3iq global cryptoasset fund...2020/09/03 · see “investment strategies”. the fund will not...
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LEGAL_1:47107988.22
This confidential offering memorandum (the “Offering Memorandum”) together with other marketing material constitutes an offering of the securities described herein only in those jurisdictions and to those persons where and to whom they may be lawfully offered for sale. This Offering
Memorandum is not, and in no circumstances, is to be construed as, a prospectus or advertisement or public offering of these securities. This
Offering Memorandum is confidential and contains certain information not publicly disclosed. No one is authorized to make any representation or give any warranty on behalf of the fund other than those representations and warranties made or referred to in this Offering Memorandum. The
securities to be offered hereunder have not been, and will not be, registered under the United States Securities Act of 1933, as amended or any
state securities laws and may not be offered, sold or delivered, directly or indirectly, in the United States of America, its territories, its possessions
and other areas subject to its jurisdiction except pursuant to an exemption therefrom. See “Plan of Distribution”.
CONFIDENTIAL OFFERING MEMORANDUM
Private Placement March 2019
3iQ GLOBAL CRYPTOASSET FUND
3iQ Global Cryptoasset Fund (the “Fund”) is an investment fund established as a trust under the laws of the Province
of Ontario. The Fund proposes to offer Class A units (“Class A Units”) and Class I units (“Class I Units”) on a private
placement basis (the “Offering”) at an initial price of $10.00 per Class A Unit and $10.00 per Class I Unit. The Class
A Units and Class I Units are referred to herein as the “Units”. The Class A Units are available to all investors and
Class I Units are designed for institutional accounts. The Units are available for purchase in Canadian and U.S. dollars.
The Fund’s investment objectives are to seek to provide holders of Units (“Unitholders”) of the Fund with:
(a) exposure to a portfolio of three leading cryptoassets, namely bitcoin, ether and litecoin; and
(b) the opportunity for long-term capital appreciation. See “Investment Objectives”.
To achieve its investment objectives, the Fund will invest substantially all of the net proceeds of the Offering in long-
term holdings of cryptoassets. The Fund has initially invested approximately 50% of its net assets in bitcoin, 35% of
its net assets in ether and 15% of its net assets in litecoin (collectively, the “Cryptoasset Portfolio”). See “Investment
Strategies”.
The Fund will not speculate with regard to short-term changes in cryptoassets. The Fund provides investors with the
ability to invest in cryptoassets without the inconvenience and additional transaction and storage costs associated with
a direct investment in cryptoassets. See “Investment Strategies”.
3iQ Corp. is the manager (the “Manager”) of the Fund and is responsible for providing certain general management
and administrative services to the Fund. 3iQ LP is the trustee of the Fund. TSX Trust Company is the transfer agent
of the Fund. The Manager has engaged ARK Investment Management LLC to act as the cryptoasset consultant to the
Fund and SGGG Fund Services Inc. to provide certain administrative services to the Fund. See “Organization and
Management Details of the Fund – Manager”, “Organization and Management Details of the Fund – Trustee”,
“Organization and Management Details of the Fund – Transfer Agent”, “Organization and Management Details of the
Fund – Cryptoasset Consultant” and “Organization and Management Details of the Fund – Administrator”.
There are certain risk factors associated with an investment in Units, including risks associated with investing
in cryptoassets. There is no guarantee that an investment in Units will earn any positive return in the short or
long term, nor is there any guarantee that the net asset value per Unit will appreciate or be preserved. An
investment in the Units is appropriate only for investors who have the capacity to absorb a loss of all or part of
their investment. There is no market through which the Units may be sold and purchasers may not be able to
resell Units purchased under this Offering Memorandum. See “Risk Factors”.
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Subscriptions for Units are received subject to rejection or allotment in whole or in part by the Manager, the
satisfaction of the conditions set out under “Purchases of Units – Subscription Procedure” and the right of the Manager
to close the subscription books at any time without notice. If there is a misrepresentation in this Offering
Memorandum, purchasers have the right to either sue for damages or to cancel their subscription agreement
in accordance with applicable securities laws. See “Purchasers’ Rights”.
Units are offered on a “private placement” basis on behalf of the Fund by investment dealers and exempt market
dealers, each, as placement agent (collectively, the “Agents” and each, an “Agent”) on a best efforts basis in
accordance with the terms of a separate placement agreement between each Agent and the Fund in reliance upon
certain exemptions from the prospectus requirements of applicable securities legislation. As a result, the Units are
subject to applicable resale restrictions. See “Resale Restrictions”, “Risk Factors” and “Plan of Distribution”.
LEGAL_1:47107988.22
DISCLAIMER
This Offering Memorandum does not constitute, and may not be used for or in conjunction with, an offer or solicitation
by anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorized, or to any
person to whom it is unlawful to make such an offer or solicitation. Prospective purchasers are directed to inform
themselves of and observe such restrictions and all legal requirements of their jurisdiction of residence in respect of
the acquisition, holding and disposition of the Units offered hereunder.
Any prospective purchasers should thoroughly review this Offering Memorandum and are advised to consult
with their professional advisors to assess the business, legal, income tax and other aspects of this Offering.
The Units will be issued only on the basis of information contained in this Offering Memorandum and no other
information or representation is authorized or may be relied upon as having been authorized by the Fund. Any
subscription for Units made by any person on the basis of statements or representations not contained in this Offering
Memorandum, or inconsistent with the information contained herein, shall be solely at the risk of such person. Neither
the delivery of this Offering Memorandum at any time nor any sale of Units shall, under any circumstances, constitute
a representation or create any implication, that there has been no change in the business and affairs of the Fund since
the date of the sale to any other purchaser of the Units offered hereby, or that the information contained herein is
correct as of any time subsequent to the date hereof.
The contents of this Offering Memorandum are confidential. By their receipt hereof, prospective purchasers
agree that they will not transmit, reproduce or make available to anyone, other than their professional advisors,
this Offering Memorandum or any information contained herein.
TABLE OF CONTENTS
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SUMMARY .................................................................................................................................................................. 1
SUMMARY OF FEES AND EXPENSES ................................................................................................................. 5
OVERVIEW OF THE LEGAL STRUCTURE OF THE FUND ............................................................................ 9
INVESTMENT OBJECTIVES .................................................................................................................................. 9
INVESTMENT STRATEGIES .................................................................................................................................. 9
INVESTMENT RESTRICTIONS ............................................................................................................................. 9
INVESTMENT OVERVIEW ................................................................................................................................... 11
RISK FACTORS ....................................................................................................................................................... 25
FEES AND EXPENSES ............................................................................................................................................ 34
DISTRIBUTION POLICY ....................................................................................................................................... 35
REDEMPTION OF UNITS ...................................................................................................................................... 35
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS ........................................................................... 36
EXCHANGE OF TAX INFORMATION ................................................................................................................ 39
ORGANIZATION AND MANAGEMENT DETAILS OF THE FUND .............................................................. 39
CALCULATION OF NET ASSET VALUE ........................................................................................................... 49
PURCHASES OF UNITS ......................................................................................................................................... 50
DESCRIPTION OF THE UNITS ............................................................................................................................ 51
UNITHOLDER MATTERS ..................................................................................................................................... 52
TERMINATION OF THE FUND ............................................................................................................................ 53
USE OF PROCEEDS ................................................................................................................................................ 54
PLAN OF DISTRIBUTION ..................................................................................................................................... 54
LEGAL MATTERS .................................................................................................................................................. 54
LEGAL AND ADMINISTRATIVE PROCEEDINGS ........................................................................................... 54
INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ................................. 54
MATERIAL CONTRACTS ..................................................................................................................................... 54
RESALE RESTRICTIONS ...................................................................................................................................... 55
PURCHASERS’ RIGHTS ........................................................................................................................................ 55
LEGAL_1:47107988.22
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Offering Memorandum may include or incorporate by reference statements about expected future events and
financial and operating results that are forward-looking. Forward-looking statements may include words such as
“anticipate”, “believe”, “could”, “expect”, “goal”, “intend”, “may”, “outlook”, “plan”, “strive”, “target” and “will”.
These forward-looking statements, if any, may reflect the internal projections, expectations, future growth,
performance and business prospects and opportunities of the Fund, the Manager or the Cryptoasset Consultant and
will be based on information currently available to the Fund, the Manager or the Cryptoasset Consultant. Actual results
and developments may differ materially from results and developments discussed in the forward-looking statements,
if any, as they are subject to a number of risks and uncertainties. In developing these forward-looking statements, if
any, certain material assumptions would have been made. These forward-looking statements, if any, would also be
subject to certain risks. See “Risk Factors”. Readers are cautioned not to place undue reliance on such forward-looking
statements and assumptions as the Fund, the Manager or the Cryptoasset Consultant cannot provide assurance that
actual results or developments will be realized or, even if substantially realized, that they will have the expected
consequences to, or effects on, the Fund, the Manager or the Cryptoasset Consultant. These forward-looking
statements are subject to change as a result of new information, future events or other circumstances, as discussed
above, in which case they will only be updated by the Fund, the Manager or the Cryptoasset Consultant where required
by law.
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SUMMARY
The following is a summary of the principal features of the Offering and should be read together with the more detailed
information and financial data and statements contained elsewhere in this Offering Memorandum. Certain capitalized
terms used, but not defined, in this summary are defined in the “Glossary of Terms”.
Fund: The Fund is an investment fund established as a trust under the laws of the Province of Ontario
pursuant to a declaration of trust dated February 16, 2018 (the “Declaration of Trust”). The
registered address of the Fund is 4800-1 King Street West, Box 160, Toronto, Ontario, M5H
1A1. 3iQ Corp. (the “Manager”) is the manager of the Fund. TSX Trust Company is the
transfer agent of the Fund. 3iQ LP is the trustee of the Fund. See “Overview of the Legal
Structure of the Fund”.
Offering: The Fund is offering Class A units (the “Class A Units”) and Class I units (the “Class I Units”)
pursuant to certain exemptions from the prospectus requirements of the securities legislation
of the Provinces and Territories of Canada (the “Offering”). The Class A Units and Class I
Units are referred to herein as the “Units”. The Units are available for purchase in Canadian
and U.S. dollars.
Purchasers of Units will be required to execute a subscription agreement with the Manager
and may be required to execute such certificates and other documents as the Manager may
reasonably require to evidence their eligibility and entitlement to rely on such exemptions.
See “Purchases of Units – Subscription Procedure”.
The Fund reserves the right to discontinue the Offering at any time and from time to time.
Pursuant to applicable securities legislation, a report of an exempt trade must be filed with
securities regulatory authorities that identifies purchasers and the Fund will pay regulatory
fees based on the amount invested.
Price: Purchase Price
The purchase price of a Unit is equal to the sum of (a) the Net Asset Value per Class A Unit
or Class I Unit, as applicable, on the date such subscription is accepted by the Manager and
(b) any costs or expenses per Unit payable by the Fund in connection with the issuance of
such Unit.
Minimum
Subscription:
Initial Investment
100 Class A Units, or such lesser amount as the Manager, in its sole discretion, may accept.
200,000 Class I Units, or such lesser amount as the Manager, in its sole discretion, may
accept.
Subsequent Investment Amount
$1,000 for Class A Units or Class I Units
Investment
Objectives:
The Fund’s investment objectives are to seek to provide holders of Units (“Unitholders”) of
the Fund with:
(a) exposure to a portfolio of three leading cryptoassets, namely bitcoin, ether and
litecoin; and
(b) the opportunity for long-term capital appreciation. See “Investment Objectives”.
Investment
Strategies:
To achieve its investment objectives, the Fund will invest substantially all of the net proceeds
of the Offering in long-term holdings of cryptoassets. The Fund initially invested
approximately 50% of its net assets in bitcoin, 35% of its net assets in ether and 15% of its
net assets in litecoin (collectively, the “Cryptoasset Portfolio”).
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The Fund will not speculate with regard to short-term changes in cryptoassets. The
Cryptoasset Portfolio is designed to maintain exposure to those cryptoassets which the
Manager believes have the best long-term utility or value. The Fund provides investors with
the ability to invest in a diversified portfolio of cryptoassets without the inconvenience and
additional transaction and storage costs associated with a direct investment in cryptoassets.
The Fund does not hedge any U.S. dollar currency exposure back to the Canadian dollar. See
“Investment Strategies”.
Distribution
Policy:
The Fund does not intend to pay distributions. See “Distribution Policy”.
Redemption
Privileges:
Units may be redeemed at the option of Unitholders on each business day (each, a
“Redemption Date”), subject to the Fund’s right to suspend redemptions in certain
circumstances. Units so redeemed will be redeemed at a redemption price equal to the Net
Asset Value per Unit as of the Redemption Date, less any costs and expenses associated with
the redemption, including commissions incurred by the Fund to fund such redemptions. For
a redemption order to be effective on a Redemption Date, the redemption request must be
received in good order by the Manager prior to 1:00 p.m. (EST) on the redemption Date or
such other time as the Manager may determine in its sole discretion. Redemption requests not
received in good order by the Manager by such time will be processed on the following
Redemption Date. Under normal market circumstances, payment of the proceeds of
redemption will be made in Canadian dollars on or before the third business day following a
Redemption Date. Payment of redemption proceeds may be delayed in the event that the Fund
experiences delays or other challenges in selling cryptoassets or receiving the proceeds of
sale of cryptoassets in order to fund such redemptions. See “Risk Factors – Liquidity
Constraints on Cryptoasset Markets may Impact the Fund’s Holdings” and “Financial
Institutions may Refuse to Support Transactions Involving Cryptoassets”.
See “Redemption of Units” and “Redemption of Units – Suspension of Redemptions”.
Termination of
the Fund:
The Fund does not have a fixed termination date. The Manager may, in its discretion,
terminate the Fund without the approval of Unitholders if, in its opinion, it would be in the
best interest of the Unitholders to terminate the Fund.
See “Termination of the Fund”.
Use of Proceeds: The Fund will use substantially all of the net proceeds of the Offering to acquire cryptoassets
for the Cryptoasset Portfolio in accordance with the investment objectives and investment
strategies of the Fund. See “Use of Proceeds”.
Risk Factors: There are certain risk factors associated with an investment in Units, including risks
associated with investing in cryptoassets. There is no guarantee that an investment in
Units will earn any positive return in the short or long term, nor is there any guarantee
that the net asset value per Unit will appreciate or be preserved. An investment in the
Units is appropriate only for investors who have the capacity to absorb a loss of all or
part of their investment. There is no market through which the Units may be sold and
purchasers may not be able to resell Units purchased under this Offering
Memorandum. See “Risk Factors”.
Income Tax
Considerations:
This summary of Canadian federal income tax considerations for the Fund and for Canadian
resident Unitholders is subject in its entirety to the qualifications, limitations and assumptions
set out under “Income Tax Considerations”.
A Unitholder who is an individual (other than a trust) resident in Canada and who holds Units
as capital property (all within the meaning of the Tax Act) will generally be required to
include in the Unitholder’s income for tax purposes for any year the amount of net income
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and net taxable capital gains of the Fund paid or payable to the Unitholder in the year and
deducted by the Fund in computing its income. Any return of capital from the Fund paid or
payable to a Unitholder in a taxation year will reduce the adjusted cost base of the
Unitholder’s Units of the Fund. To the extent that a Unitholder’s adjusted cost base would
otherwise be a negative amount, the negative amount will be deemed to be a capital gain
realized by the Unitholder and the adjusted cost base of the Unit to the Unitholder will be
increased by the amount of such capital gain. Any loss of the Fund cannot be allocated to,
and cannot be treated as a loss of, the Unitholders of the Fund. Upon the actual or deemed
disposition of a Unit, including the exchange or redemption of a Unit, a capital gain (or a
capital loss) will generally be realized by the Unitholder to the extent that the proceeds of
disposition of the Unit exceeds (or is less than) the aggregate of the adjusted cost base to the
Unitholder of the Unit and any reasonable costs of disposition.
The Declaration of Trust requires that the Fund distribute its net income and net realized
capital gains, if any, for each taxation year to Unitholders to such an extent that the Fund will
not be liable in respect of the taxation year for ordinary income tax.
Each investor should satisfy himself or herself as to the tax consequences of an investment in
Units by obtaining advice from his or her own tax advisor. See “Income Tax Considerations”.
Taxation of
Registered Plans:
In the opinion of Osler, Hoskin & Harcourt LLP, counsel to the Fund, provided that the Fund
qualifies as a “mutual fund trust” within the meaning of the Tax Act, such Units will be
qualified investments for trusts governed by registered retirement savings plans, registered
retirement income funds, deferred profit sharing plans, registered disability savings plans,
registered education savings plans and tax-free savings accounts (collectively, “Registered
Plans”). Holders of tax-free savings accounts and annuitants of registered retirement savings
plans and registered retirement income funds should consult their own tax advisors to ensure
Units would not be a “prohibited investment” for the purposes of the Tax Act in their
particular circumstances. In addition, on September 8, 2017, the Department of Finance
released draft income tax legislative proposals relating to certain measures announced in the
March 22, 2017 federal budget, including amendments to the Tax Act that would extend the
application of the prohibited investment rules to a holder of a registered education savings
plan or a registered disability savings plan. See “Income Tax Considerations – Status of the
Fund”.
ORGANIZATION AND MANAGEMENT DETAILS OF THE FUND
Manager: 3iQ Corp. acts as manager, and is the promoter of the Fund. The principal office of the
Manager is located at 4800-1 King Street West, Box 160, Toronto, Ontario, M5H 1A1. See
“Organization and Management Details of the Fund – Manager”.
Trustee: 3iQ LP (the “Trustee”) acts as trustee of the Fund. The general partner of 3iQ LP is 3iQ GP
Inc., a wholly-owned subsidiary of the Manager. The Manager is the sole limited partner of
3iQ LP. See “Organization and Management Details of the Fund – Trustee”.
Transfer Agent: TSX Trust Company (the “Transfer Agent”) will act as transfer agent of the Trust. The
principal office of the Transfer Agent is located in Toronto, Ontario. See “Organization and
Management Details of the Trust – Transfer Agent”.
Administrator: The Manager has engaged SGGG Fund Services Inc. (the “Administrator”) to provide certain
administrative services to the Fund including fund accounting and acting as recordkeeper in
respect of the Units. The principal office of the Administrator is located in Toronto, Ontario.
See “Organization and Management Details of the Fund – Administrator”.
Cryptoasset
Consultant:
The Manager has engaged ARK Investment Management LLC (the “Cryptoasset Consultant”
or “ARK”) to act as the cryptoasset consultant to the Fund. The principal office of the
Cryptoasset Consultant is located at 155 W. 19th Street, 5th Floor, New York, New York
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10011 USA. See “Organization and Management Details of the Fund – Cryptoasset
Consultant”.
Promoter: The Manager may be considered a promoter of the Fund within the meaning of applicable
securities legislation by reason of its initiative in organizing the Fund. See “Organization and
Management Details of the Fund – Promoter”.
Auditor: The auditor of the Fund is MNP LLP, Chartered Professional Accountants, Licensed Public
Accountants, Toronto, Ontario. See “Organization and Management Details of the Fund –
Auditor”.
Custodian: Coinbase, Inc. (the “Custodian” or “Coinbase”) acts as custodian of the assets of the Fund.
The Custodian is located in San Francisco, California, USA. The Custodian may appoint a
sub-custodian from time to time with the consent of the Manager. To the extent required under
securities regulation applicable to the Manager, the Manager will obtain securities regulatory
approval prior to changing the Custodian or approving the appointment of sub-custodians of
the Cryptoasset Portfolio. See “Organization and Management Details of the Fund –
Custodian”.
Reports: Unitholders are sent audited annual financial statements within 90 days of year end and
unaudited semi-annual financial statements within 60 days of June 30, or as otherwise
required by law. Additional interim reporting to Unitholders will be at the discretion of the
Manager. The Fund may enter into other agreements with certain Unitholders, which may
entitle such Unitholders to receive additional reporting. Unitholders will receive the
applicable required tax form(s) within the time required by applicable law to assist
Unitholders in making the necessary tax filings.
No Listing: The Units will not be listed or traded on any stock exchange. The Units are available for
purchase through Fundserv and may be available for purchase on other trading platforms.
Resale
Restrictions:
Unitholders may be restricted from selling their Units under applicable securities laws for an
indefinite period. See “Resale Restrictions”.
Purchasers’
Rights:
Securities legislation in certain of the Provinces of Canada provides purchasers with, in
addition to any other rights they may have at law, a remedy for rescission or damages, or both,
where this Offering Memorandum and any amendment to it and, in some cases, advertising
and sales literature used in connection therewith, contains a misrepresentation (as such term
may be defined in the applicable legislation). However, those remedies, or notice with respect
thereto, must be exercised or delivered, as the case may be, by the purchaser within the time
limits prescribed in applicable legislation. Further, such rights may depend on the particular
prospectus exemption relied upon by the issuer. Each purchaser should refer to the provisions
of the applicable legislation for the particulars of these rights or consult with a legal advisor.
See “Purchasers’ Rights”.
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SUMMARY OF FEES AND EXPENSES
The following table contains a summary of the fees and expenses payable by the Fund and the Manager, which will
therefore reduce the value of a Unitholder’s investment in the Fund. All fees are subject to current and future taxes.
For further particulars, see “Fees and Expenses”.
Fees and Expenses Payable by the Fund
Type of Fee Amount and Description
Expenses of the Offering: The Fund will bear the expenses incurred in connection with the Offering (including
the costs of creating the Fund, the costs of preparing the Offering Memorandum, legal
expenses of the Fund and marketing expenses). Initially, these costs will be paid by
the Manager and reimbursed by the Fund. These expenses will be reimbursed by the
Fund over a 60 month period. See “Fees and Expenses – Fees and Expenses Payable
by the Fund – Expenses of the Offering”.
Fees Payable to the
Manager for Acting as
Manager of the Fund:
An annual management fee of 1.25% in respect of the Class A Units and 0.75% in
respect of the Class I Units of the Fund’s net asset value calculated daily and payable
monthly, plus applicable taxes, are paid to the Manager. The Manager manages the
day-to-day business and operations of the Fund and provides certain general
management and certain administrative services to the Fund. See “Fees and Expenses
– Fees and Expenses Payable by the Fund – Fees Payable to the Manager for Acting
as Manager of the Fund”. The Manager pays the fees of the Cryptoasset Consultant
out of its management fee.
Ongoing Expenses of the
Fund:
In addition to the management fee, the Fund pays all of its own expenses and all
administration expenses incurred by the Manager for its duties as the manager to the
Fund. Such fees and expenses to be borne by the Fund are estimated to be $230,000
per annum and include, without limitation: brokerage and trading commissions and
other fees and expenses associated with the execution of transactions in respect of the
Fund’s investment in cryptoassets; fees payable to the Administrator, the Custodian,
the Transfer Agent, any sub-custodians of the assets of the Fund and other service
providers to the Fund and expenses relating to the monitoring and supervision of such
service providers; legal, audit, and valuation fees and expenses; costs and expenses of
preparing, printing, and mailing financial and other reports to Unitholders, material
for Unitholders’ meetings and securities regulatory filings; costs and expenses of
communication with Unitholders; costs and expenses arising as a result of complying
with all applicable securities legislation and other applicable laws, regulations and
policies; all taxes (including income, capital, federal GST or HST, and
Provincial/Territorial sales taxes); and costs associated with the provision of such
other managerial and administrative services as may be reasonably required for the
ongoing business and administration of the Fund.
The Manager may, from time to time, in its sole discretion, pay a portion of any
ongoing expenses of the Fund which would otherwise be payable by the Fund.
See “Fees and Expenses – Fees and Expenses Payable by the Fund – Ongoing
Expenses of the Fund”.
Fees and Expenses Payable by the Investor
Sales Charge: An investor may pay a sales charge of up to 5% of the initial subscription price of the
Units paid by such investor to the Fund to the dealer of such investor.
