Conflict of Interest Disclosure Statement

Trans-Canada Capital Inc. (“TCC”) was formed and incorporated under the Canada Business Corporations Act in March 2018, with its head office located at 1800 McGill College Ave., Suite 2000, Montreal. TCC is a wholly-owned subsidiary of Air Canada and the duly appointed investment manager for the Air Canada Pension Master Trust Fund. TCC is also the duly appointed investment manager of six (6) specialized funds (the “Funds”).

TCC is registered in Quebec as an investment fund manager, portfolio manager, derivatives portfolio manager and exempt market dealer, in Ontario as an investment fund manager, portfolio manager, commodity trading manager and exempt market dealer, in Newfoundland & Labrador as an investment fund manager and exempt market dealer, and in Alberta, British Columbia, Manitoba, Nova Scotia, Prince Edward Island, New Brunswick, Saskatchewan, Yukon, Nunavut and Northwest Territories as an exempt market dealer. As such, TCC’s responsibilities include, inter alia, general administrative services, portfolio management services, selection of brokers and negotiation of their commissions, investment decisions and the calculation and reporting of the Funds’ net asset value on a monthly and yearly basis through the designated Portfolio Administrator.

Under Canadian securities regulations, TCC is required to identify material conflicts of interest which could arise between TCC and its clients. In the event that a material conflict of interest would occur, TCC will disclose such to its concerned client.

The purpose of this Conflicts of Interest Disclosure Statement is to provide TCC’s clients with a description of the conflicts of interest TCC may encounter as per its different registration categories and the mitigating controls currently in place.

Description of conflicts of interest

TCC has adopted a code of ethics and a compliance manual outlining the basic principles that guide the conduct of TCC and its employees with regard to conflicts of interest.  Conflicts of interest may arise in the following aspects of our business, among others:

1. Investment in Related or Connected Issuers

Securities legislation in Canada requires that brokers and advisers, when trading or providing advice on their own securities or the securities of other issuers with whom they are connected or related, to follow certain rules when carrying out such trades or giving such advice; the investors will then be aware of any relationships and connections the brokers and advisers have with the issuers of the securities.

As an exempt market dealer, TCC may sell to third-party investors securities of its Funds.The Funds are related and connected issuer of TCC in accordance with applicable securities laws. However, TCC is not compensated for acting as an exempt market dealer for the Funds.

TCC will be prohibited, directly or indirectly, from investing, or recommending investment in, any securities of Air Canada.

2. Outside Business Activities

TCC employees may not engage in any outside activity or employment that might affect their objectivity, independence of judgment or conduct in carrying out their duties and responsibilities for TCC. This means, for example, that employees may not work for an organization that is a supplier or competitor of TCC without the prior written consent of the President and CCO.

TCC requires that employees disclose in writing to the CCO all outside business, commercial, financial, charitable or community interests, including officer positions and directorships (“outside business activities” or “OBAs”) or activities that might lead to a conflict of interest. If TCC reasonably believes an employee’s OBAs could hamper the employee’s ability to deal fairly, honestly, in good faith and in the best interest of TCC or TCC’s clients, the employee may be required to end the interests or activities.

3. Principal Transactions and Cross Trading Securities

For month-end rebalancing purposes, a cross trade is performed when a security is to be acquired and disposed by two investment funds managed by TCC. The transaction is carried out at market price through a broker, which allows cost savings on the “Bid-Ask” spread in the best interests of TCC’s clients.

In the interest of carrying out fiduciary duty and in order to adequately address any actual or perceived conflict of interest, every cross trade must be:

  • consistent with the investment objectives of the participating investment funds;
  • notified to the compliance team by the trading team;
  • reviewed at the monthly compliance meeting, and
  • transacted at the current market price, and in respect of exchange-traded securities.
4. Best Execution

Best Execution represents TCC’s duty of loyalty, which obligates TCC to act in our client’s best interest, and to exercise reasonable care to obtain the most advantageous terms for the customer. It is therefore our obligation to seek the most advantageous execution terms reasonably available under the circumstances when executing a transaction on your behalf. We will consider such execution factors as price, speed, likelihood of execution & settlement, and costs. We will also consider prevailing market conditions when manually handling client orders.

