Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from National Instrument 81-102 Mutual Funds to permit mutual funds to invest in silver and to invest up to 10% of net assets in leveraged ETFs, inverse ETFs, gold ETFs, silver ETFs, leveraged gold ETFs and leveraged silver ETFs traded on Canadian or US stock exchanges, subject to 10 % total exposure in gold and silver, and certain conditions, and custodial provision to allow the Royal Canadian Mint to act as custodian.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 2.3(f), 2.3(h), 2.5(2)(a), 2.5(2)(c), 6.1(1), 6.2 and 19.1.

February 1, 2013

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

NORTHWEST & ETHICAL INVESTMENTS L.P.

(the Filer)

AND

ETHICAL BALANCED FUND

NORTHWEST MACRO CANADIAN EQUITY FUND

(FORMERLY NORTHWEST SPECIALTY INNOVATIONS FUND)

NORTHWEST MACRO CANADIAN ASSET ALLOCATION FUND

(the Funds)

Decision

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption, pursuant to section 19.1 of National Instrument 81-102 Mutual Funds (NI 81-102) from

(1) Paragraph 2.3(f) of NI 81-102 (the Silver Exemption) to permit the Funds to:

(a) purchase silver (Physical Silver); and

(b) purchase a certificate representing silver that is:

(i) available for delivery in Canada, free of charge, to or to the order of the holder of such silver certificate;

(ii) of a minimum fineness of 999 parts per 1,000;

(iii) held in Canada;

(iv) in the form of either bars or wafers; and

(v) if not purchased from a bank listed in Schedule I, II or III of the Bank Act (Canada), fully insured against loss and bankruptcy by an insurance company licensed under the laws of Canada or a jurisdiction

(the Permitted Silver Certificates);

(2) Paragraph 2.3(h) of NI 81-102 (the Silver Derivative Exemption) to permit the Funds to purchase, sell or use a specified derivative the underlying interest of which is Physical Silver or a specified derivative of which the underlying interest is Physical Silver on an unlevered basis (the Silver Derivatives and together with Physical Silver and Permitted Silver Certificates, Silver);

(3) Paragraphs 2.3(h) and 2.5(2)(a) and (c) of NI 81-102 (the ETF Exemption) to permit the Funds to purchase and hold securities of:

(a) exchange-traded funds that seek to provide daily results that replicate the daily performance of a specified widely-quoted market index (the exchange-traded fund's Underlying Index) by a multiple of up to 200% (the Leveraged Bull ETFs) or an inverse multiple of up to 200% (the Leveraged Bear ETFs and together with the Leveraged Bull ETFs, the Leveraged ETFs);

(b) exchange-traded funds that seek to provide daily results that replicate the daily performance of their Underlying Index by an inverse multiple of 100% (the Inverse ETFs);

(c) exchange-traded funds that seek to replicate the performance of gold or silver or the value of a specified derivative the underlying interest of which is gold or silver on an unlevered basis (the Gold ETFs and the Silver ETFs, as the case may be, and collectively, the Commodity ETFs); and

(d) exchange-traded funds that seek to provide daily results that replicate the daily performance of gold or silver or the value of a specified derivative the underlying interest of which is gold or silver on an unlevered basis (the exchange-traded fund's Underlying Gold Interest or the exchange-traded fund's Underlying Silver Interest) by a multiple of up to 200% (the Leveraged Gold ETFs and the Leveraged Silver ETFs, respectively and collectively, the Leveraged Commodity ETFs).

Leveraged ETFs, Inverse ETFs, Commodity ETFs and the Leveraged Commodity ETFs are referred to collectively in this application as the Underlying ETFs.

(4) Paragraph 6.1(1) and 6.2 of NI 81-102 (the Bullion Custody Exemption) to permit the Funds to appoint the Royal Canadian Mint (the Bullion Custodian) as custodian of the Funds in respect of each Fund's bullion in Canada; and from clauses 6.1(3)(b) and 6.2 to permit the Bullion Custodian to appoint International Depository Services of Canada Inc. (the Sub-Custodian) as the sub-custodian of the Funds in respect of each Fund's silver bullion in Canada.

