1832 Asset Management L.P. et al.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemptive relief granted from subsection 6.1(1), paragraph 6.1(3)(b) and section 6.2 of NI 81-102 to permit the Royal Canadian Mint to act as Funds' custodian and for International Depository Services of Canada Inc. to act as sub-custodian to the Mint -- State Street Trust Company Canada acts as custodian of the Funds' assets other than Bullion and the Bank of Nova Scotia, the sub-custodian to State Street Trust Company Canada, expected to cease offering Bullion custody services -- Funds wishing to appoint the Royal Canadian Mint to custody the Bullion of the Funds, together with State Street Trust Company Canada as non-Bullion custodian -- Due to physical storage capacity constraints, the Royal Canadian Mint may appoint International Depository Services of Canada Inc. to act as Bullion sub-custodian -- Funds unable to appoint the Royal Canadian Mint as the custodian of the Funds' Bullion, alongside State Street Trust Company Canada as non-Bullion custodian, because subsection 6.1(1) of NI 81-102 provides that a Fund may have one custodian -- Royal Canadian Mint and International Depository Services of Canada not qualified custodians under sections 6.2 of NI 81-102 -- Relief granted subject to conditions -- National Instrument 81-102 Investment Funds.

Applicable Legislative Provisions

National Instrument 81-102 Investments Funds, ss. 6.1(1), 6.1(3)(b), 6.2 and 19.1.

March 9, 2021

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 1832 ASSET MANAGEMENT L.P. (1832 AM) OR AN AFFILIATE (collectively, the Manager) AND IN THE MATTER OF DYNAMIC PRECIOUS METALS FUND, DYNAMIC STRATEGIC GOLD CLASS AND ANY OTHER EXISTING OR FUTURE INVESTMENT FUNDS MANAGED BY THE MANAGER TO WHICH NATIONAL INSTRUMENT 81-102 INVESTMENT FUNDS (NI 81-102) APPLIES (the Funds)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from 1832 AM on behalf of the Funds that it manages and on behalf of the Funds managed by its affiliates 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) subsection 6.1(1) and section 6.2 of NI 81-102, to permit the Mint to act as custodian to hold the Fund's Bullion; and

(b) paragraph 6.1(3)(b) and section 6.2 of NI 81-102, to permit the Sub-Custodian to the Mint, a person or company that is not described in sections 6.2 or 6.3 of NI 81-102, to be appointed as sub-custodian of the Funds to hold the Funds' Bullion.

(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.

1832 AM means 1832 Asset Management L.P.

Bullion means gold, silver, platinum and palladium bullion.

Manager means 1832 AM and each person or company that is, or may in the future be, registered to act as an investment fund manager in a Jurisdiction and that is, or will be, an affiliate of 1832 AM or its general partner within the meaning of the Securities Act (Ontario).

Metals Funds means Dynamic Precious Metals Fund and Dynamic Strategic Gold Class.

Funds means the Metals Funds and any other existing or future investment funds managed by a Manager to which NI 81-102 applies and Fund means any one of them.

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.

NI 81-102 means National Instrument 81-102 Investment Funds.

Sub-Custodian to the Mint means International Depository Services of Canada Inc.

Representations

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

1832 AM and the Funds

1. 1832 AM is a limited partnership formed and organized under the laws of the province of Ontario. The general partner of 1832 AM is 1832 Asset Management G.P. Inc., an Ontario corporation wholly-owned directly by the Bank of Nova Scotia, with its head office in Toronto, Ontario.

2. 1832 AM is registered as: (i) a portfolio manager in all the provinces of Canada and in the Northwest Territories and the Yukon; (ii) an exempt market dealer in all of the provinces in Canada (except Prince Edward Island and Saskatchewan); (iii) an investment fund manager in Ontario, Quebec, Newfoundland and Labrador and the Northwest Territories; (iv) a commodity trading manager in Ontario; (v) an adviser in Manitoba; and (vi) a derivatives portfolio manager in Quebec.

3. 1832 AM is the manager of the Metals Funds and a Manager is or will be the manager of the existing Funds and the future Funds.

