CI Investments Inc. and the Top Funds

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from conflict of interest provisions in 111 of the Securities Act, and section 13.5 of NI 31-103 to permit investments by public and private investment funds into related underlying investments that are not reporting issuers -- relief also granted from related party transaction reporting requirements in section 117 of the Securities Act -- relief subject to certain conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 111(2)(b) and (c), 111(4), 113 and 117.

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.5(2)(a) and 15.1.

December 29, 2020

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 CI INVESTMENTS INC. (CI) AND THE TOP FUNDS (as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from CI and its affiliates (collectively, the Filer) on behalf of investment funds managed by the Filer subject to National Instrument 81-102 Investment Funds (NI 81-102) and National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) (the Existing Public Top Funds) and investment funds managed by the Filer that are not reporting issuers subject to NI 81-102 and NI 81-107 (the Existing Private Top Funds) and any future investment funds managed by the Filer that are, or will be, reporting issuers subject to NI 81-102 and NI 81-107 (the Future Public Top Funds, and together with the Existing Public Top Funds, thePublic Top Funds) or are not, or will not be, reporting issuers subject to NI 81-102 and NI 81-107 (the Future Private Top Funds, together with the Existing Private Top Funds, thePrivate Top Funds, and the Private Top Funds together with the Public Top Funds, theTop Funds). The Filer intends for one or more of the Top Funds, as appropriate, to invest a portion of its assets in CI Global Private Real Estate Fund (the Real Estate Fund), a proposed private equity fund to be created in the near future (the Private Equity Fund and together with the Real Estate Fund, the Initial Underlying Investments) and/or in any other future collective investment scheme that is, or will be, managed by the Filer that will have similar non-traditional investment strategies (the Future Underlying Investments and, together with the Initial Underlying Investments, the Underlying Investments) and therefore has applied for a decision under the securities legislation of the Jurisdiction (the Legislation):

1. exempting the Top Funds from the restriction in the Legislation which prohibits:

(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 Related Issuer Relief);

2. exempting the Filer when it wishes to cause a Top Fund to invest in an Underlying Investment from the restriction in paragraph 13.5(2)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) that prohibits a registered adviser from knowingly causing an investment portfolio managed by it, including an investment fund for which it acts as adviser, to invest in securities of any issuer in which a responsible person or an associate of a responsible person is a partner, officer or director, unless the fact is disclosed to the client and the written consent of the client to the investment is obtained before the purchase (the Consent Requirement Relief); and

3. exempting the Filer, with respect to the Top Funds, from the requirement to prepare a report in accordance with the requirements of the Legislation of every transaction of purchase of securities from or sale of securities to any related person or company (the Reporting Relief).

The Related Issuer Relief, the Consent Requirement Relief and the Reporting Relief are collectively, the Exemption Sought.

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

(a) the Ontario Securities Commission is the principal regulator for the Application; 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 Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Québec, Prince Edward Island, Saskatchewan and Yukon (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. CI is a corporation with its head office located in Toronto, Ontario.

2. CI is registered

(a) under the securities legislation of all provinces and territories of Canada as a portfolio manager

(b) under the securities legislation of Ontario, Québec, and Newfoundland and Labrador as an investment fund manager

(c) under the securities legislation of all provinces and territories of Canada as an exempt market dealer and

(d) under the Commodity Futures Act (Ontario) as a commodity trading counsel and a commodity trading manager.

3. The Filer is the investment fund manager (IFM) and portfolio manager of the Existing Public Top Funds and the Existing Private Top Funds (together, the Existing Top Funds) and the Filer will be the IFM and portfolio manager of the Future Public Top Funds and the Future Private Top Funds (together, the Future Top Funds). To the extent that the Filer is the IFM and portfolio manager of any Future Top Fund, the representations set out in this decision will apply to the same extent to such Future Top Fund.

4. The Filer also is the manager and portfolio manager of the Initial Underlying Investments and the Filer will be the manager and portfolio manager of the Future Underlying Investments. To the extent that the Filer is the manager and portfolio manager of any Future Underlying Investment, the representations set out in this decision will apply to the same extent to such Future Underlying Investment.