(collectively, the Exemption Sought)

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

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

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

Interpretation

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

Representations

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

The Filer and the Funds

2. The Filer is a limited partnership formed under the laws of Ontario with its head office in Toronto, Ontario. Northwest & Ethical Investments Inc., which is the general partner of the Filer, is a corporation formed under the laws of Ontario with its head office in Toronto, Ontario. The Filer is the trustee, manager and portfolio manager for the Funds.

3. The Filer is registered as an investment fund manager in Ontario and a portfolio manager in Ontario and British Columbia.

4. Each of the Funds is an open-end mutual fund trust established pursuant to an Amended and Restated Declaration of Trust governed under the laws of Ontario.

5. Each of the Funds is offered pursuant to a simplified prospectus and annual information form, each dated July 3, 2012, which have been filed in every province and territory of Canada.

6. OtterWood Capital Management Inc. (the "Sub-Advisor") was appointed the sub-advisor of the Ethical Balanced Fund effective May 14, 2012 and was appointed sub-advisor of the Northwest Macro Canadian Equity Fund and Northwest Macro Canadian Asset Allocation Fund effective July 3, 2012.

7. Each Fund is a reporting issuer under the securities legislation of each province and territory of Canada.

8. Neither the Filer nor any of the Funds are in default of securities legislation in the provinces and territories of Canada.

9. The investment objective of the Ethical Balanced Fund is to increase the value of an investor's investment over the long term, protect an investor's original investment and provide a high degree of current income. It invests mostly in a mix of Canadian and US equities and fixed income investments. The Ethical Balanced Fund also follows a socially responsible approach to investing, as described in its simplified prospectus.

10. The investment objective of the Northwest Macro Canadian Equity Fund is to achieve long-term capital appreciation by investing its assets, excluding the cash and cash equivalent portion, primarily in equity securities of Canadian companies and to a lesser extent, foreign companies. The Fund is able to invest in any sector and in both large and small capitalization companies.

11. The investment objective of the Northwest Macro Canadian Asset Allocation Fund is to provide investment returns and protection of capital through an active asset allocation process. It invests primarily in a mix of Canadian and foreign equity and fixed income securities including money markets instruments.

12. The simplified prospectus of the Funds dated July 3, 2012 discloses that commodity risk is a risk associated with each of the Funds.

Investments in Gold and Silver

13. Pursuant to NI 81-102, the Funds are permitted to invest in gold and permitted gold certificates and to invest in specified derivatives the underlying interest of which are gold.

14. In addition to investing in gold, the Funds propose to have the ability to invest in Silver.

15. Permitting each Fund to invest in Silver will permit the Funds additional flexibility to increase gains for the Funds in certain market conditions, which may otherwise cause the Funds to have significant cash positions.

16. The Filer believes that the markets in gold and silver are highly liquid, and there are no liquidity concerns with permitting a Fund to invest directly or indirectly through derivatives or ETFs, up to 10% of its net asset value in gold and Silver, in the aggregate.

17. To obtain exposure to gold or silver indirectly, the Filer intends to use specified derivatives the underlying interest of which is gold or Silver Derivatives and invest in Commodity ETFs (which together with gold, permitted gold certificates and Silver are referred to collectively in this decision as Gold and Silver Products).

18. Any investment by a Fund in Silver will be made in compliance with the custodian requirements in Part 6 of NI 81-102, except as set out below.

The Underlying ETFs

19. In addition to investing in securities of exchange traded funds that qualify as "index participation units" under NI 81-102 (IPUs), the Funds may also invest in Underlying ETFs which are not IPUs.

20. The amount of loss that can result from an investment by a Fund in an Underlying ETF will be limited to the amount invested by the Fund in securities of the Underlying ETF.

21. Each Leveraged ETF will be rebalanced daily to ensure that its performance and exposure to its Underlying Index will not exceed +/-200% of the corresponding daily performance of its Underlying Index.

22. Each Inverse ETF will be rebalanced daily to ensure that its performance and exposure to its Underlying Index will not exceed -100% of the corresponding daily performance of its Underlying Index.

23. Each Leveraged Commodity ETF will be rebalanced daily to ensure that its performance and exposure to its underlying gold or silver interest will not exceed +200% of the corresponding daily performance of the underlying gold and silver interest.

24. Each Fund's investment objective and investment strategies permit the Fund to invest in a number of asset classes. Investing in silver as well as gold will provide each Fund with an opportunity to diversify its investments.

