AlphaPro Management Inc. and Horizons ETFs Management (Canada) Inc.

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted to current, new and future commodity pools from margin deposit limit contained in paragraphs 6.8(1) and 6.8(2)(c) of National Instrument 81-102. Exemption granted to permit current, new and future commodity pools to invest in derivatives in Canada and in the U.S. through the Filer that, in turn, will use dealer in Canada or U.S. future commission merchants. Exemption conditional on the amount of margin deposited not exceeding 30% of the net assets of the funds and on all margin deposited with dealers being held in segregated accounts.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 6.8(1), 6.8(2)(c, 19.1.

June 25, 2012

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

ALPHAPRO MANAGEMENT INC.

HORIZONS ETFs MANAGEMENT (CANADA) INC.

(the Filers)

AND

THE FUNDS

(as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filers on behalf of the exchange-traded mutual funds set out in Schedule "A" and Schedule "B" (the Existing Funds) and such other exchange-traded mutual funds as the filers may establish in the future (the Future Funds, and together with the Existing Funds, the Funds) for a decision (the Exemption Sought) under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for exemptive relief from the following provisions of National Instrument 81-102 -- Mutual Funds (NI 81-102):

1. paragraph 6.8(1) of NI 81-102, to permit each Fund to deposit more than 10 percent of the net assets of the Fund, taken at market value at the time of deposit, with a qualified dealer as margin for specified transactions in Canada; and

2. paragraph 6.8(2)(c) of NI 81-102, to permit each Fund to deposit more than 10 percent of the net assets of the Fund, taken at market value at the time of deposit, with a dealer as margin for specified transactions outside Canada.

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

(a) the Ontario Securities Commission (OSC) 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 is intended to be relied upon in all of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).

Representations

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

General

1. Each Fund is, or will be, a mutual fund trust established as a trust under the laws of the Province of Ontario.

2. The Funds are, or will be, reporting issuers in each of the Jurisdictions.

3. AlphaPro Management Inc. (AlphaPro) has filed:

(a) a preliminary prospectus dated January 4, 2012 in respect of five new exchange-traded mutual funds: Horizons Gold Yield ETF, Horizons Silver Yield ETF, Horizons Crude Oil Yield ETF, Horizons Natural Gas Yield ETF and Horizons Diversified Commodity Yield ETF, further details of each of which are set out in Schedule "A" under the heading "New AlphaPro Funds"; and

(b) a preliminary prospectus dated January 6, 2012 in respect of Horizons Auspice Managed Futures Index ETF, a new exchange-traded mutual fund, further details of which are set out in Schedule "A" under the heading "New AlphaPro Funds".

4. Each of the Funds is, or will be, a commodity pool a such term is defined in National Instrument 81-104 -- Commodity Pools (NI 81-104).

5. Each of the Funds is, or will be, governed by the provisions of NI 81-102, subject to the exceptions relating to commodity pools, as such exemptions are outlined in NI 81-104.

6. In order to achieve its investment objective, each Fund may invest in equity and/or fixed income securities, currencies, commodities and/or financial instruments, including specified derivatives.

7. AlphaPro is the manager and trustee of the Funds identified in Schedule "A" and Horizons ETFs Management (Canada) Inc. is the manager of the Funds identified on Schedule "B".

8. Horizons Investment Management Inc. (the Investment Manager) acts as the Investment Manager of the Funds and is a corporation incorporated under the laws of Ontario. The Investment Manager is an affiliate of each of the Applicants.

9. As set out in Schedule "A" and Schedule "B", in respect of certain of the Funds, the Investment Manager has in turn retained a sub-advisor to make and execute investment decisions on behalf of the Funds (collectively, the Sub-Advisors and each a Sub Advisor).

10. The investment strategies of the Funds will, except to the extent that the Exemption Sought is granted and other exemptive relief is applicable, be limited to the investment practices permitted by NI 81-102 and NI 81-104.

NI 81-102, Subsections 6.8(1) and 6.8(2)(c)

11. With respect to investing a Fund's assets, the Investment Manager or Sub-Advisor, as applicable, may engage in specified derivative transactions in Canada and outside of Canada.

12. The Investment Manager or Sub-Advisor, as applicable, is authorized to establish, maintain, change and close brokerage accounts on behalf of the Funds. In order to facilitate specified derivatives transactions, the Funds have established, or intend to establish, accounts (each an Account) with futures commissions dealers and merchants (Dealers).

13. Each Dealer in the United States of America (each a US Dealer) is regulated by the Commodity Futures Trading Commission (the CFTC) and the National Futures Association (the NFA) in the United States, and is required to segregate all assets held on behalf of clients, including each Fund. Each US Dealer is subject to audits and must have insurance to guard against employee fraud. Each US Dealer has a net worth, determined from its most recent audited financial statements that have been made public, in excess of the equivalent of $50 million. Each US Dealer has an exchange assigned to it as its designated self-regulatory organization (the DSRO). As a member of a DSRO, each US Dealer must meet capital requirements, comply with the conduct rules of the CFTC, NFA and its DSRO, and participate in an arbitration process with a complainant.

14. The Dealers are members of the clearing corporations and exchanges that the standardized futures in the portfolio of the Funds are primarily traded through. The clearing corporation is obliged to apply its surplus funds and the security deposits of its members to reimburse funds owed to clients from failed members.

15. The Dealers require, for each Account, that cash and/or government securities be deposited with the Dealer(s) as collateral for specified derivatives transactions (Margin). Margin represents the minimum amount of funds that must be deposited with a Dealer to initiate trading in specified derivatives transactions or to maintain the Dealer's open position in standardized futures.

16. Dealers are required to hold all Margin, including cash and government securities, in segregated accounts and the Margin is not available to satisfy claims against the Dealer made by creditors of the Dealer.

17. Margin will be deposited with Dealers in respect of standardized futures traded on exchanges.

18. Levels of Margin are established at the Dealers' discretion. However, the Funds expect to operate generally with an approximate average margin utilization of 20% of the net asset value of each Fund, and a maximum margin utilization of 30% of the net asset value of each Fund. At no time will more than 30% of the net assets of a Fund be deposited with Dealers as Margin.

19. The Requested Relief would allow the Funds to invest in standardized futures more extensively with any one Dealer.

20. Any use of leverage by a Fund will be in accordance with the applicable investment objectives and investment restrictions of the Fund.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) the Funds shall only use margin such that the amount of Margin held by any one dealer or dealers in aggregate within Canada or outside Canada on behalf of a Fund does not exceed 30% of the net assets of the Fund, taken at market value as at the time of the deposit; and

(b) all Margin deposited with any dealers within Canada or outside Canada is and will be held in segregated accounts and is not, and will not be available to satisfy claims against such dealers made by creditors of the dealers.

SCHEDULE "A"

ALPHAPRO FUNDS

{1} Affiliate of the Manager

{2} Affiliate of a minority shareholder of the Manager

SCHEDULE "B"

HEMI FUNDS

{1} Affiliate of the Manager

{2} Affiliate of a minority shareholder of the Manager