Securities legislation in Canada requires East Coast Fund Management Inc. (“ECFMI”) to make certain disclosures regarding conflicts of interest. This statement is to inform you of the nature and extent of conflicts of interest that might be expected to arise between ECFMI and its clients.

It is important for you to be informed about how we identify and respond to conflicts of interest to minimize their impact.

Material Conflicts of Interests

ECFMI considers a conflict of interest to be any situation where the interests of a client and those of ECFMI are inconsistent. ECFMI takes reasonable steps to identify all existing material conflicts of interest and those that we would reasonably expect to arise. ECFMI determines the level of risk for each conflict.

ECFMI addresses material conflicts of interest in the best interest of our clients. This is done by placing the interests of clients first, ahead of the personal interest of ECFMI and any other competing considerations. As such, ECFMI takes reasonable steps to identify, address and avoid situations that would result in a serious conflict of interest that would be too high a risk for clients or market integrity. In other circumstances involving a conflict of interest, Ecfmi takes the appropriate steps to control the conflict of interest.

Individuals acting on behalf of Ecfmi also are required to identify potential conflicts of interest and bring them to the attention of Ecfmi, and will also disclose any relevant information that may arise in a potential conflict of interest to ECFMI.

ECFMI, whose head office is in Toronto, Ontario, is a portfolio manager in the business of providing discretionary investment advisory services to its funds (as described below), and is also an investment fund manager, managing the assets of one or more pooled investment funds (“East Coast Funds”). In addition, ECFMI is an exempt market dealer in various provinces across Canada.

The situations in which Ecfmi could be in a conflict of interest, and the way in which East Coast intends to respond to such conflicts, are described below. 

Proprietary Products

ECFMI only offers East Coast Funds to its clients (when acting as a dealer). When recommending East Coast Funds to a client, ECFMI seeks to ensure those East Coast Funds are suitable for that client. ECFMI conducts periodic reviews of client accounts and conducts KYC and KYP reviews at least annually to ensure East Coast Funds remain suitable for clients.

Compensation for Services to the Funds

ECFMI is the manager of East Coast Funds. ECFMI earns management fees and, in some cases, ECFMI may receive performance fees. ECFMI may occasionally face conflicts between its own interests and those of its client, or between the interests of one client and the interests of another. ECFMI has adopted certain policies to minimize the occurrence of such conflicts or to deal fairly where these conflicts cannot be avoided. In no case will ECFMI put its own interests ahead of those of its clients.

Investments in Related or Connected Issuers

In trading under discretionary authority or advising with respect to investments in the East Coast Funds, ECFMI will act in accordance with its client’s objectives and constraints set out in the subscription agreement and the investment objectives and constraints contained in the applicable offering documents of an East Coast Fund.

In all investment decisions, ECFMI will deal fairly, honesty and in good faith with each of its clients. Canadian securities legislation requires ECFMI, prior to trading with or advising their clients, to purchase securities, to inform them of any relevant relationships and connections they may have with the issuer of securities.

A related issuer means a person or company that influences or is influenced by, another person or company through ownership, or direction and control over, voting securities. A person or company is connected to another person or company if, due to its relationships with such person or company, a prospective purchaser of securities of the person or company might question the other person or company’s independence from the first person or company.

Each of the East Coast Funds is a related and connected issuer of ECFMI. ECFMI may act as dealer in connection with the distribution of securities of the East Coast Funds and may also receive management and/or performance fees from the East Coast Funds.

Related Registrants

A “related registrant” is a registered adviser or dealer under securities legislation that has a principal shareholder, director or officer that is a principal shareholder, director or officer of ECFMI. With regard to securities legislation only, ECFMI may be a related registrant of East Coast Asset Management SEZC, through its CEO Michael MacBain.

Services of Third Parties

ECFMI is party to a client servicing and marketing agreement with one or more third parties, under which the third party may market certain of ECFMI’s investment strategies to and provide client services to the third parties’ own clients. ECFMI pays these third parties a fee for these services.

Referral Arrangements

ECFMI does not currently have, nor does it propose to enter into any referral arrangements.

Staff/Personal Trading

Staff are allowed to operate personal trading accounts at other registered firms. ECFMI has adopted a personal trading policy that applies to all officers, directors and other staff with access to information regarding the portfolios. These policies are designed to reasonably prevent staff from trading in advance of orders for the East Coast Funds, or trading on the basis of their knowledge of the East Coast Funds’ trading activities.

