CONFLICTS OF INTEREST DISCLOSURE STATEMENT
Georgian Capital Partners Corporation. (“Georgian” or the “Firm”) is an independent investment management company incorporated under the laws of Canada. Georgian is privately owned, and the Firm’s only office is located in Toronto, Ontario. When making investment decisions, we have a fiduciary duty to act honestly, in good faith and in the best interests of our clients (“Clients”) and to exercise the degree of care, diligence and skill that a reasonably prudent investment manager would in similar circumstances.
The Firm is registered under the category of Portfolio Manager (PM) and Exempt Market Dealer (EMD) within the provinces of Ontario (principal regulator), Alberta, British Columbia, and Nova Scotia. Furthermore, the Firm is registered under the category of Investment Fund Manager (IFM) in the province of Ontario.
Georgian is in the business of providing investment advisory services to its Clients. Georgian manages the Georgian Income Growth Limited Partnership or other related investments funds organized by Georgian (each a “Fund”) and may use the Funds to manage some Clients’ accounts under fully discretionary investment management agreements. Additionally, a Client may subscribe on its own to purchase units of a Fund directly, through execution of a subscription agreement. Georgian also provides advisory services for separately managed Client accounts that invest directly in a portfolio of securities and other investments.
Georgian is registered as a Portfolio Manager to provide discretionary portfolio management services to its Clients. Georgian is also registered as an Investment Fund Manager, as Georgian is responsible for the day-to-day business and affairs of the Fund.
Under securities regulations, Georgian, in each of its registrant roles, is required to identify material conflicts of interest which would be expected to arise between Georgian (including each individual acting on its behalf) and its Clients. A conflict of interest may be considered material if a reasonable investor would expect to be informed of the nature and extent of an identified conflict of interest and the interests of the Client and Georgian are not aligned. Conflicts of interest may also be deemed to be immaterial if the interests of the Client and Georgian remain aligned. Georgian will address any material conflicts of interest in the best interest of the Client and will avoid any conflict of interest that cannot be resolved in the best interest of the Client.
All employees are required to identify and report to the Chief Compliance Officer other potential conflicts of interest which may arise between Georgian and any of its clients. Upon identifying a material conflict of interest of which, in the opinion of the Chief Compliance Officer, a reasonable investor would be expected to be informed, Georgian 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.
Georgian exclusively offers proprietary products to its Clients for investment. Georgian will ensure that the products that are offered to the Client are suitable for the Client through our Know Your Client process before allowing a Client to invest. Georgian does not offer non-proprietary products for investment and therefore will not consider the larger market of non-proprietary products or whether those non-proprietary products would be better, worse, or equal in meeting the Client’s investment needs and objectives when determining the appropriate investment for a discretionary investment management account.
Referral Arrangements with Affiliated Managers and Third Parties
Georgian has no referral arrangements with other parties and does not pay or receive referral fees.
Investments in Related or Connected Issuers
When carrying out or responsibilities, Georgian may from time to time advise or trade in securities of one of its related or connected issuers.
“related issuer” means, in respect of Georgian, an issuer of securities over which Georgian exercises a controlling interest (for example, through the ownership, discretion or control over voting securities) or an issuer of securities that exercises a controlling influence over Georgian. In this context, the term “influence” means having the power, directly or indirectly, to exercise a controlling influence over the management and policies of the issuer, whether alone or in combination with one or more persons or entities.
“connected issuer” means, in respect of Georgian, an issuer that has, or any related issuer that has, any indebtedness to or other relationship with: (i) Georgian, (ii) any related issuer of Georgian, (iii) and director, officer or partner of Georgian, or (iv) any director, officer or partner of a related issuer of Georgian, that, in connection with a distribution of securities of the issuer, is material to a prospective purchaser of securities of the issuer. Accordingly, an issuer is “connected” to Georgian if, due to indebtedness or other relationships, a prospective purchaser of securities of such issuer might question Georgian’s independence from the issuer.
