Trans-Canada Capital Inc. and TCC Alphabet Master Fund, LP
Headnote
National Instrument 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Mutual fund that is not a reporting issuer and requires financial statements of underlying funds granted 90-day extension of the annual financial statement filing and delivery deadlines under NI 81-106, subject to conditions.
Applicable Legislative Provisions
National Instrument 81-106 Investment Fund Continuous Disclosure, ss. 2.2, 5.1(2)(a) and 17.1.
June 28, 2021
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the "Jurisdiction") AND IN THE MATTER OF TRANS-CANADA CAPITAL INC. ("TCC") AND TCC ALPHABET MASTER FUND, LP (THE "FUND")
DECISION
Background
The principal regulator in the Jurisdiction has received an application from TCC on behalf of the Fund for a decision under the securities legislation of the Jurisdiction (the "Legislation") exempting the Fund from the following requirements of National Instrument 81-106 Investment Fund Continuous Disclosure ("NI 81-106"):
1. The requirement in section 2.2 that the Fund file its audited annual financial statements and auditor's report on or before the 90th day after the Fund's most recently completed financial year (the "Annual Filing Deadline"); and
2. The requirement in paragraph 5.1(2)(a) that the Fund deliver to its securityholders its audited annual financial statements by the Annual Filing Deadline (the "Annual Delivery Requirement")
to permit the Fund an extension of the Annual Filing Deadline and the Annual Delivery Requirement to June 30 of each year (the "Requested Relief").
Representations
This decision is based on the following facts represented by TCC:
TCC
1. Air Canada Pension Investment ("ACPI") was a division of Air Canada ("AC") responsible for the management of 8 AC employee Canadian defined benefit pension plans (and other AC employee savings plans), which with $23B in assets under management, are collectively the second-largest pension plan of a publicly traded company in Canada.. All ACPI's responsibilities were transferred to TCC as described below.
2. TCC was incorporated on March 12, 2018 under the Canada Business Corporations Act, with its head office and principal place of business in Montreal, Quebec, and is a wholly owned subsidiary of AC.
3. On January 1, 2019, ACPI officially became TCC (the TCC team is composed of existing members of ACPI), following which, as per an Investment Management Agreement with AC, it began to manage investment assets for the AC pension plans (directly and indirectly through six (6) specialized investment funds), third-party sophisticated institutional and eventually high net worth clients.
4. TCC is currently registered as an Exempt Market Dealer in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario and Quebec, and as a Portfolio Manager, Investment Fund Manager and Derivatives Portfolio Manager/Commodity Trading Manager in Ontario and Quebec.
5. TCC is the Investment Fund Manager and Portfolio Manager of the Fund as per an Investment Management Agreement.
6. TCC is not a reporting issuer in any jurisdiction and is not in default of securities legislation of any jurisdiction of Canada.
The Fund
7. The Fund is a Limited Partnership formed under the laws of the Province of Ontario pursuant to a Limited Partnership Agreement dated November 2, 2020.
8. The Fund is both an investment fund and a mutual fund for the purposes of NI 81-106.
9. Units of the Fund are only offered for sale and distribution on a continuous basis to qualified investors in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario and Quebec pursuant to an exemption from the prospectus requirements under National Instrument 45-106 Prospectus and Registration Exemptions.
10. Currently, the Fund has only one securityholder, which is a sophisticated institutional investor, the Air Canada Pension Master Trust Fund (the "Fund Securityholder").
11. The Fund is not a reporting issuer in any jurisdiction.
12. The Fund is currently in default of the Annual Filing Deadline and the Annual Delivery Requirement (the "Default").
13. The Fund has a financial year-end of December 31.
14. The Fund invests in units of Underlying Funds which are all private commingled funds individually independently managed by external investment managers (not related to TCC) which investments are consistent with the Fund's investment objectives and strategies.
Financial Statements
15. As the Fund's financial year-end is December 31, it has a filing and delivery deadline of March 31 under the Annual Filing Deadline and the Annual Delivery Requirement.
16. Section 2.11 of NI 81-106 provides an exemption from the Annual Filing Deadline if, among other things, an investment fund delivers its annual financial statements to its securityholders in accordance with Part 5 of NI 81-106 by the Annual Filing Deadline (the "Filing Exemption").
17. In order to audit the information contained in and formulate an opinion on the Fund's financial statements, the Fund's auditor requires audited financial statements of the respective Underlying Funds that the Fund invests in. The Fund has realized that it will be unable to complete the financial statements and to submit them to the auditor until the audited financial statements of the Underlying Funds are completed and available to the Fund.
18. The Underlying Funds have varied financial year ends and are subject to a variety of financial reporting deadlines. Therefore, in most cases, the Fund will not be able to obtain the financial statements of the Underlying Funds sooner than the deadline for delivering the financial statements of the Fund and, in all cases, no sooner than other securityholders of the Underlying Funds receive the financial statements of the Underlying Funds.
19. The Fund has concluded that it will not be able to rely on the Filing Exemption since it is unable to prepare and deliver the financial statements and auditor's report within ninety (90) days after the Fund's most recently completed financial year.
20. The Fund was not able to file its annual audited financial statements by the Annual Filing Deadline. As a result, the Fund was not able to meet the Annual Delivery Requirement. The Fund expects this timing delay in the completion of its annual audited financial statements to occur every year for the foreseeable future.
21. The Fund therefore seeks an extension of the Annual Filing Deadline and the Annual Delivery Requirement to June 30 of each year, to enable the Fund's auditor to first receive the audited financial statements of the Underlying Funds so as to be able to prepare the Fund's annual audited financial statements.
22. The Fund has notified the Fund Securityholder of the Default, that it has applied for relief from the Annual Filing Deadline and Annual Delivery Requirement and that, if granted, it intends to rely on the relief.
Decision
The principal regulator in the Jurisdiction 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 in the Jurisdiction under the Legislation is that the Requested Relief is granted provided that:
1. The Fund has a financial year ended December 31;
2. Consistent with the Fund's investment objectives and strategies, the Fund invests the majority of its assets in Underlying Funds that are private funds managed by independent managers;
3. No less than 25% of the total assets of the Fund, at the time the Fund makes the initial investment decision in the Underlying Funds, 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. On behalf of the Fund, within 60 days of the date hereof, TCC will notify the Fund Securityholder that the Fund has received and intends to rely on relief from the Annual Filing Deadline and Annual Delivery Requirement;
5. If TCC distributes securities of the Fund to investors other than the Fund Securityholder after the date of this decision, TCC will immediately amend the offering memorandum of the Fund to disclose to investors that the audited annual financial statements for the Fund will be delivered within 180 days of the Fund's most recently completed financial year;
6. The Fund is not a reporting issuer and TCC 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 the Fund are filed on or before the 180th day after the 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 audited annual financial statements are delivered to securityholders of the Fund 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
8. 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 or Annual Delivery Requirement applies in connection with mutual funds.