Related Parties Investing in the Funds

ECFMI, its partners and individuals related to its partners may, at times, be considered related parties to the East Coast Funds. Related parties may at any given time be investors in the East Coast Funds while ECFMI exercises discretion over the management of the East Coast Funds.

Soft Dollar Arrangements

ECFMI has a policy of not entering into soft dollar arrangements. However, if this were to occur, the negotiation of commissions on brokerage transactions executed on behalf of ECFMI of the East Coast Funds is governed by the general obligation of ECFMI to act in the best interest of its clients and in the best interest of the East Coast Funds. ECFMI shall strive to ensure that, overall, its clients are treated equally in this regard, and will never enter into a soft dollar arrangement which will knowingly prejudice one client to the benefit of another. All soft dollar agreements are documented and are conducted in accordance with applicable law.

Fair Allocation Among Clients

ECFMI may, from time to time, act as portfolio manager to segregated managed accounts in addition to certain pooled investment funds. To ensure fairness in the allocation of opportunities among its clients, and as between its segregated accounts and the East Coast Funds, ECFMI will ensure:

• Where orders are entered simultaneously for execution at the same price, fills are allocated on a pro rata basis

• When transactions are executed at different prices for a group of clients, fills are allocated on an average price basis;

• In the case of a new securities issue, where the allotment received is insufficient to meet the full requirements of all accounts on whose behalf orders have been placed, allocation is made on a pro rata basis. However, if such prorating should result in an inappropriately small position for a client and or particular fund, the allotment would be reallocated to another account. Depending on the number of new issues, over a period of time, every effort will be made to ensure that these prorating and reallocation policies result in fair and equal treatment of all clients, including the East Coast Funds; and

• Trading commissions are allocated on a pro rata basis, in accordance with the foregoing trade allocation policies.

Pricing Errors

ECFMI 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. ECFMI uses a third-party service provider to calculate net asset values of the East Coast Funds. ECFMI has policies that establish consistent standards for the correction of discrepancies in the calculation of net asset value across the East Coast Funds and in accordance with industry guidelines.

Other Conflicts of Interest

From time to time, other conflicts of interest may arise. ECFMI will continue to take appropriate measures to identify and respond to such situations fairly and reasonably and in the best interests of its clients.

HOW WE RESPOND TO CONFLICTS OF INTEREST

Whenever ECFMI identifies a conflict of interest, we will apply the following policies:

1. Every director, officer or employee of ECFMI shall conduct themselves in a manner consistent with the highest ethical standards. They will avoid any action, whether for personal profit or otherwise, that results in an actual or potential conflict of interest, or the appearance of a conflict of interest, with a client or which may be otherwise detrimental to the interests of a client.

2. ECFMI will ensure that its clients are adequately informed about any conflicts of interest that may affect the services provided to them. ECFMI will disclose, in a timely manner, the nature and extent of the conflict of interest to the client whose interest conflicts with the interest identified. ECFMI will use its best judgment for the best way and time to inform clients about these conflicts in order to provide such clients a reasonable amount of time to assess such conflicts.

3. The client’s interest has precedence over any director, officer or employee’s personal interest. While there is no standard that applies in every case, in general, directors, officers and/or employees will solicit client orders before entering orders for personal accounts in the same security.

4. Where a client and one or more of the other clients of ECFMI are engaged in the purchase or sale of the same security, the transaction will be effected on an equitable basis. ECFMI will allocate opportunities to make and dispose of investments equitably among clients with similar investment objectives having regard to whether the security is currently held in any of the relevant investment portfolios or accounts, the relative size and rate of growth of the client and the other clients under common management and such other factors as ECFMI may consider relevant in the circumstances.

5. ECFMI acknowledges that disclosure may not be appropriate if a conflict of interest involves confidential or commercially sensitive information, or the information amounts to “inside information” under insider trading provisions in applicable securities laws. In these situations, ECFMI will assess whether there are other methods to adequately respond to the conflict of interest and, if not, ECFMI may have to decline to provide the service to avoid the conflict of interest.

6. ECFMI will only recommend an investment by a client in a “connected issuer” where disclosure of such fact has been provided to the client prior to the time of purchase and East Coast is reasonably satisfied that an investment in the issuer would be suitable for the client based on information supplied to ECFMI by the client.

7. If a conflict of interest is sufficiently contrary to the interests of a client that ECFMI cannot use controls or disclosure to respond to them, ECFMI will avoid such conflict, stop providing the service or stop dealing with the client.