Legislation that a mutual fund not knowingly make or hold an investment in a person or company in which the mutual fund, alone or together with one or more related mutual funds, is a substantial security holder (the Investment Limits); and

(b) an exemption from the requirements in the Legislation that a management company file a report relating to a purchase or sale of securities between the mutual fund and any related person or company or any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, the mutual fund is a joint participant with one or more of its related persons or companies (the Related Person Requirements).

Under the Mutual Reliance Review System for Exemptive Relief Applications

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

(b) this MRRS Decision Document evidences the decision of each Decision Maker.


Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.


This decision is based on the following facts represented by the Filer:

1. The Filer, a member of the TD Bank Financial Group, is registered as, inter alia, a limited market dealer, investment counsel, portfolio manager and commodity trading manager with the Ontario Securities Commission, with its registered address at Toronto Dominion Centre, 12th Floor, TD Bank Tower, 66 Wellington Street West, Toronto, Ontario;

2. As of the date hereof, in total, the Filer and its affiliates managed in excess of $124,000,000,000 for mutual funds, pension funds, corporations, institutions, endowments, foundations and high net worth individuals;

3. Each Fund will be an open-ended unit trust established under the laws of the Province of Ontario by the Filer by a trust agreement between the Filer and The Canada Trust Company;

4. Each Fund is authorized to issue an unlimited number of classes of units (Units). Each Fund proposes to issue Units to qualified investors in the provinces and territories of Canada pursuant to exemptions from applicable registration and prospectus requirements. It is anticipated that there will be at least three classes of Units for each of the Funds at the time of their creation, having such terms and conditions as the Filer may determine, the characteristics of which will be described in an offering memorandum. The Units of the TD Waterhouse Cdn$ Alternative Investment Fund (Cdn$ Fund) will be denominated in Canadian dollars, and the Units of the TD Waterhouse US$ Alternative Investment Fund (US$ Fund) will be denominated in US dollars. Each investor will be given a copy of the offering memorandum pertaining to the applicable Fund when initially subscribing for Units;

5. Each Fund will be a mutual fund as defined in the securities legislation of the Jurisdictions;

6. The Funds do not intend to become reporting issuers, as such term is defined in the securities legislation of the Jurisdictions, and the Units will not be listed on any stock exchange;

7. Each Fund's investment objective is (i) to achieve long-term capital appreciation and (ii) to generate consistently positive returns irrespective of stock market volatility or direction, while focusing on preservation of capital;

8. Each Fund seeks to achieve its investment objectives by investing primarily in units of hedge funds or units of funds that invest primarily in hedge funds (the Underlying Funds). Initially, the portfolios of the Funds will consist primarily of securities of the Tremont Opportunity Fund Limited, an open ended investment company organized as an exempted company under the laws of the Cayman Islands (the Tremont Fund). The Cdn$ Fund will invest in a class of shares of the Tremont Fund denominated in Canadian dollars and the US$ Fund will invest in a class of shares of the Tremont Fund denominated in US dollars. In managing the investments of the Funds, the Filer may change the funds in which the Funds invest, in each case, without notice to unitholders;

9. The Funds intend to distribute sufficient net income and net realized capital gains, if any, to unitholders in each calendar year to ensure that a Fund is not liable for income tax under Part I of the Income Tax Act (Canada) (the Tax Act), after taking into account any loss carry forwards and capital gains refunds. All distributions (other than management fee distributions and expense distributions) will be made on a pro rata basis within each class to each registered unitholder determined as of the close of business on the last valuation date prior to the date of the distribution;

10. It is the intention of each Fund that all distributions (other than distributions made upon the redemption of Units) of capital, net income and net realized capital gains to unitholders (less any amounts required by law to be deducted therefrom) will automatically be reinvested by the Filer for the account of each unitholder in additional Units of the same class (as the Units to which the distribution relates) at the net asset value per unit of the class calculated as of the next valuation date. The costs of distributions, if any, will be paid by the Fund;

11. The Filer will act as manager of each Fund. The Filer will not perform any activity which would require it to be registered under applicable securities laws unless the Filer holds the necessary registrations;

12. The investment by the Funds in the Underlying Funds is compatible with the fundamental investment objectives of the Funds;

13. No fees and charges of any sort are paid by a Fund or by an Underlying Fund or by the manager or principal distributor of a Fund or an Underlying Fund or by any affiliate or associate of any of the foregoing entities to anyone in respect of a Fund's purchase, holding or redemption of the securities of the Underlying Funds;

14. No sales commissions or other charge in respect of a trade in additional Units of the Fund under the reinvestment plan is required to be paid by the unitholder directly or indirectly;

15. In order to meet its investment objectives, each Fund requires exemption from the Investment Limits; and

16. In the absence of an exemption from the Related Person Requirements, the Filer would be required to file a report for every transaction by a Fund involving units of the Tremont Fund or an Underlying Fund and every transaction in which, by arrangement, any of the Cdn$ Fund, the US$ Fund, the Tremont Fund or the Underlying Funds are acting as joint participants.


Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

1. the annual report and annual financial statements of each Fund disclose:

(a) the intent of the Fund to invest in Underlying Funds;

(b) the manager of the Underlying Funds;

(c) the name of the Underlying Funds; and

(d) the investment objectives, investments strategies, risks and restrictions of the Underlying Funds;

2. the arrangements between or in respect of the Funds and the Underlying Funds are such as to avoid the duplication of management fees or incentive fees;

3. the Filer does not vote on securities of the Underlying Funds that are managed by the Filer or an affiliate or associate of the Filer; and

4. in addition to receiving the annual and the semi-annual financial statements of the Fund, securityholders of the Fund have received appropriate summary disclosure in respect to the Fund's holdings of securities of the Underlying Funds in the financial statements of the Funds.

"Robert L. Shirriff"
Ontario Securities Commission
"Susan Wollburgh Jenah"
Vice Chair
Ontario Securities Commission