Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemptive relief granted to permit the Royal Canadian Mint, Dillon Gage Inc. and its subsidiary to be appointed as sub-custodians to hold the bullion of current and future funds for whom CIBC Mellon acts as custodian inside Canada, subject to certain conditions -- National Instrument 81-102 Investment Funds.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 6.1(3)(b), 6.2, 19.1.

April 30, 2019

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
THE FUNDS (as defined below)

AND

IN THE MATTER OF
NINEPOINT GOLD BULLION FUND
(the Representative Fund)

AND

IN THE MATTER OF
NINEPOINT PARTNERS LP
(the Representative Manager)

AND

IN THE MATTER OF
CIBC MELLON TRUST COMPANY
(CIBC Mellon) (collectively, the Filers)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers 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 Investment Funds (NI 81-102) from:

(a) clause 6.1(3)(b) of NI 81-102, to permit the Mint and the Sub-Custodian to the Mint, respectively, which are persons or companies that are not described in sections 6.2 or 6.3 of NI 81-102, to be appointed as sub-custodians of the Funds to hold the Funds' bullion; and

(b) section 6.2 of NI 81-102 to permit the Mint and the Sub-Custodian to the Mint, as applicable, to be appointed as sub-custodians of the Funds to hold the Funds' bullion in Canada.

(collectively, the Requested Relief).

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

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

(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each other province and territory in Canada (together with Ontario, the Jurisdictions).

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.

"bullion" means physical silver, gold, platinum or palladium bullion.

"Custodian" means CIBC Mellon or any entity that is an affiliate and acts as successor custodian and that meets the requirements in NI 81-102 for a custodian.

"Funds" means the Representative Fund and each of the other public investment funds now, or in the future, that has appointed, or will appoint, the Custodian to act as custodian under NI 81-102 that holds, or intends to hold, bullion in its investment portfolio and that is, or will be, managed by a Manager.

"Manager" means the Representative Manager and each of the investment fund managers of the Funds.

"Mint" means The Royal Canadian Mint.

"Mint Business Day" means any day other than a Saturday, a Sunday or a holiday observed by the Mint or the Sub-Custodian to the Mint.

"Sub-Custodian to the Mint" means the person or entity listed in Schedule "A" that operates a vault and that is, or will be, appointed as a sub-custodian to the Mint in respect of which the representations relating to a Sub-Custodian to the Mint set out below are applicable.

Representations

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

The Managers

1. The Representative Manager is a limited partnership formed and organized under the laws of the Province of Ontario. The head office of the Representative Manager is located in Toronto, Ontario. The general partner of the Representative Manager is Ninepoint Partners GP Inc. (the General Partner), which is a corporation incorporated under the laws of the Province of Ontario. The General Partner is a wholly-owned, direct subsidiary of Ninepoint Financial Group Inc. Ninepoint Financial Group Inc. is a corporation incorporated under the laws of the Province of Ontario. Ninepoint Financial Group Inc. is the sole limited partner of the Representative Manager and the sole shareholder of the General Partner.

2. The Representative Manager is registered under the securities legislation: (i) in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, and Newfoundland and Labrador as an adviser in the category of portfolio manager; (ii) in Ontario, Newfoundland and Labrador and Quebec as an investment fund manager; and (iii) in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Quebec and Newfoundland and Labrador as a dealer in the category of exempt market dealer.

3. The Representative Manager is the manager and portfolio adviser of the Representative Fund.

4. Each of the Managers has been, or will be, formed and organized under the laws of Canada or a Jurisdiction. Each of the Managers is, or will be, registered under the securities legislation of one or more of the Jurisdictions in such registration categories as are necessary to carry on its business. Each of the Managers is, or will be, the investment fund manager of one or more of the applicable Funds.

The Funds

5. The Representative Fund is an open-ended mutual fund trust established under the laws of Ontario. The units of the Representative Fund are qualified for distribution pursuant to a simplified prospectus, annual information form and Fund Facts dated April 23, 2018 that have been prepared and filed in accordance with the securities legislation of each applicable Jurisdiction.

6. The investment objective of the Representative Fund is to seek to provide a secure, convenient alternative for investors seeking to hold gold. The Representative Fund invests primarily in unencumbered, fully allocated gold bullion and permitted gold certificates, the underlying interest of which is gold.

7. The Representative Fund has obtained exemptive relief from Canadian securities regulatory authorities to invest up to 100% of its net asset value, taken at the market value at the time of investment, in gold and/or permitted gold certificates. The Representative Fund's investment in gold is made in accordance with the conditions described in the exemptive relief and as described in the simplified prospectus of the Representative Fund.

8. Each of the Funds is, or will be, an investment fund established under the laws of Canada or a Jurisdiction. The securities of each of the Funds are, or will be, qualified pursuant to a prospectus or a simplified prospectus, as applicable, that have been prepared and filed with the securities legislation of one or more Jurisdictions such that it will be a reporting issuer under the securities legislation in one or more of the Jurisdictions.

9. The investment objective and/or strategies of each of the Funds specifies, or will specify, that the Fund may invest in bullion. The investment by each of the Funds in bullion is, or will be, made in accordance with the securities legislation of each applicable Jurisdiction or in accordance with an exemption granted by Canadian securities regulatory authorities. Each of the Fund's investments in bullion are, or will be, as described in the prospectus or simplified prospectus of the Fund.

