Manulife Investment Management Limited

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from conflict of interest investment restrictions and management company reporting requirements in ss.111(2), 111(4) and 117(1) of the Securities Act (Ontario), the self-dealing restriction in s.13.5(2)(a) of NI 31-103, and the fund-on-fund investment requirements in paragraphs 2.5(2)(a) and (c) of NI 81-102 and the control restriction in subsection 2.2(1) of NI 81-102, to permit investment funds that are reporting issuers to invest in related underlying investment funds and collective investment schemes that are not reporting issuers -- Relief subject to conditions, including that investment by a Top Fund in securities of an underlying investment fund or scheme be included as part of the calculation for the purposes of the 10% illiquid asset restriction in section 2.4 of NI 81-102 and that the independent review committee of a Top Fund review and provide its approval to the purchase of securities of a related underlying investment fund or scheme.

Applicable Legislative Provisions

Securities Act (Ontario), R.S.O. 1990, c. S.5, as am., ss. 111(2)(b), 111(2), 111(4), 113, 117(1)1 and 117(2).

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

National Instrument 81-102 Investment Funds, ss. 2.2(1), 2.5(2)(a), 2.5(2)(c) and 19.1.

Securities Act, R.S.O. 1990, c.S.5, as am.

August 8, 2024

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
MANULIFE INVESTMENT MANAGEMENT LIMITED
(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer, on behalf of each of the Filer, the Filer's affiliates, the investment funds managed by the Filer or by an affiliate of the Filer that are reporting issuers 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 Top Funds) and any future investment funds managed by the Filer or an affiliate of the Filer that are, or will be, reporting issuers subject to NI 81-102 and NI 81-107 (the Future Top Funds, and together with the Existing Top Funds, the Top Funds) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation):

1. exempting the Top Funds from the restrictions in the Legislation which prohibit:

(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 and each affiliate that is a registered adviser from the prohibition in paragraph 13.5(2)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) against knowingly causing a Top Fund 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);

3. exempting the Filer and each affiliate that acts as manager of a Top Fund from the requirement to prepare a report in accordance with the requirements of the Legislation of every transaction by a Top Fund involving a purchase of securities from, or sale of securities to, any related person or company (the Reporting Relief);

4. exempting the Top Funds from subsection 2.2(1) (the Control Restriction) of NI 81-102 in order to permit each of the Top Funds to purchase a security of an Underlying Investment (as defined below) if immediately after the purchase, the Top Fund would hold securities representing more than 10% of (a) the votes attaching to the outstanding voting securities of the Underlying Investment or (b) the outstanding equity securities of the Underlying Investment (the Control Relief); and

5. exempting each Top Fund from the restrictions in paragraphs 2.5(2)(a) and 2.5(2)(c) of NI 81-102 that prohibit an investment fund from investing in securities of an investment fund that is not subject to NI 81-102 and is not a reporting issuer in any Jurisdiction (the Fund of Fund Relief and collectively with the Related Issuer Relief, the Consent Requirement Relief, the Reporting Relief and the Control Relief, the Exemption Sought), to permit the Filer, or an affiliate of the Filer, to cause the Top Funds to invest directly or indirectly, in: (i) Manulife Canadian Real Estate Investment Fund (MCREIF or the Initial Underlying Investment); (ii) any other future collective investment scheme that is, or will be, managed by the Filer or one of its affiliates that will have similar non-traditional investment strategies as an Initial Underlying Investment (the Future Underlying Investments and, together with the Initial Underlying Investment, the Underlying Investments and each an Underlying Investment); (iii) Manulife Real Asset Fund (MRAF or the Initial Underlying Fund); and (iv) any future investment fund that is, or will be, managed by the Filer or an affiliate of the Filer that will have similar non-traditional investment strategies as the Initial Underlying Funds (the Future Underlying Funds and, together with the Initial Underlying Fund, the Underlying Funds and each an Underlying Fund).

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;

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) that:

(i) the Related Issuer Relief and the Reporting Relief is to be relied upon by the Filer and the Top Funds in Alberta; and

(ii) the Consent Requirement Relief, the Control Relief and the Fund of Fund Relief is to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (together with the Jurisdiction, the Jurisdictions).