Short-Term Trading
Fee:
At the Manager’s discretion, a redemption charge of 0%-3% of the net asset value of
the redeemed Units may be charged to the Unitholder and paid to the Fund if Units are
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redeemed within 30 days of such Units having been acquired. This charge does not
apply to systematic transactions. This short-term trading redemption charge is in
addition to any other fees a Unitholder is otherwise subject to under this Offering
Memorandum. See “Fees and Expenses – Fees and Expenses Payable by the Investor
– Short-Term Trading Fee”.
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GLOSSARY OF TERMS
In this Offering Memorandum, the following terms have the meanings set forth below, unless otherwise indicated.
“AML Regulation” means statutes, regulations and other laws enacted by the government of the applicable
jurisdiction aimed at the prevention and detection of money laundering and terrorist financing activities.
“bitcoin” refers to the digital currency that is the native unit of account within the Bitcoin Network.
“Bitcoin Network” is the network of computers running the software protocol underlying bitcoin, which maintains
the database of bitcoin ownership and facilitates the transfer of bitcoin among parties.
“BitLicense” has the meaning given to it under “Organization and Management Details of the Fund – Custodian”.
“business day” means any day except Saturday, Sunday, a statutory holiday in Toronto, Ontario.
“Class A Units” means the class of transferable, redeemable units of the Fund designated as the “Class A Units”.
“Class I Units” means the class of transferable, redeemable units of the Fund designated as the “Class I Units”.
“CRA” means the Canada Revenue Agency.
“Cryptoasset Consultant” means ARK Investment Management LLC.
“Cryptoasset Portfolio” means the investment portfolio of the Fund, which includes bitcoin, ether and litecoin.
“Custodian” means Coinbase, Inc. in its capacity as custodian of the assets of the Fund and any additional custodians
that may be appointed by the Manager from time to time.
“Custodian Agreement” means the user agreement dated March 22, 2018 between the Manager, on behalf of the
Fund, and the Custodian, as it may be amended from time to time.
“Declaration of Trust” means the declaration of trust establishing the Fund dated as of February 16, 2018, as it may
be amended from time to time.
“Ethereum Network” means the network of computers running the global computer known as “Ethereum”, which
maintains the database of ethereum smart contracts.
“ether” means the digital currency that is the native unit of account within the Ethereum Network.
“Extraordinary Resolution” means a resolution passed by the affirmative vote of at least two-thirds of the votes cast,
either in person or by proxy, at a meeting of Unitholders called for the purpose of considering such resolution.
“Fund” means the 3iQ Global Cryptoasset Fund, an investment fund established as a trust under the laws of the
Province of Ontario pursuant to the Declaration of Trust.
“Fundserv” means Fundserv Inc.
“Independent Advisory Committee” means the independent advisory committee of the Fund.
“litecoin” means the digital currency that is the native unit of account within the Litecoin Blockchain.
“Management Fee” has the meaning ascribed thereto under “Fees and Expenses – Fees and Expenses Payable by the
Fund – Fees Payable to the Manager for Acting as Manager of the Fund”.
“Manager” means 3iQ Corp., the manager and promoter of the Fund, and, if applicable, its successor.
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“Net Asset Value of the Fund” means the net asset value of the Fund as determined by subtracting the aggregate
liabilities of the Fund from the aggregate value of the assets of the Fund on the date on which the calculation is being
made, as more fully described under “Calculation of Net Asset Value”.
“Net Asset Value per Unit” means, in respect of a class of Units, the Net Asset Value of the Fund allocated to the
Units of such class, divided by the total number of Units of such class outstanding, on the date on which the calculation
is being made.
“Offering” means collectively, the offering of Class A Units and Class I Units on a private placement basis pursuant
to this Offering Memorandum.
“Ordinary Resolution” means a resolution passed by the affirmative vote of at least a majority of the votes cast,
either in person or by proxy, at a meeting of Unitholders called for the purpose of considering such resolution.
“Redemption Date” means each business day.
“Registered Plan” means a registered retirement savings plan, a registered retirement income fund, a deferred profit
sharing plan, a registered education savings plan, a registered disability savings plan, and a tax-free savings account.
“SIFT Rules” means the provisions of the Tax Act, including those contained in sections 104, 122 and 122.1 of the
Tax Act, which apply to the taxation of a “specified investment flow through trust” and its unitholders.
“SIFT trust” means a specified investment flow-through trust for the purposes of the Tax Act.
“Tax Act” means the Income Tax Act (Canada), as now or hereafter amended, or successor statutes, and includes
regulations promulgated thereunder.
“Tax Proposals” means all specific proposals to amend the Tax Act publicly announced by or on behalf of the
Minister of Finance (Canada) prior to the date hereof.
“Transfer Agent” means TSX Trust Company, and if applicable, its successor.
“Trustee” means 3iQ LP, and if applicable, its successor.
“United States” or “U.S.” means the United States of America.
“Unitholders” means the holders of Units.
“Units” means the Class A Units and Class I Units issued by the Fund.
“Valuation Date” means each business day.
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OVERVIEW OF THE LEGAL STRUCTURE OF THE FUND
3iQ Global Cryptoasset Fund (the “Fund”) is investment fund established as a trust under the laws of the Province of
Ontario pursuant to a declaration of trust dated February 16, 2018 (the “Declaration of Trust”). 3iQ Corp. (the
“Manager”) is the manager and promoter of the Fund nd provides certain general management and administrative
services required by the Fund. 3iQ LP is the trustee of the Fund. TSX Trust Company is the transfer agent of the Fund.
The general partner of 3iQ LP is 3iQ GP Inc., a wholly-owned subsidiary of the Manager. The Manager is the sole
limited partner of 3iQ LP. The Manager has engaged ARK Investment Management LLC to act as the cryptoasset
consultant to the Fund and SGGG Fund Services Inc. to provide certain administrative services to the Fund. The
principal office of the Fund, the Manager and the Trustee is located at 4800-1 King Street West, Box 160, Toronto,
Ontario, M5H 1A1. See “Organization and Management Details of the Fund”.
The Fund is authorized to issue an unlimited number of Class A units (“Class A Units”) and Class I units (“Class I
Units”). The Class A Units and Class I Units are collectively referred to herein as the “Units”. The Class A Units are
available to all investors and the Class I Units are designed for institutional accounts. The Units are available for
purchase in Canadian and U.S. dollars. U.S. denominated Units are offered only as a convenience for investors and
do not act as a currency hedge between the Canadian and the U.S. dollar. The Net Asset Value per Unit of each class
will not be the same as a result of the different fees and expenses allocable to each class of Units. See “Fees and
Expenses”.
INVESTMENT OBJECTIVES
The Fund’s investment objectives are to seek to provide Unitholders with:
(a) exposure to a portfolio of three leading cryptoassets, namely bitcoin, ether and litecoin; and
(b) the opportunity for long-term capital appreciation.
INVESTMENT STRATEGIES
To achieve its investment objectives, the Fund will invest substantially all of the net proceeds of the Offering in long-
term holdings of cryptoassets. The Fund initially invested approximately 50% of its net assets in bitcoin, 35% of its
net assets in ether and 15% of its net assets in litecoin.
The Fund will not speculate with regard to short-term changes in cryptoassets. The Cryptoasset Portfolio is designed
to maintain exposure to those cryptoassets which the Manager believes have the best long-term utility or value. The
Fund provides investors with the ability to invest in a diversified portfolio of cryptoassets without the inconvenience
and additional transaction and storage costs associated with a direct investment in cryptoassets.
The Fund does not hedge any U.S. dollar currency exposure back to the Canadian dollar.
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions that, among other things, limit the assets that the Fund may
acquire for its portfolio. The Fund’s investment restrictions may not be changed without approval by resolution passed
by at least 66⅔% of the votes cast by holders of Units voting thereon who attend in person or by proxy and vote at a
meeting called for such purpose. See “Unitholder Matters – Amendment of the Declaration of Trust”. The Fund’s
investment restrictions provide that the Fund may:
(a) not invest more than 75% of its total assets in bitcoin;
(b) not invest more than 50% of its total assets in ether;
(c) not invest more than 50% of its total assets in litecoin;
- 10 - LEGAL_1:47107988.22
(d) purchase debt securities only if such securities are cash equivalents;
(e) not borrow or enter into any leverage transaction;
(f) not undertake any activity, take any action, omit to take any action or make or hold any investment
that would result in the Fund failing to qualify as a “mutual fund trust” within the meaning of the
Tax Act;
(g) not make or hold any investment that would result in the Fund becoming a “SIFT trust” within the
meaning of subsection 122.1(1) of the Tax Act;
(h) not invest in: (i) any security that is an offshore investment fund property that would require the
Fund to include significant amounts in the Fund’s income pursuant to section 94.1 of the Tax Act;
or (ii) any interest in a non-resident trust that would require the Fund to include amounts in income
in connection with such interest pursuant to sections 91, 94 or 94.2 of the Tax Act;
(i) not invest in any security that would be a “tax shelter investment” within the meaning of the Tax
Act; and
(j) not invest in any security of an issuer that would be a foreign affiliate of the Fund for purposes of
the Tax Act.
The Fund may not invest in securities or assets other than those referred to above. Notwithstanding the foregoing, at
the Manager’s discretion, the Fund may be invested in cash or cash equivalents from time to time.
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INVESTMENT OVERVIEW
The Fund will invest substantially all of its assets in the Cryptoasset Portfolio, comprised of bitcoin, ether and litecoin.
The initial portfolio of the Fund was allocated as follows:
History of Cryptoassets
The prefix “crypto” is an abbreviation and is derived from the underlying key technology of digital asset systems:
cryptography. Cryptography is the science of securely transmitting data so that only intended recipients can make use
of it.
Bitcoin and other cryptoassets were established following the 2008 financial crisis as a result of the demand for the
secure transmission of value and assets over the internet. Cryptoassets are consensus networks that enable secure
digital transactions and payments using blockchain technology.
Cryptoassets are now establishing their own utility and usefulness. The chart below compares different types of
mediums of exchange and their monetary properties.
Different Types of Money and their Properties
Monetary Property Collectables Gold Banknotes bitcoin
Intrinsic Value (individual recourse if this monetary trade network collapses)
low medium high high
Portability (transaction variable costs)
low medium very high very high
Divisibility (ease of contracting fractional units, transaction fixed costs)
very low high very high very high
Scarcity (ability to resist expansion of the money supply, inflation tax)
medium very high low very high
bitcoin50%
ether35%
litecoin15%
3iQ GLOBAL CRYPTOASSET FUND
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Different Types of Money and their Properties
Recognisability (assay costs) low medium high very high
Fungibility (user privacy, ease of value calculations, maintenance of recognisability)
low very high low very high
Durability (total storage and maintenance costs, including security)
high high high high
As of February 25, 2018, there were over 1,500 cryptoassets with a total network value of over US$399 billion. Bitcoin
is the largest and most actively traded cryptoasset with a network value as of February 25, 2018 of over US$160
billion and accounting for 41% of the total network value. The next largest cryptoasset is ether which as of February
25, 2018 had a network value of over US$82 billion.
Bitcoin
Overview of Bitcoin
Bitcoin is a cryptoasset that is not issued by any government, bank or central organization. Bitcoin is a cryptoasset
based on the decentralized, open source protocol of the peer-to-peer Bitcoin computer network (the “Bitcoin
Network”), which creates the decentralized public transaction ledger, known as the “blockchain”, on which all bitcoin
transactions are recorded. Movement of bitcoin is facilitated by a 100% digital, transparent and immutable ledger,
enabling the rapid transfer of value across the internet without the need for centralized intermediaries. The Bitcoin
Network software source code includes the protocol that governs the creation of bitcoin and the cryptographic
operations that verify and secure bitcoin transactions. It is common practice to refer to Bitcoin with a capital “B” when
referring to the protocol or network, and bitcoin with a lowercase “b” when referring to the cryptoasset. The blockchain
is an official record of every bitcoin transaction (including creation or “mining” of new bitcoin) and every bitcoin
address associated with a quantity of bitcoin. The Bitcoin Network, and software applications built atop it, can interpret
the blockchain to determine the exact bitcoin balance, if any, of any public bitcoin address listed in the blockchain. A
bitcoin private key controls the transfer or “spending” of bitcoin from its associated public bitcoin address. A bitcoin
“wallet” is a collection of public bitcoin addresses and their associated private key(s). Only the owner of bitcoin can
send bitcoin, only the recipient of bitcoin can unlock what the sender sent and the transactional validation and bitcoin
ownership can be verified by any third party anywhere in the world.
The Mechanics of Bitcoin
The Bitcoin Network can be described using the analogy of a computer. The most basic level of any computer is the
hardware that all of the software runs upon. The hardware providers for the Bitcoin Network are called “miners.”
Miners buy specialized computational equipment in the form of servers that are composed of primarily application
specific integrated circuits (ASICs), and these servers have been constructed entirely for the purpose of verifying
bitcoin transactions, building bitcoin’s blockchain and thereby minting new bitcoin.
Miners’ servers run Bitcoin software, which can be thought of as the operating system on top of the hardware, just as
personal computers have installed an operating system. Bitcoin software is maintained in the open source model, with
the community collaborating on GitHub. GitHub is a platform for software creation, orchestrating the storage, version
control and integration of code for different software projects. Bitcoin’s software is available for all developers and
non-developers to peruse and discuss. For example, from GitHub one can download the entire source code of Bitcoin
software. While there are a few different implementations of Bitcoin software, the one used by most miners is called
“Bitcoin Core” and is maintained by over 400 well-known and respected developers. By running similar software on
- 13 - LEGAL_1:47107988.22
similar hardware the miners have created a basic worldwide computer that operates in sync, despite being
geographically distributed.
Just as one may run applications on top of the hardware and operating system of their computer, various companies
have built applications that run on top of the hardware and operating system of the Bitcoin Network. Applications
include wallets that store users’ bitcoin, exchanges that allow users to swap bitcoin for other currencies, remittances
providers that send money to people in other countries and decentralized marketplaces that function similar to an
online distributor (e.g. eBay). Accordingly, there is no central company. While Bitcoin’s application ecosystem is still
in its infancy, the Manager believes that, as more developers and users adopt the platform over time there will be an
increasing number of applications, which will provide greater functionality to the system as a whole.
The end user relies on the hardware, operating system, and applications provided by bitcoin miners, developers and
companies, respectively. The greater the number of bitcoin users, the greater the incentive will be potentially for
miners, developers and companies to continue to develop their systems, which in turn should promote the Bitcoin
Network as a whole.
Below is a figure that graphically depicts the stack of miners, developers, companies and end users.
Source: ARK Investment Management LLC
Security of the Network
There are a few key metrics that determine the security of the Bitcoin Network. First, there are the number of nodes
connected to the network. A “node” is a computer that is connected directly to the Bitcoin Network. If a node discovers
that a block contains an invalid transaction or has otherwise violated the consensus rules, then that block is rejected
and not appended to Bitcoin’s blockchain. While some of these nodes are miners, not all of them are miners. Some
are there to forward transactions around the network and keep track of Bitcoin’s blockchain, while not getting involved
with Bitcoin’s proof of work process to create new blocks. Non-mining nodes are referred to as “full nodes”, and
many bitcoin companies run full nodes so that they have their own store of the blockchain, which proves useful for
interacting with the network and creates strong redundancy within the system. As of October 30, 2018, there were
over 10,100 nodes connected to the Bitcoin Network, with the greatest density being in the U.S., Germany and France.
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Source: https://bitnodes.earn.com/
As demonstrated by the above distribution map, the Bitcoin Network is dispersed across the globe. If a nation banned
miners from supporting Bitcoin, the majority of the nodes would continue unaffected. There is also the ability for
miners to use network obfuscation technology that would make it appear as though they were accessing the Bitcoin
Network from another country rather than the country in which they are physically located. If a large segment of
miners were to be taken offline, the economics would improve for the remaining miners as they would have less
competition, likely leading to an influx of new miners from unaffected geographies.
Another important metric for the security of Bitcoin’s network is the hash rate. A “hash” is the output of a hash
function, which takes data of arbitrary length and crunches it into a fixed-length string of alphanumeric characters. As
it relates to bitcoin, the “hash rate” is the frequency at which miners guess a new solution to create a valid “block
hash” (i.e., proof-of-work), which allows a miner to append a new block of transactions to Bitcoin’s blockchain. For
single entities, the more mining machines they own the higher of a hash rate they will control, which increases their
opportunity of finding the next block hash and receiving the block reward of newly minted bitcoin. For the Bitcoin
Network as a whole, a higher hash rate signifies more competition amongst the miners, likely dissuading one nefarious
group from trying to take over the network in what is commonly referred to as a “51% attack”. As shown below, the
hash rate of the Bitcoin Network has been increasing at an exponential rate over time.
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Note: (1) Log scale.
(2) Data as of October 26, 2018.
Source: 3iQ Corp., data sourced from Blockchain.com
Supply Characteristics
By 2140, the Manager anticipates that the number of bitcoin available to the public will have reached an equilibrium
state of 21 million units (which is prescribed in the original Bitcoin protocol). This differs from a traditional currency,
which does not have a theoretical cap on the amount of the currency that will be circulated to the public.
The “minting” of new bitcoin is part of the mining process. Each time a block is created, the first transaction in the
block issues a certain number of bitcoin to the miner who created the block. This transaction is called a “coinbase
transaction.” Every 210,000 blocks, or roughly every 4 years, the amount of bitcoin issued to miners in the coinbase
transaction is cut in half. This is called “block reward halving” or “halving”.
For example, from the time of launch of the Bitcoin Network on January 3, 2009 up until November 28, 2012, coinbase
transactions issued 50 bitcoin to the miner who created the block. Starting from a base of zero bitcoin outstanding,
this made the currency highly inflationary. However, on November 28, 2012, the coinbase transaction was switched
to only 25 bitcoin. This switch was hard wired into Bitcoin’s protocol, so that once the 210,000th block had been mined
all subsequent blocks created only issued 25 bitcoin as the miner’s fee transaction. On July 9, 2016, the issuance was
cut in half again, to only 12.5 bitcoin per miner’s fee transaction, which means that currently there are only 1,800
newly minted bitcoin issued per day. The estimated supply schedule since the 2009 launch to 2084 is shown in the
graph below.
0
0
0
0
1
100
10,000
1,000,000
100,000,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Has
h R
ate
(TH
/s)
Hash Rate(Log Scale)
- 16 - LEGAL_1:47107988.22
Source: 3iQ Corp., data sourced from Bitcoin Wiki
The Manager believes that although the world has no precedent for a strictly supply capped currency, economic theory
would imply that if demand for bitcoin as a means of exchange and store of value continues to increase, then with a
disinflationary going on deflationary supply schedule the price of bitcoin should increase, or the velocity should
increase, or both, in order to facilitate this increase demand.
As there is little precedent for a purely crypto currency, it is unclear what the natural velocity of bitcoin should be.
For example, the velocity of the M1 Money Stock is currently around 5, which is also roughly the current velocity of
bitcoin. If bitcoin’s velocity does not increase considerably, but demand continues to increase, then the only means
for the market to meet such demand is with an increase in the price of bitcoin. Investors that hold bitcoin as a store of
value and who do not trade it for a period of time will likely contribute to a rising value in the price of bitcoin.
Fortunately, each unit of bitcoin is divisible into the hundred millionth unit (also known as a “Satoshi”), and so even
as the price of a single bitcoin increases it can be broken into smaller units for use cases that need to transfer or store
less value.
Combining the growing base of bitcoin outstanding with the smaller number of bitcoin issued per coinbase transaction,
leads to a rate of supply increase that is continually decreasing. Currently, the annual rate of supply increase is roughly
4% and will decrease to less than 2% by 2020 when the next halving of the block reward is to occur. The average
annual rate of bitcoin supply increase over each coinbase era is shown in the graph below.
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
20
09
20
11
20
13
20
15
20
17
20
19
20
21
20
23
20
25
20
27
20
29
20
31
20
33
20
35
20
37
20
39
20
41
20
43
20
45
20
47
20
49
Nu
mb
er o
f B
itco
inBitcoin Outstanding
- 17 - LEGAL_1:47107988.22
Source: 3iQ Corp., data sourced from Bitcoin Wiki
The Manager believes that by the middle of the next decade it is likely that bitcoin will be one of the least inflationary
currencies in the world, if not the least inflationary, given the cap on the number of units of bitcoin available in the
Bitcoin Network. As a means of contrast, the graphs below illustrate the increase in the supply of U.S. dollars over
the years.
Note:
(1) Data as of October 26, 2018.
Source: 3iQ Corp., data sourced from Federal Reserve Bank of St. Louis
User Behavior, Identity, and Adoption
Those wishing to use bitcoin must establish a bitcoin wallet. A wallet provides the user with a public key that is used
to derive an address for others to send them bitcoin, as well as a private key which is used to unlock balances of the
0
2
4
6
8
10
12
2012-2016 2016-2020 2020-2024 2024-2028 2028-2032 2032-2036 2036-2040 2040-2044
Rat
e o
f Su
pp
ly In
crea
se (
%)
Bitcoin Rate of Supply Increase
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
USD
Bill
ion
s
US Monetary Base
- 18 - LEGAL_1:47107988.22
user’s bitcoin to send to others. A bitcoin wallet can be a desktop client, which is a software application running on a
computer. It can also be a hardware wallet provided by a company that offers such products. With a desktop client or
hardware wallet, the user is in control of the private keys that control the bitcoin they own. Alternatively, consumers
may use a hosted bitcoin wallet where a provider protects the private keys, and the consumer accesses their accounts
through a web browser or mobile application. A hosted bitcoin wallet is the most common way for those new to the
system to access bitcoin.
A user that seeks to convert fiat currency into bitcoin must open an account on a cryptoasset exchange. Most
cryptoasset exchanges apply identity verification (KYC) and anti-money-laundering (AML) procedures on all
accounts which are consistent with the KYC and AML requirements applicable to Canadian Chartered Banks. In
addition, each cryptoasset wallet which holds the user’s cryptoassets purchased on a cryptoasset exchange must be
connected to the user’s bank account or credit card issued by a regulated financial institution that is subject to KYC
and AML requirements. It is a common misconception that users of bitcoin are anonymous. If they have passed
through the above checks, their identity has been appropriately verified. However, if they have not passed through the
above processes, they are still pseudonymous, with identity represented by an alphanumeric string of characters on
the Bitcoin blockchain. Since Bitcoin’s blockchain is transparent, the actions of pseudonymous users can be easily
tracked, and using network forensics their identities can be determined if necessary.
In an analysis that ARK and Coinbase performed on user behavior in January 2017, they estimated that over 10 million
people globally hold a balance of bitcoin greater than $100 (equal to roughly 2% of equity investors globally).
Numerous merchants have been accepting bitcoin directly, notably, Overstock.com. Bitcoin backed debit cards and
Coinbase Commerce are working to provide convenient mechanisms for consumer point-of-sale payments.
Bitcoin as a Means of Exchange
The use of bitcoin as a means of exchange is increasing rapidly throughout the world, particularly in nations where
faith in central bank-backed fiat currencies (a currency that a government has declared a legal currency) has been
unstable, or where necessary banking infrastructure is lacking. Bitcoin makes it possible for users to accept and send
payments globally directly from their mobile phone, twenty-four hours a day. The number of transactions processed
by the Bitcoin Network on a daily basis is shown in the graph below. In October 2018, Bitcoin’s blockchain processed
on average 290,000 transactions per day (the equivalent of 3.4 transactions per second).
Note:
(1) Data as of October 26, 2018.
Source: 3iQ Corp., data sourced from Blockchain.com
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Number of Transactions
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The Bitcoin Core developer team (an open source development team that maintains the most widely used version of
Bitcoin’s software) has released an update that will increase the capacity of the Bitcoin Network among other
upgrades, and miners are in the midst of signaling support. This is an example of Bitcoin’s ability to adapt to increased
demand and a changing environment, largely as a result of its open source contributor model.
In terms of dollar value, on average over the three months ending on October 30, 2018, US$716 million has been
transacted using Bitcoin’s blockchain daily, as shown in the graph below (the data is presented on a rolling 3-month
average to smooth day to day bumpiness). Dividing the transaction volume by the transaction frequency yields an
average transaction size of US$9,386.