10. Prior to the date hereof, the Representative Fund relied on exemptive relief from the Canadian securities regulatory authorities in relation to its custodian arrangements for bullion in a decision dated December 10, 2015 (the Prior Relief). As a result of the Requested Relief, the Representative Fund will cease to rely on the Prior Relief upon appointment of the Custodian by the Manager pursuant to paragraph 14.

CIBC Mellon

11. CIBC Mellon is a Canadian trust company existing under the Trust and Loans Companies Act (Canada) and is regulated and supervised by the Office of the Superintendent of Financial Institutions. CIBC Mellon provides custodial services to a number of public investment funds in Canada.

12. The head office of CIBC Mellon is located in Toronto, Ontario.

13. Each of CIBC Mellon, the Representative Manager and the Representative Fund is not in default of securities legislation in any of the Jurisdictions.

Appointment of the Custodian

14. The Representative Manager has appointed, or will appoint, the Custodian to act as the custodian of the portfolio assets for the Representative Fund. Each of the Managers has appointed, or will appoint, the Custodian to act as the custodian of the portfolio assets for the applicable Funds. The Custodian acts as the custodian of the portfolio assets for the Representative Fund pursuant to the terms of a custodial services agreement dated April 16, 2018 (as amended and supplemented from time to time) (the Custodial Services Agreement), and the Custodian acts, or will act, as the custodian of the portfolio assets for the Funds pursuant to agreements (such agreements include the Custodial Services Agreement, other trust agreements or custodian agreements (collectively, the Fund Custodian Agreements)), that comply with all of the requirements in Part 6 of NI 81-102, other than the matters covered in the Requested Relief.

15. CIBC Mellon is unable to store a Fund's bullion as it does not currently own a vault facility which could accommodate a Fund's bullion. There are a limited number of custodians that meet the requirements in NI 81-102 and which have the vault space, facilities, operational infrastructure and expertise to hold bullion on behalf of clients.

Appointment of the Mint

16. As a result, CIBC Mellon has appointed, or will appoint, the Mint to be a sub-custodian to CIBC Mellon and to hold each Fund's bullion pursuant to a precious metals storage and custody agreement relating to bullion entered into between CIBC Mellon and the Mint (the Storage and Custody Agreement). Each Manager, on behalf of each Fund, has provided, or will provide, written consent to such appointment. The Storage and Custody Agreement will comply with the requirements of Part 6 of NI 81-102, other than the matters covered in the Requested Relief. The head office of the Mint is located in Ottawa, Ontario.

17. The Mint is not in default of securities legislation in any of the Jurisdictions.

18. In order to meet the bullion custody supply needs of its public investment fund clients in Canada and in considering the options available to the Funds for custody of their bullion, the appointment by the Custodian of the Mint as sub-custodian to the Custodian in respect 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 and custodial risk for the Funds in terms of transporting, storing and managing bullion. The Mint is the appropriate choice to provide bullion custodial services to each Fund because the Mint is experienced in providing bullion storage and custodial services, and is familiar with the requirements relating to the physical handling and storage of bullion.

19. The Custodian has experience in providing bullion custody services to public investment fund clients. The Custodian has appointed, or will appoint, the Mint as its sub-custodian as described in paragraph 16.

20. The Mint is established pursuant to the Royal Canadian Mint Act (Canada) (the "Mint Act") and is a Canadian Crown corporation. Pursuant to section 5 of the Mint Act the Mint is an agent of Her Majesty in right of Canada and, as such, its obligations generally constitute unconditional obligations of the Government of Canada. The Mint is responsible for the minting and distribution of Canada's circulation coins. As part of its operations, the Mint maintains secure storage facilities located in Canada that it owns and operates, and provides storage space to third parties.

21. The Mint had shareholders' equity of (i) C$128,226,000 as at December 31, 2017, the date of its most recent audited annual financial statements that have been made public, and (ii) C$ 143,788,000 as at September 29, 2018, the date of its most recent interim unaudited financial statements that have been made public, each significantly in excess of the requirement in section 6.2 of NI 81-102.

Appointment of the Sub-Custodian to the Mint

22. Due to physical storage capacity constraints and having regard to the amount of bullion which the Funds may acquire, there may not be sufficient space in the vault facilities of the Mint to store all of the Funds' physical bullion. As a result, the Mint may be required to use the services of sub-custodians to store and hold all or a portion of each Fund's physical bullion.

23. The number of entities in Canada which are eligible to act as sub-custodians for the physical storage of bullion is limited. Of these eligible entities, some already have exclusive relationships with other investment funds for storage purposes whereas others simply may not have the excess capacity that the Funds may need to store physical bullion. These capacity constraints have been intensified due to the increased demand for physical commodities and the corresponding need to arrange for safe-keeping.

24. The Mint intends to appoint the Sub-Custodian to the Mint, if necessary, to hold all or a portion of the bullion of each of the Funds in the vault facilities operated by the Sub-Custodian to the Mint located in Canada. As a result of the foregoing, the Mint may be required to hold all or a portion of the Funds' bullion that it does not hold directly in its own vaults in the vaults of the Sub-Custodian to the Mint located in Canada. Each Manager, on behalf of each Fund, will provide written consent to such appointment.

