Northwest & Ethical Investments L.P. et al.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund mergers -- approval required because merger does not meet the criteria for pre-approved reorganizations and transfers in National Instrument 81-102 -- the fundamental investment objectives of some terminating funds and corresponding continuing funds are not substantially similar, and some mergers are not a "qualifying exchange" or a tax-deferred transaction under the Income Tax Act -- securityholders of terminating funds are provided with timely and adequate disclosure regarding the mergers.

Applicable Legislative Provisions

National Instrument 81-102 Investment Funds, ss. 5.5(1)(b), 19.1.

September 8, 2015

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 NORTHWEST & ETHICAL INVESTMENTS L.P. (the Manager) AND NEI INCOME FUND, NEI NORTHWEST SPECIALTY HIGH YIELD BOND FUND, NEI NORTHWEST MACRO CANADIAN EQUITY FUND, NEI NORTHWEST MACRO CANADIAN EQUITY CORPORATE CLASS, NEI SELECT GLOBAL BALANCED PORTFOLIO, NEI SELECT GLOBAL GROWTH PORTFOLIO (each, a Terminating Fund and collectively, the Terminating Funds and together with the Manager, the Filers)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Manager on behalf of the Terminating Funds for a decision under the securities legislation of the Jurisdiction for approval pursuant to paragraph 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) of the proposed mergers (the Mergers) of the Terminating Funds into the Continuing Funds (defined below) (the Approval Sought).

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

(a) the Ontario Securities Commission is the principal regulator (the Principal Regulator) for this Application; and

(b) the Manager has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the provinces and territories of Canada, other than the province of Ontario (the Other 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.

Continuing Funds means NEI Canadian Bond Fund, NEI Northwest Specialty Global High Yield Bond Fund, NEI Northwest Macro Canadian Asset Allocation Fund, NEI Northwest Macro Canadian Asset Allocation Corporate Class, NEI Select Balanced Portfolio and NEI Select Growth Portfolio;

Funds means the Terminating Funds and the Continuing Funds, collectively.

Representations

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

The Manager

1. The Manager is a corporation governed by the laws of the province of Ontario with its head office in Toronto, Ontario.

2. The Manager is the investment fund manager of the Funds and is registered as an investment fund manager in Ontario, British Columbia, Newfoundland and Labrador and Quebec, and as a portfolio manager in Ontario and British Columbia.

The Funds

3. All of the Funds, other than NEI Northwest Macro Canadian Equity Corporate Class and NEI Northwest Macro Canadian Asset Allocation Corporate Class, are open-ended mutual fund trusts established under the laws of the province of Ontario. NEI Northwest Macro Canadian Equity Corporate Class and NEI Northwest Macro Canadian Asset Allocation Corporate Class are separate classes of securities of Northwest Corporate Class Inc. (the Corporation), a mutual fund corporation governed under the laws of the province of Ontario.

4. Securities of the Funds are currently qualified for sale under a simplified prospectus, annual information form and fund facts each dated June 26, 2015 (collectively, the Offering Documents).

5. Each of the Funds is a reporting issuer under the applicable securities legislation of the province of Ontario and the Other Jurisdictions (the Legislation).

6. Neither the Manager nor the Funds is in default under the Legislation.

7. Other than circumstances in which the securities regulatory authority of a province or territory of Canada has expressly exempted a Fund therefrom, each of the Funds follows the standard investment restrictions and practices established under NI 81-102.

8. The net asset value for each series of the Funds, as applicable, is calculated on a daily basis in accordance with the Funds' valuation policy and as described in the Offering Documents.

9. Each of NEI Northwest Macro Canadian Equity Corporate Class (the Terminating Corporate Class Fund) and NEI Northwest Macro Canadian Asset Allocation Corporate Class (the Continuing Corporate Class Fund) employs a fund-of-fund structure and invests substantially all of its assets in NEI Northwest Macro Canadian Equity Fund and NEI Northwest Macro Canadian Asset Allocation Fund, respectively.

