Ninepoint Partners LP et al.

March 28, 2018

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Approval of mutual fund mergers -- approval required because the mergers do not meet the criteria for pre-approved reorganizations and transfers in National Instrument 81-102 -- the fundamental investment objectives of the terminating funds and continuing funds are not substantially similar-- securityholders of the 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), 5.7(1)(b).

March 28, 2018

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 NINEPOINT PARTNERS LP (the Manager) AND SPROTT SMALL CAP EQUITY FUND, SPROTT CANADIAN EQUITY FUND (each, a Terminating Fund and collectively, the Terminating Funds, and 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 of the principal regulator (the Legislation) approving the mergers (the Mergers) of the Terminating Funds into Sprott International Small Cap Fund and Sprott Concentrated Canadian Equity Fund (the Continuing Funds and collectively with the Terminating Funds, the Funds), respectively, pursuant to paragraph 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) (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 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 (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.

Representations

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

The Manager

1. The Manager is a limited partnership under 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 under the securities legislation: (i) in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, and Newfoundland and Labrador as an adviser in the category of portfolio manager; (ii) in Ontario, Newfoundland and Labrador and Quebec as an investment fund manager; and (iii) in British Columbia, Alberta, Quebec, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, and Newfoundland and Labrador as a dealer in the category of exempt market dealer. The Manager is also registered in Ontario as a commodity trading manager.

The Funds

3. The Funds are open-ended mutual fund trusts established under the laws of Ontario.

4. Securities of the Terminating Funds are currently qualified for sale under a simplified prospectus, annual information form and fund facts dated April 25, 2017, as amended on August 9, 2017 (Terminating Fund Offering Documents) and securities of the Continuing Funds are currently qualified for sale under a simplified prospectus, annual information form and fund facts dated January 26, 2018 (Continuing Fund 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. The Continuing Funds are newly launched mutual funds of the Manager that were first qualified for sale under the Continuing Fund Offering Documents. The Mergers of the Terminating Funds into the Continuing Funds is not being treated as a material change for the Continuing Funds for securities regulatory purposes because disclosure of the Mergers was included in the Continuing Fund Offering Documents since the inception of the Continuing Funds.

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

8. 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.

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

Reason for Approval Sought

10. 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. The pre-approval criteria are not satisfied in the following ways, as the 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.

11. The investment objectives of the Terminating Funds and the Continuing Funds are as follows:

Terminating Fund

Investment Objective

Continuing Fund

Investment Objective

Sprott Small Cap Equity Fund

The investment objectives of Sprott Small Cap Equity Fund are to achieve long-term capital growth by investing primarily in small capitalization equity and equity-related securities listed in Canada, with some exposure to global small capitalization equities.

Sprott International Small Cap Fund

The investment objective of Sprott International Small Cap Fund is to seek to provide unitholders with long term capital appreciation by investing primarily in a portfolio of international small capitalization equity securities of issuers in countries and industries primarily located in Europe, Japan and Asia-Pacific ex-Japan.

Sprott Canadian Equity Fund

The investment objectives of Sprott Canadian Equity Fund are to outperform the broad Canadian equity market as measured by the S&P/TSX Composite Total Return Index (or its successor index), over the long term of 5+ years, providing long term capital appreciation and value by investing primarily in small to mid capitalization stocks of Canadian issuers. To assist in achieving this objective, the Fund may focus its assets in specific industry sectors and asset classes based on analysis of business cycles, industry sectors and market outlook.

Sprott Concentrated Canadian Equity Fund

The investment objective of Sprott Concentrated Canadian Equity Fund is to seek to provide unitholders with long term capital appreciation by investing primarily in a concentrated portfolio of Canadian equity securities.

12. The Continuing Funds have a risk rating that is either lower than or the same as the risk rating of the applicable Terminating Fund.

13. Each Continuing Fund is sub-advised by a third party sub-adviser, namely Scheer, Rowlett & Associates Investment Management Ltd. or Global Alpha Capital Management Ltd.

