Mackenzie Financial Corporation and Counsel Portfolio Services Inc.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from the control restriction in section 2.2(1) of NI 81-102 to permit top funds subject to NI 81-102 to invest and hold more than 10% of the equity in securities of related underlying pools that are not funds and that are not reporting issuers. Relief is subject to conditions.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 2.2(1) and 19.1.

March 28, 2022

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 MACKENZIE FINANCIAL CORPORATION (Mackenzie) COUNSEL PORTFOLIO SERVICES INC. (Counsel) (the Filers)

DECISION

Background

The securities regulatory authority in the Jurisdiction (the Decision Maker) has received an application (the Application) from the Filers on behalf of existing mutual funds managed by the Filers and any additional mutual funds established in the future of which a Filer is the manager (collectively, the Top Funds) for a decision under the securities legislation of the Jurisdiction (the Legislation) for relief from subsection 2.2(1) (the Control Restriction) of National Instrument 81-102 Investment Funds (NI 81-102) (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; and

(b) the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Québec, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and NI 81-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

Mackenzie

1. Mackenzie is a corporation formed under the laws of Ontario. It is the trustee, manager and portfolio advisor of certain Top Funds.

2. Mackenzie is registered as a portfolio manager, investment fund manager, exempt market dealer and commodity trading manager in Ontario. Mackenzie is registered as a portfolio manager, investment fund manager and exempt market dealer in Quebec and Newfoundland and Labrador. Mackenzie is also registered as a portfolio manager and exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan, and Yukon.

3. Mackenzie is not in default of any of the requirements of securities legislation in any of the Jurisdictions.

Counsel

4. Counsel is a corporation formed under the laws of Ontario. It is the trustee, manager and portfolio adviser of certain Top Funds.

5. Counsel is registered as a commodity trading manager, investment fund manager and portfolio manager in Ontario. Counsel is registered as an investment fund manager in Quebec and Newfoundland and Labrador.

6. Counsel is not in default of any of the requirements of securities legislation in any of the Jurisdictions.

The Top Funds

7. Each Top Fund is, or once established will be, a mutual fund subject to NI 81-102.

8. Each Top Fund distributes, or will distribute, its securities under a prospectus prepared in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101) (each, a Prospectus).

9. Each Top Fund is, or will be, a reporting issuer in each of the Jurisdictions and is not or will not be in default of any of the requirements of securities legislation in any of the Jurisdictions.

10. Each Top Fund is, or will be, permitted by NI 81-102 to invest up to 10% of its net assets in illiquid assets, which includes Northleaf Funds (as defined below). The Prospectus of each Top Fund discloses or will disclose in its investment strategies that the Top Fund may invest up to 10% of its net assets directly or indirectly in illiquid assets, measured at the time of investment, including in Northleaf Funds.

11. Each Top Fund is, or will be, subject to National Instrument 81-107 Independent Review Committee for Investment Funds (NI 81-107) and the Filers have established, or will, establish an independent review committee (IRC) to review conflict of interest matters pertaining to the Top Funds as required by NI 81-107.

Northleaf and the Northleaf Funds

12. Each of the Northleaf Funds is managed by Northleaf Capital Partners (Canada) Ltd. or an affiliate (collectively, Northleaf).

13. Northleaf is a global private markets investment firm with more than US$19 billion in private equity, private credit and infrastructure commitments under management on behalf of more than 200 institutional and family office investors, as of the date hereof. Northleaf is led by an experienced group of professionals, who collectively have significant experience in structuring, investing and managing global private markets investments and in evaluating, negotiating, structuring and executing complex financial transactions.

14. On October 28, 2020 Mackenzie and Great-West Lifeco Inc. (Lifeco) entered into a strategic relationship with Northleaf whereby Mackenzie and Lifeco jointly acquired a 49.9% non-controlling voting interest and 70% economic interest in Northleaf.