Some of Georgian’s clients gain access to its investment advisory services by subscribing for units of Georgian Income Growth Fund L.P., or other related investment funds organized by Georgian for which we act as Manager and which we distribute to our clients pursuant to our exempt market dealer registration. We may also invest in units of a Fund on behalf of clients for whom we have been engaged to provide discretionary portfolio management services. Both Georgian and the general partner of Georgian Income Growth Fund L.P., Georgian Capital GP Ltd., are controlled by the same shareholder, and therefore each of these Funds is considered a related issuer of Georgian. In addition, because, in our capacity as Manager, we earn fees from the ongoing management of each Fund, each Fund is considered a connected issuer of Georgian.
Because Georgian is registered as both a portfolio manager and an exempt market dealer, potential conflicts of interest could arise in connection with our acting in both capacities. However, as an exempt market dealer, Georgian intends only to sell units of the Funds and will not be remunerated by the Funds for acting in that capacity. Accordingly, there is no opportunity for a potential conflict to arise as there would be if, for example, Georgian also sold, or sought investors for, securities of unrelated issuers.
Other than the Funds, Georgian does not have any related or connected issuers nor does it expect to have any related or connected issuers in the near future. However, in the event that one or more such relationships arises, we will disclose the nature and extent of the relationship or connection between Georgian and the issuer, and we may:
(a) with the prior written consent of the relevant client, exercise discretionary authority to buy or sell securities of related or connected issuers of Georgian;
(b) make recommendations in respect of securities of related or connected issuers of Georgian; and
(c) sell securities issued by investment funds managed by Georgian or its affiliates.
Investments in Certain Other Issuers
If any of the partners, directors, officers, employees or agents of Georgian (“Employees”) are also partners, directors or officers of an issuer, Georgian will not cause an investment portfolio managed by it, including the Fund, to invest in securities of such issuers without the prior written consent of the Clients to do so after disclosure of that fact has been made in the discretionary investment management agreement. A conflict of interest can arise when an Employee includes the securities of these issuers in a Client portfolio for their own interests, including certain monetary or non-monetary benefits which may compromise the trust a Client has in Georgian. If the Client would like to proceed with the investment after disclosure has been made, Georgian will take appropriate steps to minimize the potential conflict, and the Employee who is also a partner, director or officer of an issuer will not be permitted to be involved in the management or decision making for the affected account(s).
Principal Transactions and Cross-Trading Securities
Under Canadian regulations, Georgian is subject to certain restrictions from engaging in principal transactions with or on behalf of its Clients and from cross trading securities between Client accounts. In particular, without exemptive relief from regulatory authorities, Georgian will not knowingly cause any Client investment portfolio managed by it (including the Fund), to purchase or sell securities from or to (i) Georgian, (ii) any directors, officers or associates of Georgian, or (iii) any investment funds managed by them (including the Fund).
When placing orders for and on behalf of Clients’ accounts, Georgian will select those brokers and dealers from whom they reasonably expect to obtain the best execution (after considering all transaction costs and research or other benefits). Neither Georgian nor any Employees will receive any personal benefits from companies in which we invest client capital or through which we execute transactions. Georgian does not direct any brokerage commission to certain dealers for anything other than transaction execution.
Securities legislation requires that Georgian maintain standards directed to ensuring fairness in the allocation of investment opportunities among Georgian clients, and a copy of that policy which is to be furnished to each client is as follows: Georgian’s general policy on the allocation of trades that guides all its trading practices and procedures is to allocate trades of securities pursuant to orders in effect at the same time pro rata among all accounts involved in the trade, subject to any price limits that dictate otherwise.
Trades for accounts with a similar mandate are allocated pro rata in proportion to the size of the accounts. Trades for accounts with different mandates are allocated pro rata among the mandates in proportion to the size of the order for each type of mandate. Prices are averaged, net of commissions subject to prescribed minimum commissions per trade.
In carrying out this policy, the following rules apply. Where one or more trade orders specify price limits, trades for orders with price limits are allocated pro rata with those without price limits only in respect of those trades that are consistent with such price limits. Trades for orders for different mandates entered at different times are allocated pro rata only for trades executed during the period when trading orders for such different mandates are in effect simultaneously.