14. Sprott International Small Cap Fund has the same management fee as the applicable Terminating Fund, while Sprott Concentrated Canadian Equity Fund has a management fee that is slightly lower than the applicable Terminating Fund.

15. Except as described in this decision, the proposed Mergers comply with all of the other criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102.

16. The Manager has determined that it believes that it would be most efficient to implement each Merger on a tax-deferred basis as a "qualifying exchange", within the meaning of section 132.2 of the Income Tax Act (Canada). Unitholders of each Terminating Fund will exchange on a tax-deferred rollover basis their units of the Terminating Fund for units of the applicable Continuing Fund. The Terminating Funds will not realize any net capital gains as a result of the Mergers.

The Proposed Mergers

17. The Manager intends to reorganize the Funds as follows:

(a) Sprott Small Cap Equity Fund will merge into Sprott International Small Cap Fund; and

(b) Sprott Canadian Equity Fund will merge into Sprott Concentrated Canadian Equity Fund.

18. In accordance with National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106), a press release announcing the proposed Mergers was issued and filed by the Terminating Funds via SEDAR on February 1, 2018. A material change report with respect to the proposed Mergers was filed via SEDAR on February 1, 2018.

19. As required by National Instrument 81-107 Independent Review Committee for Investment Funds, an Independent Review Committee (the IRC) has been appointed for the Funds. The Manager presented the potential conflict of interest matters related to the proposed Mergers to the IRC for a decision. The IRC reviewed the potential conflict of interest matters related to the proposed Mergers and on February 6, 2018 provided its positive decision for each of the Mergers, after determining that each proposed Merger, if implemented, would achieve a fair and reasonable result for each applicable Fund.

20. Securityholders of the Terminating Funds will be asked to approve the Mergers at special meetings to be held on or about March 26, 2018.

21. The investment portfolio and other assets of each Terminating Fund to be acquired by 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.

22. 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, printing, mailing and regulatory fees.

23. Securityholders that purchased securities of a Terminating Fund, including under the low load option, will receive securities of the applicable Continuing Fund that are not subject to a deferred sales charge.

24. If all required approvals for the Mergers are obtained, it is intended that the Mergers will occur after the close of business on or about March 29, 2018 (the Effective Date). The Manager therefore anticipates that each securityholder of each Terminating Fund will become a securityholder of the applicable Continuing Fund after the close of business on the Effective Date. Each Terminating Fund will be wound-up as soon as reasonably possible following its Merger.

25. By way of order dated October 27, 2016, the Manager was granted relief (the Notice and-Access Relief) from the requirement set out in paragraph 12.2(2)(a) of NI 81-106 to send a printed management information circular to securityholders while proxies are being solicited, and, 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.

26. In accordance with the Filer's standard of care owed to the relevant Fund pursuant to applicable legislation, the Filer will only use the notice-and-access procedure for a particular meeting where it has concluded it is appropriate and consistent to do so, also taking into account the purpose of the meeting and whether the Fund would obtain a better participation rate by sending the information circular with the other proxy-related materials.

27. Pursuant to the requirements of the Notice-and-Access Relief, a notice-and-access document and applicable proxies in connection with the special meetings, along with the fund facts of the Continuing Funds, as applicable, were mailed to securityholders commencing on February 16, 2018 and were concurrently filed via SEDAR. The management information circular, which the notice-and-access document provides a link to, was also filed via SEDAR at the same time.

28. The tax implications of the Mergers, the differences between the investment objectives, the similarities between the fee structures of the Terminating Funds and the Continuing Funds, and the IRC's recommendation of the Mergers were described in the meeting materials so that the securityholders of the Terminating Funds could consider this information before voting on the Mergers. The meeting materials also described the various ways in which investors could obtain a copy of the simplified prospectus, annual information form and fund facts for each Continuing Fund and its most recent interim and annual financial statements and management reports of fund performance.

29. 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.