5. The Filer, is, or will be, a "responsible person" of each Top Fund and each Underlying Investment, as that term is defined in NI 31-103. Since the Filer is the manager of each Underlying Investment, the Filer acts in a capacity in relation to the Underlying Investment similar to a "partner, officer or director" of the Underlying Investment, as contemplated in paragraph 13.5(2)(a) of NI 31-103.

6. The Filer is not in default of securities legislation in any Jurisdiction.

The Top Funds

7. The securities of each Public Top Fund are, or will be, qualified for distribution in one or more of the Jurisdictions and distributed to investors pursuant to a simplified prospectus, an annual information form, prospectus, ETF Facts, and/or Fund Facts, prepared in accordance with National Instrument 41-101 General Prospectus Requirements or National Instrument 81-101 Mutual Fund Prospectus Disclosure, as applicable. Each Public Top Fund is, or will be, a reporting issuer under the securities legislation of one or more Jurisdictions.

8. The securities of each Private Top Fund are, or will be, distributed solely to investors pursuant to exemptions from the prospectus requirements in accordance with National Instrument 45-106 Prospectus Exemptions (NI 45-106) and the Legislation. Each Private Top Fund has, or will have, an offering memorandum or statement of investment policies and guidelines, which is provided to investors. None of the Private Top Funds are, or will be, reporting issuers under the securities legislation of any Jurisdiction.

9. Each Top Fund may wish to invest in securities of the Underlying Investments and, as a result, the Filer is seeking the Exemption Sought in order to permit the Top Fund to make these investments. A Top Fund may wish to so invest in one or more of the Underlying Investments, provided the investment or investments is consistent with the Top Fund's investment objectives and strategies. Each Top Fund, including each Private Top Fund, will comply with the investment restrictions and practices provided for in Part 2 of NI 81-102 in making such investments, in particular, the concentration restriction provided for in section 2.1, the control restriction provided for in section 2.2 and the illiquid assets restriction in section 2.4. Each Top Fund will treat securities of the Underlying Investments as illiquid assets for these purposes.

10. The Existing Top Funds are not in default of the securities legislation of any Jurisdiction.

11. Each Public Top Fund is subject to NI 81-107 and the Filer has established an independent review committee (an IRC) in order to review conflict of interest matters pertaining to its management of the Public Top Funds as required by NI 81-107.

The Underlying Investments

12. The Initial Underlying Investments are collective investment schemes that are established as open-ended trusts under the laws of Ontario. Future Underlying Investments may be structured as limited partnerships, trusts or corporations governed by the laws of a jurisdiction of Canada.

13. The Underlying Investments are not, or will not be, reporting issuers in any of the Jurisdictions. Securities of the Initial Underlying Investments are, and any Future Underlying Investment will be, distributed solely to investors pursuant to exemptions from the prospectus requirements in accordance with NI 45-106 and the Legislation. Each Initial Underlying Investment has, or will have, an offering memorandum which is provided to investors.

14. Each Underlying Investment provides, or will provide exposure to non-traditional asset classes, such as real estate, private equity, venture capital and private credit.

15. The investment objective of the Real Estate Fund is to provide exposure to (i) the returns of the CBRE Global Investment Partners Global Alpha Fund (the Global Alpha Sub-Fund) or (ii) a selection of real estate investments selected by CBRE Global Investment Partners Limited or an affiliate in a manner that is generally consistent with the investment objectives, strategies and restrictions of the Global Alpha Sub-Fund. To achieve its investment objective, the Real Estate Fund will initially obtain exposure to the Global Alpha Sub-Fund by investing the net proceeds from subscriptions for units in an Irish corporation that will subscribe for units of the Global Alpha Sub-Fund. The Global Alpha Sub-Fund seeks to acquire a selection of investments, which together provide well-diversified exposure across global real estate markets, with the objective of generating a nominal total return over a market cycle of between 9% and 11% per annum in local currency net of its management fee and organizational and operational expenses. The Global Alpha Sub-Fund targets a distribution yield to investors of 5% per annum through direct and indirect investments in real estate and real estate-related assets in Europe, the Americas and the Asia Pacific region.