25. The custody arrangements with respect to the holding of the Funds' physical bullion by the Sub-Custodian to the Mint will be governed by the terms of the agreement between the Mint and the Sub-Custodian to the Mint (the Mint Sub-Custodian Agreement), the terms of which will comply with the requirements of Part 6 of NI 81-102, other than the matters covered in the Requested Relief.

26. The Mint and the Sub-Custodian to the Mint are not entities that are currently approved to act as a sub-custodian for portfolio assets held in Canada, as the Mint and the Sub-Custodian to the Mint is not, among other things, a bank listed in Schedule I, II or III of the Bank Act (Canada) or a trust company incorporated under the laws of Canada.

27. The Sub-Custodian to the Mint has experience in the precious metals storage business. The Sub-Custodian to the Mint is a leading provider of secure logistics for valuables, including diamonds, jewellery, precious metals, securities, currency and secure data, serving banks, retailers, governments, mines, refiners and metal traders. Specifically:

(a) International Depository Services of Canada Inc. is an LBMA Associate Member, an IIROC-approved precious metals custodian and a wholly owned subsidiary of Dillon Gage Inc., an international bullion wholesaler and LBMA Associate Member. International Depository Services of Canada Inc. is or will be a Sub-Custodian to the Mint and operates vaults in Toronto, Canada.

28. The Sub-Custodian to the Mint has either: (i) not less than the amount of shareholder's equity required under NI 81-102 (the Shareholder Equity Threshold) for entities qualified to act as a sub-custodian for portfolio assets held in Canada or (ii) an affiliate that does meet the Shareholder Equity Threshold which has, or will before the Sub-Custodian to the Mint acts as the Sub-Custodian to the Mint under this order, guaranteed all of the custodial obligations of the Sub-Custodian to the Mint (a Guaranteed Sub-Custodian). Schedule "A" identifies which of the above requirements the Sub-Custodian to the Mint currently meets.

29. The Storage and Custody Agreement provides that the Mint will monitor the Sub-Custodian to the Mint on a regular basis (at least annually) to ensure that the Sub-Custodian to the Mint either meets the Shareholder Equity Threshold or is a Guaranteed Sub-Custodian.

30. The Representative Manager, each Manager, the Custodian and the Mint believe that the Sub-Custodian to the Mint has the resources and experience required and is an appropriate sub-custodian for the Funds' physical bullion held in Canada, because the Sub-Custodian to the Mint is experienced in providing bullion storage and custodial services, and is familiar with the requirements relating to the physical handling and storage of bullion.

Custodial Arrangements

31. All physical bullion owned by each Fund will be stored in the vault facilities of either the Mint located in Canada or the Sub-Custodian to the Mint located in Canada on a fully allocated and segregated basis. The Custodian, the Mint and the Sub-Custodian to the Mint shall at all times record and identify in the books and records of the Custodian, the Mint and the Sub-Custodian to the Mint that such bullion constitutes the property of the Funds, which in the case of the Custodian, the Mint and the Sub-Custodian to the Mint will be done through the use of a unique account identifier on a per Fund basis.

32. Under the Storage and Custody Agreement and the Mint Sub-Custodian Agreement, the custodial arrangements will be structured in a descending order such that monitoring, instructions, directions, information and other communications will flow from the Custodian, to the Mint and then to the Sub-Custodian to the Mint and vice versa in the case of reporting, instructions, directions, information and other communications ascending up through the custodial structure.

33. If a Fund's bullion is to be stored at the Mint's or the Sub-Custodian to the Mint's facility, under the Storage and Custody Agreement, the Custodian will give written notice to the Mint of its intention to have bullion delivered to and stored at the Mint's or the Sub-Custodian to the Mint's facility, as the case may be. Then a written notice to the same effect will be given by the Mint to the Sub-Custodian to the Mint, if applicable. The notice will specify the amount, weight, type, assay characteristics, bar numbers and bar brands of the precious metal being delivered. The Mint 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 to the Mint. Upon receiving the bullion, the Mint or the Sub-Custodian to the Mint, as applicable, will verify the characteristics of the bullion against the information on the notice. After verification, the Mint will issue a "receipt of deposit" that confirms the count, weight, type, assay characteristics (as identified on the respective bars, and, with respect to other forms of precious metal, on the respective packaging), bar numbers and bar brands of the bullion received (each, a Receipt of Deposit). In the event of a discrepancy arising during the verification process, the Mint will promptly notify the Custodian and will also provide prompt notice to the Manager.

34. The Mint or the Sub-Custodian to the Mint will be required by the Storage and Custody Agreement or the Mint Sub-Custodian Agreement, as applicable, to keep each Fund's fully allocated bullion identifiable as the Fund's property under specifically identified account numbers as directed by the Custodian and will keep it physically segregated at all times from any other property belonging to the Mint or any of its customers. The Mint will provide a monthly inventory statement to the Custodian, and the Custodian and the Manager will reconcile the inventory statement with its records of the Fund's bullion holdings.

