iCapital Network Canada Ltd. and The Top Funds

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from conflict-of-interest investment restrictions in paragraphs 111(2)(b) and (c) and subsection 111(4) of the Securities Act (Ontario) to permit pooled funds to invest in related underlying investment vehicles that are not reporting issuers and that are managed by a third-party asset manager, subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 111(2)(b), 111(2)(c), 111(4), and 113.

May 7, 2025

IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO
(the jurisdiction)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
ICAPITAL NETWORK CANADA LTD.
(the filer)

AND

THE TOP FUNDS
(as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of each of the Filer and any affiliate of the Filer acting as investment fund manager, and on behalf of North Haven Private Income Fund A iCapital Canada Access Trust, a mutual fund trust established under the laws of the Province of Ontario (the "Existing Top Fund") and one or more other mutual funds, which is or will be similar in nature to the Existing Top Fund and is, or will be, managed by the Filer or an affiliate of the Filer (the "Other Top Funds" and, together with the Existing Top Fund, the "Top Funds") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") exempting each of the Top Funds from the restrictions in the Legislation which prohibit:

(a) an investment fund from knowingly making an investment in a person or company in which the investment fund, alone or together with one or more related investment funds, is a substantial security holder;

(b) an investment fund from knowingly making an investment in an issuer in which

(i) any officer or director of the investment fund, its management company or distribution company or an associate of any of them, or

(ii) any person or company who is a substantial security holder of the investment fund, its management company or its distribution company;

has a significant interest; and

(c) an investment fund, its management company or its distribution company from knowingly holding an investment described in paragraph (a) or (b) above;

(collectively, the "Exemption Sought"),

to permit the Existing Top Fund to invest, directly or indirectly, substantially all of its assets in securities of North Haven Private Income Fund A LLC, a Delaware limited liability company that has elected to be regulated as a "business development company" under the U.S. Investment Company Act of 1940 and in which the Filer or one of its affiliates may have a significant interest (the "Existing Underlying Investment") and to permit each of the Other Top Funds to invest, directly or indirectly, substantially all or a portion of its assets in securities of any underlying fund in which the Filer or one of its affiliates may have a significant interest, that will have non-traditional investment strategies as in the case of the Existing Underlying Investment (the "Other Underlying Investments" and, together with the Existing Underlying Investment, the "Underlying Investments").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of Alberta, British Columbia, Manitoba, Newfoundland and Labrador and Quebec, in which the Filer is registered under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (together with Ontario, the "Jurisdictions").

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

The Filer

1. The Filer is a corporation incorporated under the laws of Canada with its head office located in Toronto, Ontario.

2. The Filer is registered as an exempt market dealer in all of the provinces and territories of Canada, a portfolio manager ("PM") in each of Ontario, Québec, British Columbia, Alberta, Manitoba and Newfoundland and Labrador and as an investment fund manager ("IFM") in each of Ontario, Québec and Newfoundland and Labrador.

3. The Filer is the IFM and the PM of the Existing Top Fund and the Filer or an affiliate of the Filer is, or will be, the IFM and PM of the Other Top Funds. The representations set out in this decision will apply to the same extent to such Other Top Funds.

4. The Filer or an affiliate of the Filer may hold a significant interest in one or more of the Underlying Investments.

5. The Filer is not in default of securities legislation in any jurisdiction of Canada.

The Top Funds

6. The Existing Top Fund is a trust established under the laws of Ontario, and each Other Top Fund is, or will be, organized as a trust, limited partnership or other form of entity under the laws of Ontario or another jurisdiction of Canada.

7. Each of the Top Funds is, or will be, a "mutual fund" under the Legislation.

8. Units of, or an interest in, each of the Top Funds is, or will be, offered only on a private placement basis pursuant to available exemptions from the prospectus requirements under Canadian securities legislation.

