CI Investments Inc

Headnote

NP 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of merger of exchange traded mutual funds -- approval required because mergers do not meet the criteria for pre-approved reorganizations and transfers in National Instrument 81-102 -- merging funds may be considered not to have substantially similar investment objectives -- one merger will not be a tax deferred transaction -- approval granted subject to securityholder approval.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 5.5(1), 5.5(3), 5.6(1), 5.7(1).

March 19, 2021

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO(the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF CI INVESTMENTS INC. (the Manager) AND THE TERMINATING ETFS (as defined below)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Manager on behalf of the Terminating ETFs in the table below for a decision under the securities legislation of the Jurisdiction (the Legislation) pursuant to paragraph 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) approving the proposed merger of each Terminating ETF into the Continuing ETF shown opposite its name in the table below (each a Merger, and collectively, the Mergers) (the Merger Approval) (the Terminating ETFs and Continuing ETFs, collectively, the ETFs).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

1. the Ontario Securities Commission is the principal regulator for this application; and

2. the Manager has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Manager:

The Manager and the ETFs

1. The Manager is a corporation amalgamated under the laws of Ontario with its head office located in Ontario. The Manager is registered as follows:

(a) under the securities legislation of all provinces and territories as a portfolio manager and an exempt market dealer;

(b) under the securities legislation of Ontario, Quebec and Newfoundland and Labrador as an investment fund manager; and

(c) under the Commodity Futures Act (Ontario) as a commodity trading counsel and a commodity trading manager.

2. The Manager is the manager of each ETF.

3. Each ETF is:

(a) an open-end mutual fund trust governed by a declaration of trust;

(b) an exchange-traded mutual fund whose securities are listed on the Toronto Stock Exchange (TSX);

(c) a reporting issuer under the securities legislation of each province and territory of Canada, subject to the requirements of NI 81-102 and National Instrument 41-101 General Prospectus Requirements; and

(d) not an alternative mutual fund as defined in NI 81-102.

4. Each ETF follows the standard investment restrictions and practices established under the securities legislation of the applicable Jurisdictions, except to the extent it has received an exemption from the securities regulatory authority of a Jurisdiction to deviate therefrom.

5. Each Terminating ETF and CI First Asset Global Financial Sector ETF, a Continuing ETF, currently distributes its securities in all the Jurisdictions pursuant to a prospectus dated April 22, 2020, as amended. Each other Continuing ETF currently distributes its securities in all the Jurisdictions pursuant to a prospectus dated June 19, 2020, as amended.

6. Neither the Manager nor any ETF is in default of securities legislation in any province or territory of Canada, as applicable.

Reason for Merger Approval

7. For each Merger, regulatory approval is required because the Merger does not satisfy all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102. In particular,

(a) in respect of each Merger, a reasonable person may not consider the Terminating ETF to have a substantially similar fundamental investment objective as its corresponding Continuing ETF; and

(b) in respect of Merger 4, the Merger will not be a "qualifying exchange" within the meaning of section 132.2 of the Income Tax Act (Canada) (the Income Tax Act) or a tax-deferred transaction under subsection 85(1), 85.1(1), 86(1) or 87(1) of the Income Tax Act.

8. Each Merger otherwise complies with all of the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102.

The Proposed Mergers and Securityholder Disclosure

9. The Manager intends to merge each Terminating ETF into the Continuing ETF shown opposite its name in the table above and for Terminating ETF investors to receive the series of the Continuing ETF equivalent to their series in the Terminating ETF shown opposite its name in the table above.

10. The proposed Mergers were announced in the following documents, each of which has been filed on SEDAR:

(a) a press release dated February 1, 2021;

(b) a material change report dated February 1, 2021; and

(c) amendment dated February 3, 2021 to the prospectus and revised ETF facts of each of the Terminating ETFs.

11. As required by National Instrument 81-107 Independent Review Committee for Investment Funds, the Manager presented the terms of the Mergers to the independent review committee of the Terminating ETFs (the IRC) for its review. The IRC determined that the Mergers, if implemented, will achieve a fair and reasonable result for each of the Terminating ETFs.