35. The Mint is not authorized to deliver stored bullion out of safekeeping by the Mint or to authorize the delivery of stored bullion out of safekeeping by the Sub-Custodian to the Mint, without first receiving written instruction from the Custodian or obtaining the written approval of the Custodian to such delivery based on forms specified by the Mint or the Sub-Custodian to the Mint indicating the purpose of the delivery and giving direction with respect to the specific amount. The Sub-Custodian to the Mint is not authorized to deliver stored bullion out of safekeeping by the Sub-Custodian to the Mint without first receiving a written instruction from the Mint or obtaining the written approval of the Mint to such delivery based on forms specified by the Mint or the Sub-Custodian to the Mint indicating the purpose of the delivery and giving direction with respect to the specific amount. In each case, such instructions and approvals are referred to as a Delivery Direction.

36. The Custodian will not issue a Delivery Direction to the Mint unless it is directed by the Manager and the Fund, in the form specified in the agreement between the Fund and the Custodian.

37. Under the Storage and Custody Agreement, the Mint has 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.

38. All bullion bars purchased by the Funds will be certified by the relevant vendor as bullion conforming to the good delivery standards of the LBMA, the London Platinum and Palladium Market or another internationally recognized bullion trading body.

39. The Representative Manager, each Manager and the Custodian believe that the Fund Custodian Agreement is consistent with industry practice. The Representative Manager, each Manager, the Custodian and the Mint believe that the Storage and Custody Agreement, the Mint Sub-Custodian Agreement and the custodial arrangements with the Custodian, the Mint and the Sub-Custodian to the Mint in connection with the Funds' bullion are consistent with industry practice.

Supervision of the Custodian, the Mint and the Sub-Custodian to the Mint

40. The Manager is responsible for oversight of the work performed by the Custodian relating to the custody of portfolio assets of the Fund. In this regard, each Manager will oversee the Custodian, including, through the Custodian, any custodial functions that are performed by any sub-custodians appointed by the Custodian or any sub-custodians, and the selection and appointment of any sub-custodian by the Custodian, and will conduct ongoing reviews of the quality of the Custodian's services. Each Manager will have the same access to the records of the Custodian as it would if the Manager itself performed the activities and maintained the records.

41. The Custodian may appoint sub-custodians to hold the portfolio assets of the Funds from time to time. The Custodian is responsible for oversight of the sub-custodians in accordance with its standard of care, relating to the custody of portfolio assets of the Fund. The Custodian will have the same access to the records of the sub-custodian as it would if the Custodian itself performed the activities and maintained the records.

42. The Custodian operates a Continuous Risk Assessment Model, which evaluates its sub-custodians by reviewing legal, financial, agent bank, market, operational and other areas of risk to ensure both the safety of assets and the efficient processing of same is maintained at all times. The model is evaluated on an ongoing basis by internal and external audit teams and applicable regulatory bodies.

43. The relationship between the Custodian and the Mint will be primarily one whereby the Custodian is (a) responsible for oversight of the work performed by the Mint and (b) sub-contracts the vault facilities of the Mint for the purposes of storing a Fund's bullion. The Mint will be appointed the sub-custodian of the applicable Fund in Canada, pursuant to a written agreement between the Custodian and the Mint that complies with the requirements of Part 6 of NI 81-102, other than the matters covered in the Requested Relief. The Custodian will be responsible for ensuring that, with regard to the Mint, adequate safeguards are in place, including, in the experience and judgment of the Custodian, satisfactory insurance arrangements. Under the relevant Fund Custodian Agreement, the Custodian is required to use reasonable care in the selection and monitoring of sub-custodians. Pursuant to this obligation, the Custodian has engaged in, and on a periodic basis (at least every two years) thereafter, will engage in a review of the facilities, procedures, records, creditworthiness and level of insurance coverage of the Mint to satisfy itself as to the continuing appropriateness of using the Mint as sub-custodian of the Funds' physical bullion. The Funds will rely upon the Custodian to satisfy itself as to the appropriateness of the use or continued use of the Mint as a sub-custodian of each Fund's bullion.

44. The relationship between the Mint and the Sub-Custodian to the Mint will be primarily one whereby the Mint is (a) responsible for oversight of the work performed by the Sub-Custodian to the Mint and (b) sub-contracts the vault facilities of the Sub-Custodian to the Mint for the purposes of storing a Fund's bullion. The Sub-Custodian to the Mint will be appointed the sub-custodian of the applicable Fund in Canada pursuant to a written agreement between the Mint and the Sub-Custodian to the Mint that complies with the requirements of Part 6 of NI 81-102, other than the matters covered in the Requested Relief. The Mint must have obtained the consent of the Custodian prior to the Sub-Custodian to the Mint being appointed. The Mint will remain responsible for ensuring that, with regard to the Sub-Custodian to the Mint, adequate safeguards are in place, including, in the experience and judgment of the Mint, satisfactory insurance arrangements. Under the Storage and Custody Agreement, the Mint is required to use reasonable care in the selection and monitoring of Sub-Custodian to the Mint. Pursuant to this obligation, the Mint has engaged in, and on a periodic basis (at least every two years) thereafter, will engage in a review of the facilities, procedures, records, creditworthiness and level of insurance coverage of the Sub-Custodian to the Mint to satisfy itself as to the continuing appropriateness of using the Sub-Custodian to the Mint as sub-custodian of the Funds' physical bullion. The Funds and the Custodian will rely upon the Mint, which 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 to the Mint as a sub-custodian of each Fund's bullion.

