Merger of Evli Russia Fund

13.03.2019

Evli Fund Management Company Ltd has decided on a merger in which Evli Russia Fund (merging fund) will be merged with Evli GEM Fund (acquiring fund). The Financial Supervisory Authority granted permission to conduct the merger on January 18, 2019.

Merging fund    Acquiring fund
Evli Russia A (FI0008807557) Evli GEM A (FI4000153689)
Evli Russia B (FI0008807565) Evli GEM B (FI4000153697)

The merger will take place on April 23, 2019, at which time the merging fund will be dissolved, and its assets and liabilities will be transferred to the acquiring fund. There will be no liquidation proceedings. No separate actions are required from unit holders to accept the merger and receive the fund units of the Evli GEM Fund offered as merger consideration. Trading with the units of Evli Russia Fund will end at 12.00 noon (Finnish time) on April 18, 2019.

Reasons for the merger

The mutual funds participating in the merger invest their assets in Russia and more broadly in other emerging markets. The merging fund invests primarily only in the shares of Russian companies and has suffered in recent years because of the growing tension in the political situation between the region and its neighboring countries and continents. This has been reflected as a significant reduction in fund capital as investors avoid investing in Russia. The management of the fund’s low capital also causes relatively higher fixed trading costs than the management of a greater amount of assets.

Evli GEM invests in the emerging markets, including Russia, which accounted for around 5% of the fund’s investments on February 28, 2019. The fund offers a broader geographical diversification than a fund that invests in a single market, which is why its risk level is slightly lower than in the merging Evli Russia Fund.

The fixed annual management fee (2.75% p.a.) of the merging fund is higher than that of the acquiring fund (1.80% p.a.) and consequently the management fee for clients accepting the merger consideration will decrease by 0.95 percentage points per year.

Information on the funds involved in the merger on February 28, 2019.

Fund Return
12 mo
(%)
Return
3 yrs
(% p.a.)
Return
5 yrs
(% p.a.)
Ongoing
charges
(% p.a.)
Capital
(EUR million)
Risk rating
(1-7)
Evli Russia 0.51 20.1 5.55 2.75 11 7
Evli GEM 1.25 11.5 - 1.80 185 6

For more detailed information, please read the key investor information document of the Evli GEM Fund.

Consequences of the merger

Evli Russia unit holders

Under the Act on Common Funds, a unit holder of the merging fund will become a unit holder of the acquiring fund on the merger date, unless the unit holder redeems his/her fund units or switches them to units of another fund managed by Evli Fund Management Company Ltd before execution of the merger.

The holdings of unit holders who accept the merger will be converted by the Management Company to holdings in the acquiring fund of corresponding cash value on the basis of the values of the fund units calculated on the merger date. Holders of accumulation units will receive B series (acc. unit) units of Evli GEM as merger consideration. Holders of distribution units will receive A series (dist. unit) units of Evli GEM as merger consideration.

The unit holders’ rights in the acquiring fund will enter into force when the units received as merger consideration have been entered in the unit register maintained by the Management Company. Technical registration of the fund units received as merger consideration will be carried out by April 26, 2019, using the fund unit values confirmed for the merger date.

The Management Company may convert the assets of the merging fund into cash immediately before the merger date to ensure an uninterrupted merger. Any accrued income of the fund, such as sale price receivables for sold securities or accrued interest, will be taken into consideration as assets of the merging fund and will be transferred to the acquiring fund in the merger.

The Management Company will not charge redemption or switch fees from those unit holders who wish to redeem or switch their fund units before the execution of the merger. The deadline for placing redemption or switch orders is April 18, 2019, at 12.00 noon (Finnish time). Any orders received after this time will be executed after the completion of the merger. For redemption requests submitted by the deadline, redemption proceeds will be paid in cash to the unit holder’s bank account known to the Management Company by April 26, 2019.

Evli GEM unit holders

The merger is not expected to have a significant impact on the unit holders of the fund, and it does not affect their rights. The rules and composition of the investment portfolio of the acquiring fund will not change significantly but its assets will grow by the amount of the capital transferred in the merger. The assets of the merging fund will be transferred either as cash or as securities or a combination thereof and the acquiring fund will continue to manage them in accordance with its investment strategy.

Taxation

If a unit holder resident in Finland for purposes of taxation accepts the merger consideration offered in the form of fund units, there will be no tax consequences since this constitutes universal succession as referred to in Finnish tax legislation. However, redemption of fund units or switches to another mutual fund executed before the merger are subject to taxation in the same way as any other sale of property and the sale (or switch) of fund units will be taxed as a normal transfer. Correspondingly, any sale of the new units received as merger consideration will be taxed normally after the merger. However, the acquisition cost of the new units will be considered to be equal to the acquisition cost of the old units held in the merging fund.


EVLI FUND MANAGEMENT COMPANY LTD.


For more information, please contact:
Investor Service, tel. +358 (0)9 4766 9701 or by e-mail at info@evli.com (on weekdays from 9.30 am to 4.30 pm Finnish time).