25. The Filer submits that there are no liquidity concerns with permitting the Funds to invest in Commodity ETFs, since the securities of the Underlying ETFs trade on an exchange and are highly liquid.

26. In accordance with their investment objectives and investment strategies, each Fund is permitted generally to invest in ETFs.

27. The aggregate investment in Inverse/Leveraged ETFs by each Fund will not exceed 10% of each Fund's net asset value, taken at market value at the time of purchase.

28. The simplified prospectus of each Fund discloses, or will disclose the next time it is renewed after the date hereof, (i) in the Investment Strategy section of the prospectus, the fact that the Fund has obtained relief to invest in the Underlying ETFs and Silver, together with an explanation of what each Underlying ETF is, and (ii) the risks associated with investments in the Underlying ETFs and Silver.

29. An investment by a Fund in securities of an Underlying ETF will represent the business judgment of responsible persons uninfluenced by considerations other than the best interests of the particular Fund.

Custody of Bullion held by the Funds

30. Desjardins Trust Inc. (the Custodian) has been appointed by the Filer as the custodian of each of the Funds pursuant to a Custodian Agreement dated April 19, 2004, as amended, whereby the Custodian acts as the custodian of the assets of the Funds. The Custodian has advised the Filer that is does not have the operational and procedural requirements related to the transportation, storage, and management of the physical silver and gold bullion of the Funds.

31. In considering the options available to the Funds for custody of the bullion, the Filer has determined that the appointment of the Bullion Custodian as the custodian of the bullion owned by the Funds is the most efficient and cost-effective means of providing storage for the Funds' bullion and represents the least operational risk for the Funds in terms of transporting, storing and managing physical bullion. The Filer has determined that it is not economical to appoint a sub-custodian of the Funds solely for the purpose of overseeing the custodian services provided by the Bullion Custodian.

32. The Filer expects to appoint the Bullion Custodian as the custodian of the bullion owned by the Funds pursuant to certain precious metals storage agreements relating to bullion, entered into between the Filer, for and on behalf of the Funds, and the Bullion Custodian (each individually, a Storage Agreement and collectively, the Storage Agreements). These Storage Agreements will provide for the storage of bullion generally and will not place any limitations on the Filer's ability to buy or sell bullion. Each Storage Agreement, including the arrangements between the Funds and the Bullion Custodian in connection with the bullion, will comply with the requirements of Part 6 of NI 81-102. The Bullion Custodian intends, in turn, to appoint the Sub-Custodian to hold the silver bullion of the Funds in the vault facilities of the Sub-Custodian located in Canada.

33. Bullion owned by the Funds will be fully allocated and stored in the vault facilities of either the Bullion Custodian or the Sub-Custodian located in Canada.

34. The Bullion Custodian operates pursuant to the Royal Canadian Mint Act (Canada) and is a Canadian crown corporation. Crown corporations are "agents of Her Majesty the Queen" and, as such, their obligations generally constitute unconditional obligations of the Government of Canada. The Bullion Custodian had shareholders' equity of $258,800,000 million as at December 31, 2011. The Bullion Custodian is responsible for the minting and distribution of Canada's circulation coins. As part of its operations, the Bullion Custodian maintains a secure storage facility located in Canada that it owns and operates, and provides storage space to third parties.

35. The Bullion Custodian has advised the Filer that due to its physical storage constraints in Canada, the Bullion Custodian may be required to store and hold a portion of the Funds' silver bullion on a fully allocated basis at vault facilities located in Canada operated by the Sub-Custodian. As a result of the foregoing, the Bullion Custodian may be required to hold a portion of the Funds' silver bullion that it does not hold directly in its own vaults through the vaults of the Sub-Custodian located in Canada.

36. The Sub-Custodian is owned by its parent company, Dillon Gage Incorporated of Dallas, a U.S. based financial services firm with experience in the precious metals storage business. Dillon Gage Incorporated of Dallas has an audited net worth of US$12,837,967 as of December 31, 2011. The Sub-Custodian has vault facilities located in Mississauga, Canada.

