NexC Partners Corp has approved a proposal to convert NEXC into an open-end fund with ETF shares and mutual fund shares.
The conversion will be achieved by merging NEXC into Purpose Enhanced Dividend Fund (the PDIV), a newly established investment fund with substantially similar investment objectives and strategies as NEXC that will be managed by Purpose Investments Inc. (“Purpose”), with the PDIV being the continuing fund.
Under the Proposal, holders of Class A Shares of NEXC will receive ETF shares of PDIV and holders of Class F Shares and Class J Shares of NEXC will receive Series F shares of PDIV.
The Proposal should provide holders of Class A Shares, Class F Shares and Class J Shares of NEXC with several benefits, including a lower management fee and lower management expense ratio The management fee on PDIV will be 0.65 per cent per annum, which is a reduction from the 1 per cent management fee of NEXC. In addition, the majority of the expenses of PDIV will be borne by Purpose, which combined with the lower management fee will significantly reduce the MER of the fund by approximately 55 per cent relative to NEXC’s.
The conversion will also provide efficient trading and daily liquidity, As an exchange-traded fund is in continuous distribution, PDIV’s ETF shares are expected to trade efficiently and close to its Net Asset Value at all times and the Series F shares will be redeemable daily at N
PDIV will pay its distributions on a monthly basis while maintaining the same total annual distribution amount as NEXC. This is an improvement over the current quarterly payment schedule of NEXC and will provide shareholders with more frequent distribution payments.
The conversion will not result in a disposition of shares by shareholders of NEXC and accordingly any embedded gain will not be realised as a result of the Proposal. This differs from the treatment that would occur on a redemption or termination of a fund, which would result in a disposition of the shares and the realisation of any capital gains for tax purposes.