Investor Presentaiton

D this issuer's securities or transactions between funds (involving securities between the funds belonging to the same family), it risks furthering its own interests at the expense of those of its shareholders. This is why these transactions are forbidden or restricted under securities regulations, both in Québec and elsewhere in Canada. Commercial or operational conflicts of interest, which are those that generally arise when a management company operates a mutual fund. Examples include when the management company uses the services of its affiliated companies to operate the fund, or in allocating the expenses incurred in this operation, or during the allocation of securities among the mutual funds in one family. Although they could adversely affect investors, these conflicts of interest are not covered by any specific securities regulation. Regulation 81-107 is now being drafted to deal with these types of conflicts of interest. It provides for an independent review committee (IRC) composed of at least three directors to be set up by all of the issuers covered by the regulation. While regulation 81-107 sets forth the management company's obligations should case of conflicts of interest arise and also defines the requirements pertaining to the IRC's organization and working, subsequent modifications require that the IRC report to investors and that its existence be disclosed in the short-form prospectus. Although it "aims to impose a minimum standard of governance for all mutual funds," there are various opinions over forming an IRC. Indeed, certain industry advocates fear that, because of the cost it would incur and the difficulties in finding independent directors (owing to the size of the Québec market), the IRC constitutes a barrier to market entry for small firms. Such a consequence could stifle competition in a market dominated by the big institutions that already possess comparable structures. These industry representatives believe that investors will indeed be better protected by the IRCS, but not necessarily "better served." On the other hand, some institutional investors favor forming IRCs because they would provide better protection for investors by supervising transactions between affiliated entities. These advocates even recommend expanding the IRC's roles to improve this 9 AUTORITÉ DES MARCHÉS FINANCIERS, Mémoire préparé dans le cadre des travaux préliminaires (brief drafted during the preliminary work), p. 29 Consultation paper Page 11

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