45. Under the Storage and Custody Agreement, the Mint is required to use reasonable care in the selection and monitoring of the Sub-Custodian to the Mint. Pursuant to this obligation, the Custodian and the Mint will monitor the most recent audited financial statements of the Sub-Custodian to the Mint or their respective affiliates or subsidiaries, in order to ensure that the shareholders' equity of such entities is sufficient with what the Custodian and the Mint believe to be appropriate for an entity acting as custodian of physical bullion and, in any event at sufficient levels in order to meet the Custodian and the Mint's own internal requirements as though the Custodian and the Mint were seeking to deposit their own physical bullion with such sub-custodians. The Custodian and the Mint will also consider the insurance coverage obtained by the Sub-Custodian to the Mint in connection with the Sub-Custodian to the Mint's bullion custody activities.

46. The Mint is required under the Storage and Custody Agreement to ensure that the terms of the agreement between itself and the Sub-Custodian to the Mint are consistent with the terms of the Storage and Custody Agreement.

Audit Rights

47. In relation to each Fund, the sub-custodial activities of the Mint and the Sub-Custodian to the Mint will be limited to holding the Fund's bullion.

48. Each of the Custodian and the Manager will exercise their audit rights under the Storage and Custody Agreement on an on-going basis in order to satisfy itself that the Mint is in substantial compliance with the terms of the Storage and Custody Agreement, and, in particular, that the bullion of the Funds held by the Mint (i) is held by the Mint at vault facilities that are accepted as warehouses for the LBMA or are, in the opinion of the Mint, of a similar standard, (ii) is physically segregated and specifically identified as specified in paragraphs 31 and 34, (iii) has not sustained loss, damage or destruction, and (iv) remains the subject of a subsisting policy of insurance which covers the Mint's liability for the loss, damage or destruction of such bullion in amounts which the Mint deems appropriate in its experience and judgement acting reasonably.

49. Each of the Custodian and the Mint will exercise their audit rights under the Storage and Custody Agreement and the Mint Sub-Custodian Agreement, respectively, on a periodic basis (at least every two years, or more frequently should any material fact come to the Mint or the Custodian's attention that leads it to reasonably conclude that further evaluation should be undertaken) in order to satisfy itself that the Sub-Custodian to the Mint is in substantial compliance with the terms of the Mint Sub-Custodian Agreement, and, in particular, that the bullion of the Funds that the Mint has transferred to the Sub-Custodian to the Mint on behalf of the Fund (i) is held by the Sub-Custodian to the Mint at vault facilities that are accepted as warehouses for the LBMA, or are, in the opinion of the Mint and the Custodian, of a similar standard, (ii) is physically segregated and specifically identified as specified in paragraphs 31 and 34, (iii) has not sustained loss, damage or destruction, and (iv) remains the subject of a subsisting policy of insurance which covers the Sub-Custodian to the Mint's liability for the loss, damage or destruction of such bullion in amounts which the Mint deems appropriate in its experience and judgment acting reasonably. For the sake of clarity, it is understood that the Custodian's audit rights with respect to the Sub-Custodian to the Mint, as specified in the Storage and Custody Agreement, have been arranged by the Mint under the Mint Sub-Custodian Agreement; the Custodian does not have a direct contractual relationship with the Sub-Custodian to the Mint providing for such audit rights.

50. Each Fund will have the right to physically count and have the Fund's auditor subject the Fund's bullion to audit procedures at the vault facilities at the Mint and the Sub-Custodian to the Mint upon request on any Mint Business Day during the Mint's or the Sub-Custodian to the Mint's regular business hours, provided that the Fund has given the Mint, who shall make arrangements with the Sub-Custodian to the Mint, where required, a minimum of five business days' prior written notice and that such physical count or audit procedures do not interrupt the routine operation of the Mint's or the Sub-Custodian to the Mint's facility. The Mint has the right to reschedule the physical audit in the event that the Mint or the Sub-Custodian to the Mint, as the case may be, determines, acting reasonably, that the audit would disrupt the routine operation of the Mint's or the Sub-Custodian to the Mint's facility.

51. The Manager and the Custodian will ensure that bullion held by the Mint or the Sub-Custodian to the Mint will be subject to a physical count and inventory reconciliation by a representative (including an agent) of the Manager and the Custodian, as applicable, annually and periodically on a spot-inspection basis (subject to the notice provisions described in paragraph 50), as well as subject to audit procedures by each Fund's external auditor on at least an annual basis on prior notice.

52. The Storage and Custody Agreement requires that if a Fund's representative (including a director or officer or representative, including an agent, of the Manager) is accessing the Mint's or the Sub-Custodian to the Mint's facility, such representative must be accompanied by at least one representative of the Custodian or at least one representative of the Mint or of the Sub-Custodian to the Mint, as applicable, or if bullion is held by another custodian or sub-custodian, that custodian or its sub-custodians, as the case may be.

Insurance

53. The Custodian's ability to recover from the Mint is not contingent upon the Mint's ability to claim on its own insurance or the Sub-Custodian to the Mint's ability to claim on its own insurance.

