Mackenzie Financial Corporation (Re), 2022 CanLII 5036

January 24, 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 FINANACIAL CORPORATION

(the Filer)

AND

IN THE MATTER OF

INVESTORS GROUP SECURITIES INC.

(the Representative Dealer)

AND

IN THE MATTER OF MACKENZIE NORTHLEAF PRIVATE CREDIT INTERVAL FUND

(the Fund)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Fund for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation), exempting the Fund from the following provisions, subject to the terms and conditions, below:

(a) all of the requirements of National Instrument 41-101 General Prospectus Requirements (NI 41-101), applicable to the Fund as a non-redeemable investment fund (NI 41-101 Relief), provided that the Fund will comply with all applicable requirements of National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101), except as otherwise contemplated below;

(b) Section 71(1) of the Ontario Securities Act (the Act) to permit the Representative Dealer or any Dealer (as defined below), who trades in units of the Fund, to deliver or send the most recently filed Fund Facts document to the purchaser, in lieu of delivering the prospectus in accordance with NI 81-101 (the Fund Facts Delivery Relief);

(c) subsection 10.4(1.2) of National Instrument 81-102 Investment Funds (NI 81-102), to permit the Fund to pay redemption proceeds in connection with the redemption of Units (as defined below) pursuant to a quarterly redemption for the pro rata Units above the Repurchase Limit (as defined below) later than 15 business days after the applicable quarterly Repurchase Pricing Date (as defined below) (Redemption Relief) to address circumstances where a repurchase offer is oversubscribed and the Fund does not repurchase the entire amount of Units tendered;

(d) subsection 2.4(4), (5) and (6) of NI 81-102, to permit the Fund to invest more than 20% of its net asset value (NAV) in the North Leaf Private Credit Funds (as defined below) (Illiquid Asset Relief);

(e) subsection 2.1(1.1) of NI 81-102, to permit the Fund to invest more than 20% of its NAV in the securities of each Northleaf Private Credit Fund (Concentration Restriction Relief);

(f) subsection 2.2(1) of NI 81-102, to permit the Fund to hold more than 10% of the voting or equity securities of each Northleaf Private Credit Fund (Control Restriction Relief); and

(g) subsection 14.2(3)(b) of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) to permit the Fund to calculate its NAV weekly instead of daily (NAV Relief).

(the NI 41-101 Relief, the Fund Facts Delivery Relief, Redemption Relief, Illiquid Asset Relief, Concentration Restriction Relief, Control Restriction Relief and NAV Relief are, collectively, the Requested Relief).

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

(i) the Ontario Securities Commission is the principal regulator for this application; and

(ii) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (the Other Jurisdictions).

Interpretation

Terms defined in NI 81-102 and National Instrument 14-101 Definitions 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:

Structure

1. The Filer will be the trustee, investment fund manager and portfolio manager of the Fund. The Filer is registered as an investment fund manager, portfolio manager, exempt-market dealer and commodity trading manager in Ontario. The Filer is registered as a portfolio manager and exempt-market dealer in all other Canadian provinces and territories and as an investment fund manager in Newfoundland and Labrador and Québec. The head office of the Filer is in Toronto, Ontario.

2. The Fund will be a non-redeemable investment fund created under the laws of the Province of Ontario and will be governed by the provisions of NI 81-102, subject to any relief therefrom granted by the securities regulatory authorities.

3. The Filer is not in default of securities legislation in the Jurisdiction or the Other Jurisdictions.

4. Units of the Fund will be offered by simplified prospectus filed in all of the provinces and territories in Canada; accordingly, the Fund will be a reporting issuer in each of the provinces and territories of Canada.

5. Securities of the Fund may be distributed through the Representative Dealer as well as other dealers which may or may not be affiliated with the Filer (individually, each a Dealer and collectively, the Dealers).

6. The Representative Dealer is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and is registered in the category of investment dealer in the Jurisdiction or the Other Jurisdictions.

7. Each Dealer is, or will be, registered as a dealer in one or more of the Jurisdictions. The Dealers are, or will be, members of IIROC.

8. The Representative Dealer is not in default of securities legislation in the Jurisdiction or the Other Jurisdictions.

9. The Fund will be operated as an interval fund and will be structured to be substantially similar to interval funds that are offered to retail investors in the U.S. under Rule 23c-3 of the Investment Company Act of 1940.

