EdgePoint Investment Management Inc.

Order

Headnote

Exemption granted from s. 118(2)(a) of the Act - Exemption required to facilitate closed-end fund investing in securities of its manager that is not a public company - exemption granted subject to several conditions including prospectus disclosure, independent review committee approval, investment limited to de minimus amount, and investment priced at same price as other investors.

Applicable Legislative Provisions

Securities Act (Ontario), ss. 118(2)(a), 121(2)(a)(ii).

September 19, 2008

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

(the Act)

AND

IN THE MATTER OF

EDGEPOINT INVESTMENT MANAGEMENT INC.

 

ORDER

Background

The Ontario Securities Commission (the Commission) has received an application (the Application) under clause 121(2)(a)(ii) from EdgePoint Investment Management Inc. (the Investment Advisor) for an order exempting it from the prohibition contained in clause 118(2)(a) of the Act to permit it to make an investment in the securities of EdgePoint Wealth Management Inc. (Wealth Management Company) on behalf of Cymbria Corporation (the Fund) for which the Investment Advisor will act as portfolio manager (the Exemption Sought).

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This order is based on the following facts represented by the Investment Advisor:

1. The Investment Advisor is incorporated under the laws of Ontario and has been in existence since January 21, 2008.

2. The Investment Advisor is a wholly-owned subsidiary of EdgePoint Investment Group Inc. (the Manager) and an adviser registered with the OSC in the capacities of investment counsel and portfolio manager as well as a limited market dealer.

3. The head office of the Manager is located at located at 1000 Yonge St., Suite 200, Toronto, Ontario, M4W 2K2.

4. The Fund is intended to provide investors with exposure to a portfolio of global securities, but also with an opportunity to invest in Wealth Management Company, a subsidiary of Manager.

5. The Investment Advisor will provide portfolio advisory services to the Fund.

Corporate Structure

The Fund

6. The Fund will be structured as a corporation with three classes of shares: (i) common shares which will be owned by the Manager; (ii) Class A shares which will be offered to the public pursuant to a prospectus; and (iii) Class J shares which are being offered on a private placement basis and which will be convertible into Class A shares.

Wealth Management Company

7. It is proposed that Wealth Management Company will issue common shares to the Manager and the Fund. Wealth Management Company will also reserve 10% of its equity for issuance to employees.

8. The amount of the equity to be held by the Fund will be based on a formula determined by the amount of the proceeds raised in the sale of Class A and Class J shares (the Offering). If these aggregate proceeds reach $100 million, the Fund will be issued 10% of the equity of Wealth Management Company. For each $10 million raised between $100 million and $250 million, the Fund will be issued an additional 1% of the equity of Wealth Management Company. For each $10 million raised between $250 million to a maximum of $750 million, the Fund's ownership level in Wealth Management Company will increase by 0.30% to a maximum of 40%.

9. The consideration that the Fund will pay for its equity interest in Wealth Management Company will be its pro rata share of the working capital required to fund operations of the Wealth Management Company, to a maximum of $5 million (which will be not more than 5% of the minimum proceeds of the Offering). The remaining working capital will be funded by Manager who will receive its equity interest in Wealth Management Company at the same price as the Fund.

10. The Fund's investment in Wealth Management Company will be consistent with the Fund's investment objectives and will be a passive investment. Wealth Management Company will be controlled by Manager who will initially own at least 60% of Wealth Management Company.

11. The Fund's preliminary and final prospectus (the Prospectus) will fully disclose the details of the Fund's investment in Wealth Management Company.

Corporate Governance

12. The Fund will have an independent review committee (IRC) as required under National Instrument 81-107 -- Independent Review Committee for Investment Funds (NI 81-107). The Fund's investment in Wealth Management Company will be approved by the Fund's IRC. The IRC will approve the Fund's investment in the Wealth Management Company only after making the determination under sub-section 5.2(2) of NI 81-107.

13. In addition, the IRC will be required to review the continued holding of equity of Wealth Management Company and any actions outside of the ordinary course of business by Wealth Management Company which could affect the Fund's holdings. These requirements will be included in the IRC's policies and procedures.

14. In addition, it is anticipated that Wealth Management Company will be governed by a unanimous shareholders' agreement (USA) among the Fund, the Manager and any key employees holding equity in the Wealth Management Company. Pursuant to the USA, any material transaction involving Wealth Management Company will require prior approval of the Board of Directors of the Fund (a majority of whom will be independent of the Manager), if Wealth Management Company:

(a) purchases or acquires an asset from a related party;

(b) sells, transfers or disposes of an asset to a related party;

(c) leases a property to or from a related party;

(d) acquires a related party through an amalgamation, arrangement or otherwise;

(e) issues a security to a related party, except in respect of share issuances to employees described in paragraph 7 above;

(f) subscribes for a security of a related party;

(g) assumes or otherwise becomes subject to a liability of a related party;

(h) borrows from, or lends to, a related party;

(i) releases, cancels or forgives a debt owed by a related party;

(j) materially amends the outstanding debt owed by or to a related party; or

(k) provides a guarantee on behalf of a related party.

For the purposes hereof, "related party" shall have the meaning ascribed thereto under applicable securities laws.

In addition the USA will provide the Fund with certain "piggy-back" rights to the Fund in the event that the Manager receives directly or indirectly (through an offer to purchase all of the shares of the Manager) a bona fide third party offer to purchase the Manager's interest in Wealth Management Company.

15. These corporate governance procedures will be disclosed in the Prospectus.

16. It is likely that directors and/or officers of the Investment Advisor will also be directors and/or officers of Wealth Management Company.

17. The vast majority of the proceeds raised by the Fund will be invested in a portfolio of global equity securities and the investment in Wealth Management Company will represent a nominal use of proceeds. The Manager will also waive its management fee for the first three years of the Fund.

Order

The Commission is satisfied that in the circumstances there is adequate justification for so doing;

The Commission orders that the Exemption Sought is granted so long as:

1. the Prospectus fully discloses the details of Fund's investment in Wealth Management Company including the consideration and the corporate governance procedures;

2. the Fund's investment in Wealth Management Company is consistent with its investment objectives;

3. the Fund invests no more than $5 million of the proceeds raised under the Offering in Wealth Management Company; and

4. the Fund's IRC approves the Fund's investment in Wealth Management Company and the IRC will be required to review the continued holding of equity of Wealth Management Company and any actions outside of the ordinary course of business by the Wealth Management Company which could affect the Fund's holdings.

"Paul K. Bates"

"Paulette L. Kennedy"