9. None of the Top Funds are, or will be, reporting issuers in any jurisdiction of Canada.

10. The Existing Top Fund intends to invest, directly or indirectly, substantially all of its assets in securities of the Existing Underlying Investment. Each of the Other Top Funds may also wish to invest, directly or indirectly, substantially all or a portion of its assets in securities of Underlying Investments, provided the investment is consistent with the applicable Other Top Fund's investment objectives and strategies.

11. Each Top Fund qualifies, or will qualify, to invest in securities of an Underlying Investment pursuant to applicable exemptions from the prospectus requirement under National Instrument 45-106 Prospectus Exemptions ("NI 45-106") and/or the Legislation.

12. Neither the Existing Top Fund nor any of the existing Other Top Funds is in default of securities legislation in any jurisdiction of Canada.

The Underlying Investments

13. The Existing Underlying Investment is a limited liability company established under the laws of Delaware, and each Other Underlying Investment is, or will be, structured as either a limited partnership, trust, corporation or other domestic or foreign entity under the laws of a province or territory of Canada or a foreign jurisdiction.

14. Securities of an Underlying Investment are, or will be, distributed to a Top Fund, and each Underlying Investment is, or will be, distributed to investors in Canada, solely pursuant to exemptions from the prospectus requirements in accordance with NI 45-106 and the Legislation and may be sold by way of prospectus or private placement in other jurisdictions.

15. The Existing Underlying Investment may be treated as an "investment fund" under the Legislation. Certain Other Underlying Investments are not or will not be "investment funds" under the Legislation and certain Other Underlying Investments are, or will be, "investment funds" under the Legislation.

16. The Existing Underlying Investment has an offering memorandum which is provided to investors in the Existing Top Fund and each Other Underlying Investment has or will have a prospectus, offering memorandum or similar document which has been or will be provided to investors in the applicable Other Top Fund.

17. Each of the Underlying Investments will produce their respective audited financial statements on an annual basis, in accordance with applicable generally accepted accounting principles, and with a qualified auditing firm as the auditor of those financial statements. The Filer will have access to audited financial statements prepared in respect of the Underlying Investment made by the Top Fund.

18. The investment objective of the Existing Underlying Investment is to achieve attractive risk-adjusted returns via current income and, to a lesser extent, capital appreciation by investing primarily in directly originated senior secured term loans issued by U.S. middle market companies in which private equity sponsors have a controlling equity stake in the portfolio company.

19. The investment objective and strategies of each Other Underlying Investment are expected to be focused on generating gains and possibly income from investments in private assets, including private equity, real estate, private credit, hedge funds, infrastructure and other similar asset classes.

20. None of the Top Funds will actively participate in the business or operations of an Underlying Investment.

21. MS Capital Partners Adviser Inc., a U.S. Securities and Exchange Commission registered investment advisor and a wholly owned subsidiary of Morgan Stanley is the investment fund manager and portfolio adviser of the Existing Underlying Investment. The manager and adviser of each Other Underlying Investment is, or will be, a third-party asset manager. Each Underlying Investment will calculate a net asset value that is used for the purposes of determining the purchase and redemption price of the securities of the Underlying Investment.

22. None of the Underlying Investments are, or will be, reporting issuers in any jurisdiction of Canada.

Investments by Top Funds in the Underlying Investments

23. An investment by a Top Fund in an Underlying Investment will only be made if the Underlying Investment is compatible with the investment objectives and investment strategy of the Top Fund.

24. The Filer believes that an investment by any Top Fund in an Underlying Investment will provide such Top Fund with an efficient and cost-effective manner of pursuing portfolio, asset class, and strategy diversification. Each such Top Fund will also gain access to the investment expertise of the adviser of the Underlying Investment and the Underlying Investment's investment strategy, which would otherwise not be available to the Top Fund or to the investors in the Top Fund.

25. Investments by each Top Fund in an Underlying Investment will be effected at an objective price. The Filer's policies and procedures provide that an objective price, for this purpose, will be the net asset value per security of the applicable class or series of the Underlying Investment.