10. The Fund will seek to achieve income-oriented risk-adjusted returns by investing primarily in (i) illiquid private credit investments and other debt instruments on an indirect basis (the portion of the Fund’s assets allocated to such securities, the Private Portfolio); and (ii) public securities and other debt instruments (the Public Portfolio). The Fund’s exposure to the Private Portfolio will be made through investments in one or both of Northleaf Senior Private Credit Fund (NSPC) and Northleaf Senior Private Credit-L Fund (NSPC-L) (together the Northleaf Private Credit Funds and each a Northleaf Private Credit Fund). Under most market conditions, the Fund will seek to allocate approximately 35% to 65% (the Target Allocation) of its assets in the Private Portfolio. However, due to the timeframe associated with purchasing private investments, it is not possible to meet the Target Allocation immediately upon the launch of the Fund. The Fund’s exposure to the Public Portfolio will be made through investments in exchange traded funds (ETFs) or other investment funds managed by the Filer or third parties in accordance with NI 81-102. The Public Portfolio will be invested in securities that are not “illiquid assets” under NI 81-102.

11. The Fund may use derivatives for hedging purposes to reduce its exposure to changes in exchange rates, securities prices, interest rates or other risks.

12. The Fund will enter into a subscription agreement, committing the Fund to a capital call schedule that establishes the periodic deployment of its applicable capital commitment amount in a Northleaf Private Credit Fund which will take up to eight calendar quarters (the Initial Ramp-up Period). In order for the portfolio manager to appropriately manage the Fund’s Target Allocation, the Filer will provide balance sheet support from its corporate assets to ensure the Fund will be in a position to meet the capital call schedule within the Private Portfolio and/or to increase the Fund’s allocation to the Public Portfolio. The Filer or its affiliate will provide the balance sheet support by way of periodic investment(s) in the Fund, as necessary. After the Initial Ramp-Up Period, the Filer expects the Fund will reach its Target Allocation in the Private Portfolio through its exposure to the Northleaf Private Credit Funds. Therefore, it is expected that substantially all of the assets of the Fund will be invested in the Public Portfolio at inception.

13. The Fund’s annual management fee for Series A securities will be 2.25% and for Series F securities will be 1.25%. The Fund’s administration fee for Series A securities will be 0.20% and for Series F securities will be 0.15%. The Filer acknowledges that during the Initial Ramp-up Period, the Fund’s exposure to private credit loans may be less than its Target Allocation of 35% to 65% of its net assets. Consequently, during the Initial Ramp-Up Period, the Filer will waive the Fund’s management fees on a sliding scale up to 0.65%. The Filer will cease the practice of waiving a portion of the Fund’s management fees after the Fund’s exposure to the Private Portfolio exceeds the minimum target range threshold of 35% of its assets and such waiver is only applicable in respect of the Initial Ramp-up Period.

14. Following the Initial Ramp Up Period, the portfolio manager may increase the Fund’s exposure to one or both Northleaf Private Credit Funds periodically by making additional capital commitments to the Northleaf Private Credit Funds. Such subsequent investments will be subject to ramp-up periods similar to the Initial Ramp-Up Period. As a result, it is possible that the Fund’s exposure to the Private Portfolio could be diluted by cash flows from subscriptions that cannot be immediately invested in a Northleaf Private Credit Fund, including to the point where the Fund’s exposure to the Northleaf Private Credit Funds may be reduced below the minimum Target Allocation. The Fund’s exposure to the Private Portfolio could also be diluted by market exposure if the Public Portfolio appreciates in value significantly relative to the Private Portfolio. For greater certainty, the Filer will not be implementing management fee waivers after the Initial Ramp-up Period.

15. NSPC is an open-end pooled fund organized using a series of Ontario-resident entities. It was launched by Northleaf (defined below) in March 2019. NSPC has a global investment mandate focused on making senior secured loans, primarily to finance private equity-backed companies. Its strategy seeks to mitigate risk while maximizing returns by investing in a portfolio focused on senior secured private credit loans diversified by borrower, industry and geography. NSPC’s portfolio is diversified across geographies, industry sectors and individual borrowers. NSPC makes prudent use of leverage in the form of subscription line financing (the Subscription Line). The Subscription Line, which is secured by undrawn investor commitments, enables NSPC to make investments in an efficient manner as each tranche of investor capital is drawn, as opposed to drawing capital in advance and then gradually deploying that capital over time. The manager of NSPC is Northleaf Capital Partners (Canada) Ltd. (together with its affiliates, Northleaf).

16. NSPC-L is an open-end pooled fund organized using a series of Ontario-resident entities. It was launched by Northleaf in October 2018. NSPC-L follows the same strategy as NSPC except that it utilizes asset-level leverage as part of investment strategy and has an annual incentive fee payable by investors if NSPC-L’s annual return is above a set hurdle. NSPC‐L makes use of leverage in the form of an asset‐based lending facility. The asset-based leverage utilized by NSPC-L is expected to result in the Fund having greater exposure to private credit strategies than the size of the Private Portfolio would indicate. In addition, NSPC-L also makes use of leverage in the form of subscription line financing (as described above).