37. The relationship between the Bullion Custodian and the Sub-Custodian will be primarily one whereby the Bullion Custodian is sub-contracting the vault facilities of this service provider for the purposes of storing the Funds' physical silver bullion. The Sub-Custodian will be appointed the sub-custodian of the Funds in Canada pursuant to a written agreement between the Bullion Custodian and the Sub-Custodian that complies with the requirements of Part 6 of NI 81-102. The Bullion Custodian will remain responsible for (i) ensuring that adequate safeguards are in place, including satisfactory insurance arrangements; and (ii) indemnifying the Funds for all direct loss, damage or expense that may occur in connection with the Fund's bullion that is stored at the vault facilities of the Bullion Custodian and/or the Sub-Custodian, and on a periodic basis thereafter, the Bullion Custodian will review the facilities, procedures, records and creditworthiness of the Sub-Custodian. The Funds will rely upon the Bullion Custodian, who is in the business of precious metals storage, to satisfy itself as to the appropriateness of the use or continued use of the Sub-Custodian as a sub-custodian of the Funds' physical silver bullion.

38. The Bullion Custodian has also advised the Funds and the Filer that, pursuant to the terms of its existing relationship with the Sub-Custodian, the Sub-Custodian has arranged for sufficient insurance coverage in respect of any material held by the Bullion Custodian through the vault facilities of the Sub-Custodian. The Filer has discussed with the Bullion Custodian the level of insurance coverage obtained by the Sub-Custodian and the risks insured against by the Sub-Custodian and believes that the level of insurance will be sufficient.

39. The Filer and the Bullion Custodian believe that the Sub-Custodian has the resources and experience required to act as a sub-custodian for the Funds' physical silver bullion held in Canada.

40. Under each of the Storage Agreements, upon the initial notice being delivered, the Bullion Custodian or its Sub-Custodian, as the case may be, will receive such bullion based on a list provided by the Filer in such written notice that specifies the amount, weight, type, assay characteristics and value, and serial number of the precious metal being delivered, as the case may be. After verification, the Bullion Custodian will issue a "receipt of deposit" that confirms the plate or ingot count. Pursuant to each of the Storage Agreements, the Bullion Custodian reserves the right to refuse delivery in the event of storage capacity limitations at either its own vault or at the vault facilities of the Sub-Custodian. In the event of a discrepancy arising during the verification process, the Bullion Custodian will promptly notify the Filer. The Bullion Custodian will keep each Fund's fully allocated bullion specifically identified as the Fund's property and will keep it physically segregated at all times from any other property belonging to the Bullion Custodian or any of its customers. The Bullion Custodian will provide a monthly inventory statement, which the Filer or its delegate will reconcile with each Fund's records of its bullion holdings. The Filer will have the right to physically count and have a Fund's auditors subject the Fund's bullion to audit procedures at the vault facilities at the Bullion Custodian and the Sub-Custodian upon request on any Bullion Custodian business day (which means any day other than a Saturday, a Sunday or a holiday observed by the Bullion Custodian or the Sub-Custodian) during the Bullion Custodian's or the Sub-Custodian's regular business hours, provided that such physical count or audit procedures do not interrupt the routine operation of the Bullion Custodian's facility.

41. Upon the Bullion Custodian's receipt and taking into possession and control (either directly or through the Sub-Custodian) of any of the Funds' bullion, whether through physical delivery or a transfer of bullion from a different customer's account at the Bullion Custodian, the Bullion Custodian's liability will commence with respect to such bullion. The Bullion Custodian will bear all risk of physical loss of, or damage to, the bullion owned by each Fund in the Bullion Custodian's custody (regardless of the location at which the Bullion Custodian decides to store the bullion), except in the case of circumstances or causes beyond the Bullion Custodian's reasonable control, including, without limitation, acts or omissions or the failure to cooperate of the Filer, acts or omissions or the failure to cooperate by any third party, fire or other casualty, act of God, strike or labour dispute, war or other violence, or any law, order or requirement of any governmental agency or authority, and has contractually agreed to replace or pay for lost, damaged or destroyed bullion in a Fund's account while in the Bullion Custodian's or Sub-Custodian's care, custody and control. Under each of the Storage Agreements, the Bullion Custodian's liability terminates with respect to any bullion upon termination of the applicable Storage Agreement, whether or not a Fund's bullion remains in the Bullion Custodian's or Sub-Custodian's possession and control, or upon transfer of such bullion to a different customer's account at the Bullion Custodian or Sub-Custodian.