Note: (1) Data as of October 26, 2018.
Source: 3iQ Corp., data sourced from Blockchain.com
Given bitcoin’s global, 24 hour, low fee nature, the Manager believes that merchants will continue to adopt bitcoin,
which will increase bitcoin transactions and global demand for bitcoin. The introduction of CBOE and CME bitcoin
futures allow merchants’ payments in bitcoin to be hedged as bitcoin exposure accumulates. This hedging process
may allow merchants to protect their margins while accepting bitcoin in its current volatile phase.
In a report titled, The Evolution of the Bitcoin Economy: Extracting and Analyzing the Network of Payment
Relationships, researchers from the Central Bank of Germany, University of Wisconsin-Madison, and London School
of Economics did a detailed analysis of bitcoin transactions and found the currency has gone through three distinct
phases since the establishment of the Bitcoin Network: (1) an early prototype stage, (2) a growth stage populated in
large part with “sin” enterprise (i.e., gambling, black markets), and (3) a third stage marked by a sharp progression
away from “sin” and toward “legitimate enterprises.” Since bitcoin identities are pseudonymous, and the transactions
propagated through the network are transparent to anyone who accesses it, the Manager believes that early adopters
of bitcoin that used it for criminal activities have largely migrated to other means of payment.
Bitcoin Exchange Market
Bitcoin exchanges operate websites that facilitate the purchase and sale of bitcoin for various government-issued
currencies, including the U.S. dollar, the euro and the Chinese yuan. Activity on the bitcoin exchanges should not be
confused with the process of users sending bitcoin from one address to another bitcoin address. The latter is an activity
that uses bitcoin as a means of exchange and is largely conducted directly using Bitcoin’s blockchain, whereas the
former is mostly activity around bitcoin as a store of value and largely occurs within the trade books of exchanges
(i.e., off-blockchain).
$0
$1,000,000,000
$2,000,000,000
$3,000,000,000
$4,000,000,000
$5,000,000,000
$6,000,000,000
2013 2014 2015 2016 2017 2018
Dai
ly V
olu
me
(USD
)
Daily Bitcoin Transaction Volume
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Bitcoin exchanges typically report publicly on their websites the bid and ask prices for the purchase or sale of bitcoin.
Although each bitcoin exchange has its own market price, it is expected that most bitcoin exchanges’ market prices
should be relatively consistent with the bitcoin exchange market average since market participants can choose the
bitcoin exchange on which to buy or sell bitcoin. Price differentials across bitcoin exchange enable arbitrage between
bitcoin prices on the various exchanges, and occur most notably between geographies.
Bitcoin exchanges are open 24 hours a day and 365 days of the year. There currently exist globally over 30 bitcoin
exchanges. The exchanges and OTC liquidity providers with significant trading volume are Bitfinex, Bitstamp,
Bitflyer, GDAX (Global Digital Asset Exchange operated by Coinbase), Kraken, Gemini, Genesis, Bittrex, Bithumb,
Circle Trade, and Cumberland Mining. The majority of these exchanges and OTC liquidity providers employ rigorous
KYC procedures in compliance with applicable AML Regulation.
Absolute Returns
Past performance of bitcoin is not indicative of future performance and should not be used to forecast any
return that an investor may realize on the Units of the Fund. Past performance of bitcoin does not necessarily
reflect the performance of the Fund if it had been in existence at the time of bitcoin’s debut as such performance
does not take into consideration the costs and expenses associated with the operation of the Fund.
The price of bitcoin has increased substantially since its debut. Below is a graph of the bitcoin price on a logarithmic
scale. While the most famous price ascent of bitcoin occurred in November of 2013 when the price broke through
$1,000 a bitcoin, the currency also experienced a number of other steep price ascents prior thereto such as spring 2013,
which are less known because bitcoin was less mainstream at the time. On November 29, 2017, Bitcoin’s price crossed
through the USD$10,000 price point for the first time.
Note:
(1) Data as of October 26, 2018. Source: 3iQ Corp., data sourced from Bloomberg CFIX, XBTUSD
Over the last eight years, each bitcoin, has risen from a value of US$0 to US$1,000. As with any asset, returns are
sensitive to endpoints. Below are different examples of potential bitcoin returns if an investor had invested in bitcoin
on January 1 of a given year, and held bitcoin for the following 7, 6, 5, 4, 3, 2 and one year respectively.
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
$20,000
2013 2014 2015 2016 2017 2018
Bit
coin
Pri
ce (
USD
)
Bitcoin Price
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Note:
(1) Data as of November 19, 2018. Source: 3iQ Corp., data sourced from Bloomberg CFIX, XBTUSD
Volatility
The price of bitcoin is volatile and fluctuations are expected to have a direct impact on the Net Asset Value of the
Units of the Fund. However, movements in the price of bitcoin in the past are not necessarily a reliable indicator of
future movements. Movements may be influenced by various factors including supply and demand, geo-political
uncertainties, macroeconomic concerns such as inflation and speculative investor interest.
Bitcoin’s past volatility is clear in its daily percent price changes. With daily price changes as high as 50%, bitcoin
was extremely volatile through much of 2011, 2012 and 2013, as demonstrated in the chart below.
Note:
(1) Data as of October 26, 2018.
Source: 3iQ Corp., data sourced from Bloomberg CFIX, XBTUSD
As of October 30, 2018, bitcoin’s daily volatility has returned to levels seen in 2015 through early 2017 that are in the
range of many technology stocks. The decline in bitcoin’s volatility has been caused by a number of factors: more
270%
235%
141%
197%220%
122%
-66% -100%
-50%
0%
50%
100%
150%
200%
250%
300%
Last 7 YearsLast 6 YearsLast 5 YearsLast 4 YearsLast 3 YearsLast 2 YearsYTD
Bitcoin Compound Annual Returns
-60%
-40%
-20%
0%
20%
40%
60%
80%
20
12
-01
20
12
-04
20
12
-07
20
12
-10
20
13
-01
20
13
-04
20
13
-07
20
13
-10
20
14
-01
20
14
-04
20
14
-07
20
14
-10
20
15
-01
20
15
-04
20
15
-07
20
15
-10
20
16
-01
20
16
-04
20
16
-07
20
16
-10
20
17
-01
20
17
-04
20
17
-07
20
17
-10
20
18
-01
20
18
-04
20
18
-07
Bitcoin Daily Percent Change
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stable and liquid spot exchanges, greater regulatory approval, broader ownership, and increasingly reliable price
discovery data.
Note: (1) Data as of October 26, 2018.
Source: 3iQ Corp., data sourced from Bloomberg CFIX, XBTUSD
While bitcoin’s volatility has dropped considerably, on a weekly volatility basis it has still been the most
volatile of the broad asset classes over the last five years, as shown below.
Note:
(1) Data as of October 26, 2018. Measured by the standard deviation of weekly price changes. Source: 3iQ Corp., data sourced from Bloomberg
Sharpe Ratio
As modern portfolio theory suggests, neither absolute returns nor volatility are sufficient indicators of a good
investment. Instead, one must adjust absolute returns for the amount of volatility, or risk, to attain risk adjusted returns.
The most common measure of risk adjusted returns is the Sharpe Ratio, which measures returns above the risk-free
rate divided by the volatility of the asset. Assets can be compared to one another because each unit of return is
0%
2%
4%
6%
8%
10%
12%
2012 2013 2014 2015 2016 2017 2018
Bitcoin Daily Volatility
0.0000
0.0200
0.0400
0.0600
0.0800
0.1000
0.1200
0.1400
0.1600
Bitcoin US Equity US Bonds US RealEstate
Gold Oil EM Currency USD Dollar
Weekly Volatility
Last 6 Years Last 5 Years Last 4 Years Last 3 Years Last 2 Years Last Year
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standardized per unit of risk. Assets with the highest Sharpe Ratio best compensate investors for the volatility they are
bearing.
Although bitcoin has been extremely volatile historically, when its returns are adjusted to account for volatility, its
Sharpe Ratios have been superior. Over many of the holding periods shown below, bitcoin has outperformed
traditional assets on a risk adjusted basis. Over the two years bitcoin has been a clear standout, as it has appreciated
significantly on an absolute basis, enough to overcome significant volatility.
Note: (1) Data as of October 26, 2018.
Source: 3iQ Corp., data sourced from Bloomberg
Ethereum
Overview
The native asset of the Ethereum Blockchain is ether, a cryptoasset that is issued by, and transmitted through, the
decentralized, open source protocol of the peer-to-peer Ethereum Network. Ethereum’s goal is to serve as a
decentralized world computer where Bitcoin is aimed to be a decentralized world currency. A decentralized world
computer is one on which is globally accessible and uncensored applications can be built. No single entity owns or
operates the Ethereum Network. The infrastructure of the Ethereum Network is collectively maintained by a
decentralized user base. Ether can be used to pay for use on the Ethereum Virtual Machine or in individual end-user-
to-end-user transactions under a barter system. All such transactions can be made without the use of a middle man or
any other counterparties while maintaining transparency, meaning anyone can view Ethereum’s programs from
anywhere in the world. The Ethereum Network allows users to write and upload smart contracts to the network – that
is, general-purpose code that executes on every computer in the network and can instruct the transmission of
information and value based on a sophisticated set of logical conditions. Smart contracts are more versatile than
traditional are capable of facilitating, verifying, and automatically enforcing the negotiation or performance of the
contract.
These smart contracts are general-purpose code that executes on every computer in the network (currently over 6,000
computers). Transactions on the Ethereum Network are executed automatically on the blockchain and cost ether for
the use of the network’s processing. The Ethereum Network is one of a number of projects intended to expand
blockchain use beyond Bitcoin’s peer-to-peer money system. As of February 28, 2018, ether was the second largest
cryptocurrency/asset by market capitalization with US$84 billion at US$856 per ether.
Over the last two years, the price of ether has risen in value from US$5 to over US$831. Below are different examples
of potential ether returns if an investor had invested and held ether since inception (as with any assets, returns are
sensitive to endpoints).
-2.0000
-1.0000
0.0000
1.0000
2.0000
3.0000
Bitcoin US Equity US Bonds US RealEstate
Gold Oil EM Currency USD Dollar
Annualized Sharpe Ratios
Last 6 Years Last 5 Years Last 4 Years Last 3 Years Last 2 Years Last Year
- 24 - LEGAL_1:47107988.22
Note:
(1) Data as of February 23, 2018. Source: Bloomberg, GDAX, and Coinmarketcap.com
Litecoin
Overview
Litecoin is a peer-to-peer cryptocurrency and open source software that allows for the transfer and creation of new
coins without a central managing authority. Litecoin is nearly identical to Bitcoin in its technical aspects as both use
a global blockchain to record all balances and transactions and have an identical mining procedure for the verification
of past/current blocks and generation of new coins. Relative to Bitcoin, Litecoin has four times the maximum coin
limit, four times the block generation rate, and four times the number of blocks created before halving of reward. This
allows for Litecoin to process transactions every 2.5 minutes due to the lower block generation time, implying a higher
strength against a 51% attack.
In May 2017, Litecoin implemented the SegWit (segregated witness) system, something that Bitcoin has recently
decided to implement as a means of solving their scaling problem. SegWit allows Litecoin to store all of the signature
data in an alternate blockchain to allow for more transactions to fit within blocks on the original blockchain. The use
of SegWit along with Litecoin’s larger coin cap means that scaling is unlikely to become an issue in the near future.
Litecoin was originally introduced in October 2011 by Charlie Lee, a former Google engineer as a fork of the Bitcoin
core client. As of February 28, 2018, litecoin was the fifth largest cryptocurrency with a market capitalization of
US$11 billion at US$205 per litecoin.
From February 2016, the price of litecoin has risen in value from US$3 to over US$203 (as with any assets, returns
are sensitive to endpoints).
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Feb/16 May/16 Aug/16 Nov/16 Feb/17 May/17 Aug/17 Nov/17 Feb/18
Ether Price Chart
- 25 - LEGAL_1:47107988.22
Note:
(1) Data as of February 23, 2018. Source: Bloomberg, GDAX, and Coinmarketcap.com
The following chart provides comparative information in respect of bitcoin, ether and litecoin as at February 28, 2018:
bitcoin vs. ether vs. litecoin
BITCOIN (BTC) ETHER (ETH) LITECOIN (LTC)
Date Created January-09 July-15 October-11
Current Coin Supply 16,878,660 97,897,546 55,418,208
Max Coin Supply 21,000,000 N/A 84,000,000
Market Capitalization $178B $85B $12B
Blockchain Size 187.52 GB 243.77 GB 14.64 GB
Average Block Time (min/sec)
8m 47s 14.5s 2m 26s
Lightning Network Yes Not applicable Yes
Smart Contracts Yes Yes No (but in progress)
User Anonymity Low Low Low
Source: Bitinfocharts.com, represented in USD, last updated February 28, 2018
RISK FACTORS
The following are certain considerations relating to an investment in Units of the Fund which prospective investors
should consider before purchasing such securities.
Risks Factors Relating to an Investment in the Fund
No Assurance in Achieving Investment Objectives
There is no assurance that the Fund will be able to achieve its investment objectives.
$0
$50
$100
$150
$200
$250
$300
$350
$400
Jan/16 Mar/16 May/16 Jul/16 Sep/16 Nov/16 Jan/17 Mar/17 May/17 Jul/17 Sep/17 Nov/17 Jan/18
Litecoin Price Chart
- 26 - LEGAL_1:47107988.22
No Listing
The Units will not be listed on any stock exchange.
Loss of Investment
An investment in the Fund is appropriate only for investors who have the capacity to absorb a loss on their investment.
Fluctuation in Value of Cryptoassets
The Net Asset Value of the Units will vary according to the value of the cryptoassets included in the Cryptoasset
Portfolio. The value of the cryptoassets will be influenced by factors which are not within the control of the Fund or
the Manager.
Concentration Risk
The Fund was created to invest in cryptoassets and is not expected to have exposure to any other investments or assets.
Other than cash or cash equivalents, the Fund will invest substantially all of its assets in cryptoassets. The Net Asset
Value per Unit may be more volatile than the value of a more broadly diversified portfolio and may fluctuate
substantially over short periods of time. This may have a negative impact on the Net Asset Value of the Units.
Reliance on the Manager
Unitholders are dependent on the abilities of the Manager to effectively administer the affairs of the Fund. The
Manager depends, to a great extent, on a very limited number of individuals in the administration of its activities as
manager of the Fund. The loss of the services of any one of these individuals for any reason could impair the ability
of the Manager to perform its duties as manager of the Fund.
Reliance on the Cryptoasset Consultant
Unitholders are dependent on the abilities of the Cryptoasset Consultant to effectively provide advice regarding
cryptoassets to the Fund. The Cryptoasset Consultant depends, to a great extent, on a very limited number of
individuals in connection with its provision of services to the Fund. The loss of the services of any one of these
individuals for any reason could impair the ability of the Cryptoasset Consultant, to perform its duties, as cryptoasset
consultant to the Fund.
No Ownership Interest in the Cryptoasset Portfolio
An investment in Units does not constitute an investment by Unitholders in the securities included in the Cryptoasset
Portfolio. Unitholders do not own the cryptoassets or cash or cash equivalents held by the Fund.
Changes in Legislation
There can be no assurance that certain laws applicable to the Fund, including income tax laws, government incentive
programs and the treatment of mutual fund trusts under the Tax Act, will not be changed in a manner which adversely
affects the Fund or Unitholders.
Conflicts of Interest
The Manager and its directors and officers engage in the promotion, management or investment management of one
or more funds or trusts with similar investment objectives to those of the Fund. Although none of the directors or
officers of the Manager will devote his or her full time to the business and affairs of the Fund, each director and officer
of the Manager will devote as much time as is necessary to supervise the management of (in the case of the directors)
or to manage the business and affairs of (in the case of officers) the Fund and the Manager.
- 27 - LEGAL_1:47107988.22
Valuation of the Fund
Valuation of the Fund may involve uncertainties and judgement determinations, and, if such valuations should prove
to be incorrect, the Net Asset Value of the Fund could be adversely affected. The Manager may face a conflict of
interest in valuing the cryptoassets held by the Fund because the values assigned will affect the calculation of the
Management Fee payable by the Fund to it.
Significant Redemptions
If a substantial number of Units are redeemed, the number of Units outstanding could be significantly reduced with
the effect of decreasing liquidity of the Units. In addition, the expenses of the Fund would be spread among fewer
Units resulting in a lower Net Asset Value per Unit than if there were fewer redemptions. If, as a result of significant
redemptions, the Manager determines that it is in the best interests of Unitholders to terminate the Fund, the Manager
could cause the termination of the Fund without Unitholder approval. See “Redemption of Units” and “Termination
of the Fund.”
Limited Liquidity in the Units
There is no market through which the Units may be sold and purchasers may not be able to resell their Units purchased
pursuant to the Offering. No market for the Units is expected to develop. In addition, the Units are issued pursuant to
certain exemptions from the prospectus requirements of applicable securities laws and accordingly are subject to
certain resale restrictions, which will further limit the transferability of the Units. The Units are also non-redeemable,
except in limited circumstances.
Limited Operating History
The Fund has no operating history. Accordingly, the Fund does not have any significant operating history upon which
prospective investors may evaluate its performance.
Not a Fund Company
The Fund is not a trust company and, accordingly, is not registered under the trust company legislation of any
jurisdiction. Units are not “deposits” within the meaning of the Canada Deposit Insurance Corporation Act (Canada)
and are not insured under provisions of that statute or any other legislation.
Exchange Rate Risk
The assets and liabilities of the Fund are valued in Canadian dollars. The Fund will purchase cryptoassets which are
denominated in U.S. dollars. For the purposes of calculating the Net Asset Value of the Fund, the Manager will
convert, on a daily basis, the value of the cryptoassets held in the Cryptoasset Portfolio into Canadian dollars.
Fluctuations in the value of the Canadian dollar relative to the U.S. dollar will impact the Net Asset Value of the Fund.
If the value of the Canadian dollar has increased relative to the U.S. dollar, the return on the cryptoassets may be
reduced, eliminated or made negative. The opposite can also occur and if it does occur, the Fund may benefit from an
increase in the value of the U.S. dollar relative to the Canadian dollar. The Fund’s U.S. dollar exposure is not hedged
back to the Canadian dollar.
An investor may purchase Units in U.S. dollars. This purchase option is offered only as a convenience for investors
and does not act as a currency hedge between the Canadian dollar and the U.S. dollar.
Liquidity Constraints on Cryptoasset Markets may Impact the Fund’s Holdings
While the liquidity and traded volume of cryptoassets are continually growing, they are still maturing assets. The Fund
may not always be able to acquire or liquidate its assets at a desired price. It may become difficult to execute a trade
at a specific price when there is a relatively small volume of buy and sell orders in the marketplace, including on
cryptoasset exchanges. When transacting in the cryptoasset markets, the Fund will be competing for liquidity with
other large investors, including speculators, miners and other investment funds and institutional investors.
- 28 - LEGAL_1:47107988.22
Unexpected market illiquidity, and other conditions beyond the Manager’s control, may cause major losses to the
holders of a cryptoasset. The large positions in bitcoin, ether and litecoin that the Fund may acquire increases the risks
of illiquidity by both making its cryptoassets difficult to liquidate and in liquidating, the Fund may impact the
cryptoasset’s price significantly.
Tax Risk
If the Fund were to not qualify as a “mutual fund trust” for the purposes of the Tax Act for any period of time, there
could be negative tax consequences for the Fund and the Unitholders.
There can be no assurances that the Canada Revenue Agency (the “CRA”) will agree with the tax treatment adopted
by the Fund in filing its tax return and the CRA could reassess the Fund on a basis that results in tax being payable by
the Fund or Unitholders. In particular, if any transactions of the Fund are reported by it on capital account, but are
subsequently determined by the CRA to be on income account, there may be an increase in the net income of the Fund
and/or the taxable component of distributions made or deemed to be made to Unitholders. Further, in such event, the
CRA could assess the Fund for a failure of the Fund to withhold tax on distributions made by it to non-resident
Unitholders that are subject to withholding tax. Accordingly, any such redetermination by the CRA may result in the
Fund being liable for unremitted withholding taxes on prior distributions made to Unitholders who were not resident
in Canada for the purposes of the Tax Act at the time of the distribution. If the Fund were not able to recover such
withholding taxes from non-resident Unitholders, including those whose Units were redeemed, payment of any such
amounts by the Fund would reduce the Net Asset Value of the Units.
The Tax Act contains tax loss restriction event rules that apply to trusts such as the Fund. The loss restriction event
rules generally apply at any time when a unitholder of a trust (counted together with its affiliates) becomes a majority-
interest beneficiary of the trust (i.e., holds more than 50% of the fair market value of the units of the trust) or a group
of unitholders of the trust becomes a majority interest group of beneficiaries of the trust. If applicable to the Fund,
then the taxation year of the Fund would be deemed to end and an automatic distribution of income and net capital
gains may occur under the terms of the Declaration of Trust. In addition, accrued capital losses and certain other
realized losses of the Fund would be unavailable for use by the Fund in future years. However, trusts that qualify as
an “investment fund” as defined in the loss restriction event rules are exempt from such adverse consequences. An
“investment fund” for this purpose includes a trust that meets certain conditions, including satisfying certain of the
conditions necessary to qualify as a “mutual fund trust” for purposes of the Tax Act, not using any property in the
course of carrying on a business and complying with certain asset diversification requirements. There can be no
assurance that the Fund will not become subject to the loss restriction event rules and there can be no assurance
regarding when distributions resulting from a loss restriction event will be made.
Risks Associated with Investing in Cryptoassets
Cryptocurrency Risk
Cryptocurrency, often referred to as “virtual currency” or “digital currency”, operates as a decentralized, peer-to-peer
financial exchange and value storage that is used like money. Cryptocurrency operates without the oversight of a
central authority or the banks and is not backed by any government. Even indirectly, cryptocurrencies may experience
high volatility and related investment vehicles may be affected by such volatility. Funds holding cryptocurrency may
also trade at a significant premium to net asset value. Cryptocurrency is not legal tender. Federal, state or foreign
governments may restrict the use and exchange of cryptocurrency, and regulation in North America is still developing.
Cryptocurrency exchanges may stop operating or permanently shut down due to fraud, technical glitches, hackers or
malware which could have an adverse impact on the Net Asset Value of the Units.
Limited History of Cryptoassets
Cryptoassets are new technological innovations with a limited history. There is no assurance that usage of any
particular cryptoasset and its blockchain will continue to grow. A contraction in use of a cryptoasset or its blockchain
may result in increased volatility or a reduction in the price of such cryptoasset, which could adversely impact the Net
Asset Value of the Units.
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Volatility in the Price of Cryptoassets
The cryptoasset markets are sensitive to new developments, and since volumes are still maturing, any significant
changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume
and subsequent price changes. Such volatility can adversely affect the Net Asset Value of the Units.
The price of cryptoassets on public exchanges has a limited history. Cryptoasset prices on exchanges as a whole have
been volatile and subject to influence by many factors including the levels of liquidity at the exchanges.
Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the
public, accounts for anticipated future appreciation in value. The Manager believes that momentum pricing of
cryptoassets has resulted, and may continue to result, in speculation regarding future appreciation in the value of
cryptoassets, inflating and making more volatile the value of cryptoassets. As a result, cryptoassets may be more likely
to fluctuate in value due to changing investor confidence in future appreciation, which could adversely affect an
investment in the Units.
Underlying Value Risk
Bitcoin and other cryptoassets represent a new form of digital value that is still being digested by society. Their
underlying value is driven by their utility as a store of value, means of exchange, and unit of account, and the demand
for cryptoassets within those use cases. Just as oil is priced by the supply and demand of global markets, as a function
of its utility to, for instance, power machines and create plastics, so too are cryptoassets priced by the supply and
demand of global markets for its own utility within remittances, B2B payments, time-stamping, etc.