The Merger Application

10. The Manager intends to reorganize the Funds by merging each Terminating Fund set out in the table below into its respective Continuing Fund set out in the table below:

<<Merger #>>	<<Terminating Fund:>>	<<Continuing Fund:>>	<<This Merger is also referred to as:>>
1.	NEI Income Fund	NEI Canadian Bond Fund	Trust Fund Merger
2.	NEI Northwest Specialty High Yield Bond Fund	NEI Northwest Specialty Global High Yield Bond Fund	Trust Fund Merger
3.	NEI Northwest Macro Canadian Equity Fund	NEI Northwest Macro Canadian Asset Allocation Fund	Trust Fund Merger
4.	NEI Select Global Balanced Portfolio	NEI Select Balanced Portfolio	Trust Fund Merger
5.	NEI Select Global Growth Portfolio	NEI Select Growth Portfolio	Trust Fund Merger
6.	NEI Northwest Macro Canadian Equity Corporate Class	NEI Northwest Macro Canadian Asset Allocation Corporate Class	Corporate Class Fund Merger

11. Regulatory approval of the Mergers is required because each 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 the following ways:

(a) in respect of the merger of NEI Income Fund into NEI Canadian Bond Fund, the merger of NEI Northwest Specialty High Yield Bond Fund into NEI Northwest Specialty Global High Yield Bond Fund, the merger of NEI Northwest Macro Canadian Equity Fund into NEI Northwest Macro Canadian Asset Allocation Fund and the merger of the Terminating Corporate Class Fund into the Continuing Corporate Class Fund, the fundamental investment objectives of the Continuing Funds are not, or may be considered not to be, "substantially similar" to the investment objectives of their corresponding Terminating Funds; and

(b) the Trust Fund Mergers will not be completed as "qualifying exchanges" or tax-deferred transactions under the Income Tax Act (Canada).

12. Except for the reasons noted in paragraph 11 above, the Mergers otherwise comply with all the criteria for pre-approved reorganizations and transfers as set forth in section 5.6 of NI 81-102.

13. No sales charges will be payable in connection with the acquisition by a Continuing Fund of the investment portfolio of its applicable Terminating Fund.

14. The investment portfolio and other assets of each Terminating Fund to be acquired by or included in the portfolio of the applicable Continuing Fund in order to effect the Mergers are currently, or will be, acceptable, on or prior to the effective date of the Mergers, to the portfolio manager(s) of the applicable Continuing Fund and are, or will be, consistent with the investment objectives of the applicable Continuing Fund at the time of the Merger.

15. Securityholders of each Terminating Fund will continue to have the right to redeem securities of the Terminating Fund at any time up to the close of business on the business day immediately before the effective date of the Mergers.

16. In accordance with National Instrument 81-106 -- Investment Fund Continuous Disclosure, a press release announcing the proposed Mergers was issued on June 19, 2015 and subsequently filed on SEDAR. A material change report with respect to the Terminating Funds relating the proposed Mergers was filed via SEDAR on June 22, 2015, and the related prospectus disclosure in respect of the Terminating Funds that remained open for sale to the public was included in the Offering Documents.

17. A notice of meeting, a management information circular (the "Circular") and a proxy in connection with special meetings of securityholders were mailed to securityholders of the Terminating Funds and the Continuing Corporate Class Fund commencing on or about July 28, 2015 and concurrently filed via SEDAR. The Circular provides securityholders of the Terminating Funds with information about the differences between the Terminating Funds and the Continuing Funds, the management fees of the Continuing Funds and the tax consequences of the Mergers.

18. Fund facts relating to the relevant series of the Continuing Funds were mailed to securityholders of the corresponding Terminating Funds.

19. Securityholders of the Terminating Funds approved the Mergers at special meetings held on August 31, 2015.

20. The Mergers will not be a material change for each of the Continuing Funds.

21. In accordance with corporate law requirements, securityholders of the Continuing Corporate Class Fund approved an amendment to the articles of the Corporation in connection with the exchange of securities relating to the Corporate Class Fund Merger at a special meeting held on August 31, 2015.

