The Securities Commission approved a fund merger between NEI Growth & Income Fund (Terminating Fund) and NEI Select Growth & Income RS Portfolio (Continuing Fund) under subsection 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102). The merger did not meet all pre-approval criteria as it was to be conducted on a taxable basis and the funds’ investment objectives were similar but not substantially similar. However, the merger was allowed subject to investor approval.
Key points include:
– The merger was not a tax-deferred transaction and could not be considered a qualifying exchange under the Income Tax Act (Canada).
– The investment objectives and strategies of the Continuing Fund were similar to those of the Terminating Fund, but there was a question of whether they were “substantially similar” as required by the pre-approval criteria in NI 81-102.
– The merger was expected to result in benefits such as greater portfolio diversification, reduced transaction costs, a more streamlined product lineup, and a more significant market profile for the Continuing Fund.
– The Independent Review Committee (IRC) reviewed the merger and determined it to be fair and reasonable for the Terminating Fund and its unitholders.
– A special meeting for the unitholders of the Terminating Fund was scheduled to vote on the merger, with virtual participation due to COVID-19 restrictions.
– The Filer, Northwest & Ethical Investments L.P., would bear all costs associated with the merger.
– The merger was subject to the approval of the Terminating Fund’s unitholders, and sufficient information was to be provided to them to make an informed decision.
The decision was made in accordance with various securities regulations, including National Instrument 81-102 Investment Funds, National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, and other relevant provisions. The outcome was contingent on the affirmative vote of the Terminating Fund’s unitholders at a special meeting convened for this purpose.