12. The Manager is convening a special meeting of the securityholders of each Terminating ETF in order to seek their approval to complete the applicable Merger, as required by paragraph 5.1(1)(f) of NI 81-102 (each, a Meeting). The Meetings will be held concurrently on or about April 1, 2021. As disclosed in the management information circular of the Terminating ETFs dated February 19, 2021 (the Circular), due to the COVID-19 pandemic and current restrictions placed on public gatherings, investors will not be able to attend the Meetings physically. Securityholders of the ETFs and duly-appointed proxyholders, regardless of geographic location, will have an equal opportunity to participate at the Meetings through teleconference as they would at a physical meeting, provided they remain connected on the telephone at all times during the Meetings. Securityholders and duly-appointed proxyholders will be able to listen to the Meetings and to ask questions when prompted while the Meetings are being held, and to submit their votes by the end of the Meetings.

13. The Manager has concluded that the Mergers are not material changes to the Continuing ETFs, and accordingly, there is no intention to convene meetings of securityholders of the Continuing ETFs to approve the Mergers pursuant to paragraph 5.1(1)(g) of NI 81-102.

14. By way of order dated July 28, 2017, the Manager was granted relief (the Notice-and-Access Relief) from the requirement set out in paragraph 12.2(2)(a) of National Instrument 81-106 Investment Fund Continuous Disclosure to send a printed management information circular to securityholders while proxies are being solicited that, subject to certain conditions, instead allows a notice-and-access document (as described in the Notice-and-Access Relief) to be sent to such securityholders.

15. Pursuant to requirements of the Notice-and-Access Relief, a notice-and-access document and applicable proxies in connection with the Meeting, along with the ETF facts of the Continuing ETFs, were mailed to securityholders of the Terminating ETFs on February 19, 2021 and were concurrently filed via SEDAR. The Circular, which the notice-and-access document provides a link to, was also filed via SEDAR at the same time.

16. If all required approvals for a Merger are obtained, it is intended that the Merger will occur after the close of business on or about April 16, 2021 (the Effective Date). The Manager therefore anticipates that each securityholder of a Terminating ETF will become a securityholder of its corresponding Continuing ETF after the close of business on the Effective Date. Each Terminating ETF will be wound-up as soon as reasonably possible following its Merger.

17. The Circular describes:

(a) The tax implications of the Mergers;

(b) The differences between the investment objectives and other features of the Terminating ETFs and the Continuing ETFs;

(c) The IRC's recommendation in respect of the Mergers;

(d) The various ways in which securityholders can obtain a copy of the prospectuses and ETF facts for the Continuing ETFs and their most recent interim and annual financial statements and management reports of fund performance; and

(e) The steps for implementing each Merger.

18. The Circular also discloses that:

(a) Securityholders will continue to have the right to redeem their securities of the Terminating ETFs up to the close of business on the Effective Date. Securityholders of the Terminating ETFs will subsequently be able to redeem their securities of the corresponding Continuing ETFs acquired through the Mergers, which will be subject to the same redemption charges, if any, their securities of the Terminating ETFs were subject to;

(b) In respect of Merger 4, which is being effected on a taxable basis, the Continuing ETF has capital loss carryforwards for tax purposes that will be lost if that Merger is implemented on a tax-deferred basis. Merger 4 will be effected on a taxable basis and the Continuing ETF will preserve its unutilized capital loss carryforwards for use to shelter capital gains realized by it in future years;

(c) It is expected that only the Terminating ETFs involved in Mergers 2 and 5 will distribute net realized capital gains to their securityholders as a result of the Mergers in advance of the effective date(s) of the Mergers. For Merger 4, the Terminating ETF expects that it will have sufficient loss carryforwards or sufficient capital gains refund to offset any capital gains realized on the liquidation of assets prior to its Merger and on the transfer of its assets to the Continuing ETF. These expectations may change in advance of the Mergers due to market activity, portfolio manager activity and/or securityholder activity;

(d) Neither the Terminating ETFs nor the Continuing ETFs will bear any of the costs and expenses associated with the Mergers. Such costs will be borne by the Manager;

(e) If a proposed Merger is not approved by securityholders of a Terminating ETF, that Terminating ETF will instead be terminated on or about April 22, 2021.

