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Pursuant to National Instrument 31-103, we are required to identify material conflicts of interest which would be expected to arise between us and our clients. The following are potential conflicts of interest, listed in alphabetical order and not in order of importance that we have identified. Other conflicts of interest may arise. If we determine that a conflict is material or expected to affect your decisions or our recommendations or decisions the conflict will be disclosed. 

Allocation of expenses amongst portfolios and in a portfolio

Each Portfolio pays its own operating expenses and fees of third party service providers. Information on the types of expenses that may be charged to the Portfolios is set out in the Simplified Prospectus, if applicable. The Manager has established policies and procedures to ensure that expenses charged to the Portfolios are reasonable and appropriate and the method of allocating such expenses amongst the Portfolios is fair and equitable to all Portfolios. Non portfolio-specific operating expenses that cannot be directly linked to a particular Portfolio are allocated amongst the Portfolios that used the services, typically based on the Portfolios’ respective net asset values.

Similarly, if a Portfolio has more than one series of units, the common expenses will be shared amongst such series, typically based on the respective net asset values of the relevant series.

Best execution

The Manager has adopted policies to ensure that the Manager or sub-advisors retained by the Manager seek to achieve best execution of client portfolio transactions. The Manager employs trading techniques, methods and venues in an effort to seek the best overall price and execution available to meet its clients’ specific needs. The Manager’s overall goal is to execute portfolio transactions at the most favorable prices and in the most efficient manner possible.

In connection with the selection of brokers and the placing of equity portfolio transactions (on behalf of the Portfolios and other clients of the Manager), the Manager seeks the best overall price and execution available from responsible brokerage firms, taking into account all factors deemed relevant, including by way of illustration, price, the size of the transaction, the nature of the market or the security, the amount of the commission, the timing and impact of the transaction taking into account market prices and trends, the reputation, the need for anonymity in the market, experience and financial stability of the brokers or dealers involved, and the quality of services rendered by the broker in other transactions.

While commission rates are monitored as an aspect of best execution, the Manager may determine that the broker charging the lowest commission may not necessarily provide the best execution for a client. Commissions are only one factor considered when determining overall transaction costs. Where the Manager uses soft dollars, the Manager may cause a client to pay a broker that provides brokerage and/or research services to the Manager an amount of commissions for effecting a securities transaction for the client in excess of the amount of commissions other brokers or dealers would have charged for the transaction. This can occur only if the Manager determines in good faith that the amount of the commission to be paid is reasonable in relation to the value of the brokerage and research services provided by the broker either in terms of a particular transaction or the Manager’s overall responsibilities for discretionary accounts.

The Manager periodically and systematically reviews the performance of the broker-dealers that execute its transactions, including the commission rates paid to brokers by considering the value and quality of brokerage services provided. The quality of a broker’s services is measured by analyzing various factors that could affect the execution of trades. These factors include the ability to execute trades with a minimum of market impact, the speed and efficiency of executions, electronic trading capabilities, adequacy of capital, information provided to the adviser, and accommodation of the adviser’s special needs. The Manager may employ outside vendors to provide reports on the quality of broker-dealer executions (e.g. ITG/Plexus).

For fixed income portfolio transactions, the Manager must seek best execution for all accounts by executing at the most favourable prices and in the most effective manner possible. The Manager utilizes an order process to execute new issue trades and either an order process or a competitive bidding process to execute secondary market trades. The Manager will execute trades only with brokers that have been reviewed and approved by the sub-advisor’s Head of the Fixed Income Team or a designee.

In determining which venue or venues and process (order approach or competitive bids/offers) to employ to effect secondary market trades, traders may consider factors such as execution price, speed of execution, the size of the order(s), the trading characteristics of the security involved, execution capability, a broker-dealer’s status as primary market maker in the security or other factors deemed relevant by the trader.

Brokerage arrangements and soft dollars

The Manager may utilize soft dollars in accordance with National Instrument 23-102. The Manager has adopted a Soft Dollar Policy as part of its Policies and Procedures Manual. In certain circumstances, the Manager will receive the benefit of soft dollars in connection with trades in securities on behalf of clients. Soft dollars create a perceived conflict of interest to the extent that the Manager may use soft dollars for services that benefit the Manager and some, but not all, clients and/or Portfolios.

It also creates a perceived conflict, as it permits the Manager to pay a higher commission if it is believed that the cost is reasonable in relation to the value of the brokerage and research services provided by the executing broker and [or] dealer. This decision is made after viewing the tradeoffs in three different contexts: 1) the particular transaction; 2) the value of research and brokerage services provided in connection with the Manager’s overall relationship with the broker; and 3) the Manager’s overall responsibilities to the account and its clients. The Manager complies with the Canadian regulatory requirements pertaining to the use of soft dollars. Pursuant to such regulatory requirements, the Manager will review its soft dollar usage on an annual basis in order to gauge the policy’s efficacy and assess the value of the services provided.

