BMO Asset Management Inc. and The Top Funds (Re), 2023 CanLII 33913

April 26, 2023

(THE “JURISDICTION”)

AND

(THE “FILER”)

AND

(AS DEFINED BELOW)

Background

The Ontario Securities Commission (the OSC) has received an application from the Filer, the Filer’s affiliates, BMO Partners Group Global Private Markets Fund (the Initial Top Fund) and any other existing or future mutual 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 in underlying funds (the Underlying Funds) as part of its investment strategy (the Future Top Funds and together with the Initial Top Fund, the Top Funds), under the securities legislation of the Jurisdiction (the Legislation), to request relief from section 2.2, section 2.4, paragraph 5.1(2)(a) and paragraph 5.1(2)(b) of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) on behalf of the Filer.

In accordance with Part 4 of Multilateral Instrument 11-102 Passport System (MI 11-102) and section 3.6 of National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions (NP 11-203), the OSC has been selected as the principal regulator (the Principal Regulator) for the purposes of this application, as the head office of the Filer is in Toronto, Ontario.

In accordance with subsection 4.7(2) of MI 11-102, the Filer gives notice to the Principal Regulator pursuant to paragraph 4.7(1)(c) of MI 11-102 that the requested relief is to be relied upon by the Filer in each of the other provinces and territories of Canada.

The Filer, the Filer’s affiliates and the Top Funds, request a decision, pursuant to section 17.1 of NI 81-106, exempting the Top Funds from:

(a) the requirement in section 2.2 of NI 81-106 that the Top Funds file their audited annual financial statements and auditor’s report (the Annual Financial Statements) on or before the 90^th day after the Top Funds’ most recently completed financial year (the Annual Filing Deadline);

(b) the requirement in paragraph 5.1(2)(a) of NI 81-106 that the Top Funds deliver to securityholders their Annual Financial Statements by the Annual Filing Deadline (the Annual Delivery Requirement);

(c) the requirement in section 2.4 of NI 81-106 that the Top Funds file their unaudited interim financial statements (the Interim Financial Statements) on or before the 60^th day after the Top Funds’ most recently completed interim period (the Interim Filing Deadline); and

(d) the requirement in paragraph 5.1(2)(b) of NI 81-106 that the Top Funds deliver to securityholders their Interim Financial Statements by the Interim Filing Deadline (the Interim Delivery Requirement);

(collectively, the Exemption Sought).

Definitions

Unless expressly defined herein, terms used have the respective meanings given to them in MI 11-102, National Instrument 14-101 Definitions and National Instrument 81-102 Investment Funds.

Representations

The Filer

The Filer is a corporation incorporated under the laws of the Province of Ontario. The Filer’s head office is located in Toronto, Ontario.
The Filer is registered as an investment fund manager (IFM) in each of Ontario, Québec and Newfoundland and Labrador, as a portfolio manager and an exempt market dealer in each province and territory of Canada, as a commodity trading manager in Ontario, and as a derivatives portfolio manager in Québec.
The Filer is or will be the IFM of the Top Funds.
The Filer, the Filer’s affiliates or a third party is or will act as trustee or general partner of each Top Fund.
The Filer is not a reporting issuer in any jurisdiction of Canada and is not in default of securities legislation of any jurisdiction of Canada.

The Top Funds

The Initial Top Fund will be formed by the Filer as a trust under the laws of the Province of Ontario. Each Future Top Fund will be formed by the Filer as a trust or limited partnership under the laws of the Province of Ontario.
Each of the Top Funds will be a “mutual fund” for purposes of the securities legislation of Ontario.
Securities of the Top Funds will only be offered for sale to qualified investors in all provinces and territories of Canada pursuant to exemptions from the prospectus requirements under National Instrument 45-106 Prospectus Exemptions.
None of the Top Funds is, or will be, a reporting issuer in any province or territory of Canada.
Each Top Fund will have a financial year-end of December 31.
Each of the Top Funds’ investment objective will generally be to provide investors with capital growth and/or income over the medium to long-term by investing in private asset classes.
Each of the Top Funds will seek to achieve its investment objective by primarily investing in securities of one or more Underlying Funds, either directly or through another Underlying Fund managed by an independent manager or by the Filer or an affiliate of the Filer (each, a BMO Master Fund) (the Filer, together with its affiliates, BMO).
The Underlying Funds will be managed by independent managers, except for the BMO Master Funds which will be managed by BMO.
BMO believes that the Top Funds’ investment in the Underlying Funds offers benefits not available through a direct investment in the companies, other issuers or assets held by the Underlying Funds.
Securities of the Top Funds will be typically redeemable at various intervals, as will securities of certain Underlying Funds, but securities of other Underlying Funds will not be redeemable until the termination of such Underlying Funds. As each Top Fund has a medium to long-term investment horizon, each Top Fund will be able to manage its own liquidity requirements taking into consideration the frequency at which securities of the Underlying Funds may be redeemed.
The net asset value of each Top Fund will be calculated on a monthly basis. Securityholders of each Top Fund will be provided with the net asset value of the Top Fund on a monthly basis.
Certain holdings of each Top Fund invested in securities of the Underlying Funds may be disclosed in the Top Fund’s Annual Financial Statements and Interim Financial Statements.