17. Each Northleaf Private Credit Fund is not an “investment fund” pursuant to the Act.

18. Each Northleaf Private Credit Fund is not, and is not expected to be, a reporting issuer in any of the Canadian jurisdictions or listed on any recognized stock exchange. Interests in the Northleaf Private Credit Funds are, or will be, sold pursuant to exemptions from the prospectus requirements in accordance with National Instrument 45-106 Prospectus Exemptions.

19. Each Northleaf Private Credit Fund holds senior loans, comprised primarily of first lien and unitranche loans.

20. Northleaf is a global private markets investment firm with more than US$15 billion in private credit, private equity and infrastructure commitments under management on behalf of more than 100 institutional investors. 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.

21. As of January 1, 2022, (i) NSPC had accepted investor commitments of approximately US$735 million from more than 60 distinct investors and had a portfolio of loans valued at approximately US$483 million, and (ii) NSPC-L had accepted investor commitments of approximately US$630 million from more than 60 distinct investors and had a portfolio of loans valued at approximately US$1,118 million.

22. On October 28, 2020, the Filer, Great-West Lifeco Inc. (Lifeco) and Northleaf entered into a strategic relationship whereby the Filer and Lifeco jointly acquired a 49.9% non-controlling voting interest and 70% economic interest in Northleaf. The Filer believes this strategic partnership will expand and enhance the private markets product capabilities across the Filer’s and Lifeco’s distribution channels and accelerate Northleaf’s growth strategy by providing additional access to balance sheet capital, global relationships and best-in-class retail product development and distribution.

23. The Filer expects that at all times while the Fund is invested in one or both Northleaf Private Credit Funds, such investments will be accompanied by other arm’s length investors.

24. As an investment fund, the Fund will appoint an Independent Review Committee to address any potential conflict of interest issues as required by National Instrument 81-107 Independent Review Committee for Investment Funds.

Subscriptions and Repurchases

25. Subscriptions for the Fund will be processed as of the last Business Day (where a “Business Day” means any day that the Toronto Stock Exchange is open for trading) of each month (each a Subscription Date). Subscriptions must be received by the Filer at least three Business Days (the “transaction cut-off date”) prior to the relevant Subscription Date. Investors have the right to withdraw from the Fund up to five Business Days following the “transaction cut-off date”. The NAV will be calculated effective on the Subscription Date once the valuations of the Northleaf Private Credit Funds are made available which will be approximately seven Business Days following each Subscription Date.

26. As the Fund will be operated as an interval fund, it will conduct quarterly repurchase offers (which are effectively similar to redemptions) to be effective as of the last Business Day of March, June, September and December of each year (a Repurchase Pricing Date). Repurchase offers will be subject to a limit of 5% of the Fund’s outstanding Units at NAV (the Repurchase Limit) on the Repurchase Pricing Date in accordance with the following schedule:

(a) On a quarterly basis, the Filer will notify the Fund’s unitholders (Unitholders) of the repurchase offer (at least 21 calendar days before the Repurchase Request Deadline Date (as defined below)) by posting to the Filer’s website a repurchase offer notice (the Repurchase Offer Notice) for each applicable quarter.

(b) The Repurchase Offer Notice will describe the repurchase offer terms, including: (i) the Repurchase Request Deadline Date, Repurchase Pricing Date and Repurchase Payment Deadline (as defined below); (ii) a statement of the risk of fluctuation in NAV between the Repurchase Request Deadline Date and the Repurchase Pricing Date; (iii) the procedures for tendering Units and modifying or withdrawing previous tenders until the Repurchase Request Deadline Date; (iv) the procedures under which the Fund may repurchase shares on a pro-rata basis; (v) the circumstances in which the Fund may suspend or postpone a repurchase offer; (vi) details on where and when Unitholders can find the Fund’s most recently calculated NAV; and (vii) the repurchase tender form (Repurchase Tender Form) that must be submitted in order for Unitholders to tender their Units.

(c) Unitholders will have at least 21 calendar days from the posting on the Filer’s website of the applicable Repurchase Offer Notice for the Repurchase Tender Form to be received by the Filer (i.e., the date by which Unitholders can tender their Units in response to a repurchase offer) (the Repurchase Request Deadline Date). The Repurchase Request Deadline Date will be no more than 14 calendar days before the Repurchase Pricing Date.

(d) Following the Repurchase Request Deadline, the Filer will determine repurchase allocations for Unitholders up to the applicable limit, on pro-rata basis.

(e) The month-end NAV will be calculated no later than seven Business Days following each applicable Repurchase Pricing Date.

(f) The Filer will pay repurchase proceeds to Unitholders no later than nine Business Days (the Repurchase Payment Deadline) following the Repurchase Pricing Date.

