Integra Capital Limited and the Top Funds
Headnote
National Instrument 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from section 2.2 and paragraph 5.1(2)(a) of NI 81-106 granting mutual funds that are not reporting a 90-day extension of the annual financial statement filing and delivery deadlines -- subject to conditions -- Terminates upon the coming into force of any amendment to NI 81-106 or other rule that modifies the annual financial statement filing and delivery deadlines applicable to the funds.
Applicable Legislative Provisions
National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 2.2, 5.1(2)(a) and 17.1.
March 24, 2022
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO AND IN THE MATTER OF INTEGRA CAPITAL LIMITED AND THE TOP FUNDS (as defined below)
ORDER
Background
The Ontario Securities Commission (the Commission) has received an application from Integra Capital Limited (the "Filer"), as investment fund manager of the CLAC Conservative Fund and CLAC Balanced Fund (the "Initial Top Funds") and any other existing or future mutual fund that is not and will not be, a reporting issuer, and that is, or will be, managed by the Filer and invests in 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) exempting the Filer and the Top Funds from:
1. the requirement in section 2.2 of NI 81-106 that the Top Funds file their audited annual financial statements and auditor's report on or before the 90th day after the Top Funds' most recently completed financial year (the "Annual Filing Deadline"); and
2. the requirement in paragraph 5.1(2)(a) of NI 81-106 that the Top Funds deliver their audited financial statements by the Annual Filing Deadline (the "Annual Delivery Requirement")
(collectively, relief from the Annual Filing Deadline and the Annual Delivery Requirement, the "Requested Relief").
Representations
This order is based on the following facts represented by the Filer.
A. The Filer
1. The Filer is a private corporation existing under the Business Corporations Act (Ontario) having its head office in Oakville, Ontario.
2. The Filer is registered as a portfolio manager in each province and territory of Canada except Nunavut, an investment fund manager in each of Ontario, Québec, and Newfoundland and Labrador, an exempt market dealer in each province and territory of Canada except Nunavut, and a commodity trading manager in Ontario.
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 and portfolio manager of the Initial Top Funds. The Filer is, or will be, the investment fund manager and portfolio manager of each Top Fund. The Filer or a third party will act as trustee of each Top Fund.
B. The Top Funds
5. The Initial Top Funds are trusts organized under the laws of Ontario pursuant to separate trust agreements each dated July 13, 2021. Each Future Top Fund will be organized as a pooled fund trust or limited partnership under the laws of Ontario or another jurisdiction of Canada.
6. Each Top Fund will be a "mutual fund" for the purposes of the securities legislation of Ontario.
7. Securities of each Top Fund will only be offered for sale on a continuous basis to qualified investors in all provinces and territories in Canada except Nunavut pursuant to an exemption from the prospectus requirements under the Securities Act (Ontario) ("OSA") or National Instrument 45-106 Prospectus Exemptions ("NI 45-106").
8. Units of each Top Fund will only be distributed in Canada pursuant to exemptions from the prospectus requirement in accordance with the OSA or NI 45-106.
9. None of the Top Funds is, or will be, a reporting issuer in any province or territory of Canada.
10. Each Top Fund will have a financial year-end of December 31.
11. Each Top Fund will invest in units of one or more underlying funds (each, an "Underlying Fund"), either directly or indirectly.
12. The investment objective of each Top Fund is, or will be, to provide capital appreciation over a specified term and/or income, or to help underlying investors nearing retirement to continue to save through a diversified investment vehicle. The investment strategy of each Top Fund permits investment of the Top Fund's investable assets in Underlying Funds.
13. Each Top Fund, directly or indirectly, will generally invest through a number of different approaches, including without limitation, direct and indirect investments in a mix of securities that may include equities, fixed income, infrastructure, real estate and other diversifying strategies.
14. The Filer believes that investing in the Underlying Funds offers benefits not available through a direct investment in the companies, other issuers or assets held by the Underlying Funds.
15. The Filer engages in an extensive due diligence process when selecting Underlying Funds.
16. Securities of certain Underlying Funds are redeemable at various intervals, but securities of other Underlying Funds are not redeemable until the termination of such 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.