54. Each Manager believes that the insurance carried by the Custodian, the insurance carried by the Mint, together with its status as a Canadian Crown corporation with its obligations generally constituting unconditional obligations of the Government of Canada, and the insurance carried by the Sub-Custodian to the Mint, provides each Fund with such protection in the event of loss or theft of the Fund's bullion stored at the Mint or at the Sub-Custodian to the Mint that is consistent with the protection afforded by other custodians that store precious metals bullion commercially and is sufficient.

55. The Mint has confirmed that it has arranged for insurance coverage in respect of any bullion held by the Mint in amounts which the Mint deems appropriate in its experience and judgment, acting reasonably. The Mint has confirmed that pursuant to the terms of its existing relationship with the Sub-Custodian to the Mint, the Sub-Custodian to the Mint has arranged for insurance coverage in respect of any bullion held by the Mint through the vault facilities of the Sub-Custodian to the Mint in amounts which the Mint deems appropriate in its experience and judgment, acting reasonably. The Custodian has discussed with the Mint the level of insurance coverage obtained by the Mint and the Sub-Custodian to the Mint, and the risks insured against by the Mint and the Sub-Custodian to the Mint, and believes that the level of insurance will be sufficient and appropriate for the applicable Fund.

56. By no later than the date of the final receipt of the next simplified prospectus of the Fund (after a Fund first relies on this decision), each Fund will disclose, in its annual information form, the material details of the Fund's custodial and sub-custodial arrangements.

57. Each of the Custodian, the Mint and the Sub-Custodian to the Mint is required to ensure that its own insurance coverage is in an amount that it deems appropriate.

Liability and Standard of Care

58. The Custodian shall indemnify and hold harmless the Fund in respect of all direct loss, damage or expense (a Loss) arising out of any negligence, willful misconduct, fraud or lack of good faith or breach of the standard of care by the Custodian in respect of the services contemplated under the Fund Custodian Agreements. The Custodian has the right under the Storage and Custody Agreement to seek recourse against the Mint in the event such Loss was as a result of a failure by the Mint or the Sub-Custodian to the Mint, to comply with the standard of care, subject to the limitations of liability set out in the Storage and Custody Agreement. The Mint has the right under the Mint Sub-Custodian Agreement to seek recourse against the Sub-Custodian to the Mint in the event such Loss was as a result of a failure by the Sub-Custodian to the Mint to comply with the standard of care, subject to the limitations of liability set out in the Mint Sub-Custodian Agreement.

59. Pursuant to the Fund Custodian Agreements, the Custodian has agreed to exercise (i) the same degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances or (ii) at least the same degree of care as it exercises with respect to its own property of a similar kind if this is a higher degree of care than the degree of care described in (i) hereto.

60. Pursuant to the Storage and Custody Agreement, the Mint has agreed to exercise (i) the same degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances or (ii) at least the same degree of care as it exercises with respect to its own property of a similar kind if this is a higher degree of care than the degree of care described in (i) hereto. The Custodian has satisfied itself that the degree of care to which the Mint is subject under the Storage and Custody Agreement is no less than the degree of care to which the Custodian is subject under the Custodial Services Agreement.

61. The agreement pursuant to which the Mint appoints the Sub-Custodian to the Mint to act as sub-custodian includes a similar standard of care in respect of the obligations of the Sub-Custodian to the Mint as the standard of care set out for the Mint in the Storage and Custody Agreement. The Mint has satisfied itself that the degree of care to which the Sub-Custodian to the Mint is subject under such agreement is no less than the degree of care to which the Mint is subject under the Storage and Custody Agreement.

62. Upon the Mint sending a Receipt of Deposit to the Custodian, the Mint's liability to the Custodian will commence with respect to such bullion and the Mint will bear all risk of loss, destruction and/or damage to the bullion owned by the Fund in the Mint's custody (or in the custody of the Sub-Custodian to the Mint), subject to certain limitations generally based on events beyond the Mint's reasonable control, including, without limitation, acts or omissions or the failure to cooperate by the Custodian and/or third parties, chemical, biological, electromagnetic or nuclear weapons or incidents, terrorism, government confiscation, fire or other casualty, act of God, strike, lockout or other labour disturbance, riot, war or other violence, or any law, order or requirement of any governmental agency or authority. To the extent that the Mint is liable, the Mint has contractually agreed to replace or pay for lost, damaged or destroyed bullion in the Fund's account while in the Mint's or the Sub-Custodian to the Mint's care, custody and control. Under the Storage and Custody Agreement, the Mint's liability terminates with respect to any bullion: (i) at the expiration of the 90 day prior notice of termination for convenience of the Storage and Custody Agreement, whether or not the Fund's bullion thereafter remains in the Mint's or the Sub-Custodian to the Mint's possession and control; (ii) 90 days following the termination of the Storage and Custody Agreement for default, whether or not the Fund's bullion thereafter remains in the Mint's or the Sub-Custodian to the Mint's possession and control; (iii) upon transfer of such bullion to a different customer's account at the Mint or the Sub-Custodian to the Mint; or (iv) upon remittance of the bullion to the Custodian's carrier or representative in the event that the Mint returns the bullion for the reasons specified in the Storage and Custody Agreement.

