EdgePoint Wealth Plans Non-HST Series Launch

TORONTO, July 12 /CNW/ - As a result of the questionable decision by Ontario and British Columbia to create the harmonized sales tax (HST), EdgePoint has decided to launch, pending regulatory approval, a new series of its Portfolios for investors residing in non-HST participating provinces.

We believe this approach is the appropriate course of action for an investment-led company that puts the interests of its unitholders first in all decisions. The thought of having investors in non-HST participating provinces subsidize investors in HST-participating provinces is just wrong in our opinion.


Effective July 1, 2010, Ontario and British Columbia have combined the provincial sales tax (PST) with the federal goods and services tax (GST) to create the HST. These provinces join Nova Scotia, New Brunswick and Newfoundland and Labrador as HST participants.

Currently, management fees and most operating expenses of mutual funds are only subject to the 5% GST. Mutual fund investors who reside in HST-participating provinces must now pay additional sales taxes as a result of the changes. These taxes will negatively impact management expense ratios (MER) and ultimately investor returns.

Mutual fund companies have different options with regards to how they choose to implement the new tax. These approaches include, but are not limited to, the following:

1. Blended Rate

Mutual fund companies can choose to calculate the HST payable using a "blended" rate, which is based on the residency of unitholders and the value of their investments in each series. All investors, including those in non-HST participating provinces, would be subject to higher MERs as a result of this methodology.

The most significant drawback of this approach is subsidization. A blended rate effectively means that investors in non-HST participating provinces would pay a portion of the provincial sales tax liability of those investors in HST-participating provinces.

The most significant benefit of this approach is that from an implementation perspective, it is the simplest to administer. All unitholders in the series would pay the same MER and effectively the same blended HST rate.

2. Separate Series for Non-HST Participating Provinces

Mutual fund companies can choose to create a separate series that would be only available to investors in non-HST participating provinces.

The most significant benefit of this approach is that investors in non-HST participating provinces are not subsidizing investors residing in HST-participating provinces. It does, however, entail more administrative work for the mutual fund company.

EdgePoint's Approach

As an investment-led wealth management firm which prides itself on putting the interests of its investment partners first in every decision, the thought of jamming this unfortunate new tax on unsuspecting investors is simply unjust.

We are against this type of subsidization. As such, in early August we plan to launch non-HST equivalents of series A, series B, and series F for each of our Portfolios (pending regulatory approval). A preliminary simplified prospectus has been filed with certain Canadian Securities Commissions. Investors cannot buy units of the portfolio series until the relevant Securities Commissions issue receipts for the simplified prospectus.

Notwithstanding the additional cost that HST adds to all products, we expect our year-end MERs for most series will be lower at the end of 2010 than they were at the end of 2009.

About EdgePoint Wealth Management

EdgePoint Wealth Management is an independent investment management firm based in Toronto that is owned and operated by investors(TM). It offers mutual funds, institutional and other investment products through financial advisors. Its founding members - Tye Bousada, Patrick Farmer, Robert Krembil and Geoff MacDonald - have proven track records of building wealth for those who have entrusted them with their savings.

EdgePoint(R) is a registered trademark of EdgePoint Investment Group Inc. Owned and operated by investors is a trademark of EdgePoint Investment Group Inc.

This is not an offer to purchase. Mutual funds can only be purchased through a registered Dealer. Please read the simplified prospectus before investing. Copies are available from your advisor or visit our website for more information at www.edgepointwealth.com. The information contained in this document is not intended to provide legal or tax advice.

SOURCE EdgePoint Wealth Management Inc.

For further information: For further information: Patrick Farmer, CEO, EdgePoint Wealth Management Inc., 416-963-9353, farmer@edgepointwealth.com

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