Utility and the associated value of a cryptoasset such as bitcoin can be thought of in two time frames: “current utility
value” and “discounted expected utility value”. Utility value is based on the expected velocity of the bitcoin blockchain
to reach its maximum of 21 million bitcoins. However, since this level of penetration will likely not occur for 5-10
years, such value in the case of remittances needs to be discounted back to the present. The combination of “current
utility value” and “discounted expected utility value” is what creates the current market price. That aside, this is an
entirely new method of valuation that has not been sufficiently tested by the market given its short operating history.
If these means of a valuing cryptoassets prove to be fundamentally flawed, then the market may undergo a repricing
of the cryptoasset, which could have an adverse impact on the Cryptoasset Portfolio.
Potential Decrease in Global Demand for a Cryptoasset
Each cryptoasset must serve as a means of exchange, store of value, and unit of account. Many people using
cryptoassets as money-over-internet-protocol (MoIP) do so with it as an international means of exchange. Speculators
and investors using cryptoassets as a store of value then layer on top of means of exchange users, creating further
demand. If consumers stop using a cryptoasset as a means of exchange, or its adoption therein slows, then the
cryptoasset’s price may suffer, adversely affecting the price of the Units.
Investors should be aware that there is no assurance that any cryptoasset will maintain its long-term value in terms of
purchasing power in the future or that the acceptance of a cryptoasset for payments by mainstream retail merchants
and commercial businesses will continue to grow. In the event that the price of a cryptoasset declines, the Manager
expects the Net Asset Value of the Units to decline proportionately. As relatively new products and technologies,
cryptoassets such as bitcoin have only recently become widely accepted as a means of payment for goods and services
by many major retail and commercial outlets, and use of cryptoassets such as bitcoin by consumers to pay such retail
and commercial outlets remains limited. Banks and other established financial institutions may refuse to process funds
for cryptoasset transactions, process wire transfers to or from cryptoasset exchanges, cryptoasset-related companies
or service providers, or maintain accounts for persons or entities transacting in a cryptoasset. Conversely, a significant
portion of cryptoasset demand is generated by speculators and investors seeking to profit from the short- or long-term
holding of one or more cryptoassets. Price volatility undermines a cryptoasset’s role as a medium of exchange as
retailers are much less likely to accept it as a form of payment. Market capitalization for a cryptoasset therefore, as a
medium of exchange and payment method, may continue to be low. A lack of expansion by a cryptoasset into retail
and commercial markets, or a contraction of such use, may result in increased volatility which could adversely impact
- 30 - LEGAL_1:47107988.22
the Net Asset Value of the Units. The Manager believes that, like any commodity, cryptoassets generally will fluctuate
in value, but over time will gain a level of acceptance as a store of value, similar to precious metals.
Uncertain Regulatory Framework
Due to the short history of bitcoin and other cryptoassets and their emergence as a new asset class, the regulation of
cryptoassets is continually evolving in North America and the global markets. Decisions by governments and
regulatory authorities regarding the characterization and taxation of cryptoassets, and the appropriate regulatory
framework for trading and investing in cryproassets, may have a material impact on the demand for cryptoassets
generally and, consequently, on the value of the Cryptoasset Portfolio held by the Fund.
For example, in the U.S. the Commodity Futures Trading Commission has ruled bitcoin a commodity, while the IRS
has ruled bitcoin a property, and the U.S. Securities and Exchange Commission (the “SEC”) has not made a formal
statement regarding its classification. The SEC has gone as far to say that the bitcoin markets are still as of yet
unregulated. Meanwhile, other jurisdictions, like the European Union and Japan have moved to treat bitcoin like a
currency for taxation purposes, which the Manager believes is likely helping to fuel adoption in those areas. In some
other nations, like China and Russia, regulation is evolving to allow citizens to responsibly interface with bitcoin,
which is a positive indicator. The Manager believes that the bitcoin regulatory situation will continue to evolve to
allow for innovation while also protecting consumers. Regulators worldwide are increasingly recognizing the powerful
innovation of bitcoin and blockchain technology, and therefore the Manager believes that it is unlikely that a hostile
regulatory environment will develop. However, if a hostile regulatory environment were to emerge against bitcoin, it
could have an adverse impact on the Net Asset Value of the Units.
Because the cryptoasset markets are largely unregulated today, marketplaces and OTC counterparties that trade or
facilitate trading exclusively in cryptoassets are generally not subject to registration or licensing requirements with
any financial services regulatory body and, therefore, are not directly subject to prescribed KYC, reporting and
recordkeeping requirements which apply to financial services firms and other “reporting entities” under AML
Regulation. However, most leading cryptoasset marketplaces and institutional liquidity providers have voluntarily
adopted KYC procedures which reflect industry best practices to seek to ensure compliance with AML Regulation
requirements which apply generally in the jurisdictions where they carry on business.
The Manager has selected market-leading cryptoassets for the Fund’s Cryptoasset Portfolio, an industry-leading
Custodian and reputable trading counterparties for the purpose of investing and liquidating the Fund’s assets. Although
the Manager is making these decisions in the best interest of the Fund and with a view to managing risk in accordance
with prudent business practice, there can be no guarantee that the Fund will not be adversely affected by the uncertain
regulatory framework for cryptoassets, much of which is beyond the control of the Manager..
Financial Institutions may refuse to Support Transactions involving Cryptoassets
In the uncertain regulatory climate for cryptoassets, Canadian regulated financial institutions may cease to support
transactions involving cryptoassets, including the receipt of cash proceeds from sales of cryptoassets. Should this
occur, the Fund would be unable to pay out redemption proceeds within the timeframe set out under “Redemption of
Units – Daily Redemptions”.
Lack of Insurance
The assets of the Fund are not insured by any government or private insurer except to the extent that portions of assets
may be deposited in bank accounts insured by a government agency such as the Canada Deposit Insurance Corporation
or the Federal Deposit Insurance Corporation (United States) and such deposits and securities are subject to such
insurance coverage (which, in any event, is limited in amount). Therefore, in the event of the insolvency of a
depository, custodian, sub-custodian, broker, or other similar service provider, the Fund may be unable to recover all
of its funds or the value of its securities so deposited.
The Fund’s crypotassets are held by the Custodian offline in “cold storage”. Assets held in cold storage are protected
by Coinbase’s security measures, which reflect best practices in the payment industry generally and in the cryptoasset
- 31 - LEGAL_1:47107988.22
space in particular. To the extent any assets of the Fund are temporarily held online in a Coinbase “hot wallet”, such
assets will be fully insured.
Residency of the Custodian
The Custodian is resident outside Canada and all or a substantial portion of its assets are located outside Canada. As
a result, anyone seeking to enforce legal rights against it may find it difficult to do so.
Liability of Unitholders
The Fund is a unit trust and as such its Unitholders do not receive the protection of statutorily mandated limited
liability in some provinces and territories as in the case of shareholders of most Canadian corporations. There is no
guarantee, therefore, that Unitholders could not be made party to legal action in connection with the Fund. However,
the Declaration of Trust provides that no Unitholder, in its capacity as such, will be subject to any liability whatsoever,
in tort, contract or otherwise, to any person in connection with the Fund’s property or the obligations or the affairs of
the Fund and all such persons are to look solely to the Fund’s property for satisfaction of claims of any nature arising
out of or in connection therewith and only the Fund’s property will be subject to levy or execution. Pursuant to the
Declaration of Trust, the Fund will indemnify and hold harmless each Unitholder from any costs, damages, liabilities,
expenses, charges and losses suffered by a Unitholder resulting from or arising out of such Unitholder not having
limited liability. The Declaration of Trust also provides that the Manager shall use reasonable efforts to cause to be
inserted in each material written agreement, undertaking and obligation signed by or on behalf of the Fund a provision
to the effect that such agreement, undertaking or obligation will not be binding upon Unitholders personally.
As a result of the foregoing, it is considered that the risk of any personal liability of Unitholders is minimal in view of
the nature of its activities. In the event that a Unitholder should be required to satisfy any obligation of the Fund, such
Unitholder will be entitled to reimbursement from any available assets of the Fund.
Improper Transfers of Cryptoassets
Cryptoasset transfers are irreversible. An improper transfer (whereby a cryptoasset is accidentally sent to the wrong
recipient), whether accidental or resulting from theft, can only be undone by the receiver of the cryptoasset agreeing
to send the cryptoasset back to the original sender in a separate subsequent transaction. To the extent the Fund
erroneously transfers, whether accidental or otherwise, a cryptoasset in incorrect amounts or to the wrong recipients,
the Fund may be unable to recover the cryptoasset, which could adversely affect an investment in the Units.
Risks Associated with Investing in Bitcoin
Top Bitcoin Holders Control a Significant Percentage of the Outstanding Bitcoin
A small proportion of bitcoin addresses hold a significant proportion of the bitcoin currently outstanding. While this
concentration has decreased significantly over the years it is still concentrated. If one of these top holders were to exit
their bitcoin position it could cause volatility that may adversely affect the Net Asset Value of the Units.
Loss of “Private Keys”
The loss or destruction of certain “private keys” (numerical codes required by the Fund to access its bitcoin) could
prevent the Fund from accessing its bitcoin. Loss of these private keys may be irreversible and could result in the loss
of all or substantially all of an investment in the Fund.
Risks Associated with the Bitcoin Network
Dependence on Bitcoin Developers
While many contributors to bitcoin’s software are employed by companies in the industry, most of them are not
directly compensated for helping to maintain the protocol. As a result, there are no contracts or guarantees that they
will continue to contribute to bitcoin’s software.
- 32 - LEGAL_1:47107988.22
Disputes on the Development of the Bitcoin Network may lead to Delays in the Development of the Network
There can be disputes between contributors on the best paths forward in building and maintaining bitcoin’s software.
Furthermore, the miners supporting the network and companies using it can disagree with the contributors as well,
creating greater debate. Therefore, the bitcoin community often iterates slowly upon contentious protocol issues,
which many perceive as prudently conservative, while others worry that it inhibits innovation.
Significant Increase in Bitcoin Interest Could Affect the Ability of the Bitcoin Network to Accommodate Demand
One of the most contentious issues within the bitcoin community has been around how to scale the network as user
demand continues to rise. The debate goes back to the earliest days of bitcoin. There are many possible solutions, and
most of them boil down to different ideologies on how bitcoin should be used. However, it will be important for the
community to continue to develop at a pace that meets the demand for transacting in bitcoin, otherwise users may
become frustrated and lose faith in the network.
Bitcoin’s Blockchain may from Time to Time Temporarily or Permanently Fork
The bitcoin software and protocol are open source. When a modification is released by the developers and a substantial
majority of miners consent to the modification, the change is implemented and the Bitcoin Network continues
uninterrupted. However, if a change were activated with less than a substantial majority consenting to the proposed
modification, and the modification is not compatible with the software prior to its modification, the consequence
would be what is known as a “hard fork” (i.e. a split) of the Bitcoin Network (and the blockchain). One blockchain
would be maintained by the pre-modified software and the other by the post-modification software. The effect is that
both softwares would be running parallel to one another, but each would be building an independent blockchain with
independent native assets (e.g., bitcoin and bitcoin cash).
Although forks are likely to be addressed by a community-led effort to merge the two groups, such a fork could
adversely affect bitcoin’s viability. Recently, the bitcoin network forked, resulting in two separate coins, bitcoin and
bitcoin cash, which went through a period of volatility, followed by a clean separation of the community, with bitcoin
prevailing significantly over bitcoin cash. There was another precedent for this occurring, as witnessed with Ethereum
splitting into ether and ether classic in the summer of 2016, with both coins continuing to exist to this day, and in a
form of greater combined value than the single coin prior to the fork. Depending on how the situation unfolds, a fork
could adversely affect the Net Asset Value of the Units.
In the event that a fork in the blockchain of the Bitcoin Network, the Litecoin Network or Ethereum results in: (i)
issuance to the Fund of an additional cryptoasset alongside the bitcoin, litecoin or ether held by the Fund; or (ii) a
choice to keep the existing cryptoasset or exchange or replace it with a different cryptoasset, 3iQ Corp. will make the
investment decision that it believes is in the best interest of the Fund and the Unitholders at the time. There will likely
be many factors relevant to such decision, including the value and liquidity of the new/replacement asset and whether
a disposition of such asset would trigger a taxable event for the Fund.
The Manager will consult with the auditor of the Fund to ensure that all assets received by the Fund as a result of a
fork in the blockchain of a constituent of the Cryptoasset Portfolio are properly valued in accordance with Canadian
generally accepted accounting principles (“GAAP”) for the purpose of calculating the Net Asset Value of the Fund.
Dependence on the Internet
Bitcoin miners (and full nodes) relay transactions to one another via the internet, and when blocks are mined they are
also forwarded via the internet. Companies access Bitcoin’s blockchain via the internet, and most customers access
these companies via the internet. Thus, the entire system is dependent upon the continued functioning of the internet.
Risk if Entity Gains a 51% Share of the Bitcoin Network
If an entity gains controls over 51% of the compute power (hash rate) the entity could use its majority share to double
spend bitcoin. Essentially, the entity would send bitcoin to one recipient, which is confirmed in the existing blockchain,
while also creating a shadow blockchain that sends that same bitcoin to another entity under its control. After a period
- 33 - LEGAL_1:47107988.22
of time, the entity will release its hidden blockchain and reverse previously confirmed transactions, and due to the
way mining works, that new blockchain will become the record of truth. This would significantly erode trust in the
Bitcoin Network to store value and serve as a means of exchange which may significantly decrease the value of the
bitcoin and in turn the Net Asset Value of the Units.
Possible Increase in Transaction Fees
Bitcoin miners, functioning in their transaction confirmation capacity, collect fees for each transaction they confirm.
Miners confirm transactions by adding previously unconfirmed transactions to new blocks in the blockchain. Miners
are not forced to confirm any specific transaction, but they are economically incentivized to confirm valid transactions
as a means of collecting fees. Miners have historically accepted relatively low transaction confirmation fees because
miners have very low marginal cost of validating unconfirmed transactions. If miners collude in an anticompetitive
manner to reject low transaction fees, then bitcoin users could be forced to pay higher fees, thus reducing the
attractiveness of the Bitcoin Network. Bitcoin mining occurs globally and it may be difficult for authorities to apply
antitrust regulations across multiple jurisdictions. Any collusion among miners may adversely impact the Net Asset
Value of the Units.
Attacks on the Bitcoin Network
The Bitcoin network is periodically subject to distributed denial of service attacks to clog the list of transactions being
tabulated by miners, which can slow the confirmation of authentic transactions. Another avenue of attack would be if
a large number of miners were taken offline then it could take some time before the difficulty of the mining process
algorithmically adjusts, which would stall block creation time and therefore transaction confirmation time. Thus far
these scenarios have not plagued the network for long or in a systemic manner.
Decrease in Block Reward
The block reward will decrease over time. In summer of 2020, the block reward will reduce from 12.5 to 6.25 bitcoin,
and to 3.125 bitcoin in 2024. As the block reward continues to decrease over time, the mining incentive structure will
transition to a higher reliance on transaction verification fees in order to incentivize miners to continue to dedicate
processing power to the blockchain. If transaction verification fees become too high, the marketplace may be reluctant
to use bitcoin. Decreased demand for bitcoin may adversely affect the Net Asset Value of the Units.
Competitors to Bitcoin
To the extent a competitor to bitcoin gains popularity and greater market share, the use and price of bitcoin could be
negatively impacted, which may adversely affect an investment in Units of the Fund. Similarly, Bitcoin and the price
of bitcoin could be negatively impacted by competition from incumbents in the credit card and payments industries,
which may adversely affect the Net Asset Value of the Units.
Hacking of Bitcoin Exchanges May Have A Negative Impact on Perception of the Security of the Bitcoin
Network
While Bitcoin’s blockchain has never been compromised by hackers, exchanges frequently have. The exchanges that
adhere to best practices are insured, and most all of these have not been hacked, or if they have the loss has been
minimal. Bitcoin’s price is at risk if another exchange is hacked as it can shake consumer confidence for those that
don’t understand the difference between a weakness in the exchange versus a weakness in Bitcoin and its blockchain.
Significant Energy Consumption to run the Bitcoin Network
Because of the significant computing power required to mine bitcoin, the network’s energy consumption as a whole
may ultimately be deemed to be or indeed become unsustainable (barring improvements in efficiency which could be
designed for the protocol). This could pose a risk to broader and sustained acceptance of the network as a peer-to-peer
transactional platform.
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Risks Associated with Cryptoasset Exchanges
Limited Operating History of Cryptoasset Exchanges
Cryptoasset exchanges have a limited operating history. Since 2009 several bitcoin exchanges have been closed or
experienced disruptions due to fraud, failure, security breaches or distributed denial of service attacks. In many of
these instance, the customers of such exchanges were not compensated or made whole for the partial or complete loss
of funds held at the exchanges. The potential for instability of cryptoasset exchanges and the closure or temporary
shutdown of exchanges due to fraud, business failure, hackers, distributed denial of service attacks or malware or
government-mandated regulation may reduce confidence in cryptoassets, which may adversely affect the Net Asset
Value of the Units. Also see “Risks Associated with Investing in Cryptoassets – Uncertain Regulatory Framework”.
Closure of Exchange(s)
Between 2013 and 2018, a number of cryptoasset exchanges such as bitcoin exchanges have been closed due to fraud,
failure or security breaches. In many of these instances, the customers of such exchanges were not compensated or
made whole for the partial or complete losses of their account balances in such exchanges. While smaller cryptoasset
exchanges are less likely to have the infrastructure and capitalization that make larger cryptoasset exchanges more
stable, larger exchanges are more likely to be appealing targets for hackers and “malware” (i.e., software used or
programmed by attackers to disrupt computer operation, gather sensitive information or gain access to private
computer systems). Further, the collapse of the largest bitcoin exchange in 2014 suggests that the failure of one
component of the overall cryptoasset ecosystem can have consequences for both users of a cryptoasset exchange and
the cryptoasset industry as a whole.
FEES AND EXPENSES
Fees and Expenses Payable by the Fund
Expenses of the Offering
The Fund will bear the expenses incurred in connection with the Offering (including the costs of creating the Fund,
the costs of preparing the Offering Memorandum, legal expenses of the Fund and marketing expenses). Initially, these
costs will be paid by the Manager and reimbursed by the Fund. These expenses will be reimbursed by the Fund over
a 60 month period.
Fees Payable to the Manager for Acting as Manager of the Fund
An annual management fee of 1.25% in respect of the Class A Units and 0.75% in respect of the Class I Units of the
Fund’s net asset value calculated daily and payable monthly, plus applicable taxes, are paid to the Manager. The
Manager manages the day-to-day business and operations of the Fund and provides certain general management and
certain administrative services to the Fund.
Ongoing Expenses of the Fund
In addition to the management fee, the Fund pays all of its own expenses and all administration expenses incurred by
the Manager for its duties as the manager to the Fund. Such fees and expenses to be borne by the Fund are estimated
to be $230,000 per annum and include, without limitation: brokerage and trading commissions and other fees and
expenses associated with the execution of transactions in respect of the Fund’s investment in cryptoassets; fees payable
to the Administrator, the Custodian, the Transfer Agent, any sub-custodians of the assets of the Fund and other service
providers to the Fund and expenses relating to the monitoring and supervision of such service providers; legal, audit,
and valuation fees and expenses; costs and expenses of preparing, printing, and mailing financial and other reports to
Unitholders, material for Unitholders’ meetings and securities regulatory filings; costs and expenses of communication
with Unitholders; costs and expenses arising as a result of complying with all applicable securities legislation and
other applicable laws, regulations and policies; all taxes (including income, capital, federal GST or HST, and
- 35 - LEGAL_1:47107988.22
Provincial/Territorial sales taxes); and costs associated with the provision of such other managerial and administrative
services as may be reasonably required for the ongoing business and administration of the Fund.
The Manager may, from time to time, in its sole discretion, pay a portion of any ongoing expenses of the Fund which
would otherwise be payable by the Fund.
Additional Services
Any arrangements for additional services between the Fund and the Manager, or any affiliate thereof, that have not
been described in this Offering Memorandum will be on terms that are no less favourable to the Fund than those
available from arm’s length persons (within the meaning of the Tax Act) for comparable services and the Fund will
pay all expenses associated with such additional services.
Fees and Expenses Payable by the Investor
Sales Charge
An investor may pay a sales charge of up to 5% of the initial subscription price of the Class A Units paid by such
investor to the Fund to the dealer of such investor.
Short-Term Trading Fee
Short-term trading activities in the Fund may adversely affect Unitholders. Short-term trading has the potential to
increase costs associated with the administration of the trades and potentially poses challenges to investment advisors
in generating optimum returns through long-term portfolio investments. At the Manager’s discretion, a redemption
charge of 0%-3% of the net asset value of the redeemed Units may be charged to the Unitholder and paid to the Fund
if Units are redeemed within 30 days of such Units having been acquired. This charge does not apply to systematic
transactions. Further purchase orders from the same Unitholder may be refused by the Manager. This short-term
trading redemption charge is in addition to any other fees a Unitholder is otherwise subject to under this Offering
Memorandum.
DISTRIBUTION POLICY
Distributions
The Fund does not intend to pay distributions to Unitholders.
On an annual basis, the Fund will ensure that its income and net realized capital gains, if any, have been distributed to
Unitholders to such an extent that the Fund will not be liable for ordinary income tax thereon. To the extent that the
Fund has not distributed the full amount of its net income or capital gains in any year, the difference between such
amount and the amount actually distributed by the Fund will be paid as a “reinvested distribution”. Reinvested
distributions, net of any required withholding taxes, will be reinvested automatically in additional Units at a price
equal to the Net Asset Value per Unit and the Units will be immediately consolidated such that the number of
outstanding Units following the distribution will equal the number of Units outstanding prior to the distribution. The
tax treatment to Unitholders of reinvested distributions is discussed under the heading “Income Tax Considerations –
Taxation of Unitholders”.
In addition to the distributions described above, the Fund may from time to time pay additional distributions on its
Units, including without restriction in connection with a special distribution or in connection with returns of capital.
REDEMPTION OF UNITS
Daily Redemptions
Units may be redeemed at the option of Unitholders on each business day (each, a “Redemption Date”), subject to
the Fund’s right to suspend redemptions in certain circumstances. Units so redeemed will be redeemed at a redemption
- 36 - LEGAL_1:47107988.22
price equal to the Net Asset Value per Unit on the Redemption Date, less any costs and expenses associated with the
redemption, including commissions incurred by the Fund to fund such redemptions. For a redemption order to be
effective on a Redemption Date, the redemption request must be received in good order by the Manager prior to 1:00
p.m. (EST) on the redemption Date or such other time as the Manager may determine in its sole discretion. Redemption
requests not received in good order by the Manager by such time will be processed on the following Redemption Date.
Under normal market circumstances, payment of the proceeds of redemption will be made in Canadian dollars on or
before the third business day following a Redemption Date. Payment of redemption proceeds may be delayed in the
event that the Fund experiences delays or other challenges in selling cryptoassets or receiving the proceeds of sale of
cryptoassets in order to fund such redemptions. See “Risk Factors – Fund’s Holdings may become Illiquid” and
“Financial Institutions may Refuse to Support Transactions Involving Cryptoassets”.
By causing a broker or dealer to deliver a notice of the Unitholder’s intention to redeem Units, or by delivering directly
to the Administrator, a notice of the Unitholder’s intention to redeem Units, the Unitholder will be deemed to have
irrevocably surrendered his or her Units for redemption and, if applicable, to have appointed his or her broker or dealer
to act as his or her exclusive settlement agent with respect to the exercise of such redemption privilege and the receipt
of payment in connection with the settlement of obligations arising from such exercise.
Any redemption notice that the Administrator or the Manager or the Trustee determines to be incomplete, not in proper
form or not duly executed will, for all purposes, be void and of no effect and the redemption privilege to which it
relates will be considered, for all purposes, not to have been exercised thereby. A failure by a dealer or broker to
exercise redemption privileges or to give effect to the settlement thereof in accordance with a Unitholder’s instructions
will not give rise to any obligations or liability on the part of the Fund, the Trustee or the Manager to the broker or
dealer or the Unitholder.