4. Dynamic Precious Metals Fund is a trust fund organized under the laws of the province of Ontario. Dynamic Strategic Gold Class is a class of shares of Dynamic Global Fund Corporation, a corporation created under the laws of the province of Ontario. Each Fund is or will be an investment fund governed by the laws of Canada or of one of the Jurisdictions. Each Fund is, or will be, a reporting issuer in one or more Jurisdictions.

5. Securities of each existing Fund are, and it is expected that securities of each future Fund will be, qualified for distribution in some or all of the Jurisdictions under a simplified prospectus, annual information form, and fund facts and/or ETF facts prepared and filed in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure or National Instrument 41-101 General Prospectus Requirements. Each Fund is, or will be, governed by NI 81-102, subject to any relief therefrom granted by the securities regulatory authorities.

6. 1832 AM and the existing Funds that it manages are not in default of securities legislation in any of the jurisdictions.

Appointment of the Mint as Custodian of a Fund's Bullion

7. State Street Trust Company Canada (State Street) acts as custodian of the assets other than Bullion of each existing Fund managed by 1832 AM, including the Metal Fund, pursuant to the terms of an amended and restated custodian agreement between 1832 AM, as trustee and manager, and State Street, dated April 27, 2004, which complies with all of the requirements in Part 6 of NI 81-102. State Street or another qualified custodian pursuant to Part 6 of NI 81-102, subject to any relief therefrom granted by the securities regulatory authorities, is or will be the custodian of the assets other than Bullion of each existing or future Fund managed by a Manager, pursuant to an agreement that complies with all of the requirements in Part 6 of NI 81-102, subject to any relief therefrom granted by the securities regulatory authorities. State Street or such other custodian is or will be only responsible for the assets of such Funds that are held directly by it, its affiliates or appointed sub-custodians.

8. The Bank of Nova Scotia acts as sub-custodian to State Street Trust Company Canada as custodian with respect to Bullion of the Metals Funds and the other existing Funds managed by 1832 AM. The Bank of Nova Scotia will cease in the future to offer Bullion custody services.

9. As a result, the Metals Funds and each other existing Fund managed by 1832 AM wish to appoint the Mint as the custodian of such Fund's Bullion. The existing and/or future Funds managed by a Manager also desire or will desire to appoint the Mint as the custodian of such Fund's Bullion.

10. Under subsection 6.1(1) of NI 81-102, a Fund is unable to appoint the Mint as the custodian of such Fund's Bullion since this subsection specifies that the Fund may have one custodian. Under subsection 6.2 of NI 81-102, a Fund is unable to appoint the Mint as the custodian of such Fund's Bullion since the Mint is not qualified to act as a "custodian".

11. The safekeeping of Bullion is a specialized business in respect of which the Mint has particular specialized knowledge, expertise and experience.

12. The head office of the Mint is located in Ottawa, Ontario.

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

14. 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.

15. The Mint had shareholders' equity of (i) C$150,206,000 as at December 31, 2019, the date of its most recent audited annual financial statements that have been made public, and (ii) C$175,638,000 as at September 26, 2020, 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.

16. Each Manager will negotiate the specific terms and conditions of a precious metal storage and custody agreement (each a Storage Agreement) relating to Bullion with the Mint, which will provide for the storage of Bullion generally and will not place any limitations on a Fund's ability to buy or sell Bullion. The Storage Agreement, including the arrangements between the Mint and a Fund in connection with Bullion, will comply with the requirements of Part 6 of NI 81-102, other than with respect to the matters covered in the Requested Relief.

Appointment of the Sub-Custodian to the Mint

17. 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' 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 Funds' Bullion.

18. 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.

19. The Mint may appoint sub-custodians, which are qualified pursuant to Part 6 of NI 81-102, to hold all or a portion of the Bullion of each of the Funds in the vault facilities operated by such sub-custodians located in Canada. The Mint may also 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.

20. The Sub-Custodian to the Mint is not an entity currently approved to act as a sub-custodian for portfolio assets held in Canada, as 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.