22. Each Trust Fund Merger will be effected on a taxable basis. The Corporate Class Fund Merger will be effected on a tax-deferred basis.

23. The Manager will pay for the costs of the Mergers. These costs consist mainly of brokerage charges associated with the merger-related trades that occur both before and after the effective date of the Mergers and legal, proxy solicitation, translation, printing, mailing and regulatory fees.

24. If the required approvals are obtained, each Terminating Fund will merge into the applicable Continuing Fund at the close of business on or about September 14, 2015 and the Continuing Funds will continue as publicly offered open-ended mutual funds.

25. Securities of the Continuing Funds received by securityholders in the Terminating Funds as a result of the Mergers will have the same sales charge option and, for securities purchased under low load, low load 2, low load 3 or deferred sales charge options, the same remaining deferred sales charge schedule as their securities in the Terminating Funds.

26. Each Trust Fund Merger will be structured as follows:

(a) prior to the effective date of the merger, if there are any securities held by the Terminating Fund that do not meet the investment objectives and investment strategies of the Continuing Fund (as determined by the portfolio manager of the Continuing Fund), such securities will be sold and converted to cash or cash equivalents. In this limited circumstance, the Terminating Fund may hold cash or money market instruments and may not be fully invested in accordance with its investment objectives for a period of time prior to the effective date of the Merger;

(b) the balance of the Terminating Fund's investment portfolio and other assets will be valued and determined at the close of business on the effective date of the merger in accordance with the constating documents of the Terminating Fund;

(c) the Continuing Fund will acquire the investment portfolio and cash and/or cash equivalents referred to above in exchange for units of the Continuing Fund;

(d) the Continuing Fund will not assume the liabilities of the Terminating Fund, and the Terminating Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the effective date of the merger;

(e) the units of the Continuing Fund received by the Terminating Fund under the merger will have an aggregate net asset value equal to the value of the Terminating Fund's portfolio assets and other assets that the Continuing Fund is acquiring from the Terminating Fund and will be issued at the applicable series net asset value per unit as of the close of business on the effective date of the merger;

(f) the Terminating Fund will distribute to its securityholders a sufficient amount of its net income and net realized capital gains so that it will not be subject to tax under Part I of the Income Tax Act (Canada) for its current taxation year;

(g) immediately thereafter, the units of the Continuing Fund received by the Terminating Fund under the merger will be distributed to securityholders of the Terminating Fund on a dollar-for-dollar and series-by-series basis in exchange for their units in the Terminating Fund such that the holders of Series A units, Series F units, Series I units and Series T units of a Terminating Fund, as applicable, will receive corresponding Series A units, Series F units, Series I units and Series T units of the applicable Continuing Fund; and

(h) following the effective date of the merger, the Terminating Fund will be wound up.

27. The Corporate Class Fund Merger will be structured as follows:

(a) prior to the effective date of the merger, if there are any securities held by the Terminating Corporate Class Fund that do not meet the investment objectives and investment strategies of the Continuing Corporate Class Fund (as determined by the investment adviser of the Continuing Corporate Class Fund), such securities will be sold and converted to cash or cash equivalents. In this limited circumstance, the Terminating Corporate Class Fund may hold cash or money market instruments and may not be fully invested in accordance with its investment objectives for a period of time prior to the effective date of the Merger;

(b) the Corporation may elect to declare dividends payable to the securityholders of the Terminating Corporate Class Fund, including with respect to capital gains realized on the merger of NEI Northwest Macro Canadian Equity Fund and NEI Northwest Macro Canadian Asset Allocation Fund;

(c) the articles of incorporation of the Corporation, as amended, will be further amended such that all of the issued and outstanding shares of the Terminating Corporate Class Fund will be exchanged for shares of the Continuing Corporate Class Fund on a dollar-for-dollar basis and distributed to securityholders of the Terminating Corporate Class Fund. The holders of Series A shares and Series F shares of the Terminating Corporate Class Fund, as applicable, will receive corresponding Series A shares and Series F shares of the Continuing Corporate Class Fund. The shares of the Terminating Corporate Class Fund will be cancelled; and

(d) the cash and securities in the portfolio of assets attributable to the Terminating Corporate Class Fund will be included in the portfolio of assets attributable to the Continuing Corporate Class Fund.

