Harvest Portfolios Group Inc. and Harvest Bitcoin Leaders Enhanced Income ETF

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief granted from paragraphs 2.5(2)(a), (a.1) and (c) of National Instrument 81-102 Investment Funds to permit investment funds to invest up to 10% of their respective net asset value, in aggregate, in securities of underlying ETPs that are reporting issuers in the United States and that are regulated by and in good standing with the U.S. Securities and Exchange Commission -- U.S. underlying ETPs are not IPUs, are not reporting issuers in a Canadian jurisdiction and are not subject to NI 81-102 -- Relief granted subject to conditions.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 2.5(2)(a), (a.1) and (c), and 19.1.

April 23, 2025

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
HARVEST PORTFOLIOS GROUP INC.
(the Filer)

AND

IN THE MATTER OF
HARVEST BITCOIN LEADERS ENHANCED INCOME ETF
(the Fund)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Fund and such other mutual funds or alternative mutual funds that are or will be managed from time to time by the Filer or by an affiliate or successor of the Filer to which National Instrument NI 81-102 Investment Funds (NI 81-102) applies (collectively, the Funds and each, a Fund), for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption from the following:

(a) exempting each Fund from the following provisions of NI 81-102 to permit such Fund to invest in securities of IBIT (defined below) and other existing and future exchange-traded products (ETPs) that are not index participation units (IPUs) and whose securities are, or will be, listed for trading on a stock exchange in the United States (collectively, the Underlying ETPs):

(i) paragraph 2.5(2)(a) and (a.1) to permit each Fund to purchase and/or hold securities of an Underlying ETP even though the Underlying ETP is not subject to NI 81-102; and

(ii) paragraph 2.5(2)(c) to permit each Fund to purchase and/or hold securities of an Underlying ETP even though the Underlying ETP is not a reporting issuer in any province or territory of Canada.

(collectively, the Exemption Sought).

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 Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in all 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, MI 11-102 and NI 81-102 have the same meaning if used in this decision, unless otherwise defined herein:

Representations

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

The Filer

1. The Filer is a corporation incorporated under the laws of the Province of Ontario, with its head office located at 610 Chartwell Road, Suite 204 in Oakville, Ontario.

2. The Filer is registered as an investment fund manager and portfolio manager in the province of Ontario and as an investment fund manager in the provinces of Newfoundland and Labrador and Québec.

3. The Filer is, or will be, the registered investment fund manager of each of the Funds.

4. The Filer is not in default of the securities legislation in any of the Jurisdictions.

The Funds

5. Each Fund is, or will be, an investment fund organized and governed by the laws of a Jurisdiction.

6. Each Fund is, or will be, governed by the applicable provisions of NI 81-102, subject to any exemption therefrom that have been or may in the future be, granted by the securities regulatory authorities.

7. Each Fund is, or will be, a reporting issuer in the Jurisdictions.

8. Each Fund is, or will be, subject to NI 81-107 Independent Review Committee for Investment Funds.

9. The Funds may, from time to time, wish to invest in Underlying ETPs in accordance with their investment strategy. The Fund currently wishes to invest in securities of the iShares® Bitcoin Trust (IBIT), which is an Underlying ETP.

10. The fundamental investment objective of the Fund is to invest, on a levered basis, in securities of bitcoin-related issuers selected by the Filer to seek to provide unitholders with (i) monthly cash distributions; (ii) the opportunity for capital appreciation; and (iii) lower overall volatility of portfolio returns than would otherwise be experienced by owning securities of the selected issuers directly on a levered basis. To achieve lower overall volatility of portfolio returns, the Fund generally writes covered call options on up to 50% of the option eligible portfolio securities held in the portfolio of the Fund. The level of covered call option writing may vary based on market volatility and other factors.

11. None of the existing Funds is in default of applicable securities legislation in any Jurisdiction.

IBIT

12. IBIT is a Delaware statutory trust that issues shares (IBIT Shares) representing fractional undivided beneficial interests in its net assets.

13. IBIT is governed by the provisions of a Second Amended and Restated Trust Agreement (the Trust Agreement) executed as of December 28, 2023, as amended from time to time, by the Sponsor and the Trustee and the Delaware Trustee (each as defined below).

14. IBIT seeks to reflect generally the performance of the price of bitcoin, before payment of IBIT's expenses and liabilities, by investing directly in bitcoin. The assets of IBIT consist solely of bitcoin and cash.