16. It is expected that the investment objective of the Private Equity Fund will be to seek attractive long-term capital appreciation through an evergreen investment structure by obtaining exposure to a globally diversified portfolio of private equity and private debt investments. To achieve its investment objective, the Private Equity Fund will invest in a Cayman Islands exempted limited partnership master fund (Master Fund) through a Cayman Islands exempted company feeder fund. The feeder fund will be established by Adams Street Partners, LLC (ASP Manager) for the purposes of investing in the Master Fund. ASP Manager will act as investment manager of the Master Fund.

17. The underlying assets to which the Underlying Investments will have exposure, will be managed by entities that are independent and at arm's length to the Filer. In respect of the Real Estate Fund, the Global Alpha Sub-Fund and CBRE Global Investment Partners Limited are at arm's length and not related to the Filer. For the Private Equity Fund, ASP Manager and the Master Fund are at arm's length and not related to the Filer.

18. The Underlying Investments are not, or will not be, investment funds as such term is defined under Canadian securities legislation. Nevertheless, the Underlying Investments are, or will be, operated in a manner similar to how the Filer operates its investment funds. The Underlying Investments are, or will be, administered by the Filer, as manager, and their assets are, or will be, managed by the Filer, as portfolio manager. The Filer, as manager of the Underlying Investments, calculates, or will calculate, a net asset value (NAV) which will be used for the purposes of determining the purchase and redemption price of the securities of the Underlying Investments.

19. The value of the underlying portfolio assets of the Real Estate Fund will be independently determined by CB Richard Ellis Group, Inc. or its affiliates, all of whom are at arm's length to the Filer, the Real Estate Fund and the other Underlying Investments, on a quarterly basis. The value of the underlying portfolio assets of the Private Equity Fund will be independently determined by ASP Manager or its affiliates, all of whom are at arm's length to the Filer, the Private Equity Fund and the other Underlying Investments on a quarterly basis. Similar independent valuation will be carried out in respect of the underlying portfolio assets of each Future Underlying Investment.

20. Each Underlying Investment produces, and will produce, audited financial statements on an annual basis, in accordance with generally accepted accounting principles 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 each underlying asset that is invested in by the Underlying Investments.

21. The Real Estate Fund is not in default of the securities legislation of any Jurisdiction.

22. No Top Fund will actively participate in the business or operations of an Underlying Investment.

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 investment is, or will be, compatible with the investment objectives of the Top Fund and allows, or will allow, the Top Fund to obtain exposure to asset classes in which the Top Fund may otherwise invest directly.

24. The Filer believes that the investment by a Top Fund in an Underlying Investment will provide the Top Fund with an efficient and cost-effective manner of pursuing portfolio diversification and asset diversification instead of purchasing securities, or the underlying assets of each Underlying Investment, directly. The Top Fund will gain access to the investment expertise of the portfolio adviser to the underlying assets of each Underlying Investment, as well as to their investment strategies and asset classes.

25. Investments by a 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 NAV per security of the applicable class or series of the Underlying Investment.

26. A Top Fund will not invest in an Underlying Investment unless the portfolio manager of the Top Fund believes that the liquidity of the Top Fund's portfolio is adequately managed through other strategies. As part of such strategies, a Top Fund will not invest more than 10% of its NAV, at the time of purchase, in securities of an Underlying Investment and it will not invest in securities of an Underlying Investment that represent, at the time of purchase, more than 10% of the securities of the Underlying Investment. The Top Fund will also comply with section 2.4 of NI 81-102 with respect to illiquid investments and the Filer will include an investment by a Top Fund in an Underlying Investment in its basket of illiquid securities for the purposes of compliance with this section.

27. Each Public Top Fund is, or will be, valued and redeemable daily, while each Private Top Fund is or will be valued and redeemable either daily or on a weekly basis, and the Underlying Investments may be potentially subject to lock-up periods, early redemption penalties, and limitations on redemptions depending on the amounts being redeemed.