42. In the event of physical loss, damage or destruction of a Fund's bullion in the Bullion Custodian's or Sub-Custodian's custody, care and control, the Filer, on behalf of a Fund, must give written notice to the Bullion Custodian within one business day after the discovery of any such loss, damage or destruction, but, in the case of loss or destruction of a Fund's bullion, in any event no more than 60 days after the delivery by the Bullion Custodian to the Filer, on behalf of a Fund, of an inventory statement in which the discrepancy first appears. The Bullion Custodian will, at its discretion, either (i) replace, or restore to its original state in the event of partial damage, as the case may be, the Fund's bullion that was lost, destroyed or damaged as soon as practicable after the Bullion Custodian becomes aware of said loss or destruction, based on the advised weight and assay characteristics provided in the initial notice; (ii) compensate the Fund, through the Filer, for the monetary value of the Fund's bullion that was lost or destroyed, within one business day from the date the Bullion Custodian becomes aware of said loss or destruction, based on the advised weight and assay characteristics provided in the initial notice and the market value of such bullion that was lost or destroyed; or (iii) replace a portion of the lost or damaged bullion and compensate the Fund, through the Filer, for the monetary value of the remaining portion of the lost or damaged bullion based on the advised weight and assay characteristics provided in the initial notice. If such notice is not given in accordance with the terms of the applicable Storage Agreement, all claims against the Bullion Custodian will be deemed to have been waived. In addition, no action, suit or other proceeding to recover any loss, damage or destruction may be brought against the Bullion Custodian unless notice of such loss, damage or destruction has been given in accordance with the terms of the applicable Storage Agreement and unless such action, suit or proceeding shall have been commenced within 12 months from the time such notice is sent to the Bullion Custodian. The Bullion Custodian will not be responsible for any special, incidental, consequential, indirect or punitive losses or damages (including lost profits or lost savings), and whether or not the Bullion Custodian had knowledge that such losses or damages might be incurred.

43. Pursuant to each of the Storage Agreements, the Bullion Custodian will be required to exercise the same degree of care and diligence in safeguarding the property of a Fund as any reasonably prudent person acting as custodian of the bullion would exercise in the same circumstances. The Bullion Custodian will not be entitled to an indemnity from the Fund in the event the Bullion Custodian breaches its standard of care.

44. The Bullion Custodian reserves the right to reject bullion delivered to it if the bullion contains a hazardous substance or if such bullion is or becomes unsuitable or undesirable for metallurgical, environmental or other reasons.

45. The Filer may terminate the custodial relationship with the Bullion Custodian by giving written notice to the Bullion Custodian of its intent to terminate the applicable Storage Agreement if: (i) the Bullion Custodian is in default in carrying out any of its obligations under such Storage Agreement that is not cured within ten business days following the Filer giving written notice to the Bullion Custodian of such default; (ii) the Bullion Custodian is dissolved or adjudged bankrupt, or a trustee, receiver or conservator of the Bullion Custodian or of its property is appointed, or an application for any of the foregoing is filed; or (iii) the Bullion Custodian is in breach of any representation or warranty contained in such Storage Agreement. The obligations of the Bullion Custodian include, but are not limited to, maintaining an inventory of a Fund's bullion stored with the Bullion Custodian, providing a monthly inventory to the Filer, maintaining a Fund's bullion physically segregated and specifically identified as the Fund's property, and taking good care, custody and control of the Fund's bullion. The Filer believes that all of these obligations are material and anticipates that it would terminate the Bullion Custodian as custodian if the Bullion Custodian breaches any such obligation and does not cure such breach within ten business days of the Filer giving written notice to the Bullion Custodian of such breach. Prior to terminating the custodial relationship with the Bullion Custodian, the Filer will appoint a replacement custodian for bullion that complies with the requirements under NI 81-102.

46. The Bullion Custodian carries such insurance as it deems appropriate for its businesses and its position as custodian of the Funds' bullion and will provide the Filer, on behalf of the Funds, with at least 30 days' notice of any cancellation or termination of such coverage. The Funds' ability to recover from the Bullion Custodian is not contingent upon the Bullion Custodian's ability to claim on its own insurance or the Sub-Custodian's ability to claim on its own insurance.