15. Northleaf Growth Fund (NGF) is a closed-end pooled fund managed by Northleaf that seeks to provide investors with access to investments in privately held growth-stage companies in Canada and the United States. NGF consists of a series of one or more investment vehicles created to meet the legal, tax, regulatory or other investment requirements of specific types of investors (both taxable and non-taxable) which together comprise the fund. "NGF" refers collectively to such investment vehicles. NGF's portfolio of investments will be comprised of a mix of (i) direct investments in portfolio companies (ii) investments in portfolio companies via third-party managed co-investment vehicles and (iii) secondary investments. (each a Portfolio Investment and collectively the Portfolio Investments). A "direct investment" is an investment made directly in the securities of a private company, generally alongside other investment partners. A "secondary investment" generally involves purchasing securities in an existing private company or private equity fund from an existing securityholder through a private purchase and sale transaction between the existing securityholder and the buyer. NGF will seek to mitigate risk by building a portfolio that is diversified by business maturity, industry sector, and investment syndicate partner. According to its governing documents, the maximum amount NGF may invest in a single Portfolio Investment is 15% of the aggregate capital commitments to NGF.

16. Northleaf seeks to be an active investor engaged with the management of Portfolio Investments in which NGF invests to maintain an active ongoing governance role for the duration of NGF's investment. This includes Northleaf holding significant minority portions of the outstanding equity securities of NGF's Portfolio Investments with commensurate legal rights and/or having representation, as a voting member or observer, on the board of directors (or similar) of NGF's Portfolio Investments.

17. In addition to NGF, Northleaf currently offers, or in the future may offer, (i) other private markets funds that are actively involved in the management of the issuers in which they invest, and (ii) private credit funds that originate loans in the private credit market (collectively, together with NGF, the Northleaf Funds).

18. The Northleaf Funds are not, or will not be, subject to NI 81-102, and have not and will not prepare a prospectus in accordance with NI 81-101 or National Instrument 41-101 General Prospectus Requirements (NI 41-101).

19. The Northleaf Funds are not, and will not be, reporting issuers in any of the Jurisdictions or listed on any recognized stock exchange.

20. None of the Northleaf Funds is, or will be, an "investment fund" pursuant to the securities legislation of the Jurisdictions.

21. The Northleaf Funds are, or will be, sold only to investors who qualify to invest in the Northleaf Funds pursuant to an exemption from the prospectus requirement under applicable Canadian securities laws.

22. The Northleaf Funds are not in default of the securities legislation of any of the Jurisdictions.

23. The Northleaf Funds are, or will be, primarily held by accredited investors who are not affiliated with the Filers or Northleaf.

24. There is no established, publicly available secondary market for interests in Northleaf Funds nor are there generally any redemption rights applicable to investors in Northleaf Funds. As such, investors in a Northleaf Fund cannot readily dispose of their interests in a Northleaf Fund and any interest that a Top Fund holds in a Northleaf Fund is or will be considered an "illiquid asset" under NI 81-102.

25. Each Northleaf Fund is, or will be, valued quarterly by Northleaf. On an annual basis the financial statements of each Northleaf Fund, are, or will be, audited by Northleaf's external auditors, being an internationally recognized independent account and audit firm (typically Ernst & Young LLP or PricewaterhouseCoopers LLP (Canada)), as part of their annual independent audit. The applicable audit firm also audits the controls and processes in place to ensure Portfolio Investments are accurately valued in accordance with Northleaf's valuation policy.

Reasons for the Requested Relief

26. Absent the Requested Relief, a Top Fund would be prohibited by subsection 2.2(1)(a) of NI 81-102 from investing in NGF or any other Northleaf Fund beyond the confines of the Control Restriction. Due to the expected size disparity between the Top Funds and the Northleaf Funds, with the Top Funds expected be significantly larger than the Northleaf Funds, it is possible that a relatively small investment, on a percentage of NAV basis, by a relatively larger Top Fund in a Northleaf Fund could result in such Top Fund holding securities representing more than 10 per cent of (i) the votes attaching to the outstanding voting securities of the Northleaf Fund or (ii) the outstanding equity securities of the Northleaf Fund, contrary to the restrictions in paragraph 2.2(1)(a) NI 81-102.