Allocations of Capital Gains to Redeeming Unitholders
Pursuant to the Declaration of Trust, the Fund may allocate and designate as payable any capital gains realized by the
Fund as a result of any disposition of property of the Fund undertaken to permit or facilitate the redemption of Units
to a Unitholder whose Units are being redeemed. Any such allocations will reduce the redemption price otherwise
payable to the redeeming Unitholder.
Suspension of Redemptions
The Manager may suspend the redemption of Units or payment of redemption proceeds of the Fund for any period
during which the Manager determines that conditions exist that render impractical the sale of assets of the Fund or
that impair the ability to determine the value of the assets of the Fund. The suspension may apply to all requests for
redemption received prior to the suspension but as to which payment has not been made, as well as to all requests
received while the suspension is in effect. All Unitholders making such requests shall be advised by the Manager of
the suspension and that the redemption will be effected at a price determined on the first Redemption Date following
the termination of the suspension. All such Unitholders shall have and shall be advised that they have the right to
withdraw their requests for redemption. The suspension shall terminate in any event on the first day on which the
condition giving rise to the suspension has ceased to exist, provided that no other condition under which a suspension
is authorized then exists. To the extent not inconsistent with official rules and regulations promulgated by any
government body having jurisdiction over the Fund, any declaration of suspension made by the Manager shall be
conclusive.
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Osler, Hoskin & Harcourt LLP, the following is a summary of the principal Canadian federal income
tax considerations under the Tax Act for the Fund and for a prospective investor in the Fund who, for the purpose of
the Tax Act at all relevant times, is an individual (other than a trust), is resident in Canada, holds Units of the Fund as
capital property, is not affiliated and deals at arm’s length with the Fund, and has not entered into a “derivative forward
agreement” (as defined in the Tax Act) with respect to Units of the Fund. This summary is based upon the current
provisions of the Tax Act and regulations thereunder, the Tax Proposals and counsel’s understanding of the current
published administrative policies and assessing practices of the Canada Revenue Agency publicly available prior to
the date hereof. This summary does not take into account or anticipate any other changes in law whether by legislative,
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administrative or judicial action and it does not take into account provincial, territorial or foreign income tax legislation
or considerations, which may differ from the considerations described below.
This summary is of a general nature only and is not exhaustive of all possible income tax considerations. Prospective
investors should therefore consult their own tax advisors about their individual circumstances.
Under the SIFT Rules, trusts or partnerships (defined as “SIFT trusts” and “SIFT partnerships”, respectively) the
securities of which are listed or traded on a stock exchange or other public market, and that hold one or more “non-
portfolio properties” (as defined), are effectively taxed on income and taxable capital gains in respect of such non-
portfolio properties at combined rates comparable to the rates that apply to income earned and distributed by Canadian
corporations. Distributions of such income received by unitholders of SIFT trusts (and allocations of such income
made to members of SIFT partnerships) are treated as eligible dividends from a taxable Canadian corporation.
The SIFT Rules could affect the Fund and its Unitholders to the extent that the Fund is a SIFT trust to which the SIFT
Rules apply, and the Fund earns income from non-portfolio property or taxable capital gains from the disposition of
“non-portfolio property”. The Fund is subject to investment restrictions intended to restrict its ability to hold “non-
portfolio property.” If the Fund is considered to be a SIFT trust, “non-portfolio earnings” of the Fund will be subject
to the tax under the SIFT Rules when such amounts are distributed by the Fund to its Unitholders and such distributions
will be treated in the hands of such Unitholders as eligible dividends from a taxable Canadian corporation. This
summary assumes that at no time will the Fund be a SIFT trust.
Status of the Fund
This summary is based on the assumption that the Fund will comply at all material times with the conditions prescribed
in the Tax Act and otherwise so as to qualify as a “mutual fund trust” as defined in the Tax Act. Counsel is advised
that the Fund is expected to qualify as a “mutual fund trust” under the Tax Act at all material times. If the Fund were
to not qualify as a “mutual fund trust” for the purposes of the Tax Act for any period of time, the tax considerations
could be materially different from those described below.
In the opinion of counsel, provided that the Fund qualifies as a “mutual fund trust” within the meaning of the Tax Act
such Units will be qualified investments for Registered Plans. Notwithstanding the foregoing, if Units are a “prohibited
investment” for a tax-free savings account (“TFSA”), registered retirement savings plan (“RRSP”) or registered
retirement income fund (“RRIF”) that acquires Units, the holder or annuitant will be subject to a penalty tax as set out
in the Tax Act. A “prohibited investment” includes a unit of a trust with which the holder or annuitant does not deal
at arm’s length. Holders of TFSAs and annuitants of RRSPs and RRIFs should consult with their tax advisors in this
regard. In addition, on September 8, 2017, the Department of Finance released draft income tax legislative proposals
relating to certain measures announced in the March 22, 2017 federal budget, including amendments to the Tax Act
that would extend the application of the prohibited investment rules to a holder of a registered education savings plan
or a registered disability savings plan.
Taxation of the Fund
The Fund will include in computing its income, taxable distributions received or deemed to be received on assets held
by it, the taxable portion of capital gains realized by the Fund on the disposition of assets held by it, and other income.
The Declaration of Trust requires that the Fund distribute its net income and net realized capital gains, if any, for each
taxation year of the Fund to Unitholders to such an extent that the Fund will not be liable in any taxation year for
ordinary income tax (after taking into account any applicable losses of the Fund and any capital gains refunds to which
the Fund is entitled). If in a taxation year the income for tax purposes of the Fund exceeds the cash available for
distribution by the Fund, the Fund will distribute its income through a payment of reinvested distributions.
The CRA has expressed the opinion that virtual currencies, such as bitcoins, are generally treated as commodities for
purposes of the Tax Act. The CRA has further opined that gains (or losses) of mutual fund trusts resulting from
transactions in commodities should generally be treated for tax purposes as ordinary income rather than as capital
gains, although the treatment in each particular case remains a question of fact to be determined having regard to all
the circumstances. In light of the foregoing administrative positions of the CRA, and because the Fund intends to be
a long-term holder of cryptoassets, the Manager anticipates that the Fund will generally treat gains (or losses) as a
- 38 - LEGAL_1:47107988.22
result of any disposition of cryptoassets as capital gains (or capital losses) although, depending on the circumstances,
the Fund may instead include the full amount in (or deduct the full amount from) income.
Any losses incurred by the Fund may not be allocated to Unitholders, but may generally be carried forward and back
and deducted in computing the taxable income of the Fund in accordance with the detailed rules and limitations in the
Tax Act.
The Fund is subject to the suspended loss rules contained in the Tax Act. A loss realized on a disposition of capital
property is considered to be a suspended loss when the Fund acquires a property (a “substituted property”) that is the
same as or identical to the property disposed of, within 30 days before and 30 days after the disposition and the Fund
owns the substituted property 30 days after the original disposition. If a loss is suspended, the Fund cannot deduct the
loss until the substituted property is sold and is not reacquired within 30 days before and after the sale, which may
increase the amount of net realized capital gains of the Fund to be made payable to its Unitholders.
The Fund will be entitled for each taxation year throughout which it is a mutual fund trust to reduce (or receive a
refund in respect of) its liability, if any, for tax on its net realized capital gains by an amount determined under the
Tax Act based on the redemptions of its Units during the year (“capital gains refund”). The capital gains refund in a
particular taxation year may not completely offset the tax liability of the Fund for such taxation year which may arise
upon the sale of its investments in connection with redemptions of Units.
The Fund is required to compute its income and gains for tax purposes in Canadian dollars. Therefore, the amount of
income, cost, proceeds of disposition and other amounts in respect of investments that are not Canadian dollar
denominated will be affected by fluctuations in the exchange rate of the Canadian dollar against the relevant foreign
currency.
Taxation of Unitholders
Distributions
A Unitholder will be required to include in the Unitholder’s income for tax purposes for any year the amount of net
income and net taxable capital gains of the Fund, if any, paid or payable to the Unitholder in the year and deducted by
the Fund in computing its income, whether or not such amounts are reinvested in additional Units. The non-taxable
portion of any net realized capital gains of the Fund that is paid or payable to a Unitholder in a taxation year will not
be included in computing the Unitholder’s income for the year and, provided appropriate designations are made by
the Fund, will not reduce the adjusted cost base of the Unitholder’s Units. Any returns of capital will reduce the
Unitholder’s adjusted cost base. To the extent that a Unitholder’s adjusted cost base would otherwise be a negative
amount, the negative amount will be deemed to be a capital gain realized by the Unitholder and the Unitholder’s
adjusted cost base will be nil immediately thereafter. The Fund will designate, to the extent permitted by the Tax Act,
the portion of the net income distributed to Unitholders as may reasonably be considered to consist of net taxable
capital gains realized or considered to be realized by the Fund. Any such designated amount will be deemed for tax
purposes to be realized by Unitholders in the year as a taxable capital gain. Capital gains so designated will be subject
to the general rules relating to the taxation of capital gains described below. Any loss of the Fund for purposes of the
Tax Act cannot be allocated to, and cannot be treated as a loss of, the Unitholders of the Fund.
Composition of Distributions
Unitholders will be informed each year of the composition of the amounts distributed to them, including amounts in
respect of both cash and reinvested distributions. This information will indicate whether distributions are to be treated
as ordinary income, taxable capital gains and returns of capital, as those items are applicable.
Tax Implications of the Fund’s Distribution Policy
When a Unitholder acquires Units of the Fund, a portion of the price may reflect income and capital gains of the Fund
that have not been realized or distributed. This may particularly be the case near year-end before year-end distributions
have been made. When such income and capital gains are distributed by the Fund, they must be taken into account by
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the Unitholder in computing its income for tax purposes even though such amounts may have been reflected in the
price paid by the Unitholder.
Disposition of Units
Upon the actual or deemed disposition of a Unit, including the exchange or redemption of a Unit, a capital gain (or a
capital loss) will generally be realized by the Unitholder to the extent that the proceeds of disposition of the Unit
exceed (or are less than) the aggregate of the adjusted cost base to the Unitholder of the Unit and any reasonable costs
of disposition. In general, the adjusted cost base of all Units held by the Unitholder is the total amount paid for the
Units (including brokerage commissions paid), regardless of when the investor bought them, less any returns of capital
and less the adjusted cost base of any Units previously disposed of by the Unitholder. For the purpose of determining
the adjusted cost base of Units to a Unitholder, when Units are acquired, the cost of the newly acquired Units will be
averaged with the adjusted cost base of all Units owned by the Unitholder as capital property immediately before that
time.
Taxation of Capital Gains and Capital Losses
One-half of any capital gain realized by an investor and the amount of any net taxable capital gains realized or
considered to be realized by the Fund and designated by the Fund in respect of an investor will be included in the
investor’s income as a taxable capital gain. One-half of a capital loss will be an allowable capital loss realized by an
investor that will be deducted from taxable capital gains subject to and in accordance with detailed rules in the Tax
Act.
EXCHANGE OF TAX INFORMATION
Pursuant to the Intergovernmental Agreement for the Enhanced Exchange of Tax Information under the Canada-U.S.
Tax Convention entered into between Canada and the U.S. (the “IGA”), and related Canadian legislation, the Fund
and its intermediaries are required to report certain information, including certain financial information (e.g. account
balances), with respect to unitholders who are U.S. residents and U.S. citizens (including U.S. citizens who are
residents or citizens of Canada), and certain other “U.S. Persons” as defined under the IGA (excluding Registered
Plans such as RRSPs), to the CRA. Intermediaries and/or entities that hold units directly or indirectly may have
different disclosure requirements under the IGA. The CRA will then exchange the information with the U.S. Internal
Revenue Service pursuant to the provisions of the Canada‑U.S. Tax Convention.
In addition, pursuant to rules in the Tax Act implementing the Organisation for Economic Co-operation and
Development Common Reporting Standard (the “CRS Rules”) the Fund and its intermediaries are required to identify
and report (commencing in May 2018) to the CRA certain information, including financial information (e.g. account
balances), relating to unitholders of the Fund (other than Registered Plans) who are resident in a country outside
Canada that has adopted the Common Reporting Standard. Intermediaries and/or entities that hold units directly or
indirectly may have different disclosure requirements under the CRS Rules. Such information would be exchanged
by the CRA with the countries where such unitholders are resident.
ORGANIZATION AND MANAGEMENT DETAILS OF THE FUND
Manager
3iQ Corp. is the manager of the Fund and provides or shall cause to be provided all administrative services required
by the Fund. The Manager may be considered to be a promoter of the Fund within the meaning of the securities
legislation of each of the Provinces and Territories of Canada.
The Manager was incorporated under the Canada Business Corporations Act on July 9, 2012. The Manager’s head
office is located at 4800-1 King Street West, Box 160, Toronto, Ontario, M5H 1A1.
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Officers and Directors of the Manager
The board of directors of the Manager currently consists of eight members. The name, municipality of residence and
office with the Manager of each director and senior officer is set out below. The directors do not have a fixed term of
office.
Name
Municipality of
Residence Office with the Manager Principal Occupation
Howard Atkinson Toronto, Ontario Director and Chairman Financial Executive
Frederick T. Pye Pointe Claire, Quebec President, Chief Executive
Officer and Chief
Compliance Officer and
Director
President of 3iQ Corp.
Shaun Cumby Etobicoke, ON Chief Investment Officer and
Director
Chief Investment Officer of
3iQ Corp.
John Loeprich Moffat, Ontario Executive Vice President,
Chief Financial Officer and
Chief Operating Officer
Chief Financial Officer of
3iQ Corp.
Anthony Cox Toronto, Ontario Director Financial Executive
Daniel Dorey Westmount, Quebec Director President of One Cap
Financial
Thomas Staudt New York, New York,
USA
Director Chief Operating Officer of
ARK Investment
Management LLC
Richard Strauss Boca Raton, Florida, USA Director Investor
Bruce J. Smith East Meadow, New York,
USA
Director Senior Advisor for Strategic
Initiatives, Van Eck
Associates Corporation
A description of the experience, background relevant to the business of the Fund and information regarding the
principal occupations held by the above noted individuals during the past five years is set out below.
Howard Atkinson
Howard J Atkinson was President of TMFD Financial (“TMFD”), focusing on business development and corporate
strategy. Prior to joining TMFD he was a founder and president of Horizons ETFs Management Inc. and over his
three decades in financial services has held executive positions with Mackenzie Financial Corporation, CI Funds and
Barclays Global Investors Canada Ltd. His board experience spans public and private companies as well as non –
profit organizations. He is the past founding chair of the Canadian ETF Association and a past president of CFA
Society Toronto. He is the author of four books including The New Investment Frontier III: A Guide to Exchange
Traded Funds for Canadians, (Insomniac Press, 2005). Mr. Atkinson holds the CFA, CIMA® and ICD.D
designations.
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Frederick T. Pye
Frederick T. Pye is the President, Chief Executive Officer and Chief Compliance Officer of 3iQ Corp. Mr. Pye is
recognized for creating and promoting creative and unique investment products for the investment industry. For the
prior 10 years Mr. Pye managed private client portfolios with National Bank Financial Inc., Wellington West Capital
Inc. and MacDougall, MacDougall & MacTier Inc. Prior to this Mr. Pye was Founder, President & Chief Executive
Officer of Argentum Management and Research Corporation, a company dedicated to managing and distributing
quantitative investment portfolios including the first long-short mutual fund in Canada. He was also Senior Vice-
President and National Sales Manager of Fidelity Investments Canada and an integral part of the team that saw assets
rise from $80 million to over $7.5 billion in assets under management during his tenure. He also held various positions
with Guardian Trust Company, which listed the first Gold, Silver and Platinum Certificates on the Montreal Exchange,
Ivory and Sime Pembroke, Gordon Private Client Corporation and Marleau, Lemire Securities Inc. Mr. Pye obtained
a Masters in Business Administration from Concordia University and is a member of the Board of the Anglican Funds
and the West Island Youth Residence.
Shaun Cumby
Shaun Cumby has worked in trading and portfolio management for over twenty years across many asset classes,
including asset-backed securities, mortgage-backed securities, credit default swaps, bank loans and equities and
related derivates. Prior to joining 3iQ Corp., Mr. Cumby served as the Chief Risk Officer of Dundee Bank of Canada
and co-head of the TD Securities corporate loan portfolio. Mr. Cumby earned a Masters in Business Administration
from the University of Toronto.
Anthony Cox
Anthony Cox has more than 15 years’ experience in Canada and the United Kingdom with major accounting firms
and over 25 years of experience in the investment fund industry in Canada. Mr. Cox’s background includes: eleven
years as Vice President and Chief Financial Officer of Spectrum United Mutual Funds Inc. (a wholly-owned subsidiary
of SunLife Assurance Company of Canada) from its inception in 1987 to $7 billion of assets under management in
1998; eleven years as Director and Chief Operating Officer of NBF Turnkey Solutions Inc. (a wholly-owned
subsidiary of National Bank Financial Inc.). Prior to joining 3iQ Corp. as Chief Financial Officer (From May 31, 2017
to June 30, 2018), Mr. Cox as President of Canadian Fund Management Inc. provided consulting and contract services
to investment fund managers, including Purpose Investments Inc. and CIBC Mellon Global Securities Services
Company. He has been very active in the industry, serving on many Investment Funds Institute of Canada committees
and was previously a director at Fundserv Inc. Mr. Cox is a member the Independent Review Committees of PIMCO
Canada funds, WisdomTree ETFs and Connor, Clark & Lunn funds. He is also President and Board Member of The
Duke of Edinburgh’s Award, Ontario and a Board Member of The Duke of Edinburgh Award, Canada. He is a CPA,
CA and holds the ICD.D designation.
Daniel Dorey
Daniel Dorey is a leader in the real estate industry with over 30 years of experience in acquisition, integration of real
estate assets and real estate corporations, as well as asset management and financial structuring. Mr. Dorey is also
Managing Director at OneCap Financial Corp., a financial services company involved in real estate investments and
finance. Mr. Dorey is also Executive Chairman of OneCap Investment Corp. a TSX Venture public company. He also
occupied the position of Senior VP at CANADA Lands Corporation where he was responsible for the development
of Crown Lands in the province of Québec and the overall operations of La Société du Vieux-Port de Montreal. Prior
thereto, he was President of Oxford Quebec, where he was involved in the acquisition of real estate assets valued at
$1 billion and directly responsible for managing the real estate portfolio. Mr. Dorey founded Koral Properties, which
became one of the largest property management firms in Quebec within a five-year period. He has also worked for
Trust General’s Institutional-Commercial-Industrial property brokerage division, for Edgecombe Realty Advisors and
for Mercantile Bank-National Bank. Mr. Dorey sat on the boards of the Youth Protection Division Foundation (DPJ),
past chairman, Urban Development Institute; board of the Montréal Economic Institute; Quebec Board of Directors,
World Presidents’ Organization (WPO); and the Quebec Board of Directors of the Young Presidents’ Organization
(YPO). He holds an MBA from McGill University and a Bachelor’s degree from Bishop’s University.
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Thomas G. Staudt
Thomas G. Staudt has been with ARK Investment Management (New York) for 3 years, and currently serves as the
Chief Operating Officer, managing the daily operation of ARK’s products and strategies, in addition to managing the
strategic operations of the firm. Mr. Staudt also serves as Director of Product Development, evaluating and
implementing ARK’s product portfolio. Prior to joining ARK, he worked in a media sales and consulting role for
WILX. Prior thereto, he worked for Fidelity Investments in their mutual fund department, and has also consulted on
millennial investing behavior to TIAA-CREF. Mr. Staudt received his Bachelor of Business Administration, magna
cum laude, in Finance and Economics from the University of Notre Dame, a Master of Arts in Telecommunications
Policy from Michigan State University, a Master of Science in New Media Management from the Newhouse School
at Syracuse University, and his Master of Business Administration from Cornell University. He is also the President
of ARK ETF Trust.
John Loeprich
John Loeprich is the Chief Financial Officer of 3iQ Corp. and is responsible for overseeing all aspects of operations
and finance, as well as assisting with sales and marketing and strategic planning. John brings over 35 years of
experience in the financial services industry, ranging from public accounting, to finance and operations with multi-
national corporations, to finance, sales, marketing and strategic planning with a number of investment management
firms. John started his investment industry tenure at Fidelity Investments Canada Ltd. where he became Chief
Financial Officer before starting his own business specializing in assisting companies launching themselves into the
mutual fund market. Prior to 3iQ Corp., John was EVP and CFO at Qwest Investment Fund Management, helping
grow the business into a profitable IFM/PM platform. Prior to Qwest, John was Senior Vice-President, Partner & head
of the Private Client Division at Hillsdale Investment Management, responsible for sales and marketing to investment
advisors and high net worth individuals. During his time at Hillsdale the firm’s assets grew from $12 million to over
$500 million. John is a Chartered Professional Accountant, Certified General Accountant and a graduate of the
University of Waterloo (Bachelor of Mathematics).
Richard Strauss
Richard Strauss has over 25 years of experience in the U.S securities industry. Most of his career was spent at Goldman
Sachs where he was a senior Financial Services analyst in charge of Investment Management, Brokerage, Investment
Banking and Money Center Bank research coverage. While at Goldman, Mr. Strauss played an important role in
marketing the firm’s 1999 initial public offering to institutional investors worldwide. After leaving Goldman, he was
a Director at Deutsche Bank covering Financial Services. Prior thereto, he was at Salomon Brothers, covering
superregional and regional banks. Currently, Mr. Strauss is President and a managing member of Kensington Partners,
a trading operation. He holds both an MBA and BA from Cornell University.
Bruce J. Smith
Mr. Bruce John Smith is the Senior Advisor for Strategic Initiatives, Chief Financial Officer, Senior Vice President,
Controller, Treasurer and Director of Van Eck Associates Corporation and as a director of certain related entities. Mr.
Smith joined Van Eck Associates Corporation in 1983. Mr. Smith was previously a CPA at McGladrey & Pullen. Mr.
Smith is a member of American Institute of Certified Public Accountants and New York State Society of Certified
Public Accountants. He holds the FINRA Series 7, 27 and 63 licenses. Mr. Smith earned the Certified Public
Accountant designation in 1980. He earned a B.S. in Accounting from Fordham University in 1977.
Duties and Services provided by the Manager
Under the Declaration of Trust, the Trustee has delegated authority to the Manager to manage and administer the day-
to-day business and affairs of the Fund, including, without limitation, acquiring or arranging to acquire cryptoassets
on behalf of the Fund, calculating the Net Asset Value of the Fund and Net Asset Value per Unit of the Fund, net
income and net realized capital gains of the Fund, authorizing the payment of operating expenses incurred on behalf
of the Fund, preparing financial statements and financial and accounting information as required by the Fund, ensuring
that securityholders are provided with financial statements (including interim and annual financial statements) and
other reports as are required by applicable law from time to time, ensuring that the Fund complies with regulatory
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requirements and preparing the Fund’s reports to unitholders and the securities regulatory authorities.
The Manager may from time to time employ or retain any other person or entity to perform, or to assist the Manager
in the performance of management, administrative and advisory services to all or any portion of the Fund’s assets and
in performing other duties of the Manager. The Manager has engaged the Administrator, the Cryptoasset Consultant,
the Custodian, the Transfer Agent, the auditor of the Fund and legal counsel to the Fund to provide services and/or to
advise the Fund and may engage other services providers from time to time, and the Manager is responsible for the
supervision and monitoring of all such service providers.
The Fund pays to the Manager the Management Fee and reimburses the Manager for certain costs and expenses
incurred by the Manager on behalf of the Fund. See “Fees and Expenses – Fees and Expenses Payable by the Fund –
Fees Payable to the Manager for Acting as Manager of the Fund” and “Fees and Expenses – Fees and Expenses
Payable by the Fund – Ongoing Expenses of the Fund”.