26. Each of the Underlying Investments is, or will be, valued and redeemable at least as frequently as, and contemporaneously with, the applicable Top Fund. The Existing Underlying Investment is valued and redeemable quarterly, and is subject to a redemption limit of 5% of the outstanding units (calculated either by the number of units or the aggregate net asset value) as of such quarter end. The Other Underlying Investments may be potentially subject to redemption limitations, including lock-up periods, early redemption penalties and other restrictions on redemptions in a given period of time.

27. The net asset value of the Existing Top Fund will be calculated by an independent fund administrator that has been appointed by the investment fund manager of the Existing Top Fund. Because the Existing Top Fund invests substantially all of its assets in the Existing Underlying Investment, changes in the net asset value of the Existing Top Fund are almost entirely based upon the most recently available net asset value of the Existing Underlying Investment. The net asset value of the Existing Underlying Investment is calculated monthly as the value of the total assets of the Existing Underlying Investment, less all of its liabilities, including accrued fees and expenses, each determined as of the relevant valuation date. The investment fund manager of the Existing Underlying Investment may also engage independent external valuation advisors to provide positive assurance or other forms of valuation support for the Existing Underlying Investment's valuations. The net asset value of the Existing Underlying Investment will be determined by a third-party that is independent of the Filer.

28. Each of the Other Top Funds invests or will invest, directly or indirectly, in securities of Underlying Investments, provided the investment is consistent with the applicable Other Top Fund's investment objectives and strategies. As a result, the net asset value of each of the Other Top Funds will almost entirely be based upon the most recently available net asset value of the corresponding Underlying Investment, which will be determined in accordance with the prospectus, offering memorandum or similar document of the applicable Underlying Investment which will be provided to the investors. In each case, the net asset value of the Underlying Investments will be will be determined by a third-party that is independent of the Filer.

29. The Filer or an affiliate of the Filer will manage the liquidity of each Top Fund having regard to the redemption features of the Underlying Investment to ensure that it can meet redemption requests from investors of the applicable Top Fund. The Filer expects that the liquidity management will be achieved through the use of structuring and terms, which may include establishing cash reserves, establishing a basket of liquid investments, setting off subscription proceeds against redemptions and/or utilizing credit facilities. The approach taken will depend on, among other things, the liquidity profile of the Underlying Investment and the anticipated needs of the applicable Top Fund.

30. An investment by any Top Fund in an Underlying Investment will only be made if such investment represents the business judgment of a responsible person uninfluenced by considerations other than the best interests of the applicable Top Fund.

Generally

31. The amount invested from time to time in any Underlying Investment by a Top Fund may exceed 20% of the outstanding voting securities of the Underlying Investment. As a result, a Top Fund could be deemed to be a "substantial security holder" of an Underlying Investment within the meaning of section 110 of the Legislation, contrary to paragraph 111(2)(b) of the Legislation.

32. An officer or director of the Filer or of an affiliate of the Filer may have a "significant interest" in any Underlying Investment and/or a person or company who is a substantial security holder of any Top Fund, the Filer or an affiliate of the Filer may have a "significant interest" in an Underlying Investment within the meaning of section 110 of the Legislation, which under paragraph 111(2)(c) of the Legislation, would prohibit the applicable Top Funds from investing in those Underlying Investments.

33. Since the Existing Underlying Investment is not an "investment fund" as defined in the Legislation, the Existing Top Fund is unable to rely on the exemption from the investment restrictions of section 111 of the Legislation that is provided under subsection 2.5.1(2) of NI 81-102 for non-reporting issuer investments funds that purchase or hold securities of another non-reporting issuer investment fund (the "Codified Exemption"). Since an Other Underlying Investment in which an Other Top Fund invests may not, in each case, be an "investment fund" as defined in the Legislation, the applicable Other Top Fund is unable to, in each case, rely on the Codified Exemption. In addition, in cases where the Other Underlying Investment is an "investment fund", the applicable Other Top Fund's investment in securities of an Other Underlying Investment may not satisfy every condition of the Codified Exemption.