28. Each Terminating Fund will be wound up following the applicable Merger.

29. As required by National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107), the Manager presented the potential conflict of interest matters related to the proposed Mergers to the Independent Review Committee (the IRC) for a recommendation. On June 17, 2015, the IRC reviewed the potential conflict of interest matters related to the proposed Mergers and provided its positive recommendation for each of the Mergers, after determining that each proposed Merger, if implemented, would achieve a fair and reasonable result for each Fund.

30. The investment objectives of each of the terminating funds compared to the continuing funds for which merger approval per representation 11(a) is being sought is as follows:

Terminating Fund	Investment Objectives	Continuing Fund	Investment Objectives
NEI Income Fund	The investment objective of NEI Income Fund is to provide income and the potential for capital gains by investing mostly in fixed income securities and income trusts.	NEI Canadian Bond Fund	The investment objective of NEI Canadian Bond Fund is to provide high current income while protecting your original investment. The Fund invests mostly in bonds, debentures and securities that are issued or guaranteed by the Government of Canada, a province or Canadian companies, and money market securities.
NEI Northwest Specialty High Yield Bond Fund	The investment objective of NEI Northwest Specialty High Yield Bond Fund is to provide a high level of current income while maintaining security of capital. The Fund invests primarily in a diversified portfolio of high-yield, higher risk, lower quality Canadian corporate bonds and notes and may also invest in other fixed income investments with similar characteristics. Most of the investments will be rated BBB and below by the Canadian Bond Rating Service (or its equivalent by another recognized bond rating service). The Fund may also invest in investments that are not rated, investments that are in default at the time of purchase, and may invest in investments denominated in foreign currencies.	NEI Northwest Specialty Global High Yield Bond Fund	The investment objective of NEI Northwest Specialty Global High Yield Bond Fund is to provide a high level of current income while maintaining security of capital. The Fund invests primarily in a diversified portfolio of high-yield, higher risk, global corporate bonds and notes and may also invest in other fixed income investments with similar characteristics. Most of the investments will be rated "BBB-" and below by Standard and Poor's or Fitch, and "Baa3" or below by Moody's or an equivalent rating by another recognized bond rating service. The Fund may also invest in investments that are not rated, investments that are in default at the time of purchase, and may invest in investments denominated in emerging market countries' currencies.
	It is expected that, except for temporary defensive purposes, the Fund will invest at least 80% of its net assets in high-yielding, income-producing corporate bonds.		It is expected that, except for temporary defensive purposes, the Fund will invest at least 80% of its net assets in high-yielding, income-producing corporate bonds.
NEI Northwest Macro Canadian Equity Fund	The investment objective of NEI Northwest Macro Canadian Equity Fund is to achieve long-term capital appreciation by investing its assets, excluding the cash and cash equivalent portion, primarily in equity securities of Canadian companies and to a lesser extent, foreign companies. The Fund will be able to invest in any sector and in both large and small capitalization companies.	NEI Northwest Macro Canadian Asset Allocation Fund	The investment objective of NEI Northwest Macro Canadian Asset Allocation Fund is to provide investment returns and protection of capital through an active asset allocation process. It invests primarily in a mix of Canadian and foreign equity and fixed income securities including money market instruments.
NEI Northwest Macro Canadian Equity Corporate Class	The investment objective of NEI Northwest Macro Canadian Equity Corporate Class is to achieve long-term capital appreciation by investing its assets, excluding the cash and cash equivalent portion, primarily in equity securities of Canadian companies and to a lesser extent, foreign companies. The Fund will be able to invest in any sector and in both large and small capitalization companies.	NEI Northwest Macro Canadian Asset Allocation Corporate Class	The investment objective of NEI Northwest Macro Canadian Asset Allocation Corporate Class is to provide investment returns and protection of capital through an active asset allocation process. The Fund invests primarily in a mix of Canadian and foreign equity and fixed income securities including money market instruments.