15. IBIT Shares are distributed in the United States pursuant to a prospectus dated August 8, 2024, as amended and supplemented from time to time, that is part of a registration statement on Form S-1 under the United States Securities Act of 1933 (the '33 Act) that was filed in respect of IBIT with the United States Securities and Exchange Commission (the SEC).

16. IBIT Shares are listed and traded on The Nasdaq Stock Market LLC (Nasdaq) under the ticker symbol "IBIT". IBIT has net assets in excess of USD$51 billion as of December 31, 2024.

17. IBIT issues IBIT Shares on a continuous basis. IBIT issues and redeems IBIT Shares only in blocks of a specific number of IBIT Shares (called a Basket), or integral multiples thereof, based on the quantity of bitcoin attributable to each IBIT Share (net of accrued but unpaid renumeration due to the Sponsor and any accrued but unpaid expenses or liabilities). IBIT may change the number of IBIT Shares in a Basket. These transactions take place in exchange for cash.

18. Baskets are offered continuously by IBIT at the NAV per IBIT Share multiplied by the Shares in a Basket. Only registered broker-dealers that become authorized participants by entering into a contract with the Sponsor and the Trustee (Authorized Participants) may purchase or redeem Baskets. Authorized Participants deliver only cash to create IBIT Shares and receive only cash when redeeming IBIT Shares.

19. IBIT is not registered, and is not required to be registered, as an "investment company" under the United States Investment Company Act of 1940, as amended (the '40 Act).

20. The sponsor (the Sponsor) of IBIT is iShares Delaware Trust Sponsor LLC, a Delaware limited liability company and an indirect subsidiary of BlackRock, Inc. (Blackrock).

21. The Sponsor arranged for the creation of IBIT, the registration of the IBIT Shares for their public offering in the United States and the listing of the IBIT Shares on the Nasdaq. The Sponsor has certain marketing and administrative duties in respect of IBIT and is responsible for the oversight and overall management of IBIT but has delegated day-to-day administration of IBIT to the Trustee (as defined below) under the Trust Agreement.

22. The trustee (the Trustee) of IBIT is BlackRock Fund Advisors, an indirect, wholly-owned subsidiary of BlackRock.

23. The Trustee is responsible for the day-to-day administration of IBIT. The Trustee has delegated certain day-to-day responsibilities to the Trust Administrator (as defined below).

24. Wilmington Trust, National Association, a national association (the Delaware Trustee), is the Delaware trustee of IBIT.

25. The Bank of New York Mellon serves as the trust administrator (Trust Administrator) of IBIT. The Trust Administrator has been engaged to provide certain administrative services, including, but not limited to, arranging for the computation of the NAV of IBIT; preparing IBIT's financial statements and annual and quarterly reports; and recording payment of fees and expenses on behalf of IBIT. The Bank of New York Mellon is also the custodian for IBIT's cash holdings.

26. Coinbase Custody Trust Company, LLC (the Bitcoin Custodian) is the custodian for IBIT's bitcoin holdings. The Bitcoin Custodian has represented that it is a fiduciary under Section 100 of the New York Banking Law and a qualified custodian for purposes of Rule 206(4)-2(d)(6) under the '40 Act.

27. The Bitcoin Custodian satisfies the criteria for a sub-custodian for assets held outside Canada in Section 6.3 of NI 81-102.

The Underlying ETPs

28. The securities of an Underlying ETP will not meet the definition of an IPU in NI 81-102 because the purpose of the Underlying ETP will not be to:

a. hold the securities that are included in a specified widely quoted market index in substantially the same proportion as those securities are reflected in that index; or

b. invest in a manner that causes the Underlying ETP to replicate the performance of that index.

29. An Underlying ETP's investment objectives and strategies will be consistent with the investment restrictions in NI 81-102 and, as such, a Fund's investment in securities of an Underlying ETP will not cause the Fund to indirectly invest in assets or have access to investment strategies that it would not be permitted to have directly.

30. Each Underlying ETP will be regulated by the SEC as a reporting issuer under the '33 Act. Shares of an Underlying ETP will be registered with the SEC under the '33 Act and will be offered in the primary market in a manner similar to the Funds pursuant to a prospectus filed with the SEC which discloses a description of Underlying ETP's properties and business, a description of the securities being offered for sale, information about the management of the Underlying ETP and financial statements certified by independent accountants, in a manner that is similar to the disclosure requirements under NI 41-101 and Form 41-101F2.

31. Each Underlying ETP will prepare key investor information documents which provide disclosure that is substantially similar to the disclosure required to be included in the ETF facts document required by Form 41-101F4 -- Information Required in an ETF Facts Document.