27. A Top Fund will not invest in any Northleaf Fund for the purpose of exercising control over, or management of, the Northleaf Fund. The securities of each Northleaf Fund that would be held by the Top Funds do not, and will not, provide a Top Fund with any right to (i) appoint directors or observers to any board of the applicable Northleaf Fund or its manager, (ii) restrict management of any Northleaf Fund or be involved in the decision-making with respect to the investments made by the applicable Northleaf Fund or (iii) restrict the transfer of securities of the applicable Northleaf Fund by other investors in the Northleaf Fund. The voting rights associated with the securities of the Northleaf Funds that would be held by the Top Funds do not, and will not, provide a Top Fund with any right to approve, or otherwise participate in the decision-making process associated with the investments made by the Northleaf Funds.

28. The Top Funds will not have any look-through rights with respect to the individual portfolio investments held by any of the Northleaf Funds. Further, the Top Funds will not have any rights to, or responsibility for, administering any of the portfolio investments held by any of the Northleaf Funds.

29. Each of the existing Northleaf Funds have, and all future Northleaf Funds are expected to have, diversification requirements which limit the indirect exposure of the Top Funds to any single underlying portfolio company.

30. The Filers believe that a meaningful allocation to private markets investments will provide the Top Funds' investors with unique diversification opportunities and represents an appropriate investment tool for the Top Funds that has not been widely available in the past. Private equity, private infrastructure and private credit investments have historically performed well in down markets; the Filers believe that permitting a Top Fund to increase its allocation to such strategies, subsets of alternative investments, offers the potential to improve a Top Fund's risk adjusted returns.

31. The Filers believe that an optimal way to access private equity, private infrastructure and private credit is through investments in the Northleaf Funds. Investing in the Northleaf Funds will provide the Top Funds with access to investments in these strategies that the Top Funds would not otherwise have exposure to through portfolios diversified across different strategies, industry sectors and geographies constructed by Northleaf's experienced investment professionals.

32. Investments in the Northleaf Funds are considered illiquid investments under NI 81-102 and are therefore included as part of the calculation for the purposes of the illiquid asset restriction in section 2.4 of NI 81-102 for the Top Fund. Furthermore, the Filers each have their own liquidity policy and manage, or will manage, Top Funds' liquidity prudently under these policies.

33. Investments by a Top Fund in the Northleaf Funds do not qualify for the exemption from the Control Restriction in paragraph 2.2(1.1)(a) of NI 81-102 as the Northleaf Funds are not, or will not be, "investment funds" subject to NI 81-102.

34. The Filers believe that granting the Requested Relief is in the best interests of the Top Funds as it would provide the Top Funds with more flexibility to increase their allocation to the private markets.

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, provided that:

1. No Top Fund is actively participating or will actively participate in the business or operations of any Northleaf Fund.

2. Each Top Fund is or will be treated as an arm's-length investor in each Northleaf Fund in which it invests, on the same terms as all other third-party investors.

3. A Top Fund does not or will not hold more than 20% of the outstanding equity or voting securities of any Northleaf Fund.

4. Investments in the Northleaf Funds are considered illiquid investments under NI 81-102 and therefore are not permitted to exceed, in aggregate, 10% of the net asset value of the Top Fund;

5. In respect of an investment by a Top Fund in a Northleaf Fund, no sales or redemption fees are, or will be paid as part of the investment in the Northleaf Fund.

6. In respect of an investment by a Top Fund in a Northleaf Fund, no management fees or incentive fees are, or will be payable by the Top Fund that, to a reasonable person, would duplicate a fee payable by a Northleaf Fund for the same service.

7. Where applicable, a Top Fund's investment in a Northleaf Fund is or will be disclosed to investors in the Top Fund's quarterly portfolio holding reports, financial statements and/or fund facts documents.

8. The manager of each of the Top Funds complies with section 5.1 of NI 81-107 and the manager and the IRC of the Top Funds will comply with section 5.4 of NI 81-107 for any possible standing instructions concerning an investment by a Top Fund in a Northleaf Fund.

9. The prospectus of the Top Fund discloses or will disclose in the next renewal or amendment as applicable the fact that the Top Fund is invested in the Northleaf Funds, and that Mackenzie holds a significant ownership interest in Northleaf.

"Darren McKall"

Manager

Investment Funds and Structured Products

Ontario Securities Commission

Application #: 2021/0761

SEDAR Project #: 3319205