27. In lieu of mailing the Repurchase Offer Notice, the Filer will instead have a dedicated webpage for the Fund where it will clearly post each Repurchase Offer Notice and all other pertinent information relating to redemptions of the Fund. As mentioned above, the Filer will notify the Fund’s Unitholders at least 21 calendar days before the Repurchase Request Deadline Date by posting to the Filer’s website an updated Repurchase Offer Notice. The Filer will notify the applicable dealers and advisors at least 21 calendar days before the Repurchase Request Deadline Date, through its Dealer Relations and Distribution representatives and provide them with the applicable Repurchase Offer Notice so they may share it with all applicable investors that hold Units of the Fund.

28. From the time the Fund posts a Repurchase Offer Notice until the applicable Repurchase Pricing Date, the Fund will hold highly liquid securities in an amount that is not less than one hundred percent of the repurchase offer amount.

29. If a repurchase offer is oversubscribed (the Filer receives requests to redeem Units representing more than the Repurchase Limit) and the Fund’s portfolio manager determines not to repurchase additional Units beyond the Repurchase Limit, the repurchase requests in excess of such amount may be deferred pro rata amongst all Unitholders seeking to redeem Units on the applicable Repurchase Pricing Date until the Repurchase Pricing Date next following such Repurchase Pricing Date. The original repurchase request will roll forward to the next Repurchase Pricing Date and Unitholders will not need to submit another Repurchase Tender Form. Unitholders will be subject to the risk of NAV fluctuations during that period. Unitholders can partially or fully withdraw their repurchase request at any time before the next Repurchase Offer Notice.

30. If on such subsequent Repurchase Pricing Date, repurchase requests again represent more than the Repurchase Limit, then the original repurchase request shall continue to roll forward to subsequent Repurchase Pricing Dates in a similar manner until the request is fulfilled. Deferred repurchase requests will not have priority over repurchase requests in respect of any other Units which have been received in respect of that or any previous Repurchase Pricing Date.

31. The Filer believes in most market conditions, investors will be able to successfully tender their investment for repurchase within six months. In circumstances where the Fund receives repurchase tender offers from investors in excess of the Repurchase Limit for eight consecutive quarters, the Fund could, if the Filer determines it would be in the best interests of the Fund, undertake an orderly wind-down (meeting 5% of liquidity requests per quarter) so that investors would have their investments returned over approximately 16 quarters or 4 years.

Valuation

32. The valuation of the Fund will be completed using the fair value of the Fund’s assets and liabilities in accordance with NI 81-106. The Filer will calculate a NAV of the Fund on at least a weekly basis and at each month-end. As the Fund’s Units are offered on a monthly basis only, the month-end NAV will be used for transactions while the weekly NAVs will be used for indicative purposes. The Public Portfolio assets, which will be publicly-traded securities for which market prices are readily available will be valued based on their trading prices. However, within the Private Portfolio, there will likely be no public market for the underlying loans held by the Northleaf Private Credit Funds. Thus, the valuation of the Northleaf Private Credit Funds, and, consequently, the Private Portfolio of the Fund, is inherently subjective and requires the use of techniques that are costly, time consuming, and ultimately provide a reasonable estimate of value. The Northleaf Private Credit Funds will retain an independent valuation firm, initially IHS Markit, to provide valuations for the underlying loans held by each Northleaf Private Credit Fund within the Private Portfolio on at least a monthly basis.

33. Each Northleaf Private Credit Fund is currently valued on a quarterly basis. Each Northleaf Private Credit Fund’s valuation is conducted by Northleaf with the assistance of the same third-party valuation agent referred to above, IHS Markit. The same methodology that is currently being used to value the Northleaf Private Credit Funds’ portfolios quarterly will be used to value the Private Portfolio monthly.

Reasons for Requested Relief

NI 41-101 Relief

34. The Fund is a non-redeemable investment fund under Canadian securities legislation and absent the NI 41-101 Relief would be subject to NI 41-101.

35. The Filer believes filing a simplified prospectus, annual information form and a fund facts document (Fund Facts) in accordance with NI 81-101 will assist in providing full, true and plain disclosure of all material facts relating to the Fund.

36. Filing documents in accordance with Forms 81-101F1, 81-101F2 and 81-101F3 would mean that the Filer will also create Fund Facts for the Fund, whereas this is not required under NI 41-101. Given the Fund Facts is a document written in plain language that highlights key information that the CSA has identified as important to investors, the Filer believes it would be beneficial to investors in the Fund to have access to Fund Facts. The Filer believes that investors will receive as much or more information under Forms 81-101F1, 81-101F2 and 81-101F3 and that this format is easier to understand for investors.

37. For the reasons provided above, the Filer submits that it would not be prejudicial to the public interest to grant the requested NI 41-101 Relief.

Fund Facts Delivery Relief

38. Absent the relief from Section 71(1) of the Act, given the Fund is a non-redeemable investment fund, any Dealer who trades in units of the Fund would have to deliver or send to an investor the most recently filed prospectus.

