The Securities Commission has approved an application for the merger of two investment funds, the Terminating Fund into the Continuing Fund, under certain conditions. The merger did not meet all pre-approval criteria of National Instrument 81-102 Investment Funds, specifically, it was not a qualifying exchange or tax-deferred transaction under the Tax Act. However, the funds had substantially similar investment objectives, fee structures, and valuation procedures.
The Filer, an Ontario corporation managing the funds, is registered as an investment fund manager and is not in default under securities legislation. The merger was publicly announced, and the Independent Review Committee provided a positive recommendation, deeming the merger fair and reasonable for the funds.
Securityholders of the Terminating Fund were to vote on the merger at a special meeting. The Filer concluded the merger would not materially change the Continuing Fund and would assume the costs of the merger. The merger was intended to be on a taxable basis for various reasons, including the potential non-qualification of the Terminating Fund as a mutual fund trust on the merger date and the tax-exempt status of the majority of its securityholders.
The merger was believed to be beneficial as it would prevent adverse tax consequences, address the economic non-viability of the standalone Terminating Fund, simplify the product lineup, and potentially attract more investors to the Continuing Fund.
The approval was contingent on the Filer obtaining prior approval from the securityholders of the Terminating Fund at the special meeting. The merger was set to be effective on or about June 25, 2021, with the Terminating Fund to be wound up within 60 days post-merger.