19. The Manager believes the Circular provides securityholders of the Terminating ETFs with sufficient information to permit them to make an informed decision as to whether to approve the applicable Merger.

Merger Implementation

20. The specific steps to implement each Merger are as follows:

(a) Prior to the Merger, if required, the Terminating ETF will sell any securities in its portfolio that do not meet the investment objective and investment strategies of the Continuing ETF. As a result, the Terminating ETF may temporarily hold cash or money market instruments and may not be fully invested in accordance with its investment objective for a brief period of time prior to the Merger being effected.

(b) The value of a Terminating ETF's investment portfolio and other assets will be determined at the close of business on the effective date of the applicable Merger in accordance with the constating documents of the Terminating ETF.

(c) Each of the Terminating ETF and the Continuing ETF may declare, pay and automatically reinvest a distribution to its securityholders of net realized capital gains and net income, if any, to ensure that it will not be subject to tax for its current tax year. In respect of Merger 4, for the Terminating ETF's securityholders, this will also ensure that they will not be subject to tax on any net income generated prior to the Merger in the Continuing ETF.

(d) The Terminating ETF will transfer substantially all of its assets to the Continuing ETF. In return, the Continuing ETF will issue to the Terminating ETF securities of the Continuing ETF having an aggregate net asset value equal to the value of the assets transferred to the Continuing ETF.

(e) The Continuing ETF will not assume liabilities of the Terminating ETF and the Terminating ETF will retain sufficient assets to satisfy its estimated liabilities, if any, as of the effective date of the applicable Merger.

(f) Immediately thereafter, securities of the Continuing ETF received by the Terminating ETF will be distributed to securityholders of the Terminating ETF in exchange for their securities in the Terminating ETF on a dollar-for-dollar and series-by-series basis (the term "series" as used here also includes class).

(g) The Terminating ETF's securities will be de-listed from the TSX and the Terminating ETF will cease to be reporting issuers in each of the provinces and territories of Canada.

(h) The Terminating ETF will be wound-up within 30 days following its Merger.

21. Each securityholder of the Terminating ETF will receive securities of the Continuing ETF with a value equal to the value of their securities of the Terminating ETF.

22. The costs of effecting the Mergers (consisting primarily of legal and regulatory fees, and proxy solicitation, printing and mailing costs) will be borne by the Manager.

23. No brokerage charges or sales charges will be payable by the ETFs or securityholders of the ETFs in connection with the Mergers.

24. The investment portfolio and other assets of each Terminating ETF to be acquired by the applicable Continuing ETF in order to effect the Mergers are currently, or will be, acceptable, on or prior to the Effective Date, to the portfolio manager(s) of the applicable Continuing ETF and are, or will be, consistent with the investment objective of the applicable Continuing ETF.

25. The result of each Merger will be that investors in each Terminating ETF will cease to be securityholders of the Terminating ETF and will become securityholders of its corresponding Continuing ETF, and the Continuing ETFs will continue as publicly-offered open-end mutual funds.

Benefits of the Mergers

26. In the opinion of the Manager, the Mergers will be beneficial to securityholders of the ETFs for the following reasons:

(a) it is expected that the Mergers will result in a more streamlined and simplified product line-up with less duplication that is easier for investors to understand;

(b) following the Mergers, each Continuing ETF will have more assets and a smaller proportion of assets to be set aside for ETF redemptions;

(c) securityholders of each Terminating ETF will benefit by moving to a Continuing ETF with a much larger net asset value, and each Continuing ETF will benefit from its larger profile in the marketplace; and

(d) the management fee and fixed administration fee or operating expenses, as applicable, with respect to each series or class of each Continuing ETF, as applicable, will be the same as, or, in certain cases, lower than, the management fee and current fixed administration fee or operating expenses, as applicable, of the corresponding series of the applicable Terminating ETF.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the decision maker under the Legislation is that the Merger Approval is granted provided that the Manager obtains the prior approval of securityholders of a Terminating ETF for its Merger prior to the Effective Date.