Under the Declaration of Trust, the Manager agrees to act honestly and in good faith and in the best interests of the
Fund and to exercise the degree of care, diligence and skill that a reasonably prudent investment fund manager would
exercise in comparable circumstances. The Manager and each of its directors, officers, employees, consultants and
agents are indemnified and will be reimbursed by the Fund to the fullest extent permitted by law against all liabilities
and expenses (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the Fund,
and counsel fees and disbursements on a solicitor and client basis) reasonably incurred in connection with the services
provided to the Fund described herein or as a director, officer, employee, consultant or agent thereof, including in
connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such
person may be made a party by reason of being or having been the manager or a director, officer, employee, consultant
or agent thereof, except for liabilities and expenses resulting from the person’s wilful misconduct, bad faith,
negligence, or breach of the standard of care of the Manager described above.
Unless the Manager resigns or is removed as described below, the Manager will continue as manager until the
termination of the Fund. The Manager will be deemed to have resigned if the Manager becomes bankrupt or insolvent
or in the event the Manager ceases to be resident in Canada for purposes of the Tax Act. Upon a material breach by
the Manager of the Declaration of Trust which has not been cured by the Manager by the 30th day after the Manager
has received written notice of such breach, the Manager may be removed by an Extraordinary Resolution of
Unitholders.
Trading Cryptoassets for the Fund’s Portfolio
The Fund purchases and sells cryptoassets primarily from or to one or more institutional liquidity providers in over-
the-counter (OTC), principal transactions. The Fund may also trade cryptoassets on cryptoasset exchanges. The
Manager may consult with the Cryptoasset Consultant in determining where to place the Fund’s cryptoasset orders
based on the prices and volumes available through such counterparties and/or on such exchanges with a view to
achieving best execution for the Fund. Orders are generally placed by phone or through electronic dealing systems at
the Cryptoasset Consultant’s discretion.
Prior to establishing a relationship with any OTC counterparty or commencing to trade on any cryptoasset exchange,
the Manager will confirm that such counterparty or exchange maintains appropriate know-your-client (KYC) policies
and procedures and refuses to transact with any person or entity that is on a list of designated persons or entities
established and maintained under applicable AML Regulation. The Manager ensures that each OTC counterparty or
exchanges through which cryptoassets are sourced for the Fund has its head office in a jurisdiction which is a member
of the International Financial Action Task Force (FATF) or its global network of FATF-Style Regional Bodies.
Once a cryptoasset order has been executed and allocated to the Fund, the Manager reviews and approves the
transaction. Upon approval, the Custodian is notified and payment for the trade is settled. Once the Custodian receives
the cryptoasset on behalf of the Fund, the Custodian immediately places the cryptoasset in the Fund’s vaulted cold
storage account.
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Conflicts of Interest – Manager
The Manager and their respective affiliates or associates may be managers or investment managers of trusts that invest
in cryptoassets. The services of the Manager are not exclusive to the Fund. The Manager may in the future act as the
manager or investment advisor to other trusts and companies and may in the future act as the manager or investment
advisor to other trusts which invest in cryptoassets and which are considered competitors of the Fund. The Trustee is
an affiliate of the Manager.
Trustee
3iQ LP (the “Trustee”) is the trustee of the Fund pursuant to the Declaration of Trust. The general partner of the
Trustee is 3iQ GP Inc., a wholly-owned subsidiary of the Manager. The Manager is the sole limited partner of the
Trustee.
The Trustee may resign upon 60 days’ notice to Unitholders and the Manager. The Trustee may be removed with the
approval of a two-thirds majority vote cast at a meeting of Unitholders of the Fund called for such purpose or by the
Manager in the event the Trustee has committed certain events of bankruptcy or insolvency or is in material default
of its obligations under the Declaration of Trust and such default continues for 30 days from the date the Trustee
receives notice of such material default from the Manager. Any such resignation or removal shall become effective
only upon the acceptance of appointment by a successor. If the Trustee resigns or is removed by the Manager, its
successor may be appointed by the Manager. The successor must be approved by Unitholders if the Trustee is removed
by Unitholders. If no successor has been appointed within 60 days from the date of written notice of such resignation
or removal, the Declaration of Trust and the Fund will be terminated.
The Trustee is required to exercise its powers and discharge the duties of its office honestly and in good faith and in
the best interests of the Fund and in connection therewith shall exercise the degree of care, diligence and skill that a
reasonably prudent trustee would exercise in comparable circumstances. Pursuant to the Declaration of Trust, the
Trustee has delegated to the Manager all of its powers and duties other than acting as registered owner of the property
of the Fund.
Under the terms of the Declaration of Trust, the Trustee benefits from a general disclaimer of liability and has a right
of indemnification from the Fund for any claims or liabilities arising out of the execution of its duties as trustee, except
in cases of gross negligence, misfeasance or wilful misconduct on the part of the Trustee or breach of its standard of
care.
The Trustee is entitled to be reimbursed for all expenses and liabilities which are properly incurred by the Trustee in
connection with the activities of the Fund.
Transfer Agent
TSX Trust Company will act as the transfer agent for the Units. The address of the Transfer Agent is 301-100 Adelaide
Street West, Toronto, Ontario M5H 4H1. The Transfer Agent is entitled to receive fees from the Fund as described
under “Fees and Expenses – Fees and Expenses Payable by the Fund – Ongoing Expenses of the Fund”
Cryptoasset Consultant
ARK Investment Management LLC (“ARK”), located at 155 West 19th Street, Floor 5, New York, New York, 10011,
USA, has been retained by the Manager, on behalf of the Fund, as a consultant to provide advice to the Manager
regarding cryptoassets pursuant to a cryptoasset consulting agreement between the Cryptoasset Consultant and the
Manager (the “Cryptoasset Consulting Agreement”).
ARK was formed in June 2013 and registered as an investment adviser with the U.S. Securities and Exchange
Commission in January 2014. ARK began managing assets on September 30, 2014, as investment manager to the
ARK ETF Trust, an investment company registered with the SEC under the Investment Company Act of 1940, as
amended. ARK offers investment products that capitalize on disruptive innovations across sectors and markets. ARK’s
mission is to deliver long-term capital appreciation and outperformance (alpha) with low correlation to traditional
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investment strategies by identifying and investing in leaders, enablers, and beneficiaries of disruptive technologies.
ARK’s strategies are designed to offer diversification and long-term growth potential.
ARK applies a thematic investment approach, and conducts a combination of top-down and bottom-up research across
sectors and markets to fully understand the impact of new technologies, such as robotics, the Internet of things,
blockchain, genomic sequencing, and 3D printing. ARK’s research ecosystem is designed to identify innovation and
convergence across markets.
In September 2015 ARK became the first public fund manager to invest in bitcoin, via Grayscale’s Bitcoin Investment
Trust. ARK continues to offer investors the only three exchange traded funds with bitcoin exposure, including its
ARK Web x.0 ETF (ARKW), Innovation ETF (ARKK), and ARK Industrial Innovation ETF (ARKQ). ARK has
collaborated with notable companies in the bitcoin blockchain space, such as Coinbase, Gem, and ConsenSys, on
research and educational outreach. The firm is a buy side thought leader in the bitcoin and blockchain space and has
a strong presence in cryptocurrency.
Services are provided to the Fund by those individuals listed below:
Name
Municipality of
Residence
Office with the Cryptoasset
Consultant Principal Occupation
Catherine Wood New York, New York Director and Chief
Investment Officer
Director and Chief
Investment Officer, ARK
Brett Winton San Francisco, California Director of Research Director of Research, ARK
Thomas G. Staudt New York, New York
Chief Operating Officer and
Director of Product
Development
Chief Operating Officer and
Director of Product
Development, ARK
Kellen Carter New York, New York Corporate Counsel and Chief
Compliance Officer
Corporate Counsel and Chief
Compliance Officer, ARK
A description of the experience and background relevant to the business of the Fund for each of the above is set out
below.
Catherine D. Wood
Catherine D. Wood has been with the firm and in her current role for 3 years, and has 36 total years of experience.
Cathie is the portfolio manager responsible for managing client’s assets. Ms. Wood founded ARK Investment
Management in January 2014 after having completed twelve years at AllianceBernstein. At AllianceBernstein, she
was Chief Investment Officer of Global Thematic Strategies, with $5 billion in assets under management and long
term investment returns. She joined AllianceBernstein from Tupelo Capital Management, a hedge fund she co-founded
which, in 2000, managed $800 million in global thematic strategies. Prior to her tenure at Tupelo Capital, she worked
for 18 years with Jennison Associates as Chief Economist, Equity Research Analyst, Portfolio Manager and Director.
Ms. Wood started her career in Los Angeles at The Capital Group as an Assistant Economist. She received her B.S.,
summa cum laude, in Finance and Economics from the University of Southern California in 1981. She was a speaker
at the 2016 World Economic Forum, and named the Winner of Outstanding Contribution by Women in Finance by
Markets Media in 2016.
Brett M. Winton
Brett M. Winton has been with the firm and in his current role for 3 years, and has a decade of experience. Mr. Winton
directs research for ARK, and is principal and founder of iamB Consulting, a firm that specializes in dimensioning
the ramifications of innovation and disruption for investors and high-growth ventures. From 2007 he spent 5 years
conducting thematic research and advising portfolio managers as a member of AllianceBernstein’s Research on
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Strategic Change team. His research topics ranged from Global Energy in the Face of Carbon Dioxide Regulation, to
Social Media and the Rise of Facebook, from the Reformation of the Financial Services Landscape to the Emergence
of Electric Vehicles. Previously he worked in business development in the RFID industry. Mr. Winton earned his B.S.
in mechanical engineering at MIT.
Kellen Carter
Kellen Carter joined ARK in April 2016. As ARK’s Corporate Counsel and Chief Compliance Officer, Mr. Carter
provides a full range of regulatory, compliance and legal advice to ARK on all business matters. He began his career
as a Securities Compliance Examiner in the Office of Compliance, Inspections, and Examinations (OCIE) at the U.S.
Securities and Exchange Commission’s (SEC) New York regional office. After OCIE, Mr. Carter was an Attorney in
the SEC’s Division of Investment Management’s Risk and Examinations Office. Subsequently, he worked as a
Management Consultant at Ernst & Young, LLP in the Wealth and Asset Management group. He received his B.S. in
Human and Organizational Development with a concentration in International Development from Vanderbilt
University, and his J.D. from Howard University School of Law.
For a brief description of the background of Thomas G. Staudt see “Organization and Management Details of the Fund
– Officers and Directors of the Manager”.
Conflicts of Interest – ARK
The Cryptoasset Consultant and its respective affiliates or associates may provide advice and other services to other
funds that invest in cryptoassets. The services of the Cryptoasset Consultant are not exclusive to the Fund. The
Cryptoasset Consultant may in the future act as the cryptoasset consultant to other trusts and companies and may in
the future act as the cryptoasset consultant to other trusts which invest in cryptoassets and which are considered
competitors of the Fund.
Cryptoasset Consulting Agreement
Under the Cryptoasset Consulting Agreement, the Cryptoasset Consultant is required to exercise its powers and
discharge its duties honestly, in good faith and in the best interests of the Fund and its Unitholders and must exercise
the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
The Cryptoasset Consultant is be liable in carrying out its duties under the Cryptoasset Consulting Agreement,
including for any loss or diminution in value of the Fund’s assets which may occur during or in the course of the
performance by the Cryptoasset Consultant of its rights, duties, powers, discretions, authorities, obligations and
responsibilities under the Cryptoasset Consulting Agreement, except to the extent that the loss or damage results from
the wilful misconduct, negligence or reckless disregard of the Cryptoasset Consultant’s duties, obligations and
responsibilities or if the Cryptoasset Consultant has failed to meet the standard of care set out above.
The Cryptoasset Consultant and each of its directors, officers, employees and agents will be indemnified and saved
harmless by the Manager and the Fund for all liabilities, costs and expenses incurred in connection with any claim,
action, suit or proceeding that is proposed or commenced or any other claim that is made against the Cryptoasset
Consultant or any of its officers, directors, employees or agents in the exercise of the Cryptoasset Consultant’s duties
if they do not result from the wilful misconduct, negligence or reckless disregard of the Cryptoasset Consultant’s
duties, obligations and responsibilities or failure to meet its standard of care.
The Cryptoasset Consultant is compensated by the Manager out of its management fees. The Cryptoasset Consulting
Agreement shall continue indefinitely unless otherwise terminated in accordance with its terms.
Independent Advisory Committee
The Manager has created an advisory board to offer assistance to the Manager’s board of directors and senior
executives with respect to relationships, processes, security, regulatory and technology developments as they relate to
cryptoassets and blockchain. The advisory board is composed of the following individuals:
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Name Municipality of Residence Principal Occupation
Francis Pouliot Montreal, Quebec President, Catallaxy
Jeremy Clark Montreal, Quebec Associate Professor, Concordia University
Jack Tatar New York, New York Author
A description of the experience and background relevant to the business of the Fund for each of the above is set out
below.
Francis Pouliot
Francis Pouliot is a Bitcoin entrepreneur, economist, researcher and industry spokesperson since 2013. Francis is also
founder and CEO of Satoshi Portal, a Montreal-based fintech startup building the software and financial infrastructure
for the Bitcoin Standard, notably through its two flagship applications Bylls and Bitcoin Outlet. Francis is the creator
and project manager of Cyphernode, an open-source Bitcoin protocol infrastructure project.
Francis is co-founder of Catallaxy, a blockchain expertise and R&D center founded with Raymond Chabot Grant
Thornton, acting as consultant for institutional clients including banks, crown corporations, private and public
companies. Francis advises numerous government bodies including OSC's Fintech Committee, Fintrac, and Ministry
of Finance.
Francis was Director of the Bitcoin Embassy, the world's first blockchain hub, is a visiting expert at Milan's Blockchain
lab and was board member of the Bitcoin Foundation, in addition to being founder and CEO of the Bitcoin Foundation
Canada in 2014.
Francis holds a master's degree in Public Policy obtained with distinction from King's College London, and a
bachelor’s degree in International Studies from the University of Montreal. His professional background is as a policy
analyst and economist for various free-market think tanks, and he currently serves as associate researcher at the
Montreal Economic Institute.
Jeremy Clark
Jeremy Clark is an expert in cryptography and cyber security. Mr. Clark is an assistant professor at the Concordia
Institute for Information Systems Engineering. He obtained his PhD from the University of Waterloo, where his gold
medal dissertation was on designing and deploying secure voting systems including Scantegrity, the first
cryptographically verifiable system used in a public sector election. He wrote one of the earliest academic papers on
bitcoin, completed several research projects in the area, and contributed to the first textbook. Beyond research, he has
worked with several municipalities on voting technology and testified to the Canadian Senate on bitcoin.
Jack Tatar
Jack Tatar is co-author of “Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond”. Jack has over two
decades of experience in financial services including as a financial advisor and executive with Merrill Lynch, and as
owner of GEM Research Solutions, a leading research provider to the financial services industry. He is an angel
investor and advisor to startups in the cryptoasset community, and speaks and writes frequently on the topic. He was
one of the first financial professionals to receive certification from the Digital Currency Council and is the coauthor
of one of the earliest books on Bitcoin, What’s the Deal with Bitcoins? as well as numerous books on retirement and
finance.
Remuneration of Directors and Officers
The officers of the Manager receive their remuneration from the Manager. The directors of the Manager do not receive
any director’s fees. The expenses of the officers and directors of the Manager are paid by the Manager.
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Administrator
The Manager has engaged SGGG Fund Services Inc. (the “Administrator”) to provide certain administrative services
to the Fund including fund accounting and acting as recordkeeper in respect of the Units. The principal office of the
Administrator is located in Toronto, Ontario.
The Administrator is entitled to receive fees from the Fund as described under “Fees and Expenses – Fees and
Expenses Payable by the Fund – Ongoing Expenses of the Fund” and to be reimbursed for all expenses and liabilities
which are properly incurred by the Administrator in connection with the activities of the Fund.
Custodian
The Fund has entered into an agreement (the “Custodian Agreement”) with Coinbase, Inc. (the “Custodian” or
“Coinbase”) pursuant to which the Cryptoasset Portfolio is held in the Coinbase vaults and the Fund may trade in
cryptoassets on the Custodian’s exchange, GDAX. The Custodian is located in San Francisco, California, USA and
maintains money transmitter licenses in 38 U.S. jurisdictions. The Custodian is subject to the regulations enforced by
the various state agencies that issued their respective money transmitter licenses. In the State of New York, the
Custodian holds a Virtual Currency Business license (the “BitLicense”), under a regulatory framework created by the
New York Department of Financial Services that sets forth consumer protection, anti-money laundering compliance
and cyber security rules tailored for digital currency companies in New York. The BitLicense was the first, and, as at
the date of this Offering Memorandum, remains the only regulatory licensing regime in the world created and applying
specifically for virtual currencies. The Custodian was one of the first three companies to hold a BitLicense.
The Custodian is responsible for safekeeping the cryptoasset investments of the Fund that are delivered to the
Custodian (but not those assets of the Fund not held by the Custodian).
The Fund’s crypotassets are held by the Custodian offline in “cold storage”. Assets held in cold storage are protected
by Coinbase’s security measures which reflect best practices in the payment industry generally and in the cryptoasset
space in particular. To the extent that any assets of the Fund are temporarily held online in a Coinbase “hot wallet”,
such assets will be fully insured.
To the extent required under securities regulation applicable to the Manager, the Manager will obtain securities
regulatory approval prior to changing the Custodian or approving the appointment of sub-custodians of the Cryptoasset
Portfolio.
The Custodian may suspend, restrict, or terminate the Fund’s access to its account and/or the Custodian Agreement if
the Custodian is compelled to do so by a facially valid subpoena, court order, or binding order of a government
authority or the Fund is in material breach of the terms of the Custodian Agreement. In such circumstances, the
Custodian will provide the Fund with notice of its actions unless a court order or other legal process prohibits the
Custodian from providing such notice. Upon a deactivation of the Fund’s account, the Fund will have 90 days to
transfer its cryptoassets out of its Coinbase account unless such transfer is prohibited by law (including AML
Legislation), subpoena or court order. The Fund may terminate the Custodian Agreement at any time.
The Custodian is entitled to receive fees from the Fund as described under “Fees and Expenses – Fees and Expenses
Payable by the Fund – Ongoing Expenses of the Fund” and to be reimbursed for all expenses and liabilities that are
properly incurred by the Custodian in connection with the activities of the Fund.
Auditor
MNP LLP is the auditor of the Fund. The office of the auditor is located in Toronto, Ontario.
Promoter
The Manager may be considered a promoter of the Fund by reason of its initiative in forming and establishing the
Fund and taking the steps necessary for the distribution of the Units. The Manager does not receive any benefits,
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directly or indirectly, from the issuance of Units offered hereunder other than amounts paid to the Manager as
described under “Fees and Expenses”.
CALCULATION OF NET ASSET VALUE
Calculation of Net Asset Value
The Net Asset Value of the Fund on a Valuation Date will be equal to (i) the aggregate fair value of the assets of the
Fund less (ii) the aggregate fair value of the liabilities of the Fund. The net asset value of Units for each class of units
on a particular date will be equal to the Net Asset Value of the Fund allocated to the Units of such class, including an
allocation of any net realized capital gains or other amounts payable to Unitholders on or before such date expressed
in Canadian dollars at the applicable exchange rate on such date. The Net Asset Value per Unit of a class on any day
will be obtained by dividing the Net Asset Value of the Fund allocated to the Units of such class on such day by the
number of Units of that class then outstanding.
For the purpose of calculating Net Asset Value of the Fund on a Valuation Date, the value of the aggregate assets of
the Fund on such Valuation Date will be determined as follows:
(a) the value of any cash on hand or on deposit, bill, demand note, account receivable, prepaid expense,
dividend, or other amount receivable (or declared to holders of record of securities owned on a date
before the Valuation Date as of which the value of the assets is being determined, and to be
receivable) and interest accrued and not yet received will be deemed to be the full amount thereof
provided that if the Manager has determined that any such deposit, bill, demand note, account
receivable, prepaid expense, dividend, or other amount receivable (or declared to holders of record
of securities owned on a date before the Valuation Date as of which the value of the assets is being
determined, and to be receivable) or interest accrued and not yet received is not otherwise worth the
full amount thereof, the value thereof will be deemed to be such value as the Manager determines
to be the fair value thereof;
(b) the value of bitcoin, ether and litecoin in the Cryptoasset Portfolio will be based on the 4:00 p.m.
(EST) posted prices as published on Bloomberg under the symbols XBT, XET and ELC,
respectively, or such other reliable third party pricing source as the Administrator, in consultation
with the Manager, may select from time to time for the purpose of valuing the Cryptoasset Portfolio;
(c) any market price reported in currency other than Canadian dollars will be translated into Canadian
currency at the rate of exchange available on the Valuation Date on which the value of the assets is
being determined;
(d) estimated operating expenses payable by the Fund shall be accrued to the Valuation Date; and
(e) the value of any security, property or other assets (including any illiquid investments) to which, in
the reasonable opinion of the Manager the above principles cannot be applied (whether because no
price or yield equivalent quotations are available as above provided, no published market exists or
for any other reason) will be the fair value thereof determined in good faith in such manner as the
Manager from time to time adopts.
Each portfolio transaction will be reflected in the calculation of the Net Asset Value per Unit no later than the
calculation of Net Asset Value per Unit next made after the date on which the transaction becomes binding. The issue
of Units will be reflected in the calculation of Net Asset Value per Unit next made after the issue date for such Units,
which may be up to two Trading Days after the date that the subscription order for such Units is accepted. The
exchange or redemption of Units will be reflected in the calculation of the Net Asset Value per Unit next made after
the exchange request or redemption request is accepted.
The Manager, in consultation with the auditor, may determine such other valuation rules as it deems necessary from
time to time, which rules are expected to be consistent with GAAP. Net Asset Value calculated in this manner will be
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used for the purpose of calculating Management Fees (and other service providers’ fees) and will be published net of
all paid and payable fees. Such Net Asset Value will be used to determine the subscription price and redemption value
of Units. To the extent that such calculations are not in accordance with GAAP, the financial statements of the Fund
will include a reconciliation note explaining any difference between such published Net Asset Value and Net Asset
Value for financial statement reporting purposes (which must be calculated in accordance with GAAP).
Valuation Issues associated with Blockchain Forks
In the event that a fork in the blockchain of the Bitcoin Network, the Litecoin Network or Ethereum results in: (i)
issuance to the Fund of an additional cryptoasset alongside the bitcoin, litecoin or ether held by the Fund; or (ii) a
choice to keep the existing cryptoasset or exchange or replace it with a different cryptoasset, 3iQ Corp. will make the
investment decision that it believes is in the best interest of the Fund and the Unitholders at the time. There will likely
be many factors relevant to such decision, including the value and liquidity of the new/replacement asset and whether
a disposition of such asset would trigger a taxable event for the Fund.
The Manager will consult with the auditor of the Fund to ensure that all assets received by the Fund as a result of a
fork in the blockchain of a constituent of the Cryptoasset Portfolio are properly valued in accordance with GAAP for
the purpose of calculating the Net Asset Value of the Fund.
Suspension of Calculation of Net Asset Value
The Manager may suspend the calculation of the Net Asset Value of the Fund and the Net Asset Value per Unit for
the whole or any part of a period during which the right to redeem Units is suspended.
PURCHASES OF UNITS
Subscription Procedure
The minimum aggregate subscription for Class A Units is 100 Class A Units and the minimum aggregate subscription
for Class I Units is 200,000, or in each case, such lesser amount as the Manager, in its sole discretion, may accept.
Each prospective and eligible purchaser who desires to subscribe for Units must:
(a) complete and sign the applicable form of subscription agreement that accompanies this Offering
Memorandum, specifying the number of Class A Units and/or Class I Units being subscribed for,
and forward such agreement to the Manager;
(b) pay the subscription price for the Units in accordance with the instructions set out in the subscription
agreement; and
(c) complete and sign any other documents deemed necessary by the Manager to comply with
applicable securities laws.
