Securities Law & Instruments


Exemption for passive fund-of-fund structureto permit top funds to invest in private bottom fund managedby the same manager.

Statutes Cited

Securities Act (Ontario), R.S.O. 1990 c. S.5,as am., ss. 111(2)(b)m 111(3), 117(1)(a) and 117(1)(d).



















WHEREAS the local securities regulatoryauthorities (the "Decision Maker") in the Provincesof Ontario, British Columbia, Alberta, Saskatchewan, Nova Scotiaand Newfoundland and Labrador (the "Jurisdictions")have received an application filed by Burgundy Asset ManagementLimited ("Burgundy"), on its own behalf and on behalfof the Burgundy Balanced Income Fund, Burgundy American EquityFund, Burgundy Partners Equity RSP Fund, Burgundy FoundationTrust Fund, Burgundy Partners' RSP Fund, Burgundy Partners'Fund and Burgundy Pension Trust Fund (collectively, the "TopFunds"), for a decision (the "Decision") pursuantto the securities legislation of the Jurisdictions (the "Legislation")that the following provisions in the Legislation (the "ApplicableRequirements") shall not apply in connection with the investmentby the Top Funds in Burgundy Small Cap Value Fund:

(a) the restrictions contained in the Legislationprohibiting a mutual fund from knowingly making or holdingan investment in a person or company in which the mutualfund, alone or together with one or more related mutualfunds, is a substantial securityholder , and

(b) the requirements contained in the Legislationrequiring the management company of a mutual fund, or inBritish Columbia, the mutual fund manager to file a reportrelating to a purchase or sale of securities between themutual fund and any related person or company, or any transactionin which, by arrangement other than an arrangement relatingto insider trading in portfolio securities, the mutual fundis a joint participant with one or more of its related personsor companies.

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;

AND WHEREAS Burgundy has representedto the Decision Makers as follows:

1. Burgundy is the manager of the Top Fundsand also of the Burgundy Canadian Equity Fund, Burgundy LargeCap Canadian Equity Fund, Burgundy Bond Fund, Burgundy MoneyMarket Fund, Burgundy U.S. Money Market Fund, Burgundy EuropeanEquity Fund and Burgundy European Foundation Fund (collectively,the "Burgundy Funds).

2. Burgundy is also the manager of severalpooled funds including the Burgundy Small Cap Value Fund,Burgundy Japan Fund and Burgundy Smaller Companies Fund (collectively,the "Private Funds").

3. The Top Funds, the Burgundy Funds and thePrivate Funds (collectively, the "Funds") are undercommon management.

4. The head office of Burgundy is locatedin Ontario.

5. Each of the Funds is an open-ended unittrust established by a Trust Agreement. The distribution ofunits of each of the Funds, other than the Private Funds,is effected with a simplified prospectus dated July 8, 2002(the "2002 Prospectus") in the Jurisdiction in orderto become a reporting issuer under the Legislation and isnot in default of any requirement of the Legislation or therules and regulations made thereunder.

6. Units of the Private Fund may be sold onan exempt basis in the Jurisdiction.

7. As manager of the Top Funds, Burgundy determinesthe different asset classes that the Top Funds should eitherbe invested in or have exposure to, in order to achieve theTop Fund's investment objectives. Given the relative sizeof the Top Funds, Burgundy believes that investing in unitsof Burgundy Funds and/or the Private Funds, which have acquiredor will acquire such asset classes for their portfolios, wouldbe a more efficient way of investing the assets of the TopFunds. The Burgundy Funds and/or the Private Funds becomethe vehicle through which the funds of investors in the TopFunds are gathered and invested in different but appropriateasset classes, which would provide the Top Funds the diversificationthey need at lower transaction costs. In accordance with ordersobtained from each of the Jurisdictions, Burgundy has causedeach of the Top Funds to invest specified percentages of itsnet assets in units of one or more of the Burgundy Funds and/orPrivate Funds, other than Burgundy Small Cap Value Fund, listedin the 2002 Prospectus.

