The Securities Commission approved a merger between two mutual funds, the Terminating Fund and the Continuing Fund, subject to securityholder approval. The approval was necessary because the merger did not meet the pre-approved reorganization criteria in National Instrument 81-102 Investment Funds (NI 81-102), specifically regarding the similarity of investment objectives and fee structures between the two funds. Despite these differences, the merger complied with other pre-approval criteria.
The merger was proposed to occur on or about November 19, 2021, if securityholder approval was obtained. The Filer, as the manager of both funds, believed the merger would benefit unitholders due to reasons such as declining assets under management in the Terminating Fund, a more streamlined product lineup, stronger long-term performance of the Continuing Fund, and potential for greater market presence and viability.
The Filer provided full disclosure to the Terminating Fund’s unitholders, including the differences in investment objectives and fees, the tax-deferred nature of the merger, and the recommendation from the independent review committee (IRC). A special meeting for unitholders to vote on the merger was scheduled for November 5, 2021, to be held virtually due to the coronavirus pandemic.
The merger process involved the Terminating Fund selling non-aligned assets, distributing net income and realized capital gains to unitholders, and then merging its assets with the Continuing Fund in exchange for equivalent units. The Filer would bear the costs of the merger.
The principal regulator granted the approval based on the condition that the Filer obtains prior approval from the Terminating Fund’s unitholders at the special meeting. The decision was made in accordance with sections 5.5(1), 5.5(3), 5.6(1), and 5.7(1) of NI 81-102.