Subscriptions are received subject to acceptance or rejection of the purchaser’s subscription, in whole or in part by the
Manager. Any decision to accept or reject a subscription will be made by the Manager in its sole discretion. The
Manager reserves the right to close the subscription books at any time without notice. The Manager is not obligated
to accept any subscriptions, and will reject any subscription the Manager considers to be not in compliance with
applicable securities laws. If any subscription is rejected, the Manager will advise the purchaser and return to the
purchaser after making the decision to reject the subscription, the subscription agreement and any other documentation
delivered by the purchaser, as well as the subscription funds (without interest).
Dealers are able to subscribe for the Units on behalf of eligible investors through the centralized mutual fund trading
platform operated by the Toronto Stock Exchange, TSX NAVeX, using the TiQGC symbol.
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Eligible Investors
The Manager is conducting the Offering in each of the Provinces and Territories of Canada by way of private
placement pursuant to the exemption from the prospectus requirement under Canadian securities laws afforded by
section 2.3 and, except in Alberta, section 2.10 of National Investment 45-106 – Prospectus Exemptions (“NI 45-
106”), and section 73.3 of the Securities Act (Ontario) (the “OSA”).
The exemption pursuant to section 2.3 of NI 45-106 or section 73.3 of the OSA, as applicable, is available for
distributions to purchasers purchasing as principal and who are “accredited investors” as defined in NI 45-106 or
section 73.3 of the OSA, as applicable. The exemption pursuant to section 2.10 of NI 45-106 (the “minimum amount
exemption”) is available for distributions to non-individual purchasers purchasing as principal and who acquire Units
of the Fund at an acquisition cost to such purchaser of not less than $150,000 paid in cash, provided that such purchaser
was not created, or is used, solely to purchase or hold securities in reliance on such exemption. Purchasers who
purchased Units under the minimum amount exemption may only make subsequent purchases of the same class of
Units, and each purchase must be in the minimum amount of $150,000.
The exemptions described above relieve the Fund from the provisions of the applicable securities laws of each of the
applicable Provinces and Territories of Canada, which otherwise would require the Fund to file and obtain a receipt
for a prospectus. Accordingly, prospective purchasers for Units will not receive the benefits associated with a
subscription for securities issued pursuant to a filed prospectus, including the review of material by securities
regulatory authorities. Purchasers will be required to make certain representations in the Subscription Agreement and
the Manager will rely on such representations to establish the availability of the exemptions from prospectus
requirements described above. No subscription will be accepted unless the Manager is satisfied that the subscription
is in compliance with applicable securities laws.
Certificates
Certificates evidencing ownership of the Units will not be issued to Unitholders. Following the applicable closing of
the Offering, Unitholders will receive a written confirmation from the Fund indicating details of the transaction
including the number and dollar value of the Units purchased.
Trading and Resale Restrictions
The Offering is being made only on a private placement basis to purchasers who are eligible to purchase on an exempt
basis under, and subject to compliance with, applicable securities laws. There is no market for the Units. The transfer
or resale of the Units (which does not include a redemption of Units) are also subject to resale restrictions under
applicable securities laws. Investors are advised to consult with legal counsel concerning such resale restrictions. The
Fund is not a reporting issuer in any of the Provinces or Territories of Canada and does not intend to become a reporting
issuer in any Province or Territory of Canada. Accordingly, redemption of the Units in accordance with the provisions
set out herein is likely to be the only means of liquidating an investment in the Fund.
DESCRIPTION OF THE UNITS
The Units
The beneficial interests in the net assets and net income of the Fund are divided into units of two classes, Class A
Units and Class I Units. The Fund is authorized to issue an unlimited number of units of each class. The Class A Units
are available to all investors and Class I Units are designed for institutional accounts. The Units are available for
purchase in Canadian and U.S. dollars.
Each Unit entitles the holder to the same rights and obligations as a Unitholder and no Unitholder is entitled to any
privilege, priority or preference in relation to any other holder of Units other than as set out herein. Each Unitholder
is entitled to one vote for each Unit held and is entitled to participate equally with respect to any and all distributions
made by the Fund, including distributions of net realized capital gains, if any. On the redemption of Units, however,
the Fund may in its sole discretion, designate payable to redeeming Unitholders, as part of the redemption price, any
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capital gains realized by the Fund in the taxation year in which the redemption occurred. On termination or liquidation
of the Fund, Unitholders of record are entitled to receive on a pro rata basis all of the assets of the Fund remaining
after payment of all debts, liabilities and liquidation expenses of the Fund.
UNITHOLDER MATTERS
Meetings of Unitholders
A meeting of the Unitholders voting as a single class (unless the circumstances are such that one class is affected
differently in which case the holders of each class of the Fund will vote separately) may be called at any time by the
Manager. Except as otherwise required or permitted by law, meetings of Unitholders will be held if called by the
Manager upon written notice of not less than 21 days nor more than 50 days before the meeting. At any meeting of
the Unitholders, a quorum shall consist of five or more individuals present in person either holding personally or
representing as proxies not less in aggregate than 10% of the Units outstanding entitled to vote at such meeting. In the
event of such quorum not being present at the appointed place on the date for which the meeting is called within 30
minutes after the time fixed for the holding of such meeting, the meeting, if called by request of Unitholders, shall be
terminated (and not adjourned) and, if otherwise called, shall stand adjourned to such day being not less than three
days later and to such place and time as may be appointed by the chairperson of the meeting. If at such adjourned
meeting a quorum as above defined is not present, the Unitholders present either personally or by proxy shall form a
quorum, and any business may be brought before or dealt with at such an adjourned meeting which might have been
brought before or dealt with at the original meeting in accordance with the notice calling the same. If the meeting is
adjourned for thirty days or more, notice of the adjourned meeting shall be given as for the original meeting.
Unitholders present in person or represented by proxy will constitute a quorum.
Voting Rights of Unitholders
The following matters may only be undertaken with the approval of Unitholders by an Extraordinary Resolution (a
separate class vote is also required if one class of Units would be affected differently):
(a) any change in the investment objectives or investment restrictions of the Fund, provided that the
following changes shall not require unitholder approval:
(i) the addition of a new leading cryptoasset to the Cryptoasset Portfolio or the replacement
of a current cryptoasset with a new cryptoasset in the Cryptoasset Portfolio, provided that
any such addition or replacement has been approved by the applicable securities regulatory
authorities for so long as such approval is required;
(ii) changes necessary to ensure compliance with applicable laws, regulations or other
requirements imposed by applicable regulatory authorities from time to time;
(b) any increase in the Management Fee;
(c) any amendment, modification or variation in the provisions or rights attaching to the Units;
(d) any change in the frequency of calculating the Net Asset Value per Unit;
(e) after the Initial Closing, the issuance of additional Units, including any offering of rights, warrants
or options to existing Unitholders to acquire Units, other than: (i) for net proceeds per Unit equal to
or greater than 100% of the most recently calculated Net Asset Value per Unit calculated prior to
the entering into of the commitment by the subscriber to purchase such Units or prior to the pricing
of the offering, as the case may be; or (ii) by way of Unit distribution;
(f) any merger, arrangement or similar transaction or the sale of all or substantially all of the assets of
the Fund other than in the ordinary course of business;
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(g) upon a material breach by the Manager of the Declaration of Trust which has not been cured by the
Manager by the 30th day after the Manager has received written notice of such breach, removal of
the Manager;
(h) any liquidation, dissolution or termination of the Fund except if it is determined by the Manager, in
its sole discretion, to be in the best interest of Unitholders or otherwise in accordance with the terms
of the Declaration of Trust; and
(i) any amendment to the above provisions except as permitted by the Declaration of Trust.
Amendments to the Declaration of Trust
The Manager is entitled to amend the Declaration of Trust without the consent of, or notice to, Unitholders, to:
(a) remove any conflicts or other inconsistencies which may exist between any terms of the Declaration
of Trust and any provisions of any law, regulation or requirements of any governmental authority
applicable to or affecting the Fund;
(b) make any change or correction in the Declaration of Trust which is of a typographical nature or is
required to cure or correct any ambiguity or defective or inconsistent provision, clerical omission,
mistake or manifest error contained therein;
(c) bring the Declaration of Trust into conformity with applicable laws, rules and policies of Canadian
securities regulators or with current practice within the securities or investment trust industries,
provided such amendments do not in the opinion of the Manager adversely affect the pecuniary
value of the interest of Unitholders or restrict any protection for the Manager or increase its
responsibilities;
(d) maintain the status of the Fund as a “mutual fund trust” for the purposes of the Tax Act or to respond
to amendments to the Tax Act or to the interpretation or administration thereof; or
(e) provide added protection or benefit to Unitholders.
Other than amendments which must be approved by Extraordinary Resolution as described above under “Voting
Rights of Unitholders” or amendments which may be made by the Manager without consent of or notice to
Unitholders, this Declaration of Trust may be amended, expanded or varied from time to time by the Manager with
notice to Unitholders provided in writing at least 45 days prior to the effective date of such change.
Reporting to Unitholders
Unitholders are sent audited annual financial statements within 90 days of year end and unaudited semi-annual
financial statements within 60 days of June 30, or as otherwise required by law. Additional interim reporting to
Unitholders will be at the discretion of the Manager. The Fund may enter into other agreements with certain
Unitholders, which may entitle such Unitholders to receive additional reporting. Unitholders will receive the
applicable required tax form(s) within the time required by applicable law to assist Unitholders in making the
necessary tax filings.
TERMINATION OF THE FUND
The Manager may, in its discretion, terminate the Fund at any time without the approval of Unitholders if, in its
opinion, it is no longer economically feasible to continue the Fund and/or it would be in the best interests of the
Unitholders to terminate the Fund. The Manager will provide at least 30 days’ prior notice of such termination to
Unitholders. Upon such a termination, the Fund will liquidate the Cryptoasset Portfolio and distribute to Unitholders
their pro rata portions of the remaining assets of the Fund after all liabilities of the Fund have been satisfied or
appropriately provided for, and which will include cash and, to the extent liquidation of certain assets is not practicable
or the Manager considers such liquidation not to be appropriate prior to the termination date, such unliquidated assets
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in specie rather than in cash, subject to compliance with any securities or other laws applicable to such distributions.
Following such distribution, the Fund will be dissolved.
USE OF PROCEEDS
The Fund will use substantially all of the net proceeds of the Offering to acquire cryptoassets for the Cryptoasset
Portfolio in accordance with the investment objectives and investment strategies of the Fund.
PLAN OF DISTRIBUTION
The Units of the Fund are offered on a “private placement” basis on behalf of the Fund by various exempt market
dealers, as placement agents (collectively, the “Agents”) on a best efforts basis in accordance with the terms of
placement agreements between each Agent and the Fund (each, a “Placement Agreement”) in reliance upon certain
exemptions from the prospectus requirements of applicable securities legislation. The obligations of the Fund to issue
and sell, and of the Agent to sell the Units, are subject to compliance with all necessary legal requirements and to the
terms and conditions contained in the applicable Placement Agreement.
The Units will not be listed on any stock exchange. The issue of the Units is a new issue of securities with no
established trading market. The Units have not and will not be registered under the U.S. Securities Act of 1933, as
amended (the “U.S. Securities Act”) and, except pursuant to an exemption from registration under the U.S. Securities
Act, may not be offered or sold in the U.S., or to, or for the account or benefit of U.S. persons. This Offering
Memorandum does not constitute an offer to sell or a solicitation of an offer to buy the Units in the U.S. or to, or for
the account or benefit of, a U.S. person (as defined in Regulation S under the U.S. Securities Act). Offers and sales of
any of the Units within the U.S., its territories, its possessions and other areas subject to its jurisdiction or to, or for
the account or benefit of, a U.S. Person (as defined in Regulation S under the U.S. Securities Act), would constitute a
violation of the U.S. Securities Act unless made in compliance with the registration requirements of the U.S. Securities
Act or an exemption therefrom.
Subscriptions for Units are received subject to rejection or allotment in whole or in part and the right is reserved to
close the subscription books for the Units at any time without notice. Closings may be held on a daily basis at the
discretion of the Fund.
LEGAL MATTERS
Certain legal matters relating to the Fund and the Units have been passed upon on behalf of the Fund by Osler, Hoskin
& Harcourt LLP.
LEGAL AND ADMINISTRATIVE PROCEEDINGS
There are no legal or administrative proceedings material to the Fund or the Manager to which the Fund or the Manager
is a party or to which any of their respective property is subject and no such legal or administrative proceedings are
known to be contemplated.
INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
The Manager is entitled to receive the Management Fee in respect of the Fund. See “Organization and Management
Details of the Fund –Manager” and “Fees and Expenses – Fees and Expenses Payable by the Fund – Fees Payable to
the Manager for Acting as Manager of the Fund”. The Trustee is an affiliate of the Manager. The Trustee is not entitled
to receive any fees in respect of its role as trustee of the Fund.
MATERIAL CONTRACTS
The only material contracts entered into by or on behalf of the Fund are as follows:
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(a) the Declaration of Trust referred to under “Overview of the Legal Structure of the Fund”;
(b) the Cryptoasset Consulting Agreement referred to under “Organization and Management Details of
the Fund – Cryptoasset Consulting Agreement”; and
(c) the Custodian Agreement referred to under “Organization and Management Details of the Fund –
Custodian”.
Copies of the foregoing agreements, after the execution thereof, may be inspected during business hours at the
principal office of the Fund during the course of distribution of the Units of the Fund offered hereby.
RESALE RESTRICTIONS
The Units are subject to a number of resale restrictions, including a restriction on trading. Until the restriction on
trading expires, a Unitholder will not be able to trade the Units unless it complies with an exemption from the
prospectus and registration requirements under securities legislation. Unless permitted under securities legislation, a
Unitholder cannot trade the securities before the date that is 4 months and a day after the date the Fund becomes a
reporting issuer in any province or territory in Canada.
The distribution in Canada of the Units is being made on a private placement basis in accordance with applicable
securities laws and is exempt from the requirement that the Fund prepare and file a prospectus with the relevant
Canadian securities regulatory authorities.
The Fund is not a reporting issuer in the Province of Ontario or any other jurisdiction in Canada or the U.S. and does
not have any current intention of becoming a reporting issuer. As a result, it is not expected that the Units will become
freely tradeable under applicable securities laws.
The foregoing is only a summary of the resale restrictions relevant to purchasers of the Units. It is not intended to be
exhaustive. All persons purchasing Units pursuant to this Offering Memorandum should consult with their own
advisors:
(a) prior to acquiring the Units pursuant to this Offering Memorandum for advice with respect to the
restrictions on resale of such Units; and
(b) prior to selling any of the Units ensure compliance under applicable securities laws.
PURCHASERS’ RIGHTS
Securities legislation in certain of the Provinces of Canada provides purchasers with, in addition to any other rights
they may have at law, a remedy for rescission or damages, or both, where this Offering Memorandum and any
amendment to it and, in some cases, advertising and sales literature used in connection therewith, contains a
misrepresentation (as such term may be defined in the applicable legislation). However, those remedies, or notice with
respect thereto, must be exercised or delivered, as the case may be, by the purchaser within the time limits prescribed
in applicable legislation. Further, such rights may depend on the particular prospectus exemption relied upon by the
issuer. Each purchaser should refer to the provisions of the applicable legislation for the particulars of these rights or
consult with a legal advisor.
For the purposes of the following, “Misrepresentation” means an untrue statement of fact that significantly affects, or
would reasonably be expected to have a significant effect on, the market price or the value of the securities described
herein (a “material fact”), or an omission to state a material fact that is required to be stated, or that is necessary to
make a statement not misleading in the light of the circumstances in which it was made.
The rights of action and rescission described below are in addition to, and without derogation from, any right or
remedy available at law to the purchaser and are subject to the defences contained in those laws. These remedies must
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be exercised by the purchaser within the time limits set out below. Purchasers should refer to the available provisions
of securities laws for the complete text of these rights or consult with a legal advisor.
The summary of the rights of rescission or to damages, or both, available to purchasers under the securities legislation
of certain of the Provinces of Canada or provided by contract are set forth below.
Ontario
If this Offering Memorandum, together with any amendment to it, is delivered to a purchaser prior to purchasing his,
her or its Units and this Offering Memorandum, or any amendment to it, contains a Misrepresentation which was a
Misrepresentation at the time of the purchase of the Units purchasers in Ontario will, without regard to whether the
purchaser relied on the Misrepresentation, have a statutory right of action against the Fund for damages or,
alternatively, while still the owner of any of the Units for rescission, in which case, if the purchaser elects to exercise
the right of rescission, the purchaser will have no right of action for damages against the Fund provided that:
(a) no person or company will be liable if it proves that the purchaser purchased the securities with
knowledge of the Misrepresentation;
(b) in a case of an action for damages, the defendant will not be liable for all or any portion of the
damages that it proves do not represent the depreciation in value of the securities as a result of the
Misrepresentation relied upon; and
(c) in no case will the amount recoverable in any action exceed the price at which the securities were
offered under this Offering Memorandum, or any amendment to it.
The statutory right of action described above does not apply to the following prospective purchasers in Ontario:
(a) a Canadian financial institution, as defined in OSC Rule 45-501 – Ontario Prospectus and
Registration Exemptions, or an authorized foreign bank named in Schedule III of the Bank Act
(Canada);
(b) the Business Development Bank of Canada incorporated under the Business Development Bank of
Canada Act (Canada); or
(c) a subsidiary of any person referred to in paragraphs (a) and (b), if the person owns all of the voting
securities of the subsidiary, except the voting securities required by law to be owned by directors of
that subsidiary.
No action may be commenced to enforce the right of action described above unless the right is exercised within:
(a) in the case of an action for rescission, 180 days after the date of the transaction that gave rise to the
cause of action; or
(b) in the case of any action for damages, the earlier of (i) 180 days after the date the purchaser first had
knowledge of the facts giving rise to the cause of action, or (ii) three years after the date of the
transaction that gave rise to the cause of action.
Saskatchewan
If this Offering Memorandum or any amendment to it is sent or delivered to a purchaser resident in Saskatchewan and
it contained a Misrepresentation, a purchaser who purchases a security covered by this Offering Memorandum or any
amendment to it has, without regard to whether the purchaser relied on the Misrepresentation, a right of action for
rescission against the Fund or has a right of action for damages against:
(a) the Fund;
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(b) every promoter (and if applicable trustee) of the Fund at the time this Offering Memorandum or any
amendment to it was sent or delivered;
(c) every person or company whose consent has been filed respecting the Offering, but only with respect
to reports, opinions or statements that have been made by them;
(d) every person who, or company that, in addition to the persons or companies mentioned in (a) to (c)
above, signed this Offering Memorandum or any amendment to this Offering Memorandum; and
(e) every person who, or company that, sells securities on behalf of the Fund under this Offering
Memorandum or amendment to this Offering Memorandum.
Such rights of rescission and damages are subject to certain limitations including the following:
(a) if the purchaser elects to exercise its rights of rescission against the Fund it shall have no right of
action for damages against the Fund;
(b) in an action for damages, a defendant will not be liable for all or any portion of the damages that he,
she or it proves do not represent the depreciation in value of the securities resulting from the
Misrepresentation relied on;
(c) no person or company, other than the Fund, will be liable for any part of this Offering Memorandum
or any amendment to it not purporting to be made on the authority of an expert and not purporting
to be a copy of, or an extract from, a report, opinion or statement of an expert, unless the person or
company failed to conduct a reasonable investigation sufficient to provide reasonable grounds for a
belief that there had been no Misrepresentation or believed that there had been a Misrepresentation;
(d) in no case shall the amount recoverable exceed the price at which the securities were offered; and
(e) no person or company is liable in an action for rescission or damages if that person or company
proves that the purchaser purchased the securities with knowledge of the Misrepresentation.
In addition, no person or company, other than the Fund will be liable if the person or company proves that:
(a) this Offering Memorandum or any amendment to it was sent or delivered without the person’s or
company’s knowledge or consent and that, on becoming aware of it being sent or delivered, that
person or company immediately gave reasonable general notice that it was so sent or delivered; or
(b) with respect to any part of this Offering Memorandum or any amendment to it purporting to be made
on the authority of an expert, or purporting to be a copy of, or an extract from, a report, an opinion
or a statement of an expert, that person or company had no reasonable grounds to believe and did
not believe that (i) there had been a Misrepresentation, or (ii) the part of this Offering Memorandum
or any amendment to it did not fairly represent the report, opinion or statement of the expert, or was
not a fair copy of, or an extract from, the report, opinion or statement of the expert.
Not all defences upon which the Fund, or others may rely on are described herein. Please refer to the full text of The
Securities Act, 1988 (Saskatchewan), as amended (the “Saskatchewan Act”).
The Saskatchewan Act also provides that where an individual makes a verbal statement to a prospective purchaser
that contains a Misrepresentation relating to the security purchased and the verbal statement is made either before or
contemporaneously with the purchase of the security, the purchaser has, without regard to whether the purchaser relied
on the Misrepresentation, a right of action for damages against the individual who made the verbal statement.
The Saskatchewan Act provides a purchaser with the right to void the purchase agreement and to recover all money
and other consideration paid by the purchaser for the securities if the securities are purchased from a vendor who is
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trading in Saskatchewan in contravention of the Saskatchewan Act, the regulations to the Saskatchewan Act or a
decision of the Financial and Consumer Affairs Authority of Saskatchewan, Securities Division.
The Saskatchewan Act also provides a right of action for rescission or damages to a purchaser of securities to whom
this Offering Memorandum or any amendment to it was not sent or delivered prior to or at the same time as the
purchaser enters into an agreement to purchase the securities, as required by the Saskatchewan Act.
The Saskatchewan Act provides that no action shall be commenced to enforce any of the foregoing rights more than:
(a) in the case of an action for rescission, 180 days after the date of the transaction that gave rise to the
cause of action; or
(b) in the case of any other action, other than an action for rescission, the earlier of:
(i) one year after the plaintiff first had knowledge of the facts giving rise to the cause of action;
or
(ii) six years after the date of the transaction that gave rise to the cause of action.
The Saskatchewan Act also provides a purchaser who has received an amended Offering Memorandum delivered in
accordance with the Saskatchewan Act with a right to withdraw from the agreement to purchase the securities by
delivering a notice to the person who or company that is selling the securities, indicating the purchaser’s intention not
to be bound by the purchase agreement, provided such notice is delivered by the purchaser within two (2) business
days of receiving the amended Offering Memorandum.
The Saskatchewan Act provides that a person or company is not liable for a Misrepresentation in forward-looking
information if the person or company proves that:
(a) with respect to the document containing the forward-looking information, proximate to that
information there is contained:
(i) reasonable cautionary language identifying the forward-looking information as such, and
identifying material factors that could cause actual results to differ materially from a
conclusion, forecast or projection in the forward-looking information; and
(ii) a statement of the material factors or assumptions that were applied in drawing a conclusion
or making a forecast or projection set out in the forward-looking information; and
(b) the person or company had a reasonable basis for drawing the conclusions or making the forecasts
and projections set out in the forward-looking information.