63. Upon the Sub-Custodian to the Mint sending a Receipt of Deposit to the Mint, the Sub-Custodian to the Mint's liability to the Mint will commence with respect to such bullion and the Sub-- Custodian to the Mint will bear all risk of loss, destruction and/or damage to the bullion owned by the Fund in the Sub-Custodian to the Mint's custody, subject to certain limitations generally based on events beyond the Sub-Custodian to the Mint's reasonable control, including, without limitation, acts or omissions or the failure to cooperate by the Mint and/or third parties, chemical, biological, electromagnetic or nuclear weapons or incidents, terrorism, government confiscation, 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. To the extent that the Sub-Custodian to the Mint is liable, the Sub-Custodian to the Mint has contractually agreed to replace or pay for lost, damaged or destroyed bullion in the Fund's account while in the Sub-Custodian to the Mint's care, custody and control. Under the Mint Sub-Custodian Agreement, the Sub-Custodian to the Mint's liability terminates with respect to any bullion: (i) at the expiration of the 90 day prior notice of termination for convenience of the Mint Sub-Custodian Agreement, whether or not the Fund's bullion, thereafter remains in the Sub-Custodian to the Mint's possession and control; (ii) 90 days following the termination of the Mint Sub-Custodian Agreement for default, whether or not the Fund's bullion thereafter remains in the Sub-Custodian to the Mint's possession and control; (iii) upon transfer of such bullion to a different customer's account at the Sub-Custodian to the Mint; or (iv) upon remittance of the bullion to the Mint's carrier or representative in the event that the Sub-Custodian to the Mint returns the bullion for the reasons specified in the Mint Sub-Custodian Agreement.

64. Each Fund will not be responsible for any losses or damages to the Fund arising out of any breach of standard of care by the Custodian, the Mint or the Sub-Custodian to the Mint.

65. The Custodian, the Mint and the Sub-Custodian to the Mint are not entitled to an indemnity from the Funds in the event that any of the Custodian, the Mint and the Sub-Custodian to the Mint breaches its standard of care.

66. Should the Custodian discover a physical loss, damage or destruction of a Fund's bullion in the Mint's custody, care and control, the Custodian must give written notice to the Mint within five business days after the discovery of any such loss, damage or destruction and will also give written notice to the Fund's Manager. For any discrepancy in the quantity of bullion on an inventory statement, the Custodian must give the Mint written notice of the loss regarding such discrepancy within 60 days after the receipt of the inventory statement in which the discrepancy first appears and will also give written notice to the Fund's Manager. The Mint will, at its discretion, as soon as practicable (subject to applicable limitations of liability as referred to in paragraph 62): (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 based on the advised weight and assay characteristics provided in the initial notice; (ii) compensate the Custodian for the monetary value of the bullion that was lost or destroyed 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 as of the first trading date following the discovery by the Mint of the loss, damage or destruction or, if first discovered by the Custodian, the date of receipt by the Mint of the relevant notice of loss from the Custodian; or (iii) replace a portion of the lost or damaged bullion and compensate the Custodian 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 and the market value of such bullion that was lost or destroyed as of the first trading date following the discovery by the Mint of the loss, damage or destruction or, if first discovered by the Custodian, the date of receipt by the Mint of the relevant notice of loss from the Custodian If the Custodian fails to give such notice in accordance with the terms of the Storage and Custody Agreement, all claims against the Mint 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 Mint if a notice of loss, damage or destruction has been given in accordance with the terms of the Storage and Custody Agreement but an action, suit or proceeding has not been commenced within 24 months from the time of discovery of the loss, damage or destruction. The above represents the Custodian's sole and exclusive remedy with respect to any and all claims, demands, losses, costs, destruction and/or damage for the physical loss, destruction and/or damage of a Fund's bullion. The Storage and Custody Agreement also provides that the Mint will not be responsible for any special, incidental, consequential, indirect or punitive losses or damages (including lost profits or lost savings), whether or not the Mint had knowledge that such losses or damages might be incurred.

67. Should the Mint discover a physical loss, damage or destruction of a Fund's bullion in the Sub-Custodian to the Mint's custody, care and control, the Mint must give written notice to the Sub-Custodian to the Mint within five business days after the discovery of any such loss, damage or destruction and will also give written notice to the Custodian who will give written notice to the Fund's Manager. For any discrepancy in the quantity of bullion on an inventory statement, the Mint must give the Sub-Custodian to the Mint written notice of the loss regarding such discrepancy within 60 days after the receipt of the inventory statement in which the discrepancy first appears and will also give written notice to the Custodian who will give written notice to the Fund's Manager. The Sub-Custodian to the Mint will, at its discretion, as soon as practicable (subject to applicable limitations of liability referred to in paragraph 63) : (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 based on the advised weight and assay characteristics provided in the initial notice; (ii) compensate the Mint for the monetary value of the bullion that was lost or destroyed 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 as of the first trading date following the discovery by the Sub-Custodian to the Mint of the loss, damage or destruction or, if first discovered by the Mint, the date of receipt by the Sub-Custodian to the Mint of the relevant notice of loss from the Mint; or (iii) replace a portion of the lost or damaged bullion and compensate the Mint 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 and the market value of such bullion that was lost or destroyed as of the first trading date following the discovery by the Sub-Custodian to the Mint of the loss, damage or destruction or, if first discovered by the Mint, the date of receipt by the Sub-Custodian to the Mint of the relevant notice of loss from the Mint. If the Mint fails to give such notice in accordance with the terms of the Mint Sub-Custodian Agreement, all claims against the Sub-Custodian to the Mint 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 Sub-Custodian to the Mint if a notice of loss, damage or destruction has been given in accordance with the terms of the Mint Sub-Custodian Agreement but an action, suit or proceeding has not been commenced within 24 months from the time of discovery of the loss, damage or destruction. The Sub-Custodian to the Mint will not be responsible for any special, incidental, consequential, indirect or punitive losses or damages (including lost profits or lost savings), whether or not the Sub-Custodian to the Mint had knowledge that such losses or damages might be incurred.