Interpretation

Terms defined in the Legislation, MI 11-102 and National Instrument 14-101 -- Definitions, NI 81-102 and NI 81-107 have the same meanings 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 amalgamated under the laws of Canada, with its registered head office located in Toronto, Ontario.

2. The Filer is currently registered as: (i) a commodity trading manager in Ontario; (ii) a portfolio manager in each province and territory of Canada; (iii) a derivatives portfolio manager in Québec; and (iv) an investment fund manager (IFM) in each of Ontario, Québec, and Newfoundland and Labrador.

3. The Filer or an affiliate of the Filer is the IFM of the Existing Top Funds and Initial Underlying Funds, and the Filer or an affiliate of the Filer will be the IFM of the Future Top Funds and Future Underlying Funds. To the extent that the Filer or an affiliate of the Filer is the IFM of any Future Top Fund or Future Underlying Fund, the representations set out in this decision will apply to the same extent to such Future Top Fund or Future Underlying Fund.

4. The Filer or an affiliate of the Filer is, or will be, the manager of the Underlying Investments. To the extent that the Filer or an affiliate of the Filer is the 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 or an affiliate of the Filer is, or will be, a "responsible person" (as that term is defined in NI 31-103) of each Top Fund and each Underlying Investment.

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

The Top Funds

7. The securities of each Top Fund are, or will be, distributed to investors pursuant to a prospectus prepared in accordance with National Instrument 41-101 General Prospectus Requirements (NI 41-101) or National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101), as applicable.

8. The securities of each Top Fund are, or will be, qualified for distribution in one or more Jurisdictions.

9. Each Top Fund is, or will be, a reporting issuer under the securities legislation of one or more Jurisdictions.

10. Each Top Fund may wish to invest in securities of the Underlying Investments and/or the Underlying Funds, provided the investment is consistent with the Top Fund's investment objectives and strategies.

11. Other than as described herein, each Top Fund will comply with the investment restrictions and practices provided in Part 2 of NI 81-102 in making any investment in an Underlying Fund or Underlying Investment and, in particular, will comply with the concentration restriction in section 2.1 and the illiquid assets restriction in section 2.4. Each Top Fund will treat securities of the Underlying Funds and Underlying Investments as illiquid assets for these purposes.

12. Each Top Fund qualifies to invest in securities of the Underlying Investments and the Underlying Funds pursuant to applicable exemptions from the prospectus requirement under National Instrument 45-106 Prospectus Exemptions (NI 45-106) and/or the Legislation.

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

14. Each Top Fund is, or will be, subject to NI 81-107 and the manager of each Top Fund has established an independent review committee (the IRC) in order to review conflict of interest matters pertaining to its management of the Top Funds as required by NI 81-107.

The Underlying Funds and the Underlying Investments

MCREIF

15. MCREIF is a limited partnership established under the laws of Ontario.

16. The investment objective of MCREIF is to is to seek to deliver a steady flow of income and long-term capital growth, while preserving capital, primarily through direct investment in Manulife Canadian Property Portfolio (MCPP). The investment objective of MCPP mirrors that of MCREIF, however, MCPP achieves such objective primarily through direct investment in, and active management of, real estate located in Canada. MCPP therefore is an operating real estate business and is therefore not an "investment fund" as such term is defined under Canadian securities legislation.

17. MCREIF anticipates holding approximately up to 85% of its assets (as noted, primarily, indirectly through investment in MCPP) in Canadian real estate. The remaining assets of MCREIF will be held in a "liquidity sleeve", being made up of public real estate securities and/or cash/cash equivalents.

18. MCREIF is also not an "investment fund" under the securities legislation of the Jurisdictions as it holds some limited direct investments in real estate and, through its investments in MCPP, is best considered an extension of an operating real estate business.