Generally

28. Subject to compliance with section 2.2 of NI 81-102, the amount invested from time to time in an Underlying Investment by a Top Fund, together with one or more other Top Funds, may exceed 20% of the outstanding voting securities of the Underlying Investment. This may result by reason of a group of Top Funds providing initial investments into the Underlying Investment on the start-up of the Underlying Investment. As a result, each Top Fund could, together with one or more other Top Funds, become a "substantial security holder" of an Underlying Investment within the meaning of section 110 of the OSA and contrary to section 111(2)(b). The Top Funds are, or will be, "related investment funds", as such term is defined in section 106(1) of the OSA by virtue of common management by the Filer.

29. In addition, from time to time, an officer or director of the Filer of the Filer may have a "significant interest" in an Underlying Investment and/or a person or company who is a substantial security holder of the Top Fund, the Filer may have a "significant interest" in the Underlying Investment within the meaning of section 110 of the OSA, which, under section 111(2)(c) would prohibit the Top Funds from investing in the Underlying Investment.

30. The Filer does not anticipate that any fees or sales charges would be incurred, directly or indirectly, by a Top Fund with respect to an investment in an Underlying Investment that, to a reasonable person, would duplicate a fee payable by the Top Fund to the Filer or its investors.

31. Since the Underlying Investments are not reporting issuers and are not "investment funds" pursuant to Canadian securities legislation, they are not subject to NI 81-102 and therefore the Public Top Funds are unable to rely upon the exemption codified under subsection 2.5(7) of NI 81-102 for investments by investment funds subject to NI 81-102 in other investment funds. Since the Private Top Funds are not reporting issuers subject to NI 81-102, they are also unable to rely on the exemption codified under subsection 2.5(7) of NI 81-102.

32. In the absence of the Related Issuer Relief, each Top Fund would be limited by the investment restrictions in the Legislation in terms of the extent to which they could invest in the Underlying Investments. Specifically, a Top Fund would be prohibited from (i) becoming a substantial security holder of an Underlying Investment, together with other Top Funds and (ii) investing in an Underlying Investment in which an officer or director of the Filer has a significant interest or in which a person or company who is a substantial security holder of the Top Fund or the Filer, has a significant interest.

33. The action of the Filer in causing a Top Fund to invest in an Underlying Investment would require disclosure to the "client" and the prior written consent of the "client" to the investment. Paragraph 13.5(2)(a) of NI 31-103 prohibits these investments in these circumstances given that the Filer manages the Underlying Investment, and hence acts in a capacity similar to a "partner, director or officer" and the Filer is a responsible person of the Top Funds.

34. According to the Legislation, every management company shall, in respect of each investment fund to which it provides services or advice, file a report of every transaction of purchase or sale of securities between the investment fund and any related person or company within 30 days after the end of the month in which it occurs.

35. In the absence of the Reporting Relief, the Filer acting as the management company (as defined in the applicable securities laws) of the Top Funds would be required to file a report of every purchase and sale of securities of the Underlying Investments by the Top Funds or every purchase or sale effected by the Top Funds through any related person or company with respect to which the related person or company received a fee either from the Top Funds or from the other party to the transaction or from both within 30 days after the end of the month in which such purchase or sale occurs (the Reporting Requirement).

36. It would be costly and time-consuming for the Top Funds to comply with the Reporting Requirement.

37. National Instrument 81-106 Investment Fund Continuous Disclosure requires the Public Top Funds to prepare and file annual and interim management reports of fund performance that include a discussion of transactions involving related parties to the Public Top Funds. Such disclosure is similar to that required under the Reporting Requirement and fulfills its objective to inform the general public about the transactions involving related parties to the Public Top Funds.

38. Subsection 6.2(2) of NI 81-107 provides an exemption for investment funds from the "investment fund conflict of interest investment restrictions" (as defined in NI 81-102) for purchases of related issuer securities if the purchase is made on an exchange. However, NI 81-107 does not apply to the Private Top Funds and the exemption in subsection 6.2(2) of NI 81-107 does not apply to purchases of non-exchange-traded securities and therefore does not apply to purchases of an Underlying Investment by a Public Top Fund.

39. A Top Fund's investment in an Underlying Investment will represent the business judgment of a responsible person uninfluenced by considerations other than the best interests of the Top Fund.