34. No redemption fees or sales charges would be payable by any Top Fund with respect to purchases or redemptions of securities of an Underlying Investment, unless that Top Fund redeems its securities of the Underlying Investment during a lock-up period, in which case an early redemption fee may be payable by that Top Fund.

35. In respect of an investment by any Top Fund in an Underlying Investment, no management fees or incentive fees will be payable by the applicable Top Fund that, to a reasonable person, would duplicate a fee payable by an Underlying Investment for the same service.

36. The offering memorandum of each Top Fund will be provided to prospective investors in such Top Fund prior to the time of investment, and will disclose:

(i) that the Top Fund will or may invest, directly or indirectly, substantially all or a portion of its assets in securities of an Underlying Investment and the expected percentage of the Top Fund's assets that may be invested in the Underlying Investment;

(ii) the fees, expenses and any performance or special incentive distributions payable by the Underlying Investment in which a Top Fund invests;

(iii) the process or criteria used to select the Underlying Investment, if applicable;

(iv) that the Filer, an affiliate of Filer or a substantial security holder of the Filer may have a significant interest in an Underlying Investment, and the potential conflicts of interest which may arise from such relationships; and

(v) for each officer, director and/or substantial security holder of the Filer or its affiliate, or of any Top Fund, that has a significant interest in an Underlying Investment, and for, the officers and directors and substantial security holders who together in aggregate hold a significant interest in an Underlying Investment, the approximate amount of the significant interest they hold, on an aggregate basis, expressed as a percentage of the Underlying Investment's net asset value, and the potential conflicts of interest which may arise from such relationship.

37. Each Top Fund's investment in an Underlying Investment is disclosed, or will be disclosed, to investors in that Top Fund's offering memorandum and, where applicable, in the periodic reports and financial statements.

38. The Filer believes that a meaningful allocation to private equity, private credit, real estate, infrastructure, hedge funds and other alternative investments provides each of the Top Fund investors with unique diversification opportunities and represents an appropriate investment tool for the Top Funds in achieving that diversification.

39. Securities of the Underlying Investments are not qualified investments for tax-free savings accounts ("TFSAs"), and trusts governed by registered retirement savings plans, registered retirement income funds, registered education savings plans, deferred profit sharing plans registered disability savings plans and other similar plans, each a defined term under the Income Tax Act (Canada) (collectively, the "Tax Deferred Plans").

40. The Existing Top Fund is formed as a trust for the purpose of accessing a broader base of investors, and if it qualifies as a "mutual fund trust" for Canadian tax purposes, including TFSAs, Tax Deferred Plans and other investors that may not be able to, nor wish to, invest directly in the Existing Underlying Investment. Each Other Top Fund is, or will be, formed as a trust, a limited partnership or other form of entity for the purpose of accessing a broader base of investors, and if it qualifes as a "mutual fund trust" for Canadian tax purposes, including TFSAs, Tax Deferred Plans and other investors that may not be able to, nor wish to, invest directly in the Underlying Investments.

41. Absent the Exemption Sought, a Top Fund would be precluded from purchasing and holding securities of an Underlying Investment due to the investment restrictions contained in the Legislation.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) the securities of each of the Top Funds and each of the Underlying Investments are distributed in Canada solely to accredited investors pursuant to exemptions from the prospectus requirements in accordance with NI 45-106;

(b) any direct or indirect investment by a Top Fund in an Underlying Investment is compatible with the fundamental investment objectives of that Top Fund;

(c) at the time of the purchase by any Top Fund, directly or indirectly, of securities of an Underlying Investment, the Underlying Investment holds no more than 10% of its net asset value in securities of other investment funds, unless the Underlying Investment:

(i) is a "clone fund" (as defined in NI 81-102); or

(ii) purchases or holds securities:

(A) of a "money market fund" (as defined in NI 81-102); or

(B) that are "index participation units" (as defined in NI 81-102) issued by an investment fund;