17. The net asset value of each Top Fund ("NAV") is calculated on a daily basis, as of the close of business on each trading day (the "Valuation Date"). A "trading day" for a Top Fund is a day on which the Toronto stock exchange is open for trading. Investors of each Top Fund are provided with the NAV on a daily basis.
18. Certain holdings of each Top Fund in securities of the Underlying Funds may be disclosed in the financial statements.
C. Financial Statements
19. Generally, section 2.2 and subsection 5.1(2)(a) of NI 81-106 require a Top Fund to file and deliver its annual audited financial statements by the Annual Filing Deadline. As each Top Fund's financial year-end is December 31, they each have a filing and delivery deadline of March 31.
20. Section 2.11 of NI 81-106 provides an exemption (the "Filing Exemption") from the Annual Filing Deadline if, among other things, an investment fund delivers its annual financial statements in accordance with part 5 of NI 81-106 by the Annual Filing Deadline.
21. In order to formulate an opinion on the financial statements on 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 each Top Fund's annual financial statements until the audited financial statements of a certain percentage of the Underlying Funds are completed and available to the respective Top Fund.
22. The Underlying Funds may be domiciled in Canada, the United States, Ireland or other international jurisdictions.
23. A material amount of the assets of the Top Funds will be invested in Underlying Funds managed by independent managers.
24. The Underlying Funds may have varying financial year-ends and may be subject to a variety of financial reporting deadlines. For example, a material amount of the assets of the Top Funds invested in Underlying Funds will be in Underlying Funds that are governed by laws that require the financial statements to be filed within 120 days of the financial year end of the Underlying Fund.
25. In most cases, the Top Funds will not be able to obtain the financial statements of the Underlying Funds sooner than the deadline for filing the financial statements of the Underlying Funds and, in all cases, no sooner than other unitholders of the Underlying Funds receive the financial statements of the Underlying Funds.
26. Investors of each Top Fund will be notified that annual audited financial statements for the Top Fund will be filed and delivered within 180 days of financial year end, subject to regulatory approval.
27. The Filer will notify unitholders in the Top Funds that it has received and intends to rely on relief from the Annual Filing Deadline and Annual Delivery Requirement.
28. The Filer does not anticipate it will be able to rely on the Filing Exemption since it is unable to prepare and deliver the audited annual financial statements and auditor's report within ninety (90) days after each Top Fund's most recently completed financial year.
29. It is expected that each Top Fund will not be able to file the annual audited financial statements of the Top Fund by the Annual Filing Deadline. As a result, the Top Funds will not be able to meet the Annual Delivery Requirement. The Filer expects this timing delay in the completion of its annual audited 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 June 30 of each 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 audited financial statements.
Order
The Director is satisfied that this order meets the test set out in the securities legislation of Ontario for the Commission to make the order.
The order of the Director under section 17.1 of NI 81-106 is that the Requested Relief is granted so long as:
1. Each Top Fund has a financial year ended December 31.
2. Each Top Fund invests the majority of its assets in Underlying Funds.
3. No less than 25% of the total assets of a Top Fund at the time the Top Fund makes the initial investment decision in the Underlying Fund(s), are invested in investment entities that have financial reporting periods that end on December 31 of each year and are subject to laws of their jurisdictions that require their financial statements to be delivered within 120 days of their financial year ends.
4. Unitholders of each Top Fund will be informed that annual audited financial statements for the Top Fund will be filed and delivered within 180 days of financial year end, subject to regulatory approval.
5. Each Top Fund notifies its unitholders that the Top Fund has received and intends to rely on relief from the filing and delivery requirements under section 2.2 and paragraph 5.1(2)(a) of NI 81-106.
6. Each Top Fund is not a reporting issuer and the Filer is a private corporation existing under the Business Corporations Act (Ontario) having its head office in Oakville, Ontario and has the necessary registrations to carry out its operations in each jurisdiction of Canada in which it operates.
7.
(a) The audited annual financial statements of each Top Fund are filed on or before the 180th day after the Top Fund's most recently completed financial year; or
(b) the conditions in section 2.11 of NI 81-106 are met, except for subsection 2.11(b), and the annual audited financial statements are delivered to unitholders 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.
8. This order 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 Requirement or Annual Delivery Requirement applies in connection with mutual funds.