A group of highly acclaimed, investment industry veterans, who include fund managers Frank Mersch and Norm Lamarche and led by Chairman and President, Gary Selke, have launched Front Street Capital in Toronto.

The new firm was created to provide alternatives to any investor who yearns for superior performance, safety and tax advantages.

“Front Street Capital is for those who no longer accept ‘performance mediocrity’ in their portfolios,” says Frank Mersch, one of five founding partners (Brian Ramsay and Parm Kalirai are the other two founding partners). “The last thing Canada needs is another mutual fund company, so we’ve come together to offer compelling alternatives to investors who demand and deserve more of each dollar invested,” he adds.

Mersch and Lamarche, two of Canada’s best known and most successful resource industry fund managers, have reunited to seize an emerging opportunity in the energy sector.

The energy industry has recently undergone massive consolidation. Consequently several ingredients for growth have emerged, according to Front Street’s five founders. First, consolidation has meant the selling off of some $6 billion in essential, but non-core, assets. Second, having just sold their companies, successful executives and management teams are now free to explore new opportunities, and will require money in addition to their own to fund new opportunities.

Gary Selke says, “The recently announced consolidation of PanCanadian and AEC is consistent with our vision that opportunities are constantly being created in the energy patch. As a consequence of the merger, producing properties will find their way to the market along with talented executives ready to take advantage of the next commodity price upswing.”

The group’s first product is Tuscarora Energy Growth Fund. The fund is an open-end mutual fund that will invest in companies — both private and public — that operate in Canada’s energy industry. The fund is registered under the federal LSVCC program in order to give it the flexibility to invest in a diversified combination of private and public companies.

“The Tuscarora Energy Growth Fund has the perfect structure to capitalize on this investment opportunity” notes Selke. “The structure meets our needs better than a conventional mutual fund in that a significant percentage of the portfolio can be investments in private companies and investors are eligible to receive a 15% tax credit on the first $5,000 they invest each year. It is superior to the LSIFs because there is no restriction on the amount of public company investing we do. As well, this fund can be expected to have value and liquidity because the investee companies will have hard assets and cash flow from day one.”

The fund will invest in small to medium-sized businesses, based on their merits and management teams who have previously operated successfully in a public company environment.

The focus will be on the natural resource area, concentrating in the energy sector and including companies engaged in oil and gas production, drilling and servicing, alternative energy and power.

The initial offering price for Tuscarora Energy Growth Fund is $10 per share (until March 1, 2002) with a minimum initial investment of $500. Canadian residents who invest are eligible for a 15 percent federal tax credit on the first $5,000 they invest each year.

The fund is a qualified investment for RRSPs and RRIFs. Every $1 (book value) of the Fund held in an RRSP increases the foreign content allowance of that RRSP by $3 to a maximum foreign content allowance of 50 percent.

Products managed by Front Street Capital currently include two hedge funds, the Casurina LP and First Wave, a specialty mutual fund – the Tuscarora Energy Growth Fund and two mutual funds, the Multiple Opportunities Fund and the Special Opportunity Fund.