19. The net asset value (NAV) per security of MCREIF is primarily based on the value of real estate investments held by MCPP. Real estate assets held by MCPP (as well as those directly held by MCREIF) will be recorded at cost upon acquisition and thereafter by independent appraisals which will be undertaken quarterly by either an income approach (including a discounted cash flow and direct-capitalization approaches), sales comparison approach, replacement cost approach, or a combination thereof to ascertain the gross asset value of each asset. The NAV calculation for MCREIF is outsourced to a third party independent of the Filer.

20. No Top Fund will actively participate in the business or operations of MCREIF.

21. MCREIF is not in default of securities legislation of any of the Jurisdictions.

MRAF

22. MRAF is a limited partnership established under the laws of Ontario.

23. The investment objective of MRAF is to achieve long term growth of capital. MRAF seeks positive returns over the Canadian Consumer Price Index by investing in direct real assets and liquid assets globally. MRAF's exposure to real assets (such as real estate, timberland and farmland and infrastructure) and other private market asset types (such as private debt) is obtained primarily by investing in securities of underlying direct real asset funds/vehicles.

24. MRAF is an "investment fund" under the securities legislation of the Jurisdictions as it will not invest for the purpose of exercising or seeking to exercise control over any issuer.

25. The NAV per security of MRAF is calculated by the Filer but is primarily based on the value of the underlying direct real asset funds/vehicles held by MRAF. 90% or more of MRAF's net asset value is invested in underlying funds/vehicles that are independently valued. The financial statements (including NAV related information and calculation) for such underlying funds/vehicles are audited at least annually by an audit firm independent of the fund/vehicle.

26. Up to 10% of MRAF's net asset value is invested in securities of a related investment vehicle, Manulife Infrastructure Fund II (MIFII). MIFII's valuation is independently valued by its auditor. Quarterly valuations are completed internally by Manulife Investment Management Private Markets (US) LLC, an affiliate of the Filer.

27. MRAF is not subject to NI 81-102 and is not a reporting issuer in any of the Jurisdictions.

28. MRAF is not in default of securities legislation of any of the Jurisdictions.

General

29. The Future Underlying Funds and the Future Underlying Investments may be structured as limited partnerships, trusts or corporations governed by the laws of any of the Jurisdictions or a foreign jurisdiction.

30. The Future Underlying Funds and the Future Underlying Investments will provide exposure to investments in one or a combination of alternative or private market asset classes, including private equity, private credit, private infrastructure, private timber, private agriculture, private real estate, and other alternative investments (the Private Market Investments).

31. Each Future Underlying Fund will be an "investment fund" as such term is defined under the Legislation.

32. Each Future Underlying Investment will not be an "investment fund" as such term is defined under the Legislation.

33. The Underlying Investments and the Underlying 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.

34. The Underlying Funds and the Underlying Investments are not, or will not be, reporting issuers in any of the Jurisdictions.

35. 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, or an affiliate of the Filer, as manager, and their assets are, or will be, managed by the Filer, or an affiliate of the Filer, as portfolio manager. A NAV of each Underlying Investment is, or will be, calculated and which is, or will be, used for the purposes of determining the purchase and redemption price of the securities of the Underlying Investment.

36. Securities of the Underlying Funds and the Underlying Investments are, or will be, distributed in the Jurisdictions solely to investors pursuant to exemptions from the prospectus requirements in accordance with NI 45-106 and the Legislation.

37. The Underlying Investments are, or will be, primarily held by investors who would qualify as accredited investors and who are not affiliated with the Filer.

38. Each Underlying Fund and each Underlying Investment has, or will have, an offering document which is provided to investors.

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

Investments by Top Funds in the Underlying Investments or the Underlying Funds

40. An investment by a Top Fund in an Underlying Fund or an Underlying Investment will only be made if the investment is, or will be, compatible with the investment objectives and strategies of the Top Fund.

41. If an investment by a Top Fund in an Underlying Fund or Underlying Investment is made indirectly, such investment may be made through a legal entity formed for tax purposes by the Filer or an affiliate of the Filer (a Blocker). A Blocker is not, or will not be, considered to be an investment fund.