21. 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, International Depository Services of Canada Inc. is a London Bullion Market Association (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.

22. 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.

23. The Storage Agreement will provide 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.

24. 1832 AM 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 physical bullion of the existing Funds managed by 1832 AM 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. Each other Manager will make a similar determination for Funds managed by it in respect of which it relies on the Requested Relief.

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

25. Under the Storage Agreement, upon the initial notice being delivered, the Mint or the Sub-Custodian to the Mint, as the case may be, will receive Bullion based on a list provided by a Manager in such written notice that specifies the amount, weight, type, assay characteristics, bar numbers and bar brand(s) of the Bullion to be stored. After verification of bar numbers, bar brands, count, weight, types and assay characteristics, the Mint will issue a "receipt of deposit" that confirms receipt of the Bullion. Pursuant to the Storage Agreement, the Mint will reserve the right to refuse delivery in the event of storage capacity limitations. In the event of a discrepancy arising during the verification process, the Mint will promptly notify the Manager. The Mint and the Sub-Custodian to the Mint will keep the Fund's Bullion fully allocated and specifically identify the Fund's Bullion as the Fund's property and will keep it physically segregated at all times. The Mint will provide a monthly inventory statement, which the Manager will reconcile with the Fund's records of its Bullion holdings. The Manager will have the right to physically count and have the Fund's auditors subject the Fund's Bullion to audit procedures at the vault facilities at the Mint and at the vault facilities of the Sub-Custodian to the Mint upon request on any Mint Business Day during the Mint's or Sub-Custodian to the Mint's regular business hours, provided that such physical count or audit procedures do not interrupt the routine operation of the facility and the requisite security procedures have been observed.

26. Upon the Mint's receipt and taking into possession and control (either directly or through the Sub-Custodian to the Mint) of any of a Fund's Bullion, whether through physical delivery or a transfer of Bullion from a different customer's account at the Mint or at the Sub-Custodian to the Mint, the Mint's liability will commence with respect to such Bullion. The Mint will bear all risk of physical loss of, or damage to, the Bullion owned by the Fund in the Mint's custody (regardless of the location at which the Mint decides to store the Bullion), except in the case of circumstances or causes beyond the Mint's reasonable control, including, without limitation, acts or omissions or the failure to cooperate of the Manager and/or of third parties, fire or other casualty, act of God, strike, lockout or other labour dispute, riot, 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 the Fund's account while in the Mint's or Sub-Custodian to the Mint's care, custody and control. Under the Storage Agreement, the Mint's liability will terminate with respect to any Bullion following termination of the Storage Agreement, whether or not the Fund's Bullion remains in the Mint's or Sub-Custodian to the Mint's possession and control, upon transfer of such Bullion to a different customer's account at the Mint or Sub-Custodian to the Mint or upon a transfer of possession of the Bullion pursuant to the Storage Agreement.

27. Each Manager will ensure that Bullion held by the Mint or Sub-Custodian to the Mint will be subject to a physical count by a representative of the Manager periodically on a spot-inspection basis as well as subject to audit procedures by a Fund's external auditors on at least an annual basis.

28. Each Manager will ensure that no director or officer of the Manager, or its general partner, as the case may be, or representative of the Manager will be authorized to enter into the Bullion storage vaults of the Mint or Sub-Custodian to the Mint without being accompanied by at least one representative of the Mint or Sub-Custodian to the Mint.

29. Each Manager will ensure that no part of a Fund's stored Bullion may be delivered out of safekeeping by the Mint (except to Sub-Custodian to the Mint or other sub-custodian) without receipt of an instruction from the Manager in the form specified by the Mint indicating the purpose of the delivery and giving direction with respect to the specific amount.

30. 1832 AM believes that the custodial arrangements with the Mint and Sub-Custodian to the Mint in connection with the bullion of the existing Funds managed by 1832 AM are consistent with industry practice. Each other Manager will make a similar determination for Funds managed by it in respect of which it relies on the Requested Relief.

Insurance

31. The Mint carries such insurance as it deems appropriate for its businesses and its position as custodian of the Fund's Bullion and will provide the Funds and each Manager with at least 60 days' notice of any cancellation or termination of such coverage.