Fees of Georgian
Georgian typically charges its Clients a fee for its advisory services calculated as a percentage of the market value of the Client’s account. In addition, Georgian may also charge its Clients an annual performance fee based on net performance exceeding benchmarks based on calculations agreed to by the Clients. The payment of a performance fee or allocation to Georgian may create an incentive for Georgian to cause the Funds to make investments that are riskier or more speculative than would be the case if this performance fee were not made. Further, certain performance fees are calculated on a basis that includes unrealized appreciation of assets, rather than on realized gains. Georgian manages such conflicts through strict adherence to the investment objectives, strategies and restrictions applicable to each Fund and the selection of investments as described above under “Allocation Policy”.
Allocating Expenses Among Funds and Within a Fund
Each of Georgian’s Funds is responsible for paying all routine and customary expenses relating to its operation, including, but not limited to, trading commissions, custody, auditing, legal and accounting fees. The amount of these expenses will vary from time to time but will be disclosed in the financial statements and/or offering documents of the Funds. Georgian may in its sole discretion, elect to absorb expenses of a Fund for a period of time.
Pricing and Account Errors
Georgian 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. Georgian uses third party service providers to calculate net asset values of the Funds and to record unitholder transactions. Georgian’s standards for the correction of discrepancies in the calculation of net asset value in a consistent manner across the Fund and in accordance with industry guidelines.
Proxy Voting and Other Corporate Actions
Georgian generally has discretion in voting the portfolio securities purchased for Clients. A perceived conflict of interest arises because of the opportunity for it to vote securities or to agree to certain corporate actions in its own interest. Georgian does not trade or invest in securities for its own account and maintains proxy voting policies and procedures which are designed to ensure that proxies are voted in the best interests of the Client. Georgian does not invest in securities of issuers in order to exercise control over, or participate in, the management of issuers.
Personal Trading, Gifts and Business Entertainment
Georgian has a Code of Ethics & Conduct that sets forth standards of business conduct intended to prevent possible conflicts of interest, diversions of corporate opportunity or appearances of impropriety and has established policies and procedures for monitoring personal trades of Employees who have access to information regarding the portfolios of Clients and the Funds. When individual portfolio managers and other personnel of Georgian invest in the same securities as Clients of Georgian, including the Fund, there is a perceived or potential conflict of interest that the portfolio manager or other personnel may benefit from opportunities at the expense of Clients and the Pooled Funds. In order to mitigate against these conflicts of interest, we have adopted a Personal Trading Policy which significantly limits the personal trading activities which may be conducted by our employees, including without limitation, by: (i) prohibiting our employees from trading personally any securities or other instruments which we have purchased on behalf of our clients within a prescribed time period prior to and after such purchase, subject to certain limited exceptions; and (ii) requiring our employees to pre-clear all personal trades with our Chief Compliance Officer.
When Employees give or accept gifts or business entertainment of more than minimal value in connection with services provided to Clients or the Pooled Funds, there is a perceived or potential conflict of interest and Georgian must determine whether it would be reasonably expected to impair the Employee’s independence or objectivity. Georgian has policies in place to limit such activity to a modest amount and to ensure it does not affect the decision making of our Employees.
Outside Business Activities
Georgian has procedures that govern Employees’ outside business activities and to which all Employees must adhere. Further, Georgian has implemented 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 work for, Georgian and its Clients.
Employee Compensation Practices
A conflict of interest can arise during the sale of Georgian products through the potential performance-based compensation of Employees. Georgian’s compensation practices have been developed to ensure that our Employees are not influenced to put any sales targets ahead of the best interest of the Client.
All Employees are compensated with a base salary and a discretionary bonus. Although the discretionary bonus can vary, the portion of the bonus that can be attributed to any corporate sales target is limited. Georgian Employees do not receive a commission for the sale of any product.
Other Conflicts of Interest
From time to time, other conflicts of interest may arise. Georgian will continue to take appropriate measures to identify and respond to such situations fairly and reasonably and in the best interests of its clients. Georgian will update this policy if there is any material change and will post the Statement on its website.