42. The Filer believes that an investment by a Top Fund in an Underlying Fund or an Underlying Investment will provide the Top Fund with an efficient and cost-effective way for the Top Fund to obtain exposure to Private Market Investments, which are generally not available through investment funds that are reporting issuers or through direct investment. A Top Fund will also gain access to the investment expertise of the portfolio manager to the underlying assets of each an Underlying Fund or Underlying Investment, as well as to their investment strategies and asset types.

43. The Filer believes that a meaningful allocation to Private Market Investments provides Top Fund investors with unique diversification opportunities and represents an appropriate investment tool for the Top Fund that has not been widely available in the past. Private Market Investments have historically provided diversification benefits in adverse market conditions and so the 44.Filer believes that permitting a Top Fund to increase its allocation to such strategies, offers the potential to improve a Top Fund's risk adjusted returns.

44. The Filer believes that an optimal way to access such investment strategies is through investments in the Underlying Investments and the Underlying Funds. Investing in the Underlying Investments and the Underlying 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 the Filer's and/or its affiliates' experienced investment professionals.

45. Investments by a Top Fund in an Underlying Fund or 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 Fund or the Underlying Investment.

46. Each Top Fund is, or will be, valued and redeemable daily and the Underlying Funds or the Underlying Investments may be potentially subject to redemption limitations, including lock-up periods, early redemption penalties and other restrictions on redemptions in a given period of time (collectively, a Redemption Limitation).

47. An investment by a Top Fund in an Underlying Fund or an Underlying Investment will only be made if such investment represents the business judgment of a responsible person uninfluenced by considerations other than the best interests of that Top Fund.

Control Restriction -- Investments in Underlying Investments

48. A Top Fund will not invest in any Underlying Investment for the purpose of exercising control over, or management of, the Underlying Investment. The securities of each Underlying Investment that would be held by the Top Funds do not, and will not, provide a Top Fund with any right to (a) appoint directors or observers to any board of the applicable Underlying Investment or its manager, (b) restrict management of any Underlying Investment or be involved in the decision-making with respect to the investments made by the applicable Underlying Investment or (c) restrict the transfer of securities of the applicable Underlying Investment by other investors in the Underlying Investment. Any voting rights associated with the securities of the Underlying Investments 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 Underlying Investment.

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

50. Each Underlying Investment is expected to have, following the completion of its initial investment period, certain diversification requirements which may include limiting the indirect exposure of the Top Funds to any single underlying portfolio company, asset type, sector or geography, as the case may be.

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

52. Further to section 3.4(2) of the companion policy to NI 81-102, the Filer further understands that, if the Fund of Fund Relief is granted, the Top Funds may rely on section 2.5(7) of NI 81-102 as it pertains to investments in an Underlying Fund, which provides that the "investment fund conflict of interest investment restrictions" and the "investment fund conflict of interest reporting requirements" (as such terms are defined in NI 81-102) do not apply to an investment fund which purchases or holds securities of another investment fund if the purchase or holding is made in accordance with this section.

Generally

53. 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 Fund or an Underlying Investment that, to a reasonable person, would duplicate a fee payable by the Top Fund or its investors to the Filer.

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

55. Where applicable, a Top Fund's investment in an Underlying Fund or Underlying Investment will be disclosed to investors in that Top Fund's quarterly portfolio holding reports, financial statements, and fund facts or ETF facts documents.

56. Where an investment is made by a Top Fund in an Underlying Fund or Underlying Investment, the annual and interim management reports of fund performance for the Top Fund will disclose the name of the related person in which an investment is made, being an Underlying Fund or Underlying Investment.

57. Where an investment is made by a Top Fund in an Underlying Fund or Underlying Investment, the records of portfolio transactions maintained by the Top Fund will include, separately for every portfolio transaction effected for the Top Fund by the Filer or through any affiliate of the Filer, the name of the related person in which an investment is made, being an Underlying Fund or Underlying Investment.