Termination and Changes to the Custodial Arrangements

68. The Custodian may terminate the sub-custodial relationship with the Mint by giving written notice to the Mint of its intent to terminate the Storage and Custody Agreement if (i) the Mint is in default in carrying out any of its obligations under the Storage and Custody Agreement that is not cured within ten business days following the Custodian giving written notice to the Mint of such default; (ii) the Mint is dissolved or adjudged bankrupt, or a trustee, receiver or conservator of the Mint or of its property is appointed, or an application for any of the foregoing is filed; or (iii) the Mint is in breach of any representation or warranty contained in the Storage and Custody Agreement. The obligations of the Mint with respect to each Fund include, but are not limited to, maintaining an inventory of the Fund's bullion stored with the Mint, providing a monthly inventory to the Custodian, maintaining the Fund's bullion physically segregated, allocated and specifically identifiable as the Fund's property under specifically identified account numbers as directed by the Custodian, and taking good care, custody and control of the Fund's bullion.

69. The Custodian believes that all of the obligations of the Mint as described in paragraph 68 are material and anticipates that it would terminate the Mint as sub-custodian if the Mint breaches any such obligations and does not cure such breach within ten business days of the Custodian giving written notice to the Mint of such breach. Prior to terminating the sub-custodial relationship with the Mint, the Custodian or the Fund will appoint a replacement sub-custodian for bullion that complies with the requirements under NI 81-102.

70. The Manager has determined that it would be in the best interests of each Fund to receive the Requested 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:

(a) The Mint meets the Shareholder Equity Threshold and, as noted on Schedule A, the Sub-Custodian to the Mint either: (i) meets the Shareholder Equity Threshold, or (ii) is a Guaranteed Sub-Custodian. The Mint will monitor the Sub-Custodian to the Mint on a regular basis (at least annually) to ensure that it either meets the Shareholder Equity Threshold or is a Guaranteed Sub-Custodian.

(b) The Custodian will provide to the Principal Regulator for the Funds on an annual basis beginning 60 days after the date upon which the Requested Relief is first relied upon by the Funds, either (i) a current list of all such Funds that are relying on the Requested Relief, or (ii) an update to the list of such Funds or confirmation that there has been no change to such list.

(c) The Funds and the Mint are limited to using the Mint or the Sub-Custodian to the Mint as sub-custodian for the Funds' bullion only, which will be held by the Mint or the Sub-Custodian to the Mint.

(d) The Custodian will obtain, at least annually, a report from the Mint, confirming that the Mint has, to the best of its ability, monitored the most recent audited financial statements of the Sub-Custodian to the Mint and is satisfied that the shareholders' equity of such entities is sufficient with what the Mint believes to be appropriate for an entity acting as custodian of physical bullion and, in any event at sufficient levels in order to meet the Mint's own internal requirements as though the Mint were seeking to deposit its own physical bullion with the Sub-Custodian to the Mint.

(e) In respect of the periodic compliance reports to be prepared by the 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 Custodian shall include a statement in such reports regarding the completion of its review process for the Mint and the Mint's review process for the Sub-Custodian of the Mint and that the Custodian is of the view that the Mint, and the Mint is of the view that the Sub-Custodian to the Mint, continue to be appropriate sub-custodians to hold the Funds' bullion in Canada.

(f) Prior to a Fund relying on this Decision, the Custodian provides to the Fund:

(i) a copy of this Decision;

(ii) a disclosure statement informing the Fund of the implications of this Decision; and

(iii) a form of acknowledgment of the matters referred to in paragraph (g) below, to be signed and returned by the Fund to the Custodian.

(g) A Fund and its Manager seeking to rely on this Decision will, prior to doing so:

(i) acknowledge receipt of a copy of this Decision providing the Requested Relief;

(ii) appoint the Custodian as its custodian under NI 81-102;

(iii) consent to the Custodian providing to staff of the Principal Regulator for the Fund on an annual basis the name of the Fund so long as it relies on this Decision; and

(iv) deliver to the Custodian a signed acknowledgement and agreement binding the Fund to the foregoing.

"Darren McKall"
Manager
Investment Funds and Structured Products Branch
Ontario Securities Commission

SCHEDULE "A"

Name of Parent Company

Name of Sub-Custodian to the Mint which is the Subsidiary operating the vault in question

Location of Vault Facilities

Dillon Gage Inc.{1}

International Depository Services of Canada Inc.{2}

Toronto, Canada

{1} Meets the Shareholder Equity Threshold requirement.

{2} Does not meet the Shareholder Equity Threshold requirement and is a Guaranteed Sub-Custodian with guarantee provided by Dillon Gage Inc.