iCapital Network Canada Ltd. and the Top Funds

Order

Headnote

National Instrument 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Mutual funds that are not reporting issuers granted 90-day extension of the annual financial statement filing and delivery deadlines and 60-day extension of the interim financial statement filing and delivery deadlines under NI 81-106 -- Funds invest the majority of their assets in Underlying Funds with later financial reporting deadlines -- Relief granted subject to conditions.

Statutes Cited

National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 2.2, 2.4, 5.1(2)(a) and (b), and 17.1.

February 16, 2023

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the "Jurisdiction") AND IN THE MATTER OF ICAPITAL NETWORK CANADA LTD. (the "Filer") AND THE TOP FUNDS (as defined below)

ORDER

Background

The Ontario Securities Commission (the "Commission") has received an application from the Filer, as investment fund manager of TCC Alternative Access Trust Fund (the "Alternative Access Trust Fund") and iCapital KKR Private Markets Access Fund (Canada) (the "Private Markets Access Fund" and together with the Alternative Access Trust Fund, the "Initial Top Funds") and any other existing or future investment fund that is not and will not be a reporting issuer, that is or will be organized under the laws of the Jurisdiction, and that is, or will be, managed by the Filer and invests or will invest directly or indirectly in underlying funds ("Underlying Funds") as part of its investment strategy (the "Future Top Funds" and together with the Initial Top Funds, the "Top Funds") for an order pursuant to section 17.1 of National Instrument 81-106 Investment Fund Continuous Disclosure ("NI 81-106") in respect of the fund-on-fund structures (described below) exempting the Filer and the Top Funds from the following requirements of NI 81-106:

1. the requirement in section 2.2 that the Top Funds file their audited annual financial statements and auditor's report (the "Annual Financial Statements") on or before the 90th day after the Top Funds' most recently completed financial year ("Annual Filing Deadline");

2. the requirement in section 2.4 that the Top Funds file their interim financial statements (the "Interim Financial Statements" and collectively with the Annual Financial Statements, the "Financial Statements") on or before the 60th day after the Top Funds' most recently completed interim period ("Interim Filing Deadline");

3. the requirement in paragraph 5.1(2)(a) that the Top Funds deliver to the securityholders their Annual Financial Statements by the Annual Filing Deadline (the "Annual Delivery Requirement"); and

4. the requirement in paragraph 5.1(2)(b) that the Top Funds deliver to the securityholders their Interim Financial Statements by the Interim Filing Deadline (the "Interim Delivery Requirement");

(collectively, the "Requested Relief").

Representations

This order is based on the following facts represented by the Filer.

The Filer

1. The Filer is a corporation incorporated under the Canada Business Corporations Act ("CBCA") with its principal place of business in Toronto, Ontario.

2. The Filer is registered as an Exempt Market Dealer and Portfolio Manager in Alberta, British Columbia, Ontario, Quebec and Newfoundland and Labrador, and as an Investment Fund Manager in Ontario, Quebec and Newfoundland and Labrador.

3. The Filer is not a reporting issuer in any jurisdiction and is not in default of securities legislation of any jurisdiction of Canada.

4. The Filer is the investment fund manager of the Initial Top Funds, and is, or will be, the investment fund manager of each of the Top Funds.

The Top Funds

5. Each of the Initial Top Funds is a trust formed pursuant to a master declaration of trust dated January 1, 2023.

6. Each Future Top Fund is or will be organized as a trust or a limited partnership under the laws of Ontario.

7. The Top Funds have and will continue to have their principal place of business in Toronto, Ontario. The Top Funds are not and will not be reporting issuers in any jurisdiction and the Initial Top Funds and each Future Top Fund is not in default of securities legislation of any jurisdiction of Canada.

8. Each Top Fund is, or will be, an "investment fund" for the purposes of the securities legislation of the Jurisdiction (the "Legislation").

9. Securities of the Top Funds are and will be offered for sale and distribution to qualified investors in all Canadian provinces and territories pursuant to exemptions from the prospectus requirements under the Legislation or National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106").

10. Securities of each Top Fund will only be distributed in Canada pursuant to exemptions from the prospectus requirement in accordance with the Legislation or NI 45-106.

11. None of the Top Funds is, or will be, a reporting issuer in any province or territory of Canada.

12. The Alternative Access Trust Fund has a financial year end of December 31 and the Private Access Markets Fund has a financial year end of March 31 and each Future Top Fund will have a financial year end of December 31 or March 31, as applicable.

