Northfront Financial Inc. and The Top Funds

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief to extend the timeline for a pooled fund who obtained a previous decision to continue to file and deliver annual financial statements from 90 to 180 days -- fund invests primarily in underlying pooled funds that do not have comparable reporting deadlines -- additional time needed to incorporate financial statements of underlying funds into top fund -- relief subject to conditions.

Applicable Legislative Provisions

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

March 28, 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
NORTHFRONT FINANCIAL INC.
(the Filer)

AND

THE TOP FUND
(as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer, as investment fund manager of the Northfront Alternative Asset Fund (the Top Fund), as a mutual fund that is not and will not be a reporting issuer, and that may invest in underlying funds (the Underlying Funds) as part of its investment strategy, for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filer and the Top Fund from:

(a) the requirement in section 2.2 of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) that the Top Fund file its audited annual financial statements and auditor's report on or before the 90th day after the Top Fund's most recently completed financial year (the Annual Filing Deadline); and

(b) the requirement in paragraph 5.1(2)(a) of NI 81-106 that the Top Fund deliver its annual financial statements on or before the 90th day after the Top Fund's most recently completed financial year (the Annual Delivery Requirement)

(collectively, the Requested Relief).

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 because the Filer is not seeking exemptive relief in Alberta and Ontario is the only other jurisdiction where the Filer is registered as an investment fund manager; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Quebec, New Brunswick, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan and Yukon.

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 the province of Alberta and having its head office in Calgary, Alberta.

2. The Filer is registered as an investment fund manager in the provinces of Alberta and Ontario, as a portfolio manager in the provinces of Alberta, British Columbia, New Brunswick, Nova Scotia, Ontario, Quebec, and Saskatchewan, and as an exempt market dealer in the provinces of Alberta, British Columbia, and 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. Majestic Asset Management LLC (Majestic) acted as the initial investment fund manager of the Top Fund, and will act as the investment fund manager of the Top Fund until March 31, 2025.

5. As of March 31, 2025, Majestic will resign as investment fund manager of the Top Fund and has appointed the Filer to act as the investment fund manager of the Top Fund, pursuant to the terms of an amended and restated trust agreement dated May 1, 2014.

6. As of March 31, 2025, the Filer will act as the investment fund manager of the Top Fund. The Filer or a third party will act as asset manager of the Top Fund.

The Top Fund

7. The Top Fund is an open-ended trust established under the laws of the province of Quebec by an amended and restated trust agreement dated May 1, 2014.

8. The Top Fund's objective is to give investors positive returns that are less correlated to traditional public market investments. In order to achieve its investment objective, the Top Fund invests across alternative assets, predominantly in Underlying Funds, private equity, private corporate fixed income securities and structured products.

9. The Top Fund is a "mutual fund" for the purposes of the Legislation.

10. Securities of the Top Fund are only be offered for sale on a continuous basis to qualified investors in all provinces and territories in Canada pursuant to an exemption from the prospectus requirements under National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106).

11. Units of the Top Fund are only be distributed in Canada pursuant to exemptions from the prospectus requirement in accordance with NI 45-106.

12. The Top Fund is not, nor will be, a reporting issuer in any province or territory of Canada.

13. The Top Fund has a financial year-end of December 31.

14. The Top Fund has invested in units of one or more Underlying Funds in which the investment objective are consistent with the Top Fund's investment objective and strategy.

15. The Filer believes that investing in the Underlying Funds in accordance with the Top Fund's investment objective and strategy offers benefits not available through a direct investment in the companies, other issuers or assets held by the Underlying Funds.

16. 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. As the Top Fund has a long-term investment horizon, it 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 the Top Fund (the NAV) is calculated quarterly and may in part be estimated based on the Underlying Funds' most recent valuation conducted by the manager of the relevant Underlying Funds. The Top Fund's NAV is calculated and published on a quarterly basis within 60 days of the applicable valuation date.

18. The holdings by the Top Fund of securities of the Underlying Funds are and will continue to be disclosed in its financial statements.