32. A Fund'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.

33. Based on information provided by the Mint, 1832 AM believes that the insurance carried by the Mint, together with its status as an agent of Her Majesty pursuant to section 5 of the Mint Act with its obligations generally constituting unconditional obligations of the Government of Canada, provides the existing Funds it manages and will provide the future Funds it manages with such protection in the event of loss or theft of a Fund's Bullion stored at the Mint or at the Sub-Custodian to the Mint that is consistent with the protection afforded under insurance carried by other custodians that store gold commercially. Each other Manager will make a similar determination for Funds managed by it in respect of which it relies on the Requested Relief.

Liability and Standard of Care

34. In the event of physical loss, damage or destruction of a Fund's Bullion in the Mint's or Sub-Custodian to the Mint's custody, care and control, a Manager must give written notice to the Mint within three business days after the discovery of any such loss, damage or destruction, but, in the case of loss or destruction of the Fund's Bullion, in any event no more than 60 days after the delivery by the Mint to the Fund of an inventory statement in which the discrepancy first appears. In the event of loss and/or destruction of Bullion, the Mint will, at its discretion, either (i) replace the Fund's Bullion that was lost, destroyed or damaged, based on the weight and assay characteristics provided in the initial notice and/or (ii) compensate the Fund, through the Manager, for the monetary value of the Fund's Bullion that was lost or destroyed, based on the weight and assay characteristics provided in the initial notice and the market value of such Bullion that was lost or destroyed, using the market price of the Bullion on the first trading day following discovery or notification of said loss or destruction. In the event of damage to Bullion, the Mint will restore the portion of damaged Bullion to at least as good a state as it was prior to being damaged. If such notice is not given in accordance with the terms of the Storage 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 unless notice of such loss, damage or destruction has been given in accordance with the terms of the Storage Agreement and unless such action, suit or proceeding shall have been commenced within 12 months from the discovery of loss, damage or destruction. 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.

35. Pursuant to the Storage Agreement, the Mint will be required to exercise the same degree of care, diligence and skill in safeguarding each Fund's property that a reasonably prudent person acting as custodian of the Bullion would exercise in the circumstance. The Fund will not relieve the Mint from its obligation to replace lost, damaged or destroyed Bullion and/or to compensate the Fund for the lost, damaged or destroyed Bullion regarding which the Mint bears the risk of loss, damage or destruction pursuant to the terms of the Storage Agreement.

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

Termination and Changes to the Custodial Arrangements

37. A Manager will be permitted to terminate the custodial relationship with the Mint by giving written notice to the Mint of its intent to terminate the Storage Agreement if: (i) the Mint is in default of its obligations under the Storage Agreement that is not cured within ten business days following the Manager 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 Agreement. The obligations of the Mint include, but are not limited to, maintaining an inventory of a Fund's Bullion stored with the Mint, providing a monthly inventory to the Manager, maintaining the 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.

38. 1832 AM believes that all of these obligations are material and anticipates that it would terminate the Storage Agreement if the Mint breaches any such obligation and does not cure such breach within ten business days of 1832 AM giving written notice to the Mint of such breach.

39. Prior to terminating the custodial relationship with the Mint, a Manager will appoint a replacement custodian for Bullion that complies with the requirements under NI 81-102.

40. A Manager 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.

41. 1832 AM has determined that it would be in the best interests of each existing Fund that it manages to receive the Requested Relief. Each other Manager will ensure that it is in the best interests of each Fund that it manages to rely on 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 Funds and the Mint are limited to using the Sub-Custodian to the Mint as sub- custodian for the Funds' Bullion only, which will be held only in Canada; and

(c) In respect of the compliance reports to be prepared by the Mint 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 Mint shall include a statement in such reports regarding the completion of the Mint's review process for the Sub-Custodian to the Mint and that the Mint is of the view that the Sub-Custodian to the Mint continues to be an appropriate sub-custodian to hold the Funds' Bullion in Canada.

SCHEDULE "A"

{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.