8. Burgundy only sells units of the Fundsand the Private Funds to clients, including Burgundy employeesand their spouses (the "Burgundy Employees"), whohave entered into investment management agreements that giveBurgundy discretionary authority to invest the clients' money.Excepting Burgundy employees, Burgundy only accepts clientswho place a minimum amount (individually or together withaccounts of immediate family members) in a Burgundy account.The minimum account size has changed over time and is currently$3,000,000. There is no minimum account size for clients whoare Burgundy Employees. The Funds are not sold by any otherdealer.

9. The Burgundy Small Cap Value Fund (the"Underlying Fund") is an open-ended mutual fundestablished under the laws of the Province of Ontario by aTrust Agreement. The Underlying Fund is not a reporting issuerunder the Legislation. However, the Underlying Fund complieswith National Instrument 81-102 Mutual Funds ("NI 81-102"),other than in respect of incentive fees charged directly toinvestors, which do not comply with section 7.1 thereof. Theincentive fee currently charged by the Underlying Fund haspreviously been negotiated with the direct investors in theUnderlying Fund.

10. Units of the Underlying Fund are soldon an exempt basis.

11. In order to achieve its investment objective,each Top Fund will invest fixed percentages (the "FixedPercentages") of its assets (exclusive of cash and cashequivalents), as specified in the simplified prospectus ofthe Top Funds, in the securities of the Underlying Fund, subjectto a variation of 2.5 percent above or below the Fixed Percentages(the "Permitted Ranges") to account for market fluctuations.

12. Currently, the Burgundy Partners' Fundintends to invest 4% of its net assets in the Underlying Fund.

13. The simplified prospectus for each TopFund (the "Prospectus") will disclose the namesand investment objectives, investment strategies, risks andrestrictions of the Underlying Funds along with the FixedPercentages and the Permitted Ranges.

14. In the absence of this Decision, pursuantto the Legislation, the Top Funds are prohibited from knowinglymaking or holding an investment in a person or company inwhich the mutual fund, alone or together with one or morerelated mutual funds, is a substantial securityholder. Asa result, in the absence of this Decision the Top Funds wouldbe required to divest themselves of any such investments.

15. In the absence of this Decision, Legislationrequires Burgundy to file a report on every purchase or saleof securities of the Underlying Fund by a Top Fund.

16. The investment of the Top Funds in theBurgundy Small Cap Value Fund represents the business judgmentof "responsible persons" (as defined in the Legislation),uninfluenced by considerations other than the best interestsof the Top Funds.

17. The Top Funds received similar prior reliefdated June 28, 2000 to invest in Burgundy Japan Fund and BurgundySmaller Companies Fund.

18. The Canadian Securities Administratorshave published for comment amendments to NI 81-102 which amongother things, deal with matters in section 2.5 of NI 81-102(the "Fund-of-Fund Amendments"). Such proposalscontinue the prohibition in clause 2.5(1)(c) which excludesinvestment by a top fund in a private fund. The Fund-of-FundAmendments also provide that all prior exemption orders shallbe deemed revoked effective one year from the date the Fund-of-FundAmendments come into force.

AND WHEREAS under the System, this MRRSDecision Document evidences the Decision of each Decision Maker;

AND WHEREAS each of the Decision Makersis satisfied that the tests contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that the Applicable Requirements do not applyso as to prevent the Top Funds from making and holding an investmentin securities of the Underlying Fund or so as to require Burgundyto file a report relating to the purchase and sale of such securities;


1. the Decision, as it relates to the jurisdictionof a Decision Maker, will terminate one year after the cominginto force of any legislation or rule of that Decision Makerdealing with matters in section 2.5 of NI 81-102;

2. the Decision shall only apply if, at thetime a Top Fund makes or holds an investment in the UnderlyingFund, the following conditions are satisfied:

(a) the Top Funds and the Underlying Fundare under common management;

(b) the securities of the Top Funds arebeing offered for sale in the jurisdiction of the DecisionMaker pursuant to a simplified prospectus and annual informationform which has been filed with and accepted by the DecisionMaker;

(c) the investment by a Top Fund in theUnderlying Fund is compatible with the fundamental investmentobjective of the Top Fund;