Financial Statement Filing and Delivery Requirements

Section 2.2 and paragraph 5.1(2)(a) of NI 81-106 require a Top Fund to file and deliver its Annual Financial Statements by the Annual Filing Deadline. As each Top Fund’s financial year-end will be December 31, the Top Funds will have a filing and delivery deadline of March 31.
Section 2.4 and paragraph 5.1(2)(b) of NI 81-106 require a Top Fund to file and deliver its Interim Financial Statements by the Interim Filing Deadline. As each Top Fund’s interim period-end will be June 30, the Top Funds will have an interim filing and delivery deadline of August 29.
Section 2.11 of NI 81-106 provides an exemption from the filing requirements of the Annual Financial Statements and the Interim Financial Statements if, among other things, the Top Fund delivers such statements in accordance with Part 5 of NI 81-106 by the Annual Filing Deadline and the Interim Filing Deadline, as applicable.
In order to formulate an opinion on the financial statements of each Top Fund, the Top Fund’s auditor or the BMO Master Fund’s auditor requires audited annual financial statements of the respective Underlying Funds in order to audit the information contained in the Top Fund’s Annual 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 and/or BMO Master Funds, as applicable.
The Underlying Funds may be domiciled in Canada, the United States or other international jurisdictions.
The Underlying Funds may have varying financial year-ends and may be subject to a variety of financial reporting deadlines.
In most cases, the Top Funds and/or the BMO Master Funds will not be able to obtain the audited annual financial statements and auditor’s reports, and interim financial reports of the Underlying Funds sooner than the deadline for filing such statements and reports of the Underlying Funds and, in all cases, no sooner than other securityholders of the Underlying Funds receive the financial statements and reports of the Underlying Funds. As a result, the Top Funds will not be able to meet each Annual Filing Deadline and Annual Delivery Requirement and each Interim Filing Deadline and Interim Delivery Requirement. The Filer expects this timing delay in the completion of the Annual Financial Statements and the Interim Financial Statements of each Top Fund to occur every year for the foreseeable future.
The offering memorandum of each Top Fund that will be provided to prospective investors will disclose, or such investors will be otherwise notified, that: (i) the Annual Financial Statements for such Top Fund will be delivered to each investor within 180 days of such Top Fund’s financial year end; and (ii) the Interim Financial Statements for such Top Fund will be delivered to each investor within 120 days following the end of each interim period of such Top Fund.
The Filer will notify securityholders of the Top Funds that it has received and intends to rely on relief from the Annual Filing Deadline and Annual Delivery Requirement and the Interim Filing Deadline and the Interim Delivery Requirement.
Each Top Fund therefore seeks an extension of the Annual Filing Deadline and the Annual Delivery Requirement to permit delivery within 180 days of such Top Fund’s most recently completed financial year-end, to enable the Top Fund’s auditors to first receive the audited annual financial statements and auditor’s reports of the relevant Underlying Funds so as to be able to prepare such Top Fund’s Annual Financial Statements.
Each Top Fund therefore seeks an extension of the Interim Filing Deadline and the Interim Delivery Requirement to permit delivery within 120 days of such Top Fund’s most recently completed interim period, to enable the Top Fund to first receive the interim financial reports of the relevant Underlying Funds so as to be able to determine the net asset value of the relevant Underlying Funds and prepare such Top Fund’s Interim Financial Statements.

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 for so long as:

The Top Fund has a financial year ending December 31.
The Top Fund’s investment strategy is to primarily invest the Top Fund’s investable assets in securities of one or more Underlying Funds, either directly or through a BMO Master Fund or another Underlying Fund managed by independent managers, which share the Top Fund’s investment objective.
The Top Fund invests the majority of its assets in Underlying Funds.
No less than 25% of the total assets of the 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 the requirement that their annual financial statements be delivered within 120 days of their financial year ends and interim financial statements be delivered between 60 and 90 days of their most recent interim period.
The offering memorandum provided to prospective investors regarding the Top Fund discloses that:

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

b. the Interim Financial Statements for the Top Fund will be filed and delivered on or before the 120^th day after the Top Fund’s most recently completed interim period, subject to regulatory approval.

The Top Fund notifies its securityholders that the Top Fund has received and intends to rely on relief from the filing and delivery requirements under section 2.2, section 2.4, paragraph 5.1(2)(a) and paragraph 5.1(2)(b) of NI 81-106.
The Top Fund is not a reporting issuer in any jurisdiction of Canada, and the Filer is a corporation incorporated under the laws of the Province of Ontario and has the necessary registrations to carry out its operations in each jurisdiction of Canada in which it operates.
The conditions in section 2.11 of NI 81-106 will be met, except for subsection 2.11(b), and:

a. the Annual Financial Statements will be delivered to securityholders of the Top Fund in accordance with Part 5 of NI 81-106 on or before the 180^th day after the Top Fund’s most recently completed financial year; and

b. the Interim Financial Statements will be delivered to securityholders of the Top Fund in accordance with Part 5 of NI 81-106 on or before the 120^th day after the Top Fund’s most recently completed interim period.

This Exemption Sought 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 Requirement applies in connection with mutual funds under the Legislation.

“Darren McKall”

Darren McKall

Manager, Investment Funds and Structured Products Branch

Ontario Securities Commission

Application No. 2023/0147