39. As mentioned above, the Filer believes delivering the Fund Facts will assist in providing full, true and plain disclosure of all material facts relating to the Fund. Given the Fund Facts is a document written in plain language that highlights key information that the CSA has identified as important to investors, the Filer believes it would be beneficial to investors in the Fund to have the Fund Facts delivered in lieu of the prospectus.

40. Given that the Fund will comply with NI 81-101, the Dealers, including the Representative Dealer, will be required to send or deliver the most recently filed Fund Facts in accordance with section NI 81-101 (the Delivery Requirement).

41. The Filer, and any Dealer distributing the Fund, will grant to an investor purchasing the securities of a Fund a Right of Withdrawal as described in this decision document upon the sending or delivery of the Fund Facts.

42. The Filer, and any Dealer distributing the Fund, will grant to an investor purchasing the securities of the Fund a right of action for failure to meet the Delivery Requirement as set out in section 3.2.2 of NI 81-101 (the Right of Action).

43. In order to be eligible to distribute the Fund, each Dealer will be required to sign an agreement (the Agreement) with the Filer which will include the terms described further herein.

44. For the reasons provided above, the Filer submits that it would not be prejudicial to the public interest to grant the requested Fund Facts Delivery Relief.

Redemption Relief

45. Subsection 10.4(1.2) of NI 81-102 provides that a non-redeemable investment fund must pay the redemption proceeds for securities that are subject to a redemption order within 15 business days after the date of calculation of the NAV per security used in establishing the redemption price. But for the Redemption Relief, the Fund would be unable to operate as an “interval fund” given that the securities subject to a repurchase tender offer made by a Unitholder to the Fund may not be paid within 15 business days of the Repurchase Pricing Date in circumstances where a repurchase offer is oversubscribed and the Fund does not repurchase the entire amount of Units tendered.

46. For the reasons provided above, the Filer respectfully submits that it would not be prejudicial to the public interest to grant the requested Redemption Relief.

Illiquid Asset Relief

47. Subsection 2.4(4) of NI 81-102 prohibits a non-redeemable investment fund from purchasing an illiquid asset if, immediately after the purchase, more than 20% of its NAV would be made up of illiquid assets. Subsection 2.4(5) of NI 81-102 prohibits a non-redeemable investment fund from holding, for a period of 90 days or more, more than 25% of its NAV in illiquid assets. Subsection 2.4(6) of NI 81-102 requires a non-redeemable investment fund, if more than 25% of its NAV is made up of illiquid assets, to take all necessary steps as quickly as commercially reasonable, to reduce the percentage of its NAV made up of illiquid assets to 25% or less.

48. The Filer seeks the Illiquid Asset Relief to enable the Fund to pursue and achieve its investment strategy of investing in private credit investments globally through the Northleaf Private Credit Funds.

49. Each investment made by the Fund in a Northleaf Private Credit Fund is subject to a separate “lock-up” period whereby the Fund generally may not submit a redemption request for any of the units the Fund holds in the Northleaf Private Credit Fund until three years after the first subscription payment date applicable to the Northleaf Private Credit Fund investment (the Lock-up Period).

50. Any interest that the Fund holds in a Northleaf Private Credit Fund will be considered an “illiquid asset” as, among other things, the Fund’s investments in the Northleaf Private Credit Funds will be subject to the Lock-up Period. Further, after the Lock-up Period is complete, Northleaf Private Credit Fund investors are only permitted to redeem on the last business day of each calendar quarter. Additionally, each redemption by a Northleaf Private Credit Fund investor is limited to 25% of the balance of such investor’s capital account per quarter. The Northleaf Private Credit Funds are structured this way due to the fact that their investments consist of a portfolio of private credit loans, which are generally themselves considered to be illiquid investments.

51. The Filer believes it will be able to manage the Fund’s repurchase requirements despite the illiquid nature of its holdings in the Northleaf Private Credit Funds. The Filer will structure the Fund to ensure liquidity is available to manage repurchase requests under all scenarios, including significant market events, by (i) using a conservative repurchase offer amount of 5% to ensure it can fulfill Unitholders’ repurchase requests, having determined this amount by stress-testing under models that contemplate severe economic downturns among other scenarios; (ii) investing 100% of the Public Portfolio in ETFs (these holdings are liquid and tradeable on the stock exchange and can be used by the portfolio manager of the Fund to assist in facilitating repurchases); (iii) seeking out other institutional investors who, subject to Northleaf’s approval, could purchase the Fund’s interests in the Northleaf Private Credit Funds, if necessary; and (iv) providing balance sheet support from the Filer’s corporate assets as described above, if necessary.

52. To ensure these illiquid investments are appropriately valued, an independent and reputable valuation firm, initially IHS Markit, has been retained and will provide valuations for the underlying loans held by the Northleaf Private Credit Funds on at least a monthly basis.