(d) the Prospectus discloses the intentof the Top Funds to invest in securities of the UnderlyingFund, the name of the Underlying Fund, the investment objectiveand investment strategies of the Underlying Fund, the risksassociated with investment in the Underlying Fund, the FixedPercentages and the Permitted Ranges within which such FixedPercentages may vary and discloses that it also incorporatesby reference the financial statements of the UnderlyingFund;

(e) the Underlying Fund will at all timesbe in compliance with NI 81-102, except section 7.1 thereofin respect of incentive fees charged directly to investorsother than the Top Fund;

(f) the only investors in the Top Fund willbe clients, including Burgundy employees and their spouses(the "Burgundy Employees") who:

i) have entered into investment managementagreements that give Burgundy discretionary authorityto invest the clients' money; and

ii) placed a minimum amount, currently$3,000,000 (individually or together with accounts ofimmediate family members) in a Burgundy account, exceptfor Burgundy Employees;

(g) the Funds are not sold by any otherdealer;

(h) the Underlying Fund will not chargean incentive fee to the Top Fund;

(i) the investment objective of the TopFund discloses that the Top Fund invests in securities ofother mutual funds;

(j) the Underlying Fund is not a mutualfund whose investment objective includes investing directlyor indirectly in other mutual funds;

(k) the Top Fund invests its assets (exclusiveof cash and cash equivalents) in the Underlying Fund inaccordance with the Fixed Percentages disclosed in the simplifiedprospectus of the Top Fund;

(l) the Top Fund's holding of securitiesin the Underlying Funds does not deviate from the PermittedRanges;

(m) any deviation from the Fixed Percentagesis caused by market fluctuations only;

(n) if an investment by a Top Fund in theUnderlying Fund has deviated from the Permitted Ranges asa result of market fluctuations, the Top Fund's investmentportfolio is re-balanced to comply with the Fixed Percentageson the next day on which the net asset value was calculatedfollowing the deviation;

(o) if the Fixed Percentages and the UnderlyingFund which are disclosed in the Prospectus have been changed,either the Prospectus has been amended in accordance withsecurities legislation to reflect this significant change,or a new simplified prospectus has been filed to reflectthe change, and the securityholders of the Top Fund havebeen given at least 60 days' notice of the change;

(p) there are compatible dates for the calculationof the net asset value of the Top Funds and the UnderlyingFund for the purpose of the issue and redemption of thesecurities of such mutual funds;

(q) no sales charges are payable by theTop Fund in relation to its purchases of securities of theUnderlying Fund;

(r) no redemption fees or other chargeswill be charged by an Underlying Fund in respect of theredemption by the Top Fund of securities of the UnderlyingFund owned by the Top Fund;

(s) no fees or charges of any sort are paidby the Top Fund and the Underlying Funds by their respectivemanagers or principal distributors, or by any affiliateor associate of any of the foregoing entities, to anyonein respect of a Top Fund's purchase, holding or redemptionof the securities of the Underlying Fund;

(t) the arrangements between or in respectof the Top Fund and the Underlying Fund are such as to avoidthe duplication of management fees;

(u) any notice provided to security holdersof the Underlying Fund as required by applicable laws orthe constating documents of the Underlying Fund has beendelivered by the Top Fund to its security holders;

(v) all of the disclosure and notice materialprepared in connection with a meeting of security holdersof the Underlying Fund and received by a Top Fund has beenprovided to its security holders , the security holdershave been permitted to direct a representative of the TopFund to vote its holdings in the Underlying Fund in accordancewith their direction, and the representative of the TopFund has not voted its holdings in the Underlying Fund exceptto the extent the security holders of the Top Fund havedirected;

(w) in addition to receiving the annualand, upon request, the semi-annual financial statementsof the Top Fund, security holders of a Top Fund have receivedappropriate summary disclosure in respect of the Top Fund'sholdings of securities of the Underlying Fund in the financialstatements of the Top Fund; and

(x) security holders of the Top Fund mayobtain, upon request, a copy of the offering memorandumof the Underlying Fund and the annual and semi-annual financialstatements of the Underlying Fund.

March 3, 2003.

"Robert W. Korthals"                    "RobertL. Shirriff"