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) Securities of the Private Top Funds are distributed in Canada solely to investors pursuant to exemptions from the prospectus requirements in NI 45-106 or the Legislation;

(b) a direct or indirect investment by a Top Fund in an Underlying Investment will be compatible with the investment objective and strategy of such Top Fund and, among other things, included as part of the calculation for the purposes of the illiquid asset restriction in section 2.4 of NI 81-102;

(c) each Private Top Fund will comply with the investment restrictions and practices provided for in Part 2 of NI 81-102 in making such investments, in particular, the concentration restriction provided for in section 2.1, the control restriction provided for in section 2.2 and the illiquid assets restriction in section 2.4 and will treat investments in Underlying Investments as illiquid assets for this purpose;

(d) at the time of the purchase by a Top Fund of securities of an Underlying Investment, either the Underlying Investment holds no more than 10% of its NAV in securities of other investment funds or the Underlying Investment:

(i) has adopted a fundamental investment objective to track the performance of another investment fund or similar investment product;

(ii) purchases or holds securities of investment funds that are "money market funds" (as such term is defined in NI 81-102); or

(iii) purchases or holds securities that are "index participation units" (as such term is defined in NI 81-102) issued by an investment fund;

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

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

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

(h) where applicable, a Public Top Fund's investment in an Underlying Investment, whether direct or indirect, will be disclosed to investors in such Public Top Fund's quarterly portfolio holding reports, financial statements and/or fund facts/ETF facts documents;

(i) the prospectus of the Public Top Fund discloses, or will disclose in the next renewal or amendment thereto following the date of a decision evidencing the Exemption Sought, the fact that the Public Top Fund may invest, directly or indirectly, in an Underlying Investment, which is an investment vehicle managed by the Filer;

(j) the offering memorandum or statement of investment policies and guidelines, where available, or other disclosure document of a Private Top Fund, will be provided to each new investor in a Private Top Fund prior to their purchase of securities of the Private Top Fund, and will disclose the following information at the next update of such document:

(i) that the Private Top Fund may purchase securities of one or more Underlying Investments;

(ii) the fact that the Filer is the IFM of the Private Top Fund and the Underlying Investments;

(iii) that the Filer does not anticipate that any fees or sales charges would be incurred, directly or indirectly, by the Private Top Fund with respect to an investment in an Underlying Investment that, to a reasonable person, would duplicate a fee payable by the Private Top Fund to the Filer or its investors; and

(iv) that the Private Top Fund will comply with the investment restrictions and practices provided for in Part 2 of NI 81-102 in making such investments, in particular, the concentration restriction provided for in section 2.1, the control restriction provided for in section 2.2 and the illiquid assets restriction in section 2.4;

(k) the IRC of the Public Top Fund will review and provide its approval, including by way of standing instructions, prior to the purchase of an Underlying Investment, directly or indirectly, by the Public Top Fund, in accordance with section 5.2(2) of NI 81-107;

(l) the Filer complies with section 5.1 of NI 81-107 and the Filer and the IRC of the Public Top Fund comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions;

(m) If the IRC becomes aware of an instance where a Filer , in its capacity as manager of a Public Top Fund, did not comply with the terms of this decision, or a condition imposed by securities legislation or the IRC in its approval, the IRC of the Public Top Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the jurisdiction under which the Public Top Fund is organized.

(n) where an investment is made by a Public Top Fund in an Underlying Investment, the annual and interim management reports of fund performance for the Public Top Fund disclose the name of the related person in which an investment is made, being an Underlying Investment;

(o) where an investment is made by a Top Fund in an Underlying Investment, the records of portfolio transactions maintained by the Top Fund include, separately for every portfolio transaction effected by a Top Fund by the Filer , the name of the related person in which an investment is made, being an Underlying Investment;

(p) a Top Fund will invest in, and redeem, each Underlying Investment at the NAV of the applicable securities of the Underlying Investment, which will be 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; and

(q) a Top Fund will invest in a Future Underlying Investment only where it is structured in similar ways to the Existing Underlying Investments, including investing in other collective investment schemes that are managed by entities that are arm's length third parties to the Filer, the NAV of the Future Underlying Investment is based on the valuation of those other collective investment schemes that are independently determined by the arm's length third party and provide the Future Underlying Investment with audited annual financial statements.

The Consent Requirement Relief

The Related Issuer Relief and the Reporting Relief