5. Compensation for services to the Funds

TCC is the investment fund manager and portfolio manager of the Funds. TCC earns management fees and, in some cases, TCC or affiliates of TCC may receive performance allocation. TCC may occasionally face conflicts between its own interests and those of its clients, or between the interests of one client and the interests of another. TCC 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 TCC put its own interests ahead of those of its clients. TCC discloses in the Fund documentation a summary of all applicable fees and expenses. The explanations of these fees and expenses are in clear language so that investors can understand what each is for and what services the fee covers.

6. Fair Allocation Amongst Clients

TCC has established a policy for the fair distribution of securities in its clients’ accounts (including funds established and managed by TCC). It will cover cases where the availability of some securities is limited.

General Rules: Generally, trades will be allocated before they are performed, on a pro-rata basis based on the risk budget for each account. The risk budget will be reassessed at least monthly in order to account for the relative account size changes. Once the risk budget allocation by account is determined, it will be used for the trade allocation until the next monthly or ad hoc reassessment.

Exceptions: It may happen that the trade allocation described in the previous section will not be respected for various reasons. A justification must then be provided in writing by TCC’s Investment Committee before trading.

7. Allocating Expenses Amongst Funds and in a Fund

TCC ensures expenses charged to any of the Funds are reasonable, effectively controlled and in compliance with the applicable documentation. TCC has an Expense Allocation Policy to assure that rules and guidelines have been put in place related to the allocation of expenses between the investment management Company and the mandates, including allocations between master and feeder funds, as well as any separately managed accounts.

The Funds’ assets must be utilized for the benefit of the Funds and its unitholders, only. Hence, expenses that are charged to one of the Funds must relate to that Funds’ activities. If expenses are incurred for multiple Funds or apply to both investment management and fund activities, a reasonable method of allocation must be utilized. In our case, TCC typically bears the cost of expenditures where the benefits are most likely to accrue to the investment management company rather than investors.

8. Pricing, Account and Trade Errors

TCC has a Pricing Policy to provide framework for the pricing of the various instruments in the different portfolios or funds managed by TCC. The policy is complemented by procedures describing the process used to validate prices for the instruments including frequency and methodology and ultimately this valuation system provides a foundation to determine the fair market value for all the assets of the portfolios or Funds.

NAV calculations are approved by the CFO, based on the approval of the Valuation Committee, on a monthly basis to ensure their reasonableness. In an occurrence of a NAV calculation error, the CCO must determine whether and to what extent the Funds and/or unitholders’ registry should be rectified for the error. To the extent a rectification is warranted, the Funds and/or unitholders’ registry will be corrected the following month.

There are occasions in which trading errors made in formulating trades may result in a financial gain or loss that does not represent the intended outcome in managing a particular client or group of clients. TCC’s policy is to ensure, based on specific facts and circumstances of each case, that trade errors resulting in losses are corrected appropriately and reimbursed in a timely manner so that clients are not materially impacted.

9. Personal Trading

TCC employees are allowed to operate personal trading accounts at other registered firms. TCC has adopted a personal trading policy that applies to all officers, directors and other employees with access to information regarding the portfolios. These policies are designed to reasonably prevent employees from trading in advance of orders for the Funds, or trading on the basis of their knowledge of the Funds’ trading activities. Access Persons must not use any non-public information about our clients for their direct or indirect personal benefit or in a manner which would not be in the best interests of TCC’s clients, including the Funds. That prohibition includes what is commonly called “front-running” and it is not only a breach of this policy but is generally prohibited under Canadian securities legislation. Mitigation occurs at employee onboarding as well as through continuous monitoring.

10. Gifts and Business Entertainment

It is expected that employees will not knowingly place themselves in a position that would create an appearance of conflict of interest between TCC or its clients, and themselves. This includes all circumstances of possible conflicts of interest with, but not limited to, current or prospective customers, vendors, and consultants. Employees must comply with TCC’s guidelines for gifts and Entertainment. TCC performs controls and monitoring to ensure compliance with the policies and guidelines. The resulting level of inherent risk and the potential appearance of conflicts of interest are then reviewed and approved
by the Chief Compliance Officer.

October 19, 2021