31. For each Trust Fund Merger, the Manager has elected not to effect the merger on a tax-deferred basis, for the following reasons:

Merger #	Terminating Fund:	Continuing Fund:	Reason Not Effected on a Tax-Deferred Basis
1.	NEI Income Fund	NEI Canadian Bond Fund	There are unrealized capital gains in the Terminating Fund that the Manager does not consider appropriate to transfer to the Continuing Fund.
2.	NEI Northwest Specialty High Yield Bond Fund	NEI Northwest Specialty Global High Yield Bond Fund	There are capital losses in the Continuing Fund that would expire if the Merger were effected on a tax-deferred basis.
3.	NEI Northwest Macro Canadian Equity Fund	NEI Northwest Macro Canadian Asset Allocation Fund	There are non-capital losses in the Continuing Fund that would expire if the Merger were effected on a tax-deferred basis.
4.	NEI Select Global Balanced Portfolio	NEI Select Balanced Portfolio	There are unrealized capital gains in the Terminating Fund that the Manager does not consider appropriate to transfer to the Continuing Fund.
5.	NEI Select Global Growth Portfolio	NEI Select Growth Portfolio	There are non-capital losses in the Continuing Fund that would expire if the Merger were effected on a tax-deferred basis. In addition, there are unrealized capital gains in the Terminating Fund that the Manager does not consider appropriate to transfer to the Continuing Fund.

32. For each Trust Fund Merger, below are the approximate amounts of the tax loss carry-forwards of each of the Terminating Funds and their corresponding Continuing Fund in the Trust Fund Mergers. The impact of the Trust Fund Mergers being carried out on a taxable basis on these tax losses is that the losses of the Continuing Fund will not expire.

		<<Carried forward losses>>
	Fund (Continuing Funds are shaded)	Non-Capital Losses	Capital Losses
1.	NEI Income Fund	0	5,258,985
	NEI Canadian Bond Fund	0	0
2.	NEI Northwest Specialty High Yield Bond Fund	0	21,087,340
	NEI Northwest Specialty Global High Yield Bond Fund	0	28,155,452
3.	NEI Northwest Macro Canadian Equity Fund	9,112,141	18,923,503
	NEI Northwest Macro Canadian Asset Allocation Fund	3,497,470	0
4.	NEI Select Global Balanced Portfolio	0	0
	NEI Select Balanced Portfolio	0	0
5.	NEI Select Global Growth Portfolio	0	0
	NEI Select Growth Portfolio	75,152	0

33. The Manager believes that the Mergers will be beneficial to the securityholders of the Terminating Funds for the following reasons:

• Series A securityholders of NEI Select Global Balanced Portfolio, NEI Select Global Growth Portfolio, NEI Northwest Macro Canadian Equity Fund and the Terminating Corporate Class Fund will enjoy increased economies of scale and lower operating expenses as part of a larger combined Continuing Fund as the fixed administration fee of the Series A securities of these Funds will be reduced from 0.40% to 0.35%;

• Series F securityholders of NEI Select Global Balanced Portfolio and NEI Select Global Growth Portfolio will enjoy increased economies of scale and lower operating expenses as part of a larger combined Continuing Fund as the fixed administration fee of the Series F securities of these Funds will be reduced from 0.35% to 0.30%;

• each Continuing Fund will have a portfolio of greater value allowing for increased portfolio diversification opportunities than within the applicable Terminating Fund; and

• each Continuing Fund, as a result of its increased size, will benefit from a more significant profile in the marketplace.

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 principal regulator under the Legislation is that the Approval Sought is granted.

"Darren McKall"

Manager, Investment Funds and Structured Products

Ontario Securities Commission