13. The investment objective of each Top Fund is, or will be, to obtain appreciation or income by investing, directly or indirectly, through another fund, in securities, units or other interests of Underlying Funds which are private or other unlisted investment entities and, in the case of the Initial Top Funds, managed by an independent manager, or, in the case of the Future Top Funds, managed by an independent manager, the Filer or an affiliate of the Filer.

14. The investment strategy of the Alternative Access Trust Fund is to primarily invest the Alternative Access Trust Fund's assets in an Underlying Fund that is a private investment entity managed by an independent manager. The Alternative Access Trust Fund seeks to provide superior risk-adjusted returns by providing exposure through the Underlying Fund to a diversified portfolio of private and/or public markets investments and a diversified array of liquid alternative strategies and alternative asset classes and by achieving broader diversification to alleviate or reduce a number of the burdens associated with these types of investments.

15. The investment strategy of the Private Access Markets Fund is to primarily invest the Private Access Markets Fund's assets indirectly in an Underlying Fund that is a private investment entity managed by an independent manager. The Private Access Markets Fund seeks to provide long-term capital appreciation by providing exposure to the Underlying Fund's portfolio which consists primarily of private equity investment interests of any type, sponsored or advised by an independent manager, including primary offerings and secondary acquisitions of interests in alternative investment funds that pursue private equity strategies and co-investment opportunities in operating companies.

16. The Filer believes that the formation and offering of the Top Funds that invest in the Underlying Funds provides Canadian investors access to asset classes and underlying managers that would not otherwise be available to such investors and offers benefits not available through a direct investment in the companies, other issuers or assets held by the Underlying Funds.

17. The Filer engages in a due diligence process when selecting Underlying Funds for each Top Fund.

18. Securities of the Underlying Funds are typically redeemable at various intervals, but in some cases may not be redeemable until the termination of the Underlying Funds. Each Top Fund is able to manage its own liquidity requirements taking into consideration the frequency at which the securities of the Underlying Funds may be redeemed.

19. The net asset value of each Top Fund ("NAV") is or will be calculated at least on a monthly or quarterly basis, as of the last business day of each month or quarter, as applicable (the "Valuation Date"). Investors of each Top Fund are or will be provided with the NAV on a monthly or quarterly basis within 45 days (where the NAV is provided monthly) or 90 days (where the NAV is provided quarterly) of each Valuation Date.

20. The holdings of each Top Fund in securities of the Underlying Funds will be disclosed in the Financial Statements.

Financial Statements

21. Section 2.2 and subsection 5.1(2)(a) of NI 81-106 require the Top Funds to file and deliver their Annual Financial Statements to the securityholders by the Annual Filing Deadline. As the financial year-end for the Top Funds is or will be December 31 or March 31, the filing and delivery deadline for the Annual Financial Statements would be March 31 or June 29, as applicable.

22. Section 2.4 and subsection 5.1(2)(b) of NI 81-106 require the Top Funds to file and deliver their Interim Financial Statements to the securityholders by the Interim Filing Deadline. As the financial year-end for the Top Funds is or will be December 31 or March 31, the filing and delivery deadline for the Interim Financial Statements would be August 29 or November 29, as applicable.

23. Section 2.11 of NI 81-106 provides an exemption (the "Filing Exemption") from the obligation to file the Annual Financial Statements within the Annual Filing Deadline and the Interim Financial Statements within the Interim Filing Deadline if, among other things, an investment fund delivers its Annual Financial Statements and Interim Financial Statements in accordance with part 5 of NI 81-106.

24. In order to formulate an opinion on the financial statements of each Top Fund, the Top Fund's auditor requires audited financial statements of the respective Underlying Funds in order to audit the information contained in the Top Fund's Financial Statements. The auditors of the Top Funds have advised the Filer that they will be unable to complete the audit of the Top Funds' annual financial statements until the audited financial statement of the Underlying Fund are completed and available to the Top Fund.

25. The Underlying Funds may have varying financial year-ends and may be subject to a variety of financial reporting deadlines. Therefore, in most cases, the Top Funds will not be able to obtain the financial statements of the Underlying Funds prior to the Annual Filing Deadline or the Interim Filing Deadline for filing the Financial Statements and, in all cases, no sooner than other investors in the Underlying Funds receive the financial statements of the Underlying Funds.