47. Based on information provided by the Bullion Custodian, the Filer believes that the insurance carried by the Bullion Custodian, together with its status as a Canadian Crown corporation with its obligations generally constituting unconditional obligations of the Government of Canada, provides the Funds with such protection in the event of loss or theft of each Fund's bullion stored at the Bullion Custodian or at the Sub-Custodian that is consistent with the protection afforded under insurance carried by other custodians that store gold and silver bullion commercially.

48. The Filer will ensure that bullion held by the Bullion Custodian or Sub-Custodian will be subject to a physical count by a representative of the Filer periodically on a spot-inspection basis as well as subject to audit procedures by the Funds' external auditors on at least an annual basis.

49. The Filer will ensure that no director or officer of the Filer or its General Partner, or representative of the Funds or the Filer will be authorized to enter into the bullion storage vaults without being accompanied by at least one representative of the Bullion Custodian or Sub-Custodian or, if bullion is held by another custodian, that custodian, as the case may be.

50. The Filer will ensure that no part of the stored bullion may be delivered out of safekeeping by the Bullion Custodian (except to an authorized sub-custodian thereof) or, if bullion is held by another custodian, that custodian (except to an authorized sub-custodian thereof), without receipt of an instruction from the Filer in the form specified by the Bullion Custodian or such custodian indicating the purpose of the delivery and giving direction with respect to the specific amount.

51. The Filer believes that the custodial arrangements with the Bullion Custodian and Sub-Custodian in connection with the Funds' bullion are consistent with industry practice.

52. The Filer will not be responsible for any losses or damages to the Fund arising out of any action or inaction by the Funds' custodians or any sub-custodians holding the assets of the Funds, including the Custodian or its sub-custodians holding the assets of the Funds other than bullion and the Bullion Custodian and/or the Sub-Custodian holding bullion owned by the Funds.

53. The Filer will have the authority to change the custodial arrangements described above including, but not limited to, the appointment of a replacement custodian or sub-custodian and/or additional custodians or sub-custodians subject to the requirements under NI 81-102.

54. The Filer has determined that it would be in the best interests of each Fund to receive the Exemption Sought.

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:

In respect of the ETF Exemption:

(a) The investment by a Fund in Underlying ETFs and/or Silver is in accordance with the fundamental investment objectives of the Fund;

(b) The Fund does not sell short securities of Underlying ETFs;

(c) The securities of the Underlying ETFs are traded on a stock exchange in Canada or the United States;

(d) The securities of the Underlying ETFs are treated as specified derivatives for the purposes of Part 2 of NI 81-102;

(e) A Fund may not purchase securities of an Underlying ETF if, immediately after the purchase, more than 10% of the net assets of the Fund in aggregate, taken at market value at the time of the purchase, would consist of securities of the Underlying ETFs;

(f) a Fund does not enter into any transaction if, immediately after such transaction, more than 20% of the net assets of the Fund, taken at market value at the time of the transaction, would consist of, in aggregate, securities of Underlying ETFs and all securities sold short by the Fund;

(g) a Fund does not purchase Gold and Silver Products if, immediately after such purchase, more than 10% of the net assets of the Fund, taken at market value at the time of such purchase, would consist of Gold and Silver Products; and

(h) a Fund does not purchase Gold and Silver Products if, immediately after such purchase, the market value exposure to gold or silver through the Gold and Silver Products is more than 10% of the net assets of the Fund, taken at market value at the time of such purchase.

In respect of the Bullion Custody Exemption:

(i) The Bullion Custodian, and the Sub-Custodian or its parent company, has in excess of the highest minimum capitalization amount of shareholders' equity required under NI 81-102 for entities qualified to act as a custodian or sub-custodian for assets held in Canada.

(j) The Funds and the Bullion Custodian are limited to using the Sub-Custodian as sub-custodian for the Fund's Physical Silver only, which will be held only in Canada;

(k) In respect of the compliance reports to be prepared by the Bullion Custodian pursuant to paragraphs 6.7(1)(b), 6.7(1)(c)(ii) and 6.7(2)(c) of NI 81-102, as such paragraphs will not be applicable given the nature of the relief granted herein, the Bullion Custodian shall include a statement in such reports regarding the completion of the Bullion Custodian's review process for the Sub-Custodian and that the Bullion Custodian is of the view that the Sub-Custodian continues to be an appropriate sub-custodian to hold the Funds' silver bullion in Canada.

"Vera Nunes"
Investment Fund Branch
Ontario Securities Commission