58. There will be no established, publicly available secondary market for securities of the Underlying Funds or Underlying Investments, nor will there generally be any special redemption rights applicable to the Top Funds as related investors in the Underlying Funds or Underlying Investments. As such, the Top Funds will not be able to readily dispose of their interests in an Underlying Fund or Underlying Investment and any interest that a Top Fund holds in an Underlying Fund or Underlying Investment will be considered an "illiquid asset" under NI 81-102.

59. The prospectus of each Top Fund relying on this decision will disclose in the next renewal or amendment thereto following the date of a decision evidencing the Exemption Sought, the fact that the Top Fund may invest, directly or indirectly, in Underlying Funds or Underlying Investments.

60. Each Underlying Fund or Underlying Investment produces, or 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.

61. The amount invested from time to time in an Underlying Investment by a Top Fund, together with one or more 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 the Legislation, further to which the Top Fund would be prohibited under the Legislation from knowingly purchasing and holding securities of an Underlying Investment. The Top Funds are, or will be, "related investment funds", as such term is defined in the Legislation by virtue of common management by the Filer or by an affiliate of the Filer.

62. In addition, an officer and/or director of the Filer, or an affiliate of the Filer may have a "significant interest" (as such term is defined in section 110(2)(a) of the Securities Act (Ontario) and section 184(l)(b) of the Securities Act (Alberta)) in an Underlying Investment from time to time. A person or company who is a substantial security holder of a Top Fund, the Filer, or an affiliate of the Filer may also have a significant interest in an Underlying Investment from time to time.

63. Paragraph 13.5(2)(a) of NI 31-103 prohibits the Filer or an affiliate that acts as portfolio manager of a Top Fund from knowingly causing a Top Fund to invest in an Underlying Investment that is structured as a limited partnership, where the general partner of the Underlying Investment is an affiliate of the Filer and the Filer or its affiliate is a responsible person of the Top Funds unless (i) this fact is disclosed to the client and (ii) the written consent of the client to the purchase is obtained before the purchase. It is impractical for the Filer to obtain the prior written consent from each investor in the Top Fund, given the widely held nature of the Top Funds.

64. Absent the Exemption Sought:

(a) each Top Fund would be prohibited from (i) becoming a substantial securityholder 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 or of an affiliate of the Filer has a significant interest or in which a person or company who is a substantial securityholder of the Top Fund or the Filer has a significant interest;

(b) each Top Fund would be precluded from investing, directly or indirectly, in one or more Underlying Investments unless the specific fact is disclosed to securityholders of the Top Fund and the written consent of the securityholders of the Top Fund is obtained prior to the purchase, since an officer and/or director of the Filer, who may be considered a "responsible person" (as per section 13.5 of NI 31-103) or an associate of a responsible person may also be a partner, officer and/or director of the applicable Underlying Investment. The Top Funds may have a number of existing investors and, as a result, obtaining the consent of each such investor is not practical;

(c) the Filer, or an affiliate of the Filer acting as the management company (as defined in the Legislation) of the Top Funds would be required to file a report of every transaction of purchase or sale of securities between the Top Funds and the Underlying Investments within 30 days after the end of the month in which such purchase or sale occurs (the Reporting Requirement);

(d) a Top Fund would be prohibited by subsection 2.2(1)(a) of NI 81-102 from investing in an Underlying Investment beyond the confines of the Control Restriction. Due to the expected size disparity between the Top Funds and the Underlying Investment, with the Top Funds expected to be significantly larger than the Underlying Investment, it is likely that a relatively small investment, on a percentage of net asset value basis, by a relatively larger Top Fund in an Underlying Investment could result in such Top Fund holding securities representing more than 10% of (a) the votes attaching to the outstanding voting securities of the Underlying Investment or (b) the outstanding equity securities of the Underlying Investment, contrary to the Control Restriction; and

(e) each Top Fund would be prohibited from purchasing or holding securities of an Underlying Fund because such Underlying Fund (i) is not, or will not be, subject to NI 81-102, and (ii) is not, or will not be, a reporting issuer in the Jurisdictions.

65. It would be time-consuming and may be costly for the Top Funds and/or the Filer (or an affiliate of the Filer) to comply with the Reporting Requirement.