26. With respect Underlying Funds managed by an affiliate of the Filer, the added costs associated with having the Underlying Funds change their financial reporting deadlines in order to provide their financial statements at an earlier date outweigh the expected benefit to the unitholders of the Top Funds.

27. The offering memorandum of each Top Fund that will be provided to investors will disclose that: (i) the annual audited financial statements for the Top Fund will be filed and delivered within 180 days of the Top Fund's financial year-end, and (ii) the unaudited interim financial statements for the Top Fund will be delivered within 120 days following the end of each interim period of the Top Fund.

28. The Top Funds will notify their securityholders that they have received and intend to rely on the Requested Relief.

29. The Top Funds do not anticipate they will be able to meet the conditions in subsection 2.11(b) of the Filing Exemption given that they do not expect to be able to deliver their Annual Financial Statements by the Annual Filing Deadline and their Interim Financial Statements by the Interim Filing Deadline. The Top Funds expect this timing delay in the completion of their Financial Statements to occur every year for the foreseeable future.

30. Each Top Fund therefore seeks an extension of the Annual Filing Deadline and Annual Delivery Requirement to permit delivery within 180 days of the Top Fund's most recently completed financial year, to enable the Top Fund's auditors to first receive the audited financial statements of the Underlying Funds so as to be able to prepare the Top Fund's Annual Financial Statements.

31. Each Top Fund seeks an extension of the Interim Filing Deadline and Interim Delivery Requirement to permit delivery within 120 days of the Top Fund's most recently completed interim period, to enable the Top Fund to first receive the financial statements of the Underlying Funds so as to be able to determine the NAV and prepare the Top Fund's Interim Financial Statements.

Order

The Commission is satisfied that this order meets the test set out in the Legislation for the Commission to make the order.

The order of the Commission under section 17.1 of NI 81-106 is that the Requested Relief is granted to a Top Fund for so long as:

1. Each Top Fund has, or will have, a financial year end of December 31 or March 31, as applicable.

2. The Top Fund's investment strategy is to primarily invest its assets directly or indirectly in the Underlying Funds that are private or other unlisted investment entities managed by independent managers, the Filer or an affiliate of the Filer;

3. The Top Fund invests the majority of its assets in Underlying Funds;

4. No less than 25% of the total assets of the Top Fund as at its financial year end of December 31 or March 31, as applicable, are invested in Underlying Fund(s) that have financial year ends corresponding to such Top Fund and are subject to laws of their jurisdictions that require annual financial statements of the Underlying Fund(s) to be delivered within 120 days of their financial year ends and interim financial statements to be delivered between 60 and 90 days of their most recent interim period.

5. The offering memorandum provided to securityholders regarding the Top Fund discloses that:

a. the Annual Financial Statements of the Top Fund will be filed and delivered on or before the 180th day after the Fund's most recently completed financial year; and

b. the Interim Financial Statements of the Fund will be filed and delivered on or before the 120th day after the Fund's most recently completed interim period.

6. The Top Fund notifies its securityholders that it has received and intends to rely on relief from the filing and delivery requirements under section 2.2, 2.4 and subsections 5.1(2)(a) and 5.1(2)(b) of NI 81-106.

7. The Top Fund is not a reporting issuer and the Filer has the necessary registrations to carry out its operations in each jurisdiction of Canada in which it operates.

8. The audited annual financial statements of the Top Fund are filed on or before the 180th day after the Top Fund's most recently completed financial year and the interim financial statements of the Top Fund are filed on or before the 120th day after the Top Fund's most recently completed interim period; or

a. The conditions in section 2.11 of NI 81-106 are met, except for paragraph 2.11(b), and the annual audited financial statements are delivered to securityholders of the Top Fund in accordance with Part 5 of NI 81-106 on or before the 180th day after the Top Fund's most recently completed financial year and the interim financial statements are delivered to securityholders of the Top Fund in accordance with Part 5 of NI 81-106 on or before the 120th day after the Top Fund's most recently completed interim period.

b. The Requested Relief terminates within one year of the coming into force of any amendment to NI 81-106 or other rule that modifies how the Annual Filing Deadline, Annual Delivery Requirement, Interim Filing Deadline, or Interim Delivery Deadline Requirement applies in connection with mutual funds under the Legislation.

"Neeti Varma"

Manager, Investment Funds and Structured Products Branch

Ontario Securities Commission

 

Application File #: 2022/0527