(d) no management fees or incentive fees will be payable by that Top Fund that, to a reasonable person, would duplicate a fee payable by an Underlying Investment for the same service;

(e) no sales or redemption fees will be payable as part of the investment by any Top Fund in the securities of an Underlying Investment, unless that Top Fund redeems its securities of the Underlying Investment during a lock-up period, in which case an early redemption fee may be payable by that Top Fund;

(f) the securities of any Underlying Investment held by the corresponding Top Fund will not be voted at any meeting of the security holders of that Underlying Investment, except that the applicable Top Fund may arrange for the securities of the Underlying Investment it holds to be voted by the beneficial holders of securities of that Top Fund;

(g) each Top Fund's investment in an Underlying Investment is disclosed, or will be disclosed, to investors in that Top Fund's offering memorandum and, where applicable, in the periodic reports and financial statements;

(h) at the time of investment by any Top Fund in an Underlying Investment, the aggregate amount of assets directed to the third-party investment fund manager of that Underlying Investment, across all underlying investments of such third-party investment fund manager, will not represent more than 20% of the total assets under management of such third-party investment fund manager as part of its overall asset management business;

(i) each Underlying Investment will produce audited financial statements on an annual basis, in accordance with applicable generally accepted accounting principles, and with a qualified auditing firm as the auditor of those financial statements;

(j) each Underlying Investment has, or will have, an investment manager that, in each case, meets the due diligence criteria established by the Filer for third party investment fund managers;

(k) the offering memorandum of each Top Fund will be provided to prospective investors in such Top Fund prior to the time of investment, and will disclose:

(i) that the Top Fund will or may invest, directly or indirectly, substantially all or a portion of its assets in securities of an Underlying Investment and the expected percentage of the Top Fund's assets that may be invested in the Underlying Investment;

(ii) the fees, expenses and any performance or special incentive distributions payable by the Underlying Investment in which a Top Fund invests;

(iii) the process or criteria used to select the Underlying Investment, if applicable;

(iv) that the Top Fund, alone or together with other Top Funds, may be a substantial security holder of an Underlying Investment, and that the Filer, an affiliate of Filer or a substantial security holder of the Filer may have a significant interest in an Underlying Investment, and the potential conflicts of interest which may arise from such relationships; and

(v) for each officer, director and/or substantial security holder of the Filer or its affiliate, or of any Top Fund, that has a significant interest in an Underlying Investment, and for, the officers and directors and substantial security holders who together in aggregate hold a significant interest in an Underlying Investment, the approximate amount of the significant interest they hold, on an aggregate basis, expressed as a percentage of the Underlying Investment's net asset value, and the potential conflicts of interest which may arise from such relationship;

(vi) that investors in the Top Fund are entitled to receive from the Filer, on request and free of charge, a copy of the offering memorandum or other similar disclosure document of the Underlying Investment; and

(vii) unless the financial statements of the Underlying Investment are subject to a restriction on disclosure that prohibits the Filer from providing such financial statements to the investors, that investors are entitled to receive from the Filer, on request and free of charge, the annual financial statements of the Underlying Investment in which the Top Fund invests its assets.

(l) where an investment is made by any Top Fund in an Underlying Investment, the records of portfolio transactions maintained by that Top Fund will include the name of the applicable Underlying Investment, as the case may be, being a related person in which an investment is made;

(m) the Top Funds will, directly or indirectly, invest in, and redeem, Underlying Investments at an objective price, which, for this purpose, will be the net asset value per security of the applicable class or series of the applicable Underlying Investment. For greater certainty, the net asset value of each Underlying Investment is based on the valuation of the applicable portfolio assets to which the Underlying Investment has exposure, independently determined by an arm's length third party;

(n) a Top Fund will invest in an Other Underlying Investment only where it is structured in similar ways to the Existing Underlying Investment, including that the manager and adviser of the Other Underlying Investment is a third-party asset manager.

"Darren McKall"
Manager, Investment Management Division
Ontario Securities Commission

Application File #: 2024/0107
SEDAR+ File #: 6092747