Northwest & Ethical Investments L.P.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from sections 2.5(2)(a) and 2.5(2)(c) of National Instrument 81-102 Investment Funds to permit mutual funds to invest up to 10% of net asset value in commodity ETFs traded on U.S. stock exchanges.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 2.5(2)(a), 2.5(2)(c) and 19.1.

March 30, 2020

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. (NEI) AND IN THE MATTER OF THE FUNDS (as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer (as defined below) in respect of any Existing and Future Funds (as defined below) managed and advised by NEI or an affiliate thereof (together, the Filer) and to which National Instrument 81-102 Investment Funds (NI 81-102) applies, for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) pursuant to section 19.1 of NI 81-102 exempting each Fund (as defined below) from sections 2.5(2)(a) and 2.5(2)(c) of NI 81-102 to permit each Fund to invest in exchange traded funds (ETFs) traded on a stock exchange in the United States that do not qualify as "index participation units" (IPUs) (as defined in NI 81-102) (each referred to as an Underlying ETF) and that seek to provide daily results that replicate the daily performance of one or more Permitted Precious Metals (as defined below) on an unlevered basis, and/or the value of a specified derivative the underlying interest of which is a Permitted Precious Metal on an unlevered basis.

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

(A) the Ontario Securities Commission is the principal regulator for the Application: and

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

Interpretation

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

The term Future Funds when used herein means investment funds that will be reporting issuers to which NI 81-102 applies and of which the Filer will act as manager and portfolio adviser in the future.

The term Existing Funds when used herein means investment funds that currently exist and of which the Filer currently acts as manager and portfolio adviser.

The term Funds when used herein means collectively the Future Funds and the Existing Funds (each, a Fund).

The term Permitted Precious Metal when used herein has the same meaning as defined in NI 81-102.

Representations

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

Northwest & Ethical Investments L.P. and the Funds

1. 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.

2. The Filer is registered as a portfolio manager and commodity trading manager in Ontario, an exempt market dealer in British Columbia, Ontario, Québec and Saskatchewan, and as an investment fund manager in British Columbia, Newfoundland and Labrador, Ontario and Québec.

3. The Filer is, or will be, the manager and portfolio manager of the Funds. The Filer may appoint one or more sub-advisors to provide the Filer with investment advice in respect of a Fund's investments in securities.

4. Each Existing Fund is, and each Future Fund will be: (a) an open-ended mutual fund established under the laws of the province of Ontario, (b) a reporting issuer under the laws of some or all of the provinces and territories of Canada, and (c) governed by the provisions of NI 81-102, subject to any relief therefrom granted by the securities regulatory authorities.

5. Securities of each Existing Fund are, and securities of each Future Fund will be, qualified for distribution in some or all of the provinces and territories of Canada under a simplified prospectus, annual information form and fund facts prepared in accordance with National Instrument 81-101 Mutual Fund Prospectus Disclosure ("NI 81-101") and filed with and receipted by the securities regulators in the applicable Jurisdiction(s).

6. None of the Filer or the Funds are in default of securities legislation in any Jurisdiction of Canada.

7. The investment objective and investment strategies of each Fund are, or will be, set out in the Fund's simplified prospectus and do, or will, permit the making of investments in the Underlying ETFs.

The Underlying ETFs

8. The Underlying ETFs are not subject to NI 81-102.

9. The securities of each Underlying ETF trade, or will trade, on a stock exchange in the United States.

10. The assets of Underlying ETFs consist primarily of one or more physical commodities, or derivatives that have an underlying interest in such physical commodity or commodities, the primary objective of which is to replicate the performance of the applicable commodity or commodities on an unlevered basis. These physical commodities will be Permitted Precious Metals.

Investment in the Underlying ETFs

11. The Funds propose to have the ability to invest in the Underlying ETFs, the securities of which are not IPUs.

12. 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 Fund.

13. Any regulatory concerns, such as undue risk, liquidity concerns or lack of transparency, in connection with investing in the Underlying ETFs are mitigated by the following facts:

(a) The Underlying ETFs trade on a U.S. exchange and are generally relatively liquid. The Underlying ETFs will be "registered" investment companies in the United States, which means that there will be clear disclosure about the Underlying ETFs readily available in the marketplace.

(b) 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.

(c) Investments by the Funds in Commodity ETFs will be very limited. In accordance with the investment strategies of the Funds, no more than 10% of the net asset value of the Fund will be invested in Underlying ETFs taken at market value at the time of purchase.

(d) The simplified prospectus of the Funds will disclose: (i) in the investment strategy section: (I) that the Funds have obtained relief to invest in securities of the Underlying ETFs; (II) an explanation of what this type of Underlying ETFs is; (III) that the Funds may indirectly invest in Permitted Precious Metals; and (ii) the risks associated with such investments.

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 relief is granted, provided that:

(a) the investment by a Fund in securities of an Underlying ETF is in accordance with the fundamental investment objectives of the Fund:

(b) the securities of the Underlying ETFs are traded on a stock exchange in the United States:

(c) each Fund does not purchase securities of an Underlying ETF if, immediately after the transaction, more than 10% of the net asset value of the Fund, taken at market value at the time of the transaction, would consist of securities of Underlying ETFs:

(d) a Fund's market value exposure (whether direct or indirect, including through Underlying ETFs or any investment permitted under NI 81-102) to all physical commodities (including gold) does not exceed 10% of the net asset value of the Fund, taken at market value at the time of the transaction:

(e) the simplified prospectus of the Funds discloses, and the simplified prospectus of each Future Fund will disclose:

a. in the investment strategy section:

i. that the Fund has obtained relief to invest in securities of the Underlying ETFs;

ii. an explanation of what this type of Underlying ETF is; and

iii. that the Fund may indirectly invest in Permitted Precious Metals; and

b. the risks associated with such investments and strategies.