53. While private credit loans are generally considered to be illiquid in nature (other than the ability to privately buy and sell these loans in a secondary market), they have historically exhibited a yield premium and relatively low losses during times of market stress (compared to liquid securities of issuers with a similar risk profile) and also provide a degree of diversification to investor portfolios. The Fund requires the Illiquid Asset Relief in order to meet its investment strategy of investing in private credit strategies through its investments in the Northleaf Private Credit Funds.

54. The Fund’s Public Portfolio will be comprised of securities that are not considered to be “illiquid assets” under NI 81-102.

55. For the reasons provided above, the Filer respectfully submits that it would not be prejudicial to the public interest to grant the requested Illiquid Asset Relief.

Concentration Restriction Relief

56. The Fund will primarily achieve its investment objectives and execute its investment strategy through direct holdings of interests in the Northleaf Private Credit Funds. Under most market environments, the Fund’s investment strategy will allow it to invest up to 65% of its NAV in securities of the Northleaf Private Credit Funds.

57. Subsection 2.1(1.1) of NI 81-102 prohibits an investment fund from purchasing a security of an issuer, entering into a specified derivatives transaction or purchasing index participation units if, immediately after the transaction, more than 20% of its NAV would be invested in securities of any one issuer.

58. The Filer believes that it is in the best interests of the Fund to be permitted to invest more than 20% of its net assets in one or both of the Northleaf Private Credit Funds. The Northleaf Private Credit Funds are investment products that provide the Fund with diversified exposure to a group of private credit investments. The Filer submits this is an efficient method for the Fund to achieve diversified exposures in accordance with its objectives and would not trigger the policy concern of the Fund being overly concentrated in a single debt issuer.

59. The Northleaf Private Credit Funds’ governing documents state that the maximum amount that the Northleaf Private Credit Fund may invest in a single company or other issuer in which that Northleaf Private Credit Fund makes a private credit investment/loan is 10% of the sum of (i) the Northleaf Private Credit Fund’s undrawn capital commitments from its investors and (ii) the Northleaf Private Credit Fund’s gross asset value, measured at the time of investment. On a look-through basis, this provides the Fund with a diversified portfolio of loans and mitigates the concentration risk that section 2.1 of NI 81-102 seeks to address.

60. For the reasons provided above, the Filer respectfully submits that it would not be prejudicial to the public interest to grant the requested Concentration Restriction Relief.

Control Restriction Relief

61. As mentioned above, the Fund will primarily achieve its investment objectives and strategies through direct holdings of interests in the Northleaf Private Credit Funds.

62. In order to ensure that investment funds are passive investment vehicles, NI 81-102 includes certain provisions to restrict the control an investment fund would have over the issuers in which it invests. Specifically, subsection 2.2(1) of NI 81-102 prohibits an investment fund from holding more than 10% of the voting securities or equity securities of an issuer or from investing for the purpose of exercising control over, or management of, the issuer.

63. The Companion Policy to NI 81-102 states in s. 3.2.1:

In determining whether an investment fund exercises control over, or is involved in the management of, an investee company, for the purposes of compliance with section 2.2 of the Instrument, the Canadian securities regulatory authorities will generally consider indicators, including the following:

(a) any right of the investment fund to appoint directors, or observers, of the board of the investee company;

(b) any right of the investment fund to restrict the management of the investee company, or to approve or veto decisions made by the management of the investee company;

(c) any right of the investment fund to restrict the transfer of securities by other securityholders of the investee company.

64. The Fund may, over the course of its existence, hold more than 10% of the securities of a Northleaf Private Credit Fund. While the securities of the Northleaf Private Credit Funds that the Fund would hold would technically be considered voting and/or equity securities, the Fund will not invest in either Northleaf Private Credit Fund for the purpose of exercising control over, or management of, the Northleaf Private Credit Fund. The securities of each Northleaf Private Credit Fund held by the Fund will not (i) provide any right to the Fund to appoint directors or observers to any board of a Northleaf Private Credit Fund or its manager, (ii) provide the Fund with any rights to restrict management of either Northleaf Private Credit Fund or be involved in the decision-making with respect to investments or loans made by a Northleaf Private Credit Fund or (iii) provide the Fund with any right to restrict the transfer of securities of a Northleaf Private Credit Fund by other investors in the Northleaf Private Credit Fund.

65. The Fund will not have any look-through rights with respect to the portfolios of loans held by the Northleaf Private Credit Funds. Further, the Fund will not have any rights to or responsibility for administering any of the loans held by the Northleaf Private Credit Funds.

66. For the reasons provided above, the Filer respectfully submits that it would not be prejudicial to the public interest to grant the requested Control Restriction Relief.

NAV Relief

67. Under section 14.2(3)(b) of NI 81-106, an investment fund that is a reporting issuer that uses or holds specified derivatives must calculate its NAV on a daily basis.

68. The Fund proposes to calculate the NAV on at least a weekly basis and at each month-end, which is consistent with the requirement for interval funds offered in the U.S.

