FAQ

Frequently Asked Questions

What is Cymbria?

Cymbria is an investment corporation created with the objective of providing shareholders with long-term capital appreciation via a concentrated portfolio of global equities and an investment in EdgePoint. Cymbria is publicly traded on the Toronto Stock Exchange.

What does Cymbria’s ownership stake in EdgePoint provide?

Cymbria owns 20.7% of EdgePoint, giving Cymbria the opportunity to participate in EdgePoint’s growth. Cymbria’s original $509,585 investment in EdgePoint has grown to $151,878,960 (as at May 15, 2017). In addition to this growth, to date Cymbria has received $28,319,570 in dividends from EdgePoint.

Why is Cymbria’s stock price different from its NAV?

Cymbria’s net asset value (NAV), just like a mutual fund’s, is calculated daily based on the closing market prices of the securities in Cymbria’s portfolio. Unlike a mutual fund, where buy and sell orders are processed using trade date NAV, Cymbria is bought and sold based on its stock price, a market-determined figure that fluctuates throughout the day. Cymbria may trade at a premium or discount to its NAV.

Can you explain Cymbria’s Liquidity Realization Opportunity (LRO)?

In certain circumstances where i) Cymbria’s portfolio has experienced growth in the previous fiscal year, ii) Class A shares are trading, on average, at a price less than 97% of NAV over a fiscal quarter, and iii) on the Manager’s recommendation, the LRO provides an opportunity for Cymbria shareholders to dispose of shares close to NAV. The purpose of this feature is to potentially increase Cymbria’s attractiveness as an investment by enhancing liquidity and flexibility.

Can you explain Cymbria’s dividend policy?

Cymbria doesn’t currently pay dividends. Rather, it reinvests the cash it generates from its investments. This will continue unless the market environment substantially changes.

Why didn’t I receive my share of EdgePoint’s dividend?

Cymbria receives its proportionate share of EdgePoint-distributed dividends that may be reinvested in existing or new investments, or be used to buy back shares of Cymbria in the open market. The same applies to any other company Cymbria owns. We believe this provides investors with the best return on their investment.

What is Cymbria’s position on share buybacks and how do they benefit shareholders?

At the right price, share buybacks can be an important driver of wealth for shareholders. They reduce the number of shares in circulation, increasing remaining shareholders’ ownership stake.

Cymbria’s Normal-Course Issuer Bid (NCIB) allows a repurchase of up to 10% of outstanding shares per year. We’ll buy back shares if Cymbria’s stock price trades at a meaningful discount to its NAV.

How does Cymbria differ from a regular mutual fund?

Ways in which Cymbria and mutual funds differ include:

Investment flexibility

Cymbria has greater investment flexibility. It’s an investment corporation that can buy (or short) publicly traded companies, purchase privately held businesses or use leverage. This provides Cymbria with a much bigger universe of investment choices.

Fixed pool of assets

Cymbria raised $234 million through its initial public offering. This fixed pool of assets will grow (or shrink) as a result of changes in investment value. Cymbria’s asset size may also decrease due to share repurchases under the NCIB and LRO. In contrast, investors can purchase and redeem units of a mutual fund, affecting the size of its investment pool.

Buy/sell price determined by the market

Funds are typically bought and sold at their NAV, which reflects the underlying prices of their securities. Since Cymbria trades on a stock exchange, its price reflects market-determined value.

Liquidity

Cymbria shares are bought and sold in the open market, and investors should consider potential liquidity constraints. Small-capitalization companies like Cymbria tend to be much less liquid than their larger-cap counterparts. Transacting a sizeable volume of shares without moving their price can prove difficult. As a result, it may take several days or even weeks to buy or sell a large number of shares.

Comparatively, liquidity isn’t an issue for mutual funds that allow investors to redeem their units at NAV. Cymbria’s LRO aims to diminish liquidity constraints by giving shareholders the option of disposing of their shares from time to time at a price close to NAV.

Share buybacks

Cymbria can buy back shares if its valuation warrants it. We believe buying back Cymbria shares at an attractive discount to its NAV makes sense for our shareholders.

Distributions

A mutual fund’s income and realized capital gains are typically distributed to unitholders annually so that unitholders (and not the fund) pay the associated income taxes. As a taxable corporation, Cymbria doesn’t currently pay annual distributions or dividends. Investors can hold Cymbria in a non-registered account, receiving no taxable income during the year. Since Cymbria’s corporate tax rate is currently lower than Canada’s highest marginal personal tax rate, having Cymbria incur taxes could be more tax efficient than owning a comparable fund in a non-registered account.

Ownership stake in EdgePoint

Cymbria has a 20.7% stake in privately held EdgePoint. Cymbria initially received this ownership stake at book value (approximately $500,000) to allow Cymbria investors to participate in EdgePoint’s growth. This opportunity is only available to Cymbria investors and EdgePoint’s internal partners.

Benefits to owning EdgePoint include:

Dividends: Cymbria receives dividends from EdgePoint (currently semi-annually)
Value: Cymbria participates in EdgePoint’s growth

To date, EdgePoint has been the single-largest contributor to Cymbria’s performance.

Does Cymbria’s performance mirror that of EdgePoint Global Portfolio?

Reasons for performance differences include:

Differences in holdings

Performance differences arise primarily from portfolio composition, most notably Cymbria’s ownership of EdgePoint Wealth. No matter the current overlap between the two investments, variances in portfolio holdings and weights may impact individual performance.

Launch date

Cymbria launched November 3, 2008, and EdgePoint Global two weeks later, on November 17. Their performance since inception can’t be compared and the market’s negative return between inception dates has led to further performance differences.

NAV versus share price

EdgePoint Global’s performance is measured by its NAV while some measure Cymbria’s performance by its stock price, a figure influenced by market sentiment. We believe Cymbria’s investment results are best measured by its NAV.

Fee structure

Cymbria pays no trailer fee and charges a management fee based on a NAV that excludes the value of EdgePoint Wealth.

Corporate taxes

Cymbria pays taxes just like any other publicly traded Canadian corporation. EdgePoint Global is a mutual fund trust. Provided EdgePoint Global Portfolio distributes all of its annual taxable income, such taxes are paid by unitholders and not by the mutual fund trust. Cymbria’s NAV is reported after tax and EdgePoint Global’s before tax.

All figures as at June 1, 2017.