Pursuant to National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, the fund and their manager are exempted from the dealer registration requirement for certain limited trading activities to be carried out by these parties in connection with warrant offerings by the fund, as the limited trading activities involve: i) the forwarding of short form prospectuses and the distribution of warrants to acquire units to existing holders of units and ii) the subsequent distribution of units to existing holders of warrants, upon their exercise of the warrants, through an appropriately registered dealer.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1) and 74(1).
Multilateral Instrument 11-102 Passport System, s. 4.7(1).
National Instrument 45-106 Prospectus and Registration Exemptions, ss. 2.1, 3.1, 3.42 and 8.5.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 8.5.
January 10, 2014
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
ENERGY LEADERS INCOME FUND
HARVEST PORTFOLIOS GROUP INC.
(the Manager) (collectively with the Fund, the Filers)
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) exempting the Filers from the dealer registration requirement in the Legislation in respect of certain trades (the Warrant Offering Activities) to be carried out by the Manager, on behalf of the Fund, in connection with a proposed offering (the Warrant Offering) of warrants (the Warrants) to acquire trust units (the Trust Units) of the Fund, to be made pursuant to a short form (final) prospectus (the Warrant Prospectus).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
1. the Ontario Securities Commission is the principal regulator for this application; and
2. each 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 British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut (collectively, the Passport Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
1. The Fund is a trust established by declaration of trust under the laws of the province of Ontario.
2. The Manager is the manager, trustee and promoter of the Fund.
3. The Manager was appointed as manager of the Fund and performs management, portfolio management and administrative services for the Funds pursuant to the declaration of trust of the Fund.
4. The Fund is a reporting issuer in each of the provinces and territories of Canada and is not in default of securities legislation in any jurisdiction.
5. The Fund is not a mutual fund under securities legislation of the provinces and territories of Canada.
6. The head office of each of the Filers is located in Oakville, Ontario.
7. The authorized capital of the Fund consists of an unlimited number of Trust Units. The Trust Units are listed and posted for trading on the Toronto Stock Exchange (the TSX).
8. The Fund is subject to certain investment restrictions that, among other things, limit the securities that may be acquired for the investment portfolio which the Fund owns.
9. The investment objectives of the Fund are to provide holders of Trust Units with (i) monthly cash distributions; (ii) the opportunity for capital appreciation; and (iii) lower overall volatility of the portfolio returns than would otherwise be experienced by owning the equity securities held by the Fund directly; by investing in the portfolio securities and writing covered call options on up to 33% of the equity securities of energy issuers held in the portfolio.
10. The Fund's portfolio consists of equity securities of energy issuers.
11. The Fund filed a final long form prospectus dated April 27, 2012, under the securities legislation of Ontario and each of the Passport Jurisdictions for the initial issuance of units of the Fund (Units), each Unit consisted of one transferable Trust Unit and one purchase warrant to subscribe for additional Trust Units. There are no Units or warrants currently outstanding.
12. The Fund does not engage in the continuous distribution of securities.
13. In connection with the Warrant Offering, the Fund has filed a preliminary short form prospectus (Warrant Prospectus), under the securities legislation of Ontario and each of the Passport Jurisdictions. Under the Warrant Offering, each holder of Trust Units, as at a specified record date, will be entitled to receive, for no consideration, one Warrant for each Trust Unit held by such holder.
14. Holders of Warrants will be entitled, upon the exercise of such Warrants, to subscribe for Trust Units, pursuant to subscription privileges provided for in the Warrants, at a subscription price to be specified in the Warrant Prospectus. Two Warrants will entitle the holder to subscribe for one Trust Unit under a basic subscription privilege. Holders of Warrants who exercise Warrants under the basic subscription privilege may also subscribe, pro rata, for additional Trust Units that are not subscribed for by other holders under the basic subscription privilege, pursuant to the terms of an additional subscription privilege. The term for the exercise of Warrants (including both the basic subscription privilege and the additional subscription privilege) will not exceed six months.
15. The Fund intends to apply to list the Warrants on the TSX.
16. The Warrant Offering Activities will consist of:
(a) the distribution of the Warrant Prospectus and the issuance of Warrants to the holders of Trust Units (as at the record date specified in the Warrant Prospectus), after the Warrant Prospectus has been filed, and receipts obtained, under the securities legislation of Ontario and each of the Passport Jurisdictions; and
(b) the distribution of Trust Units to holders of Warrants, upon the exercise of such Warrants by the holder, through a registered dealer that is registered in a category that permits the registered dealer to make such distribution.
17. The Fund is in the business of trading by virtue of its portfolio investing and trading activities. As a result, its capital raising activities, including the Warrant Offering Activities, would require each of the Filers to register as a dealer in the absence of this decision (or another available exemption from the dealer registration requirement).
18. Section 8.5 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) provides that the exemptions from the dealer registration requirements set out in section 3.1 [Rights offering] and section 3.42 [Conversion, exchange, or exercise] of NI 45-106 no longer apply.
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 Fund, and the Manager acting on behalf of the Fund, are not subject to the dealer registration requirement in respect of the Warrant Offering Activities.