66. The Filer considers that an investment by the Top Funds in the Underlying Funds or the Underlying Investments raises "conflict of interest" matters within the meaning of NI 81-107 and, therefore, if the Exemption Sought is granted, the manager of the Top Fund will request approval from the IRC of the Top Funds to permit the investment of the Top Funds in the Underlying Funds and Underlying Investments, including by way of standing instructions. No such investments will be made until the IRC provides its approvals under section 5.2 of NI 81-107. The manager of the Top Funds will comply with section 5.1 of NI 81-107 and the manager of the Top Funds and the IRC of the Top Funds will comply with section 5.4 of NI 81-107 for any standing instructions the IRC provides in connection with the transactions. If the IRC becomes aware of an instance where the manager of a Top Fund did not comply with the terms of any decision evidencing the Exemption Sought, or a condition imposed by securities legislation or the IRC in its approval, the IRC of the Top Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the Jurisdiction under which the Top Fund is organized.

67. 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 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.

68. Subsection 6.2(1)(b) 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, the exemption in subsection 6.2(1)(b) of NI 81-107 does not apply to purchases of non-exchange-traded securities and, therefore, does not apply to purchases of an Underlying Fund or Underlying Investment by a Top Fund.

69. Investments in Underlying Funds and Underlying Investments are considered illiquid investments under NI 81-102 and therefore are not permitted to exceed 10% of the NAV of a Top Fund. The investments in these Underlying Funds and Underlying Investments are included as part of the calculation for the purposes of the illiquid asset restriction in section 2.4 of NI 81-102 for a Top Fund. NI 81-102 allows holdings in illiquid investments so long as the aggregate exposure to illiquid investments is within the thresholds of the rule. The Filer has its own liquidity policy and manages each Top Fund's liquidity prudently under the policy. Given the readily available liquidity of the remainder of each Top Fund's investment portfolio, the Filer believes that the risk of the Top Funds needing to liquidate its investments in these illiquid Underlying Funds or Underlying Investments when markets are under stress or in other environments where liquidity may be reduced is remote.

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

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

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

(d) in respect of an investment by a Top Fund in an Underlying Fund or 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 the Underlying Fund or the Underlying Investment for the same service;

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

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

(g) the prospectus of a Top Fund relying on his decision discloses, or will disclose, in the next renewal or amendment thereto following the date of this decision, the fact that the Top Fund may invest in an Underlying Fund, or in an Underlying Investment;

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

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

(j) if the IRC becomes aware of an instance where the Filer or an affiliate of the Filer, in its capacity as the manager of a 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 Top Fund will, as soon as practicable, notify in writing the securities regulatory authority or regulator in the Jurisdiction under which the Top Fund is organized;

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

(l) where an investment is made by a Top Fund in an Underlying Fund or Underlying Investment, the records of portfolio transactions maintained by the Top Fund include, separately for every portfolio transaction effected for a Top Fund by the Filer or through any affiliate of the Filer, the name of the related person in which an investment is made, being the Underlying Fund or the Underlying Investment, as the case may be;

(m) a Top Fund will not invest in an Underlying Fund or Underlying Investment unless, immediately after the time of investment, at least 90% of the NAV of the Underlying Fund or the Underlying Investment is: (A) calculated using methodology substantially similar to the Initial Underlying Investment or the Initial Underlying Fund in accordance with representations 25 and 26 above, as applicable or independently by an arm's length third party; and (B) the annual financial statements of the Underlying Fund or the Underlying Investment are audited and made available to the Top Fund;

(n) if more than 15% of the NAV of an Underlying Fund or Underlying Investment does not comply with the condition described in paragraph (m)(A), above, the Underlying Fund or Underlying Investment, as applicable, will, as quickly as is commercially reasonable, take all necessary steps to reduce such percentage to 10% or less;

(o) no Top Fund will actively participate in the business or operations of any Underlying Fund or Underlying Investment; and

(p) each Top Fund is, or will be, treated as an arm's-length investor in each Underlying Investment in which it invests, on the same terms as all other third-party investors.

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

Application File #: 2024/0282

SEDAR+ File #: 6126579