69. As subscriptions for the Fund are only permitted monthly and repurchases are only permitted quarterly, a daily NAV calculation is not required as no investor will be purchasing or selling on the dates on which such values are calculated.

70. Notwithstanding the above, as with U.S. interval funds, the Fund will calculate the NAV of the Fund on each of the five business days before each Repurchase Request Deadline.

71. For the reasons provided above, the Filer respectfully submits that it would not be prejudicial to the public interest to grant the requested NAV Relief.

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:

The Fund

The Fund is an interval fund and commits that:

(a) It will offer subscriptions at NAV on the last Business Day of each month and conduct repurchase offers subject to the Repurchase Limit on the last Business day of each of March, June, September, and December in each calendar year.

(b) Repurchase Tender Forms received by the Repurchase Request Deadline Date will be processed effective on the Repurchase Pricing Date.

(c) The Filer will repurchase Units on a pro rata basis based on the number of Units tendered for repurchase.

(d) It will calculate the month-end NAV no later than seven Business Days after each applicable Repurchase Pricing Date.

(e) The Filer will pay repurchase proceeds to Unitholders no later than nine Business Days after the Repurchase Pricing Date.

(f) the Filer will have a dedicated webpage for the Fund where it will clearly post each Repurchase Offer Notice and all other pertinent information relating to redemptions of the Fund at least 21 calendar days before the Repurchase Request Deadline.

(g) The Filer will calculate a NAV of the Fund on at least a weekly basis and at each month end. The NAV will be made available on a weekly basis on the Filer’s website.

NI 81-101

The Fund will comply with all applicable requirements of NI 81-101 except as set out below:

(a) Notwithstanding section 3.2.1 of NI 81-101 an investor will have the right to withdraw from an agreement to purchase securities of the Fund any time prior to the fifth Busines Day following the applicable “transaction cut-off date” (the Right of Withdrawal);

(b) General Instruction 6 of Form 81-101F1, as some of the headings of the prospectus have been changed to address the unique structure of the Fund; and

(c) General Instruction 8 of Form 81-101F3 as an additional heading has been added to the “Quick Facts” section of the Fund Facts to address the unique structure of the Fund and text box disclosure has also been added to the Fund Facts.

Disclosure Documents

The Filer will file a separate simplified prospectus, annual information form and Fund Facts for the Fund, which will include the following disclosure:

(a) the simplified prospectus and Fund Facts will include text box disclosure identifying the Fund as an interval fund and highlighting the unique nature of the Fund. The text box will include disclosure that highlights the long-term horizon of the investment, the repurchases (redemption) mechanics including limitations thereof, and the limited liquidity of the investment;

(b) that the Fund’s NAV will be calculated and made available to Unitholders on at least a weekly basis on the Filer’s website.;

(c) that the Filer and Lifeco hold a significant ownership interest in Northleaf;

(d) regarding the unique risks associated with an investment in the Fund, including:

i. that Repurchase Offers are capped at 5% per quarter;

ii. the risks associated with a Repurchase Offer being oversubscribed;

iii. the illiquid nature of the Fund’s allocation to the Northleaf Private Credit Funds and of its indirect exposure to private credit investments;

iv. risks associated with the concentration of the Fund’s net assets in the Northleaf Private Credit Funds; and

v. appropriate risk disclosure, alerting investors of any material risks associated with the Fund’s exposure to the Northleaf Private Credit Funds.

(e) Upon the Fund’s first renewal, in compliance with the changes to NI 81-101F1 after the date of the decision, going forward the Fund will file a consolidated prospectus and annual information form, along with the Fund Facts. Any of the above disclosure included in the annual information form, will instead be included in the consolidated prospectus.

(f) The Filer will disclose in the Fund’s annual and interim financial statements, the Fund’s Management Report of Fund Performance and quarterly disclosure documents:

i. “look-through” disclosure to convey certain attributes of the loans held by each Northleaf Private Credit Fund (e.g., geography, sector, investment type and fair value);

ii. any active impairments and defaults on the loans held by the Northleaf Private Credit Funds (including missed contractual payments); and

iii. the number of arm’s-length investors in the Northleaf Private Credit Funds and the assets under management attributable to the same.

Valuation

(a) The valuation of the Fund will be completed using the fair value of the Fund’s assets and liabilities in accordance with NI 81-106. All of the private credit investments held by the Northleaf Private Credit Funds will be valued monthly by an independent and reputable valuation firm.

(b) Each Northleaf Private Credit Fund will be audited annually and, as part of this independent audit, the valuations provided by the independent valuator will be reviewed and evaluated by the Northleaf Private Credit Funds’ auditor.

Wind-up

(a) If the Fund receives repurchase tender offers from investors in excess of 5% of its NAV for eight consecutive repurchase periods or the Private Portfolio of the Fund is more than 90% of the Fund’s assets, the Fund will undertake an orderly wind-up.

