Fairness Policy

CastleMoore Inc.  (“CastleMoore” or the “Firm”)

STATEMENT OF POLICIES AND PROCEDURES TO ENSURE FAIRNESS IN THE ALLOCATION OF INVESTMENT OPPORTUNITIES AMONG CLIENTS

This Policy Statement is incorporated into the Investment Management Agreement so that each client of CastleMoore is sent a copy of this Policy Statement. and is posted to the CastleMoore web site. This policy may be amended as necessary, without prejudice to existing clients, to accommodate any changes in the scope of CastleMoore’s business activities.

Fairness in Allocating Investment Opportunities

Price fluctuations and partial fills can result in situations where decisions need to be made regarding trading allocations among clients. CastleMoore has implemented the following Fairness Policy to allocate these trading opportunities fairly among our clients:  

(a) Subscriptions or orders for multiple accounts are grouped and submitted together. Each account receives its pro rata share and the same blended price of each fill wherever practicable. Partial fills are allocated equitably on a pro-rata basis across all accounts except on the rare occasion that minimum transaction charges will make this uneconomic for a client (i.e., transaction expenses are too high compared with the value of the transaction). Brokers are asked to hold uneconomic or partial fills until such time as the transaction becomes large enough to be allocated fairly amongst all relevant accounts in a cost-effective manner. Each account receives its pro rata amount, rounded to a board lot. This process is repeated until the entire position is purchased. If the broker is not able to hold the partial fill until it is economic for all accounts, then fills are allocated to those accounts for which it is economic. This applies equally to orders for initial public offerings that are only partially filled.

(b) CastleMoore does not deliberately make trades in its own accounts which are opposite to those of its clients, nor does it act as the other party to any transaction effected by CastleMoore for its clients.

(c) CastleMoore maintains a policy of strict confidence relative to its business and its clients. A written undertaking to this effect is signed by all CastleMoore’s employees.

(d) Partially filled trades will not be allocated to CastleMoore proprietary, employee or personal accounts until all other accounts are completely filled.

Allocation:

According to the CastleMoore business model, discretionary clients are categorized according to their investor characteristics and risk tolerance, as determined by the Firm’s proprietary methodology. Accounts of a given category are aggregated as though a single account. Thus, investment opportunities are evaluated with respect to suitability to particular “aggregate” accounts. When a long position is created or augmented, the shares accumulated are distributed to individual accounts on a pro-rata basis, based on account size. Individual accounts are simultaneously debited for the shares acquired (for equities), at the weighted average cost per share of the entire accumulation for that trading day.

The same principles apply for the sale from accounts of security positions, except that pro-rata allocations are made based on market values of the security being sold rather than on the entire portfolio, thus avoiding the potential of creating unwanted short positions.

Thus, all individual accounts within the foregoing classification scheme pay or receive the same price per share, subject to rounding.

The following is a partial list of potential deviations from CastleMoore’s general policy set out above on the allocation of investment opportunities:

1. An individual account should have adequate cash or margin to accommodate new positions purchased.
2. Client preferences are honoured to the best of CastleMoore’s ability. For example, a client may have an aversion to ownership in tobacco or defence contractor companies and would thus be excluded from an investment opportunity in these areas.
3. CastleMoore is party to agreements with its custodians providing for custodial and trading services to CastleMoore clients. New clients to the Firm, however, are free to maintain their investment accounts at any dealer they chose. By electing to maintain accounts outside the CastleMoore relationship, they commit their assets to the trading service to those firms, likely achieving different results. CastleMoore applies the same standard of fairness to all clients notwithstanding the choice of custodian/trading desk but cannot guarantee the same execution price across all investment firms.
4. Client accounts received by CastleMoore from other institutions, or otherwise inherited by CastleMoore, and which include pre-existing security positions, are considered to be ”off model” (i.e. in the process of being converted over to the Firm’s proprietary management model) and may be excluded from aggregation even when received in their entirety. For instance, an account may arrive at CastleMoore already holding a position in a security being evaluated by CastleMoore’s managers (or a security with similar investment characteristics, such that a swap would not create significant value-added to the portfolio). This account would therefore not participate in a subsequent decision to buy the featured security.
5. Only accounts or portions of accounts for which CastleMoore has discretionary power are aggregated.
6. Accounts whose mandates differ from CastleMoore’s general mandate may be managed differently, although with equal fairness, than those which more readily lend themselves to CastleMoore’s general management style. Examples include a mutual fund that invests in transportation stocks or a client group that is loyal to a particular sub-advisor employed by the Firm.
7. Orders may be only partially filled (pro rata) within the desired range, and accounts may be selected at random for complete or full fills if a pro rata filling results in insignificant allocations such that there is essentially no effect or nominal effect on portfolio performance.
8. New issues are allocated on the same basis as secondary ones, with the exception that clients who chose to house their accounts at dealers other than custodians of CastleMoore may receive a greater or lesser allocation that would have otherwise been the case. Notwithstanding, accounts held by employees of the Firm or by the Firm itself are subject to internal review to insure that they do not benefit from favourable new issue allocations, wherever such accounts are hosted. Allocations which too small to be meaningful if spread over more than a small number of suitable accounts are so distributed by random selection.
9. A security sale in a particular account may be deferred if the financial benefit from the sale would be outweighed by its tax consequence at the time of sale.

Commissions:

CastleMoore does not charge trading commissions. CastleMoore custodians may charge trading commissions. Clients opting to host accounts elsewhere are subject to commissions charge by those firms. To the extent that those commissions are negotiable, however, CastleMoore uses best efforts to minimize them.

Any exceptions to this Policy must be approved by the CCO and the reasons for the exception documented.