CI Global Asset Management Announces Changes to the First Asset-Branded Mutual Funds, Risk Rating Changes, and the Completion of Liquid Alternative ETF Mergers
CI Global Asset Management ("CI GAM") today announced proposed changes to its First Asset-branded mutual funds, including fund mergers and the introduction of fixed administration fees.
In addition, the previously announced mergers of three liquid alternative exchange-traded funds ("ETFs") into other liquid alternative investment funds with identical mandates were completed after the close of business on January 15, 2021. The ticker symbols of each series of the terminating ETFs have been carried over to the corresponding ETF series of the continuing funds, which begin trading today on the Toronto Stock Exchange (the "TSX").
First Asset mutual funds
CI GAM plans to merge two First Asset mutual funds into other funds it manages and to implement fixed administration fees for the remaining two First Asset mutual funds. These changes require the approval of securities regulators and unitholders in the affected funds, which include First Asset Canadian Convertible Bond Fund, First Asset Canadian Dividend Opportunity Fund, First Asset REIT Income Fund and First Asset Utility Plus Fund.
First, CI GAM is proposing the following two fund mergers (the "Mergers"):
If the Mergers are approved, First Asset Utility Plus Fund and First Asset Canadian Dividend Opportunity Fund will be terminated and unitholders will receive the equivalent dollar value of securities in the same series of the corresponding continuing funds upon completion of the Mergers. The Mergers will not result in a taxable disposition for unitholders, but the terminating funds may pay a distribution when the mergers take place.
In each case, the terminating and continuing funds have the same CI GAM portfolio management team. Both First Asset Utility Plus Fund and Signature Global Infrastructure Fund are managed by Kevin McSweeney and Massimo Bonansinga, and both First Asset Canadian Dividend Opportunity Fund and CI North American Dividend Fund are managed by Peter Hofstra. In addition, the management and administration fees of the continuing funds are lower than the management fees and operating expenses of the corresponding terminating funds.
CI GAM has proposed the Mergers to reduce duplication in its fund lineup and create larger, more efficient funds with increased potential for diversification opportunities. The costs and expenses associated with the Mergers are being borne by CI GAM, not the funds.
Second, CI GAM is proposing to implement fixed administration fees for each series of First Asset Canadian Convertible Bond Fund and First Asset REIT Income Fund, replacing the current variable operating expenses being charged to these funds (the "Fixed Administration Fee Proposal", and together with the Mergers, the "Proposals").
If approved by unitholders, CI GAM, as manager, will be responsible for the operating expenses of each fund, other than certain expenses, in exchange for the payment by the fund of a fixed administration fee. Under the Fixed Administration Fee Proposal, the management expense ratio ("MER") of each fund series will consist of the management fee, the fixed administration fee, certain expenses and applicable taxes.
The benefits to unitholders of fixed administration fees include greater predictability and transparency of the MER for each fund, as well as protection from potential increases in future operating expenses.
Pursuant to National Instrument 81-101 Investment Funds, both Proposals require the approval of unitholders of the funds. In addition, the Mergers will require regulatory approval. Accordingly, unitholder meetings will be held on March 25, 2021 and, if required, adjourned meeting(s) will be held on April 1, 2021. Holders of record for each series of units of these funds on February 12, 2021 will be entitled to receive notice and vote at the meetings. The Notice and Access Documents which detail the Proposals will be mailed to unitholders and the Management Information Circular will be available on www.sedar.com and www.firstasset.com on or about February 23, 2021. Pending the required unitholder and regulatory approvals, if applicable, the Proposals will be implemented on or about April 19, 2021.
The Independent Review Committee of the funds has reviewed the Proposals with respect to the potential conflict of interest matters and provided its positive recommendation, having determined that the Proposals achieve a fair and reasonable result for each fund.
Risk rating changes
CI GAM has also reviewed the risk ratings for each fund involved in the Proposals and will be changing the risk rating for First Asset REIT Income Fund from "Low to Medium" to "Medium." In addition, the risk rating for Signature Global Infrastructure Fund will be changed from "Medium" to "Low to Medium."
Risk rating changes are based on the risk classification methodology mandated by the Canadian Securities Administrators to determine the risk level of mutual funds. CI GAM reviews the risk rating for each of the funds it manages at least on an annual basis, as well as when a fund undergoes a material change. Such changes are not the result of any changes to the investment objectives, strategies or management of the funds.
CI Liquid Alternatives™ ETF mergers
The mergers of three liquid alternative ETFs into liquid alternative mutual funds with identical mandates, as listed below, were completed after the close of business on January 15, 2021:
As a result of the mergers, each continuing fund now offers both mutual fund series units and ETF series units. In each case, the investment objectives and the portfolio management team for the terminating ETF and continuing fund remain unchanged. No action is required by unitholders in the terminating ETFs as a result of the mergers.
In connection with the completed mergers, each unitholder of the terminating ETF received one ETF C$ Series unit and/or ETF US$ Hedged Series unit, as applicable, of the continuing fund for each Common Unit and/or US$ Common Unit of the terminating ETF held. The ticker symbol(s) of each terminating ETF have been carried over to the corresponding continuing fund. As a result, as of today, the following number of units of each continuing fund will be listed on the TSX and commence trading:
There were no taxable dispositions for securityholders; however, the mergers resulted in the terminating ETFs paying distributions, as shown below. The distributions will not be paid in cash but have been reinvested and the resulting units immediately consolidated so that the number of units held by each investor will not change.
Each terminating ETF has now been terminated.
More information about CI Liquid Alternatives™ is available at www.ci.com/liquidalts.
About CI Global Asset Management
CI Global Asset Management is one of Canada's largest investment management companies. It offers a wide range of investment products and services and is on the Web at www.ci.com. CI GAM is a subsidiary of CI Financial Corp. (TSX: CIX, NYSE: CIXX), an independent company offering global asset management and wealth management advisory services with approximately $231 billion in total assets as at December 31, 2020.
Commissions, trailing commissions, management fees and expenses all may be associated with an investment in mutual funds and exchange-traded funds (ETFs). Please read the prospectus before investing. Important information about mutual funds and ETFs is contained in their respective prospectus. Mutual funds and ETFs are not guaranteed; their values change frequently and past performance may not be repeated. You will usually pay brokerage fees to your dealer if you purchase or sell units of an ETF on recognized Canadian exchanges. If the units are purchased or sold on these Canadian exchanges, investors may pay more than the current net asset value when buying units of the ETF and may receive less than the current net asset value when selling them.
This communication is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies.
Certain statements in this document are forward-looking. Forward-looking statements ("FLS") are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as "may," "will," "should," "could," "expect," "anticipate," "intend," "plan," "believe," or "estimate," or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what CI Global Asset Management believes to be reasonable assumptions, CI Global Asset Management cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
CI Liquid Alternatives™ is a trademark of CI Global Asset Management. CI Global Asset Management is a registered business name of CI Investments Inc.
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