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 the Top Fund's financial year-end is December 31, it has 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 of the Top Fund, the Top Fund's auditors require audited financial statements of the Underlying Funds in order to audit the information contained in the Top Fund's financial statements. The auditors of the Top Fund have advised the Filer that they will be unable to complete the audit of the Top Fund's annual financial statements until the audited financial statements of the Underlying Funds are completed and available to the Top Fund.

22. The Underlying Funds are domiciled in Canada, the United States or other international jurisdictions.

23. The majority of the Underlying Funds' financial year-ends is December 31.

24. More than 95% of the Top Fund's assets are invested in Underlying Funds that are managed by entities unrelated to the Filer.

25. As of December 31, 2024, approximately seventy percent of the Top Fund's assets were invested in the Underlying Funds.

26. The Underlying Funds may have varying financial year-ends and may be subject to a variety of financial reporting deadlines. For example, assets of the Top Fund may be invested in Underlying Funds that (i) are governed by laws or have constating documents that require the financial statements to be filed within 120 days of the financial year end of the Underlying Fund, or (ii) that may in some cases allow for the filing of financial statements beyond 120 days of the financial year end of such Underlying Funds.

27. In most cases, the Top Fund has not historically, and will not in the future, 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 investors of the Underlying Funds receive the financial statements of the Underlying Funds. The Filer expects this timing delay in the completion of its annual audited financial statements to occur every year for the foreseeable future.

28. Majestic, as the initial investment fund manager of the Top Fund, obtained a previous decision dated December 19, 2022 (the Previous Decision), exempting Majestic and the Top Fund from the Annual Filing Deadline and Annual Delivery Requirement, in order to extend the Annual Filing Deadline and Annual Delivery Requirement to permit the filing and delivery of the annual audited financial statements of the Top Fund within 180 days of the Top Fund's most recently completed financial year.

29. The Top Fund is currently in compliance with the requirements applicable to it under the Previous Decision.

30. It is expected that the Top Fund will not, without a continuation of the relief granted under the Previous Decision, be able to file its annual audited financial statements by the Annual Filing Deadline. As a result, the Top Fund would not be able to meet the Annual Delivery Requirement.

31. As a result of the Filer assuming the responsibilities of investment fund manager of the Top Fund effective March 31, 2025, the Top Fund and the Filer may not rely on the Previous Decision as such decision (i) does not apply to the Filer or relieve the Filer of its obligations further to its assuming the responsibilities as investment fund manager of the Top Fund, and (ii) relates to other investment funds not managed by the Filer. The Filer does not intend to rely on the Previous Decision.

32. Instead, the Top Fund is required to obtain a new exemption under similar terms in order to ensure continuity of the relief provided for under the Previous Decision and for the Top Fund to continue to conduct its activities in the manner they are currently conducted.

33. The investors of the Top Fund have been provided, and will continue to be provided, with an offering memorandum that discloses that the annual audited financial statements for the Top Fund will be filed and delivered within 180 days of financial year end.

34. The Filer has, and will continue to notify investors in the Top Fund that it has received and intends to rely on relief from the Annual Filing Deadline and Annual Delivery Requirement.

35. The 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, and so as to ensure continuation for the Filer of the relief granted under the Previous Decision.

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 Requested Relief is granted to the Top Fund for so long as:

1. The Top Fund has a financial year ended December 31.

2. The investment objective of the Top Fund involves investing in Underlying Funds.

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 at the time the Top Fund makes the initial investment decision in the Underlying Funds 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 on or before the 90th day of their financial year ends.

5. The offering memorandum provided to unitholders regarding the Top Fund discloses that its annual audited financial statements will be filed and delivered within 180 days of financial year end, subject to regulatory approval.

6. The Top Fund notifies its unitholders that the Top Fund has received and intends to rely on the Requested Relief.

7. The Top Fund is not a reporting issuer and the Filer is a corporation incorporated under the laws of the province of Alberta with its head office in Calgary, Alberta and has the necessary registrations to carry out its operations in each jurisdiction of Canada in which it operates.

8. The conditions in section 2.11 of NI 81-106 will be met, except for subsection 2.11(b), and:

(a) The audited annual financial statements of the Top Fund will be delivered to the Top Fund's investors 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.

9. 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 under the Legislation.

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

Application File #: 2025/0171
SEDAR+ File #: 6258143