Nova Scotia
If this Offering Memorandum, a record incorporated by reference in or deemed incorporated into this Offering
Memorandum or any amendment to it or any advertising or sales literature contains a Misrepresentation that was a
Misrepresentation at the time of purchase, the purchaser will be deemed to have relied upon the Misrepresentation and
will have a statutory right of action for damages against the Fund and, subject to additional defences, against the
trustee of the Fund and persons who have signed this Offering Memorandum. Alternatively, the purchaser may elect
to exercise a statutory right of rescission against the Fund in which case the purchaser will have no right of action for
damages. This right of action is subject to the following limitations:
(a) the right of action for damages or rescission is exercisable not later than 120 days after the date on
which payment was made for the securities;
(b) no person or company will be liable if it proves that the purchaser purchased the securities with
knowledge of the Misrepresentation;
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(c) in the case of an action for damages, the defendant will not be liable for all or any portion of those
damages that it proves do not represent the depreciation in value of the securities as a result of the
Misrepresentation;
(d) in no case will the amount recoverable exceed the price at which the securities were offered to the
purchaser;
(e) no person or company other than the Fund is liable if the person or company proves that, with respect
to any part of this Offering Memorandum or amendment to this Offering Memorandum purporting
to be made on the authority of an expert, or to be a copy of, or an extract from, a report, an opinion
or a statement of an expert, the person or company had no reasonable grounds to believe and did not
believe that (i) there had been a Misrepresentation or (ii) the relevant part of this Offering
Memorandum or amendment to this Offering Memorandum did not fairly represent the report,
opinion or statement of the expert or was not a fair copy of, or an extract from, the report, opinion
or statement of the expert;
(f) no person or company other than the Fund is liable with respect to any part of this Offering
Memorandum or amendment to this Offering Memorandum not purporting to be made on the
authority of an expert, or to be a copy of, or an extract from, a report, opinion or statement of an
expert, unless the person or company (i) failed to conduct a reasonable investigation to provide
reasonable grounds for a belief that there had been no Misrepresentation or (ii) believed that there
had been a Misrepresentation;
(g) no person or company is liable for a Misrepresentation in forward-looking information if the person
or company proves all of the following things:
(i) the document containing the forward-looking information contained, proximate to that
information,
(A) reasonable cautionary language identifying the forward-looking information as
such, and identifying material factors that could cause actual results to differ
materially from a conclusion, forecast or projection in the forward-looking
information, and
(B) a statement of the material factors or assumptions that were applied in drawing a
conclusion or making a forecast or projection set out in the forward-looking
information; and
(ii) the person or company had a reasonable basis for drawing the conclusions or making the
forecasts and projections set out in the forward-looking information;
(h) No person or company, other than the Fund is liable if this Offering Memorandum or an amendment
thereto was sent or delivered to the purchaser without the person’s or company’s knowledge or
consent and that, on becoming aware of its delivery, the person or company gave reasonable general
notice that it was delivered without the person’s or company’s knowledge or consent; and
(i) No person or company, other than the Fund is liable if after delivery of this Offering Memorandum
any amendment thereto and before the purchase of the securities by the purchaser, on becoming
aware of any misrepresentation in this Offering Memorandum, or amendment thereto, the person or
company withdrew the person’s or company’s consent to this Offering Memorandum, or
amendment thereto, and gave reasonable general notice of the withdrawal and the reason for it.
The rights of action for rescission or damages described herein are in addition to and without derogation from any
right a purchaser may have at law.
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New Brunswick
Section 150(1) of Securities Act (New Brunswick) provides that where any information relating to the Offering
provided to the purchaser of the securities contains a Misrepresentation, the purchaser will be deemed to have relied
upon the Misrepresentation if it was a Misrepresentation at the time of purchase and will have a statutory right of
action against the Fund for damages or, alternatively, for rescission, provided that no action shall be commenced to
enforce a right of action more than,
(a) in the case of an action for rescission, 180 days after the date of the transaction that gave rise to the
cause of action; or
(b) in the case of any action, other than an action for rescission, the earlier of: (i) one year after the
purchaser first had knowledge of the facts giving rise to the cause of action, and (ii) six years after
the date of the transaction that gave rise to the cause of action.
If the purchaser elects to exercise its right of rescission against the Fund it shall have no right of action for damages
against the Fund.
This right of action is also subject to the following limitations:
(a) no person will be liable if it proves that the purchaser purchased the securities with knowledge of
the Misrepresentation;
(b) in the case of an action for damages, the defendant will not be liable for all or any portion of those
damages that it proves do not represent the depreciation in value of the securities as a result of the
Misrepresentation;
(c) the Fund will not be liable where it is not receiving any proceeds from the distribution of the
securities and the Misrepresentation was not based on information provided by the Fund unless the
Misrepresentation (i) was based on information that was previously publicly disclosed by the Fund,
(ii) was a Misrepresentation at the time of its previous public disclosure, and (iii) was not
subsequently publicly corrected or superseded by the Fund before the completion of the distribution
of the securities; and
(d) in no case will the amount recoverable under section 150(1) exceed the price at which the securities
were sold to the purchaser.
The rights of action for rescission or damages described herein are in addition to and without derogation from any
other right a purchaser may have at law.
Prince Edward Island
The Securities Act (Prince Edward Island) provides that, subject to certain limitations, where any information relating
to this Offering that is provided to a purchaser of Units contains a Misrepresentation, a purchaser who purchases Units
shall regardless of whether the purchaser relied on the Misrepresentation, subject to certain defences, have a right of
action for damages or may elect to exercise a right of rescission, in which case he shall have no right of action for
damages, provided that:
(a) in an action for rescission or damages, the defendant will not be liable if it proves that the purchaser
purchased the security with knowledge of the Misrepresentation;
(b) in an action for damages, the defendant is not liable for all or any portion of the damages that it
proves do not represent the depreciation in value of the security as a result of the Misrepresentation
relied upon; and
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(c) in no case shall the amount recoverable under the right of action described herein exceed the price
at which the security was offered.
In addition, no person or company other than the issuer is liable if the person or company proves that:
(a) the Offering Memorandum or the amendment to the Offering Memorandum was sent or delivered
to the purchaser without the person’s or company’s knowledge or consent and that, on becoming
aware of its delivery, the person or company gave reasonable general notice that it was delivered
without the person’s or company’s knowledge or consent;
(b) after delivery of the Offering Memorandum or the amendment to the Offering Memorandum and
before the purchase of the securities by the purchaser, on becoming aware of any Misrepresentation
in the Offering Memorandum, or amendment to the Offering Memorandum, the person or company
withdrew the person’s or company’s consent to the Offering Memorandum, or amendment to the
Offering Memorandum, and gave reasonable general notice of the withdrawal and the reason for it;
or
(c) with respect to any part of the Offering Memorandum or amendment to the Offering Memorandum
purporting: (i) to be made on the authority of an expert; or (ii) to be a copy of, or an extract from, a
report, an opinion or a statement of an expert, the person or company had no reasonable grounds to
believe and did not believe that (a) there had been a Misrepresentation, or (b) the relevant part of
the Offering Memorandum or amendment to the Offering Memorandum (1) did not fairly represent
the report, opinion or statement of the expert, or (2) was not a fair copy of, or an extract from, the
report, opinion or statement of the expert.
Pursuant to section 121 of the Securities Act (Prince Edward Island), no action may be commenced to enforce the
right of action for rescission or damages more than (a) 180 days after the day of the transaction that gave rise to the
cause of action, in the case of an action for rescission, or (b) the earlier of (i) 180 days after the day that the plaintiff
first had knowledge of the facts giving rise to the cause of action, or (ii) three years after the day of the transaction
that gave rise to the cause of action, in any other case.
The right of action for rescission or damages described herein is in addition to and without derogation from any right
the purchaser may have at law and is subject to the express provisions of the Securities Act (Prince Edward Island),
and the rules, regulations and other instruments thereunder.
Alberta
The Securities Act (Alberta) provides that, subject to certain limitations, where any information relating to this
Offering that is provided to a purchaser of Units contains a Misrepresentation, a purchaser who purchases Units shall
regardless of whether the purchaser relied on the Misrepresentation, subject to certain defences, have a right of action
for damages or may elect to exercise a right of rescission, in which case he shall have no right of action for damages,
provided that:
(a) in an action for rescission or damages, the defendant will not be liable if it proves that the purchaser
purchased the security with knowledge of the Misrepresentation;
(b) in an action for damages, the defendant is not liable for all or any portion of the damages that it
proves do not represent the depreciation in value of the security as a result of the Misrepresentation
relied upon; and
(c) in no case shall the amount recoverable under the right of action described herein exceed the price
at which the security was offered.
In addition, no person or company other than the issuer is liable if the person or company proves that:
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(a) the Offering Memorandum or the amendment to the Offering Memorandum was sent or delivered
to the purchaser without the person’s or company’s knowledge or consent and that, on becoming
aware of its delivery, the person or company gave reasonable general notice that it was delivered
without the person’s or company’s knowledge or consent;
(b) after delivery of the Offering Memorandum or the amendment to the Offering Memorandum and
before the purchase of the securities by the purchaser, on becoming aware of any Misrepresentation
in the Offering Memorandum, or amendment to the Offering Memorandum, the person or company
withdrew the person’s or company’s consent to the Offering Memorandum, or amendment to the
Offering Memorandum, and gave reasonable general notice of the withdrawal and the reason for it;
or
(c) with respect to any part of the Offering Memorandum or amendment to the Offering Memorandum
purporting: (i) to be made on the authority of an expert; or (ii) to be a copy of, or an extract from, a
report, an opinion or a statement of an expert, the person or company had no reasonable grounds to
believe and did not believe that (a) there had been a Misrepresentation, or (b) the relevant part of
the Offering Memorandum or amendment to the Offering Memorandum (1) did not fairly represent
the report, opinion or statement of the expert, or (2) was not a fair copy of, or an extract from, the
report, opinion or statement of the expert.
Pursuant to section 211 of the Securities Act (Alberta), no action may be commenced to enforce the right of action for
rescission or damages more than (a) 180 days after the day of the transaction that gave rise to the cause of action, in
the case of an action for rescission, or (b) the earlier of (i) 180 days after the day that the plaintiff first had knowledge
of the facts giving rise to the cause of action, or (ii) three years after the day of the transaction that gave rise to the
cause of action, in any other case.
The right of action for rescission or damages described herein is conferred by section 204 of the Securities Act
(Alberta) and is in addition to and without derogation from any right the purchaser may have at law and is subject to
the express provisions of the Securities Act (Alberta), and the rules, regulations and other instruments thereunder.
Manitoba
The Securities Act (Manitoba) provides that, subject to certain limitations, where any information relating to this
Offering that is provided to a purchaser of Units contains a Misrepresentation, a purchaser who purchases Units shall
be deemed to have relied on the Misrepresentation and has, subject to certain defences, a right of action for damages
or may elect to exercise a right of rescission, in which case he shall have no right of action for damages, provided that:
(a) in an action for rescission or damages, the defendant will not be liable if it proves that the purchaser
purchased the security with knowledge of the Misrepresentation;
(b) in an action for damages, the defendant is not liable for all or any portion of the damages that it
proves do not represent the depreciation in value of the security as a result of the Misrepresentation
relied upon; and
(c) in no case shall the amount recoverable under the right of action described herein exceed the price
at which the security was offered.
In addition, no person or company other than the issuer is liable if the person or company proves that:
(a) the Offering Memorandum or the amendment to the Offering Memorandum was sent or delivered
to the purchaser without the person’s or company’s knowledge or consent and that, on becoming
aware of its delivery, the person or company gave reasonable general notice that it was delivered
without the person’s or company’s knowledge or consent;
(b) after delivery of the Offering Memorandum or the amendment to the Offering Memorandum and
before the purchase of the securities by the purchaser, on becoming aware of any Misrepresentation
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in the Offering Memorandum, or amendment to the Offering Memorandum, the person or company
withdrew the person’s or company’s consent to the Offering Memorandum, or amendment to the
Offering Memorandum, and gave reasonable general notice of the withdrawal and the reason for it;
or
(c) with respect to any part of the Offering Memorandum or amendment to the Offering Memorandum
purporting: (i) to be made on the authority of an expert; or (ii) to be a copy of, or an extract from, a
report, an opinion or a statement of an expert, the person or company had no reasonable grounds to
believe and did not believe that (a) there had been a Misrepresentation, or (b) the relevant part of
the Offering Memorandum or amendment to the Offering Memorandum (1) did not fairly represent
the report, opinion or statement of the expert, or (2) was not a fair copy of, or an extract from, the
report, opinion or statement of the expert.
Pursuant to section 141 of the Securities Act (Manitoba), no action may be commenced to enforce the right of action
for rescission or damages more than (a) 180 days after the day of the transaction that gave rise to the cause of action,
in the case of an action for rescission, or (b) the earlier of (i) 180 days after the day that the plaintiff first had knowledge
of the facts giving rise to the cause of action, or (ii) two years after the day of the transaction that gave rise to the cause
of action, in any other case.
The right of action for rescission or damages described herein is conferred by section 141 of the Securities Act
(Manitoba) and is in addition to and without derogation from any right the purchaser may have at law and is subject
to the express provisions of the Securities Act (Manitoba), and the rules, regulations and other instruments thereunder.
Newfoundland and Labrador
The Securities Act (Newfoundland and Labrador) provides that, subject to certain limitations, where any information
relating to this Offering that is provided to a purchaser of Units contains a Misrepresentation, a purchaser who
purchases Units during the period of distribution has, without regard to whether the purchaser relied upon the
Misrepresentation, a statutory right of action (a) for damages against (i) the issuer, (ii) every director of the issuer at
the date of the Offering Memorandum, and (iii) every person or company who signed the Offering Memorandum and
(b) for rescission against the issuer.
The Securities Act (Newfoundland and Labrador) provides a number of limitations and defences in respect of such
rights. Where a Misrepresentation is contained in an Offering Memorandum, a person or company shall not be liable
for damages or rescission:
(a) where the person or company proves that the purchaser purchased the securities with knowledge of
the Misrepresentation;
(b) in the case of an action for damages, the defendant is not liable for all or any part of the damages
that the defendant proves do not represent the depreciation in value of the security as a result of the
Misrepresentation; and
(c) in no case will the amount recoverable in any action exceed the price at which the securities were
offered under the Offering Memorandum.
In addition, no person or company, other than the issuer, is liable:
(a) where the person or company proves that the Offering Memorandum was sent to the purchaser
without the person’s or company’s knowledge or consent and that, on becoming aware of its being
sent, the person or company promptly gave reasonable notice to the issuer that it was sent without
the knowledge and consent of the person or company;
(b) if the person or company proves that the person or company, on becoming aware of the
Misrepresentation in the Offering Memorandum, withdrew the person’s or company’s consent to
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the Offering Memorandum and gave reasonable notice to the issuer of the withdrawal and the reason
for it;
(c) if, with respect to any part of the Offering Memorandum purporting to be made on the authority of
an expert or purporting to be a copy of, or an extract from, a report, opinion or statement of an
expert, the person or company proves that the person or company did not have any reasonable
grounds to believe and did not believe that:
(i) there had been a Misrepresentation; or
(ii) the relevant part of the Offering Memorandum:
(A) did not fairly represent the report, opinion or statement of the expert; or
(B) was not a fair copy of, or an extract from, the report, opinion or statement of the
expert; or
(d) with respect to any part of the Offering Memorandum not purporting to be made on the authority of
an expert and not purporting to be a copy of, or an extract from, a report, opinion or statement of an
expert, unless the person or company:
(i) did not conduct an investigation sufficient to provide reasonable grounds for a belief that
there had been no Misrepresentation; or
(ii) believed there had been a Misrepresentation.
Pursuant to section 138 of the Securities Act (Newfoundland and Labrador), no action may be commenced to enforce
the right of action for rescission or damages more than (a) 180 days after the day of the transaction that gave rise to
the cause of action, in the case of an action for rescission, or (b) the earlier of (i) 180 days after the day that the plaintiff
first had knowledge of the facts giving rise to the cause of action, or (ii) three years after the day of the transaction
that gave rise to the cause of action, in any other case.
The right of action for rescission or damages described herein is conferred by section 130.1 of the Securities Act
(Newfoundland and Labrador) and is in addition to and without derogation from any right the purchaser may have at
law and is subject to the express provisions of the Securities Act (Newfoundland and Labrador), and the rules,
regulations and other instruments thereunder.
Northwest Territories
The Securities Act (Northwest Territories) provides that, subject to certain limitations, where any information relating
to this Offering that is provided to a purchaser of Units contains a Misrepresentation, a purchaser who purchases Units
shall regardless of whether the purchaser relied on the Misrepresentation, subject to certain defences, have a right of
action for damages or may elect to exercise a right of rescission, in which case he shall have no right of action for
damages, provided that:
(a) in an action for rescission or damages, the defendant will not be liable if it proves that the purchaser
purchased the security with knowledge of the Misrepresentation;
(b) in an action for damages, the defendant is not liable for all or any portion of the damages that it
proves do not represent the depreciation in value of the security as a result of the Misrepresentation
relied upon; and
(c) in no case shall the amount recoverable under the right of action described herein exceed the price
at which the security was offered.
In addition, no person or company other than the issuer is liable if the person or company proves that:
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(a) the Offering Memorandum or the amendment to the Offering Memorandum was sent or delivered
to the purchaser without the person’s or company’s knowledge or consent and that, on becoming
aware of its delivery, the person or company gave reasonable general notice that it was delivered
without the person’s or company’s knowledge or consent;
(b) after delivery of the Offering Memorandum or the amendment to the Offering Memorandum and
before the purchase of the securities by the purchaser, on becoming aware of any Misrepresentation
in the Offering Memorandum, or amendment to the Offering Memorandum, the person or company
withdrew the person’s or company’s consent to the Offering Memorandum, or amendment to the
Offering Memorandum, and gave reasonable general notice of the withdrawal and the reason for it;
or
(c) with respect to any part of the Offering Memorandum or amendment to the Offering Memorandum
purporting: (i) to be made on the authority of an expert; or (ii) to be a copy of, or an extract from, a
report, an opinion or a statement of an expert, the person or company had no reasonable grounds to
believe and did not believe that (a) there had been a Misrepresentation, or (b) the relevant part of
the Offering Memorandum or amendment to the Offering Memorandum (1) did not fairly represent
the report, opinion or statement of the expert, or (2) was not a fair copy of, or an extract from, the
report, opinion or statement of the expert.
Pursuant to section 121 of the Securities Act (Northwest Territories), no action may be commenced to enforce the
right of action for rescission or damages more than (a) 180 days after the day of the transaction that gave rise to the
cause of action, in the case of an action for rescission, or (b) the earlier of (i) 180 days after the day that the plaintiff
first had knowledge of the facts giving rise to the cause of action, or (ii) three years after the day of the transaction
that gave rise to the cause of action, in any other case.
The right of action for rescission or damages described herein is in addition to and without derogation from any right
the purchaser may have at law and is subject to the express provisions of the Securities Act (Northwest Territories),
and the rules, regulations and other instruments thereunder.
Nunavut
The Securities Act (Nunavut) provides that, subject to certain limitations, where any information relating to this
Offering that is provided to a purchaser of Units contains a Misrepresentation, a purchaser who purchases Units shall
regardless of whether the purchaser relied on the Misrepresentation, subject to certain defences, have a right of action
for damages or may elect to exercise a right of rescission, in which case he shall have no right of action for damages,
provided that:
(a) in an action for rescission or damages, the defendant will not be liable if it proves that the purchaser
purchased the security with knowledge of the Misrepresentation;
(b) in an action for damages, the defendant is not liable for all or any portion of the damages that it
proves do not represent the depreciation in value of the security as a result of the Misrepresentation
relied upon; and
(c) in no case shall the amount recoverable under the right of action described herein exceed the price
at which the security was offered.
In addition, no person or company other than the issuer is liable if the person or company proves that:
(a) the Offering Memorandum or the amendment to the Offering Memorandum was sent or delivered
to the purchaser without the person’s or company’s knowledge or consent and that, on becoming
aware of its delivery, the person or company gave reasonable general notice that it was delivered
without the person’s or company’s knowledge or consent;
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(b) after delivery of the Offering Memorandum or the amendment to the Offering Memorandum and
before the purchase of the securities by the purchaser, on becoming aware of any Misrepresentation
in the Offering Memorandum, or amendment to the Offering Memorandum, the person or company
withdrew the person’s or company’s consent to the Offering Memorandum, or amendment to the
Offering Memorandum, and gave reasonable general notice of the withdrawal and the reason for it;
or
(c) with respect to any part of the Offering Memorandum or amendment to the Offering Memorandum
purporting: (i) to be made on the authority of an expert; or (ii) to be a copy of, or an extract from, a
report, an opinion or a statement of an expert, the person or company had no reasonable grounds to
believe and did not believe that (a) there had been a Misrepresentation, or (b) the relevant part of
the Offering Memorandum or amendment to the Offering Memorandum (1) did not fairly represent
the report, opinion or statement of the expert, or (2) was not a fair copy of, or an extract from, the
report, opinion or statement of the expert.
Pursuant to section 121 of the Securities Act (Nunavut), no action may be commenced to enforce the right of action
for rescission or damages more than (a) 180 days after the day of the transaction that gave rise to the cause of action,
in the case of an action for rescission, or (b) the earlier of (i) 180 days after the day that the plaintiff first had knowledge
of the facts giving rise to the cause of action, or (ii) three years after the day of the transaction that gave rise to the
cause of action, in any other case.
The right of action for rescission or damages described herein is in addition to and without derogation from any right
the purchaser may have at law and is subject to the express provisions of the Securities Act (Nunavut), and the rules,
regulations and other instruments thereunder.
Yukon
The Securities Act (Yukon) provides that, subject to certain limitations, where any information relating to this Offering
that is provided to a purchaser of Units contains a Misrepresentation, a purchaser who purchases Units shall regardless
of whether the purchaser relied on the Misrepresentation, subject to certain defences, have a right of action for damages
or may elect to exercise a right of rescission, in which case he shall have no right of action for damages, provided that:
(a) in an action for rescission or damages, the defendant will not be liable if it proves that the purchaser
purchased the security with knowledge of the Misrepresentation;
(b) in an action for damages, the defendant is not liable for all or any portion of the damages that it
proves do not represent the depreciation in value of the security as a result of the Misrepresentation
relied upon; and
(c) in no case shall the amount recoverable under the right of action described herein exceed the price
at which the security was offered.
In addition, no person or company other than the issuer is liable if the person or company proves that:
(a) the Offering Memorandum or the amendment to the Offering Memorandum was sent or delivered
to the purchaser without the person’s or company’s knowledge or consent and that, on becoming
aware of its delivery, the person or company gave reasonable general notice that it was delivered
without the person’s or company’s knowledge or consent;
(b) after delivery of the Offering Memorandum or the amendment to the Offering Memorandum and
before the purchase of the securities by the purchaser, on becoming aware of any Misrepresentation
in the Offering Memorandum, or amendment to the Offering Memorandum, the person or company
withdrew the person’s or company’s consent to the Offering Memorandum, or amendment to the
Offering Memorandum, and gave reasonable general notice of the withdrawal and the reason for it;
or
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(c) with respect to any part of the Offering Memorandum or amendment to the Offering Memorandum
purporting: (i) to be made on the authority of an expert; or (ii) to be a copy of, or an extract from, a
report, an opinion or a statement of an expert, the person or company had no reasonable grounds to
believe and did not believe that (a) there had been a Misrepresentation, or (b) the relevant part of
the Offering Memorandum or amendment to the Offering Memorandum (1) did not fairly represent
the report, opinion or statement of the expert, or (2) was not a fair copy of, or an extract from, the
report, opinion or statement of the expert.
Pursuant to section 121 of the Securities Act (Yukon), no action may be commenced to enforce the right of action for
rescission or damages more than (a) 180 days after the day of the transaction that gave rise to the cause of action, in
the case of an action for rescission, or (b) the earlier of (i) 180 days after the day that the plaintiff first had knowledge
of the facts giving rise to the cause of action, or (ii) three years after the day of the transaction that gave rise to the
cause of action, in any other case.
The right of action for rescission or damages described herein is in addition to and without derogation from any right
the purchaser may have at law and is subject to the express provisions of the Securities Act (Yukon), and the rules,
regulations and other instruments thereunder.
Contractual Rights of Action
A contractual right of action for rescission or damages which is the same as the statutory right of action for rescission
or damages provided to purchasers resident in the Province of Ontario (as discussed above) will be provided to
purchasers resident in the Provinces of British Columbia and Québec, and will be conferred by the issuance of a
purchase confirmation in respect of the Units by the Fund to such purchasers. Such contractual rights of action for
rescission or damages are in addition to, and without derogation from, any other rights or remedies the purchaser may
have at law.