Tremont Core Diversified Fund - NI 81-106 Investment Fund Continuous Disclosure, s. 17.1
Headnote
Mutual fund in Ontario (non-reporting issuer) granted an extension of the annual financial statement filing deadline as primarily invested in offshore investment funds for which audited financial information.
March 14, 2008
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
AND
IN THE MATTER OF
TREMONT CORE DIVERSIFIED FUND
(Fund)
DECISION
Background
The Ontario Securities Commission (OSC) has received an application from the Fund for a decision pursuant to section 17.1 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) for an exemption from:
(a) the requirement contained in sections 2.1 and 2.2 of NI 81-106 (Filing Requirement), which require the Fund to file their audited annual financial statements on or before the 90th day after its most recently completed financial year (Filing Deadline); and
(b) the requirement contained in subsection 5.1(2) of NI 81-106 (Delivery Requirement), which require the Fund to deliver their audited annual financial statements to securityholders of the Fund on or before the Filing Deadline.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts represented by the Fund:
The Manager and the Fund
1. Tremont Capital Management, Corp. (Manager) is a corporation existing under the laws of New Brunswick with its head office in Toronto, Ontario.
2. The Manager is registered with the OSC as a non-Canadian adviser in the categories of Investment Counsel and Portfolio Manager and as a Limited Market Dealer.
3. The Manager is responsible for the management of the Fund and its day-to-day activities, and is also the portfolio advisor of the Fund. The Manager has appointed Tremont Partners, Inc. as the Fund's investment sub-advisor.
4. The Fund is an investment fund established under the laws of the Province of Ontario. The Fund is governed by a trust agreement between the Manager and The Royal Trust Company dated as of January 2, 2004, assigned to RBC Dexia Investor Services Trust as of January 1, 2006, and amended and restated as of February 1, 2006 (Trust Agreement).
5. The Fund offered trust units (Units) to qualified investors in the provinces and territories of Canada (Offering Jurisdictions) pursuant to available exemptions from the prospectus requirements of applicable securities legislation.
6. The Fund's investment objectives are to achieve long-term capital appreciation and to provide holders of Units (Unitholders) with an attractive risk-adjusted rate of return with less volatility than traditional equity markets and low correlation to major equity and fixed income markets.
7. The Fund invested primarily in a portfolio of actively managed offshore hedge funds.
8. The Fund is not and will not be a reporting issuer in any of the Offering Jurisdictions and the Units do not trade on any exchange or market.
Mandatory Redemption and Termination
9. Determined by the Manager to be in the best interests of the Unitholders and in connection with a refocusing of its investment management strategy, the Fund has commenced a process of winding-down its operations with a view to termination.
10. The Manager delivered a notice of mandatory redemption to all Unitholders in accordance with the Trust Agreement, indicating that the Fund will redeem all Units (other than Units held by the Manager or an affiliate) as of December 31, 2007.
11. As of the Filing Deadline, the Manager or its affiliate will be the sole unitholder of the Fund. The termination of the Fund is expected to occur in 2008.
Annual Financial Statements
12. The Fund's fiscal year-end is December 31. Sections 2.1, 2.2 and subsection 5.1(2) of NI 81-106 require the Fund to file and deliver its annual financial statements by the Filing Deadline.
13. Section 2.11 of NI 81-106 provides an exemption (Filing Exemption) from the Filing Requirement if, among other things, the Fund delivers its annual financial statements to Unitholders in accordance with Part 5 of NI 81-106 by the Filing Deadline.
14. The underlying offshore hedge funds in which the Fund invests prepare audited annual financial statements in accordance with the applicable accounting principles, which include International Financial Reporting Standards or U.S. GAAP. The majority of the underlying offshore hedge funds have a financial year end of December 31, and these funds are subject to financial reporting deadlines of varying length in the different jurisdictions outside Canada. Approximately 80% of the underlying hedge funds are subject to a financial reporting deadline that is 180 days from the financial year end.
15. In order to complete the audit of the Fund, the Fund's auditors require the audited financial statements of the underlying offshore hedge funds. The Fund's auditors have indicated that they do not expect to receive sufficient, relevant, and reliable information about the underlying offshore hedge funds in time for them to complete the audit of the Fund.
16. In connection with the 2007 year-end statements for the Fund, the Manager and the auditor must also take into account the mandatory redemption of Units and the winding-down of the Fund.
17. The Fund will not be able to meet the Filing Deadline and will not be able to comply with the Delivery Requirement.
18. As the Fund will not be able to deliver its financial statements to Unitholders in accordance with Part 5 of NI 81-106 by the Filing Deadline, it cannot rely on the Filing Exemption.
Decision
The Director is satisfied that the test contained in NI 81-106 that provides the Director with the jurisdiction to make the decision has been met.
The decision of the Director under NI 81-106 is that:
(a) the Fund is exempted from the Filing Requirement provided that:
(i) the audited annual financial statements of the Fund are filed on or before the 180th day after the Fund's most recently completed financial year; or
(ii) the conditions in section 2.11 of NI 81-106 are met, except for subsection 2.11(b), and the audited annual financial statements of the Fund are delivered to Unitholders in accordance with Part 5 of NI 81-106 on or before the 180th day after the Fund's most recently completed financial year;
and
(b) the Fund is exempted from the Delivery Requirement provided that the audited annual financial statements of the Fund are delivered to Unitholders in accordance with Part 5 of NI 81-106 on or before the 180th day after the Fund's most recently completed financial year.