32. Each Underlying ETP will be subject to continuous disclosure obligations which are substantially similar to the disclosure obligations under National Instrument 81-106 -- Investment Fund Continuous Disclosure. An Underlying ETF will be required to update information of material significance in its prospectus, to prepare management reports and an unaudited set of financial statements at least quarterly, and to prepare management reports and an audited set of financial statements annually.

33. Each Underlying ETP is, or will be, an "investment fund" within the meaning of applicable Canadian securities legislation.

34. The securities of an Underlying ETP are, or will be, listed on a recognized exchange in the United States and the market for them is, or will be, liquid because it is, or will be, supported by designated brokers. As a result, the Filer expects a Fund to be able to dispose of such securities through market facilities in order to raise cash, including to fund the redemption requests of its securityholders.

35. An Underlying ETP may be managed by the Filer or an affiliate or associate of the Filer, or by a third party investment fund manager.

36. An investment in an Underlying ETP by a Fund will otherwise comply with section 2.5 of NI 81-102, including that:

a. no Underlying ETP will hold more than 10% of its net asset value in securities of another investment fund unless the Underlying ETP (i) is a clone fund, as defined in NI 81-102, or (ii) in accordance with NI 81-102, purchases or hold securities (A) of a money market fund, as defined in NI 81-102, or (B) that are IPUs issued by an investment fund; and

b. no Fund will pay management or incentive fees which to a reasonable person would duplicate a fee payable by an Underlying ETP for the same service.

37. Absent the Exemption Sought, an investment by a Fund is an Underlying ETF would be prohibited:

a. by paragraphs 2.5(2)(a) or (a.1) of NI 81-102 because such Underlying ETP may not be subject to NI 81-102;

b. be prohibited by paragraph 2.5(2)(c) of NI 81-102 because such Underlying ETP may not be a reporting issuer in any Jurisdiction; and

c. not qualify for the exception in paragraph 2.5(3)(a) of NI 81-102 because the securities of the Underlying ETPs are not IPUs.

38. The key benefits of a Fund investing in the Underlying ETPs are greater choices, lower fees and expenses and potentially enhanced returns. For example:

a. an investment in an Underlying ETP may lead to efficiencies that result from lower operating expenses and overall management fees than investing directly or through other ETFs;

b. an investment in an Underlying ETP will provide the Fund with access to specialized knowledge, expertise and/or analytical resources of the investment to the Underlying ETP;

c. investing through an Underlying ETP provides a potentially better risk profile, diversification and improved liquidity / tradability than direct holdings of asset classes to which the Underlying ETP provides exposure; and

d. the investment strategies of the Underlying ETPs offer significantly broader exposure to asset classes, sectors and markets than those available in the existing Canadian market.

39. The Filer submits that having the option to allocate a limited portion of a Fund's assets to one or more Underlying ETPs will increase diversification opportunities and may improve the Fund's overall risk/reward profile.

40. An investment in an Underlying ETP by a Fund is an efficient and cost effective alternative to obtaining exposure to securities held by or strategies of the Underlying ETP rather than purchasing those securities directly by the Fund or investing through a Canadian ETF.

41. An investment in an Underlying ETP by a Fund should pose limited investment risk to the Fund because each Underlying ETP will be a reporting issuer in the United States and as such subject to appliable laws.

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 is that the Exemption Sought is granted, provided that:

(a) the investment by a Fund in securities of an Underlying ETP is in accordance with the investment objective of the Fund;

(b) a Fund does not purchase securities of an Underlying ETP if, immediately after the purchase, more than 10% of the net asset value of the Fund, in aggregate, taken at market value at the time of the purchase, would consist of securities of Underlying ETPs;

(c) securities of each Underlying ETP are listed on a recognized exchange in the United States;

(d) each Underlying ETP is, immediately before the purchase by a Fund of securities of that Underlying ETP:

a. an "investment company" subject to the '40 Act and in good standing with the SEC; or

b. regulated by the SEC as a reporting issuer under the '33 Act and in good standing with the SEC; and

(e) the prospectus of each Fund discloses, or will disclose in the next renewal of its prospectus following the date of this decision, in the investment strategy section, the fact that the Fund has obtained the Exemption Sought to permit investments in Underlying ETPs on the terms described in this decision.

"Darren McKall"
Manager, Investment Management Division
Ontario Securities Commission

Application File #: 2025/0188
SEDAR+ File #: 6265489