(b) Once an orderly wind-up is commenced, no new commitments to the Northleaf Private Credit Funds will occur. The Fund will immediately begin the process of selling the assets in the Public Portfolio and also start redeeming the assets from the Northleaf Private Credit Funds quarterly as permitted by the Northleaf Private Credit Funds.

(c) The wind-up will be communicated to unitholders according to the requirements of any relevant securities legislation and the declaration of trust of the Fund and will be prominently disclosed on the Filer’s website.

Distribution

(a) The Filer will ensure the Fund is only distributed through Dealers that are registered through the IIROC channel. For greater clarity, “order execution only” IIROC dealers will not be permitted to distribute the Fund.

(b) Given that the Fund will comply with NI 81-101, the Dealers, including the Representative Dealer, are required to send or deliver the most recently filed Fund Facts in accordance with the Delivery Requirement.

(c) The Filer, and any Dealer distributing the Fund, will grant to an investor purchasing the securities of a Fund a Right of Withdrawal as described in this decision document upon the sending or delivery of the Fund Facts.

(d) The Filer, and any Dealer distributing the Fund, will grant to an investor purchasing the securities of the Fund a Right of Action for failure to meet the Delivery Requirement.

(e) In order to be eligible to distribute the Fund, each Dealer will be required to sign the Agreement with the Filer which will include the following:

i. confirmation of IIROC registration status;

ii. acknowledgement that the Fund is subject to NI 81-101 pursuant to this decision document;

iii. acknowledgement and agreement by the Dealer to deliver the Fund Facts in accordance with the Delivery Requirement;

iv. acknowledgement and agreement to the Right of Withdrawal applicable for the Fund, as described in this decision document; and

v. acknowledgement and agreement to the Right of Action for failure to meet the Delivery Requirement.

The Agreement will also append this decision document as a schedule to the Agreement. Notwithstanding the Agreement, the Filer will be responsible for the withdrawal rights described in the decision.

(f) The Filer will cause the Fund to honour any request made by an investor to exercise the Right of Withdrawal in respect of an agreement to purchase securities of a Fund managed by the Filer that a Dealer fails to honour, provided such request is made in respect of a validly exercised right.

(g) The Filer or its agent will keep records of the Dealer that have returned to the Filer or its agent signed copies of the Agreement and, on a confidential basis, the Filer or its agent will provide the principal regulator for the Fund on a quarterly basis beginning 60 days after the date upon which the Requested Relief is granted, and upon request, at the discretion of the Filer, either (i) a current list of all such Dealers, or (ii) an update to the list of such Dealers or confirmation that there has been no change to such list.

General

(a) Neither Northleaf Private Credit Fund will invest more than 10% of its net assets in a single private credit investment.

(b) The Fund will be treated as an arm’s length investor in the Northleaf Private Credit Funds, on the same terms as all other third-party investors.

(c) Arm’s length investors to the Filer will at all times represent at least 51% of both Northleaf Private Credit Funds.

(d) The Fund will not actively participate in the business or operations of either Northleaf Private Credit Fund.

(e) The Fund will have at least 10% of its assets invested in liquid investments at all times.

(f) The Filer will present annual updates to its Board of Directors reporting on the Fund’s liquidity management and repurchase history.

(g) No management, administration, or incentive fees will be payable by the Fund in respect of its investment in a Northleaf Private Credit Fund that, to a reasonable person, would duplicate a fee payable by a Northleaf Private Credit Fund for the same service.

(h) Investors will be provided with current and historical information of the level of redemption requests on the Filer’s website as it becomes available.

(i) Each Northleaf Private Credit Fund’s Subscription Line will be capped by the amount of undrawn investor commitments.

(j) The Fund will not invest in either Northleaf Private Credit Fund for the purpose of exercising control over, or management of, the Northleaf Private Credit Fund.

(k) The Fund will not have any rights to or responsibility for administering any of the loans held by the Northleaf Private Credit Funds.

Term

(a) This decision shall expire upon the earlier of: (i) the coming into force of securities legislation that establishes a regulatory scheme that addresses a substantially similar interval fund structure in Canadian jurisdictions; and (ii) five years from the date of this decision.

(b) The Commission will monitor developments in the capital markets and with respect to the Fund on an ongoing basis to determine whether it is appropriate to vary the terms of this decision.

As to the Fund Facts Delivery Relief

“Tim Moseley” “Frances Kordyback”

Name: Tim Moseley Title: Vice-Chair Ontario Securities Commission

Name: Frances Kordyback Title: Commissioner Ontario Securities Commission

As to the Requested Relief, except for the Fund Facts Delivery Relief

“Darren McKall”

_____________________________

Name: Darren McKall Title: Manager, Investment Funds and Structured Products Branch Ontario Securities Commission

File#: 2021/0674

Sedar #: 3329706