Brokerage and research services include advice as to the value of securities, the advisability of investing in, purchasing, or selling securities, and the availability of securities or purchasers or sellers of securities. These firms may also furnish analysis and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of baskets of trades. The services provided by these firms also include executing securities transactions and clearance and settlement of those trades.

Directed brokerage and commission recapture

Directed brokerage and commission recapture arrangements may create a perceived conflict of interest as they run counter to the desire for best execution. From time to time, a client may request that the Manager direct a portion of transactions on their account to specified brokers. Subject to certain conditions, the Manager may accept such requests. First and foremost, the client must provide written instructions relieving the Manager of its duty to seek best execution from the trades in question. If the Manager remains subject to fiduciary responsibilities for best execution, total recapture will be limited to no more than 25% of commissions generated. Furthermore, the Manager does not evaluate the brokerage services provided to clients in these instances.

Gifts and business entertainment

A perceived or potential conflict of interest also arises when an employee of the Manager or the subadvisors retained by the Manager gives or accepts gifts or entertainment of more than a minimal value in connection with the services provided to clients.

The Manager and the sub-advisors to the Portfolios have policies relating to gifts and entertainment in order to prevent perceived or potential conflicts of interest. Pursuant to this policy, a Manager employee may only receive or provide a gift that is of de minimis value and/or entertainment that is neither excessive nor frequent.

Outside business activities

A perceived or potential conflict of interest may arise as a result of an employee’s activities, interests or associations outside of the Manager. The Manager has policies and procedures that govern the outside business activities of the Manager’s employees. Only in exceptional circumstances, and with pre-approval of the Manager’s Board of Directors, may an employee serve on the board of directors or other governing body of a publicly traded company. In addition, the Manager has a notification and pre-approval process to restrict any outside business activity that would interfere or give the appearance of interfering with an employee’s ability to act in the best interests of, or perform or work for, the Manager and its clients.

Personal trading

Trading of securities or Portfolios by the Manager’s employees creates a perceived or potential conflict of interest that the employee may benefit from opportunities at the expense of the Manager’s clients. The Manager and any sub-advisors that may be retained by the Manager have a Code of Ethics that sets out standards of conduct aimed at preventing possible conflicts of interest and the Manager and each of the sub-advisors retained by the Manager has established personal trading guidelines, as well as a process for pre-clearing, monitoring and recording personal trading activity.

Portfolio holdings disclosure

Selective disclosure of portfolio holdings in any of the Portfolios creates a perceived conflict of interest, as it provides potentially material, non-public information and may provide a potential competitive advantage to certain clients at the expense of other clients. The Manager typically ensures that any disclosure regarding portfolio holdings of the Portfolios is coordinated and that the information is made available to clients at the same time, or, if information is made available to certain persons before being made publicly available, there is a valid business purpose for the disclosure and the recipient is required to agree not to disclose or act upon the portfolio holdings disclosed to them.

Pricing and account errors

The Manager may have a potential conflict of interest when determining when, and how, to deal with a pricing error or other type of unitholder account error, due to the time, processing cost and reimbursement of investors involved. The Manager uses third party service providers to calculate net asset values of the Portfolios and to record unitholder transactions. The Manager has in place a policy that establishes the standard for the correction of discrepancies in the calculation of net asset value in a consistent manner across the Portfolios in accordance with industry guidelines. The Manager looks to the service providers to process corrections pursuant to the Manager’s written policy and monitors the services providers in the performance of their duties.

Proxy voting and other corporate actions

The Manager has adopted proxy voting policies and procedures with respect to securities owned by clients for which it serves as investment adviser and has the power to vote proxies. The Manager’s policy is that proxy voting decisions are made in what it believes at the time to be the best long-term economic interests of its clients and not in the interest of any other party or in the Manager’s own corporate interests, including its institutional relationships or the distribution of the Manager’s Portfolio units. These policies and procedures are intended to address any potential material conflicts of interest on the part of the Manager or its subsidiaries that are likely to arise in connection with the voting of proxies on behalf of the Manager’s clients.

If such potential material conflicts of interest do arise, the Manager will analyze, document and report on such potential material conflicts of interest and shall ultimately vote the relevant proxies in what the Manager believes to be the best long-term economic interests of its clients. The Manager is responsible for monitoring and reporting with respect to such potential material conflicts of interest.

Trade allocation

The Manager may aggregate orders for a number of client accounts for the purchase of a particular security. The selection of which client accounts will participate in the allocation may result in a conflict of interest. To counter any potential conflict, all trade executions are allocated in proportion to the size of the orders.

Trading errors

The Manager maintains trade error correction policies and procedures designed to prevent the use of clients’ portfolios to correct the sub-advisors’ errors. The Manager may correct certain qualifying portfolio transactions assigned to a Portfolio or account in error. In addition, if the error is noted subsequent to a specified cut-off date, the Manager may elect to compensate portfolios or accounts directly for losses resulting from an error so as to rectify the error.