Merger Steps

30. The proposed Mergers will be structured as follows:

(a) Prior to effecting the Merger, each Terminating Fund will liquidate securities in its portfolio to the extent that the securities do not meet the investment objective and investment strategies of the applicable Continuing Fund. As a result, the portfolio of each Terminating Fund may temporarily hold cash or money market instruments and may not be fully invested in accordance with its investment objectives for a brief period of time prior to the applicable Merger being effected.

(b) The value of each Terminating Fund's 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 applicable Terminating Fund.

(c) Each Continuing Fund will acquire the investment portfolio and other assets of the applicable Terminating Fund in exchange for securities of the Continuing Fund.

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

(e) The Terminating Funds will distribute a sufficient amount of their net income and net realized capital gains, if any, to securityholders to ensure that they will not be subject to tax for their current tax year.

(f) The securities of each Continuing Fund received by the applicable Terminating Fund will have an aggregate net asset value equal to the value of the portfolio assets and other assets that the Continuing Fund is acquiring from the Terminating Fund, and the securities of the Continuing Fund will be issued at the applicable series net asset value per security as of the close of business on the effective date of the applicable Merger.

(g) Immediately thereafter, securities of each Continuing Fund received by the applicable Terminating Fund will be distributed to securityholders of the Terminating Fund in exchange for their securities in the Terminating Fund on a dollar-for-dollar basis, as applicable.

31. As soon as reasonably possible following each Merger, and in any case within 60 days following the effective date of the Merger, the applicable Terminating Fund will be wound up.

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

Benefits of Mergers

33. The Manager believes that the Mergers are beneficial to securityholders of each Terminating Fund and Continuing Fund for the following reasons:

(a) the Mergers will eliminate the administrative and regulatory costs of operating each Terminating Fund and Continuing Fund as separate funds;

(b) the Mergers provide securityholders of the Terminating Funds with options to (a) switch to another investment, (b) redeem their investment, and (c) maintain an investment with the Manager in the Continuing Fund without having to initiate a switch with the advisor, which provides the securityholders of the Terminating Funds with flexibility, convenience and potential cost savings;

(c) securityholders of the Terminating Funds will receive securities of the applicable Continuing Fund that have a management fee that is either lower than or the same as the management fee charged in respect of the securities of the Terminating Fund that they currently hold;

(d) securityholders of the Terminating Funds will receive securities of the applicable Continuing Fund that are expected to have a management expense ratio before waivers or absorptions that is either lower than or the same as the management expense ratio before waivers or absorptions in respect of the securities of the Terminating Fund that they currently hold; and

(e) following the Mergers, each Continuing Fund will have a portfolio of greater value, which may allow for increased portfolio diversification opportunities if desired.

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 Branch

Ontario Securities Commission

Terminating Fund	Investment Objective	Continuing Fund	Investment Objective

Sprott Small Cap Equity Fund	The investment objectives of Sprott Small Cap Equity Fund are to achieve long-term capital growth by investing primarily in small capitalization equity and equity-related securities listed in Canada, with some exposure to global small capitalization equities.	Sprott International Small Cap Fund	The investment objective of Sprott International Small Cap Fund is to seek to provide unitholders with long term capital appreciation by investing primarily in a portfolio of international small capitalization equity securities of issuers in countries and industries primarily located in Europe, Japan and Asia-Pacific ex-Japan.

Sprott Canadian Equity Fund	The investment objectives of Sprott Canadian Equity Fund are to outperform the broad Canadian equity market as measured by the S&P/TSX Composite Total Return Index (or its successor index), over the long term of 5+ years, providing long term capital appreciation and value by investing primarily in small to mid capitalization stocks of Canadian issuers. To assist in achieving this objective, the Fund may focus its assets in specific industry sectors and asset classes based on analysis of business cycles, industry sectors and market outlook.	Sprott Concentrated Canadian Equity Fund	The investment objective of Sprott Concentrated Canadian Equity Fund is to seek to provide unitholders with long term capital appreciation by investing primarily in a concentrated portfolio of Canadian equity securities.