Pangea Capital Limited - s. 80 of the CFA

Headnote

Section 80 of the Commodity Futures Act (Ontario) (the CFA) - Relief from the adviser registration requirement of paragraph 22(1)(b) of the CFA granted to a non-resident adviser in respect of advising certain non-Canadian mutual funds regarding trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada, subject to certain terms and conditions.

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20, as am., s. 22(1)(b) and s. 80.

Securities Act, R.S.O. 1990, c. S.5, as am. -- Rule 35-502 -- Non Resident Advisers.

IN THE MATTER OF

THE COMMODITY FUTURES ACT

R.S.O. 1990, CHAPTER C.20, AS AMENDED (the "ACT")

AND

IN THE MATTER OF

PANGEA CAPITAL LIMITED

ORDER

(Section 80 of the Act)

UPON the application of Pangea Capital Limited (the "Applicant") to the Ontario Securities Commission (the "Commission") for an order pursuant to section 80 of the Act that the Applicant and its directors, officers and employees are exempt from the requirements of paragraph 22(1)(b) of the Act in respect of advising Pangea Alternative Fund Limited (the "Fund") in respect of trades in commodity futures contracts and commodity futures options traded on commodity futures exchanges primarily outside of Canada and cleared through clearing corporations primarily outside of Canada (the "Proposed Advisory Business");

AND UPON considering the application and the recommendation of staff of the Commission;

AND UPON the Applicant having represented to the Commission as follows:

1. The Applicant is an investment company licensed and regulated by the Bermuda Monetary Authority for the conduct of investment business, under the terms of the Bermuda Investment Business Act of 1998.

2. The Fund is a limited liability investment company incorporated under the laws of Bermuda.

3. The Fund is a multi-strategy fund of hedge funds. The Fund will invest in managed funds (the "Sub-Funds"), which are managed by various portfolio managers (the "Portfolio Managers"). The Fund may invest some or all of its assets by means of entering into structured call options, including but not limited to, cash-settled equity barrier call options, referenced to baskets or indices of private investment vehicles managed by designated managers or products substantially similar thereto (the "Structured Product Investments"). It is expected that up to 100% of the Fund's assets will be assigned to a counterparty designated by the Applicant in consideration for the required investment in the Structured Product Investment. The Applicant may select Sub-Funds as reference assets in the Structured Product Investments, and in addition may also invest directly in Sub-Funds.

4. The Portfolio Managers may utilize trading strategies that include hedged trading of futures contracts, forward and physical cash contracts, options on futures and any other related commodity interests traded primarily outside of Canada and cleared through clearing corporations located primarily outside of Canada.

5. The Applicant, as investment manager of the Fund, provides advice and makes all decisions with respect to investment in Structured Product Investments and selection of the Portfolio Managers. The Applicant may also advise the Fund in respect of commodity futures contracts and commodity futures options traded on organized exchanges outside of Canada and cleared through clearing corporations located outside of Canada.

6. Certain of the Sub-Funds may invest in commodity futures contracts and commodity futures options traded on organized exchanges outside of Canada and cleared through clearing corporations located outside of Canada.

7. The Sub-Funds, in which the Fund will from time to time invest, are managed by certain Portfolio Managers outside of Canada and are investing, or will invest, in investments selected by the Portfolio Managers which may include commodity future contracts and commodity future options. The Portfolio Managers are unaffiliated with the Applicant and do not, and will not in the future, provide advice directly to the Fund.

8. The Applicant will select the Sub-Funds in which the Fund will invest, based on the investment strategies implemented by the Portfolio Manager of the relevant Sub-Fund and the investment objectives and policies of the Fund. The investment strategies implemented by the Portfolio Manager may include investing in commodity futures contracts and commodity futures options.

9. As would be required under section 7.10 (Privately Placed Funds Offered Primarily Abroad) of Rule 35-502 of the Securities Act (Ontario) the Fund is or will be non-Canadian and the securities of the Fund will be:

(i) primarily offered outside of Canada;

(ii) only distributed in Ontario through one or more registrants under the Securities Act (Ontario); and

(iii) distributed in Ontario in reliance upon an exemption from the prospectus requirements under the Securities Act (Ontario).

10. Prospective investors in the Fund who are Ontario residents will receive disclosure that includes:

(a) a statement that there may be difficulty in enforcing any legal rights against the Applicant (or any of the Portfolio Managers), or the directors, officers or employees of the Applicant (or any of the Portfolio Managers) because they are resident outside of Canada and all or substantially all of their assets are situated outside of Canada, and

(b) a statement that the Applicant advising the Fund and, where applicable, the Portfolio Managers advising the relevant Sub-Funds are not, or will not be, registered with or licensed by any securities regulatory authority in Canada and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Fund.

AND UPON being satisfied that it would not be prejudicial to the public interest for the Commission to grant the exemptions requested.

IT IS ORDERED pursuant to section 80 of the Act that the Applicant and its directors, officers and employees responsible for advising the Fund are not subject to the requirements of paragraph 22(1)(b) of the Act in respect of the Proposed Advisory Business in connection with the Fund, for a period of three years, provided that at the time such Proposed Advisory Business is engaged in:

1. the Applicant continues to be licensed and regulated by the Bermuda Monetary Authority under the terms of the Bermuda Investment Business Act of 1998, or is entitled to rely on appropriate exemptions from such licences and regulations, to provide advice to the Funds pursuant to the applicable legislation of its principal jurisdiction.

2. the Fund and the Sub-Funds invest in commodity futures contracts and commodity futures options traded on organized exchanges located primarily outside of Canada and cleared through clearing corporations located primarily outside of Canada, in other derivative instruments traded over the counter primarily outside of Canada, and in securities primarily outside of Canada;

3. securities of the Fund will be offered primarily outside of Canada and will only be distributed in Ontario through Ontario-registered dealers, in reliance on an exemption from the prospectus requirements of the Securities Act (Ontario) (sections 53 and 62), and upon an exemption from the adviser registration requirement provided under section 7.10 of Commission Rule 35-502 Non-Resident Advisers; and

4. prospective investors in the Fund who are Ontario residents will receive disclosure that includes

(a) a statement that there may be difficulty in enforcing any legal rights against the Applicant (or any of the Portfolio Managers), or the directors, officers or employees of the Applicant (or any of the Portfolio Managers) because they are resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and

(b) a statement that the Applicant advising the Fund and, where applicable, the Portfolio Managers advising the relevant Sub-Funds are not, or will not be, registered with or licensed by any securities regulatory authority in Canada and, accordingly, the protections available to clients of a registered adviser will not be available to purchasers of securities of the Fund.

March 2, 2004.