Mutual fund in Ontario (non-reporting issuer) granted extension of the annual financial statement filing deadline as wholly invested in offshore investment fund subject to different reporting requirements.
National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 2.2, 5.1(2).
April 2, 2007
IN THE MATTER OF
NATIONAL INSTRUMENT 81-106
INVESTMENT FUND CONTINUOUS DISCLOSURE
IN THE MATTER OF
TD ASSET MANAGEMENT INC. (the Applicant)
IN THE MATTER OF
TD WATERHOUSE $CDN ALTERNATIVE INVESTMENT FUND
TD WATERHOUSE $US ALTERNATIVE INVESTMENT FUND
The Ontario Securities Commission received an application from the Applicant, on behalf of the Funds, for a decision pursuant to section 17.1 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) exempting the Funds from:
(a) the requirement in section 2.2 of NI 81-106 that the Funds file their audited annual financial statements on or before the 90th day after their most recently completed financial year (the Filing Deadline); and
(b) the requirement in subsection 5.1(2) of NI 81-106 that the Funds deliver their 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 amalgamated under the Business Corporations Act (Ontario). It is wholly-owned subsidiary of The Toronto-Dominion Bank, a bank listed in Schedule I to the Bank Act (Canada).
2. The Applicant is registered as an investment counsel and portfolio manager or their equivalent in all provinces and territories of Canada, as a limited market dealer under the Securities Act (Ontario) and the Securities Act (Newfoundland and Labrador), and as a commodity trading manger under the Commodity Futures Act (Ontario).
3. The Applicant is manager of the Funds. The Funds are open-end mutual funds established under the laws of Ontario on April 27, 2005. They are offered to investors pursuant to exemptions from the prospectus requirement under applicable Canadian securities laws. The Funds have a financial year-end of December 31.
4. Each Fund's investment objective is to achieve long-term capital appreciation and to consistently generate positive returns for investors irrespective of stock market volatility or direction, while focusing on preservation of capital. The Funds seek to achieve their investment objectives by investing primarily in units of hedge funds or units of funds that invest primarily in hedge funds. The Funds are currently 100% invested in shares of Tremont Opportunity Fund Limited (the Tremont Fund).
5. The Tremont Fund is an open-end investment company organized as an exempted company under the laws of the Cayman Islands. The Tremont Fund invests its assets in a diverse group of non-U.S. investment funds whose managers employ a broad class of investment strategies including: long-short equity investing, hedging and arbitrage techniques in equity, fixed income and currency markets, index arbitrage, interest rate arbitrage, convertible bond and warrant hedging, merger arbitrage, statistical long/short equity strategies, pairs trading, and investment in non U.S. securities.
6. The underlying investment funds of the Tremont Fund have varying financial year-ends and are subject to financial reporting deadlines of varying lengths. As a result, the Tremont Fund is not in a position to complete its annual and interim financial statements until each of the underlying investment funds has completed its financial reporting. Accordingly, the Funds are not able to complete their audited annual financial statements and interim financial statements until the Tremont Fund provides its audited annual financial statements and interim financial statements to the Applicant. The Tremont Fund anticipates that audited annual financial statements will not be completed until late June of each year. This timing lag is expected to be an on-going issue that will occur year after year for so long as the Funds invest in the Tremont Fund or similar other investment funds that invest in hedge funds.
7. The Funds' auditors have indicated that in order to complete their audit of the Funds, they need to confirm the completion of the audit of the underlying funds so that proper assessments can be made with respect to valuations. As a result, the Funds' auditors will not provide an audit opinion on the Funds' annual financial statements unless they receive the audited financial statements of the Tremont Fund and any other investment fund that the Funds have invested in directly. TDAM and the Funds' auditors do not believe that it would be appropriate to prepare interim financial statements until the Funds have received the applicable financial statements of the Tremont Fund, or any other investment fund that the Funds have invested in directly.
8. Section 2.2 together with subsection 5.1(2) of NI 81-106 requires the Funds to file and deliver their annual audited financial statements by March 31 of each year.
9. The Funds will not be able to meet the Filing Deadlines and will not be able to comply with the Delivery Requirement.
10. The OSC granted similar relief with respect to the annual financial statements of the Funds for 2005 and the Funds received no complaints from securityholders with respect to the delay in delivering the financial statements.
11. Each of the Funds will notify its securityholders that it has received and intends to rely on relief from the Filing Deadline and the Delivery Requirement.
12. Each of the Funds will include a note in the offering memorandum of the Fund, if any, that it has received and intends to rely on relief from the Filing Deadline 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 Funds are exempt from the requirement to file their annual audited financial statements by the Filing Deadline and from the Delivery Requirement, provided that the audited annual financial statements are filed and delivered by June 30 of the year following the financial year for which the audited annual financial statements are prepared.
Nothing in this Order precludes the Funds from relying on the exemption contained in section 2.11 of NI 81-106 with respect to the audited financial statements for any given year provided the audited financial statements are delivered by the deadline specified above.