Mutual fund in Ontario (non-reporting issuer) granted an extension of the annual financial statement filing deadline as substantially invested in offshore hedge funds for which audited financial information not available until 180 days after year end.
National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 2.2, 5.1(2).
IN THE MATTER OF
NATIONAL INSTRUMENT 81-106
INVESTMENT FUND CONTINUOUS DISCLOSURE
IN THE MATTER OF
GLOBAL ALPHA CAPITAL MANAGEMENT LTD.
IN THE MATTER OF
CONNOR, CLARK & LUNN GLOBAL ABSOLUTE
RETURN STRATEGY FUND
The Ontario Securities Commission received an application from the Applicant, on behalf of the Fund, for a decision pursuant to section 17.1 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) exempting the Fund from:
(a) the requirement in section 2.2 of NI 81-106 that the Fund file its audited annual financial statements on or before the 90th day after its most recently completed financial year (the Filing Deadline); and
(b) the requirement in subsection 5.1(2) of NI 81-106 that the Fund deliver its audited annual financial statements to securityholders by the Filing Deadline (the Delivery Requirement).
This Order is based on the following facts represented by the Applicant:
1. The Applicant is a corporation incorporated under the laws of Canada.
2. The Applicant is registered as an investment counsel and portfolio manager and as a limited market dealer under the Securities Act (Ontario) (the Act).
3. The Fund is an open-ended mutual fund trust established under the laws of Ontario and is offered to investors pursuant to exemptions from the prospectus requirement under the Act. The Fund has a year-end of December 31 in each year.
4. The Fund's investment objective is to earn a positive and absolute attractive risk adjusted return over the long term while demonstrating low correlation with, and lower volatility than, traditional equity markets by investing in an actively managed portfolio of hedge funds (the Hedge Funds) managed by independent portfolio managers.
5. The Hedge Funds have varying financial year-ends and are subject to a variety of financial reporting deadlines. For example, some of the Hedge Funds are governed by the laws of the Cayman Islands which permit the financial statements to be sent within 180 days of the financial year end of the Hedge Fund.
6. The auditors will not provide their audit opinion on the financial statements of the Hedge Funds until the audited financial statements of Hedge Funds representing a significant majority of Hedge Funds that constitute a material portion of the net asset value of the Fund are available to them.
7. As the number of Hedge Funds in which the Fund invests changes according to the size of the Fund and according to the investment decisions of GACML, GACML can never be guaranteed that it will receive the audited financial statements of a Hedge Fund in advance of the Filing and Delivery Deadline for the Fund's audited financial statements in any year. Based on discussions with auditors and others, GACML believes that this will be a recurring problem in each financial year.
8. Section 2.2, and subsection 5.1(2) of NI 81-106 require the Fund to file and deliver its annual audited financial statements by March 31, 2007.
9. The Fund will not be able to meet the Filing Deadline and will not be able to comply with the Delivery Requirement.
10. The Fund will notify unitholders that it has received and intends to rely on relief from the Filing Requirement and the Delivery Requirement.
11. The Fund will include a note in the Offering Memorandum of the Fund that it has received and intends to rely on relief from the Filing Requirement and the Delivery Requirement.
The Director is satisfied that it would not be prejudicial to the public interest to grant the requested relief and orders that the Fund is exempt from the requirement to file its annual audited financial statements by the Filing Deadline and from the Delivery Requirement, provided that the audited annual financial statements are filed and delivered within 180 days of the Fund's financial year end.
Nothing in this Order precludes the Fund from relying on the exemption contained in section 2.11 of NI 81-106 provided the Fund's audited annual financial statements are delivered to unitholders within the time period specified above.
April 2, 2007