Monthly Commentaries

Is my money safe at Toron? – June, 2005

Our commentary this month is prompted by several instances of unscrupulous behaviour at hedge funds and banks that reflect poorly on the investment management industry and more particularly go to the heart of “trust and confidence” - the essential issue in Toron client relationships. We take the responsibility of acting as stewards of our clients’ financial resources very seriously and consequently have structured our business somewhat differently from other firms. Toron is not a marketing organization like a mutual fund company, driven by sales and not by the unique interests of individual clients. We don’t farm out investment selection to an inaccessible group of performance-driven managers where we would have little control over their investment or operational risk. We’re less interested in making a fast dollar and far more intent on building enduring relationships with our clients. Accordingly, we do everything ourselves and invite our clients into our business and to some extent into our lives so they can see for themselves how we think and behave and make up their own minds about our practices and sense of commitment. Although no institution can provide an ironclad 100% guarantee against fraud or the misappropriation of funds, we have purchased sensible insurance cover and have instituted several layers of internal and external controls that are designed to obstruct collusion or quickly detect any abuse of discretion over our clients’ financial assets. Some facts you should know: • All client assets are deposited with our custodian, CIBC Mellon Trust Company. Toron does not co-mingle

its own assets with those of its clients, so a Toron bankruptcy would not jeopardize your portfolio holdings. • If CIBC Mellon becomes bankrupt, you are not protected by CIPF (Canada Investor Protection Fund) or CDIC (Canada Deposit Insurance Corporation). You will have a direct claim against CIBC Mellon for your RRSP and other registered accounts where they act as your trustee. In accordance with industry practice, non-registered accounts are held by “Toron in trust” and we shall claim against CIBC Mellon on your behalf. It is precisely for this reason that we reconcile our records of individual client holdings daily with CIBC Mellon’s records for both registered and non-registered accounts. This daily reconciliation process, which is subject to surprise annual audit by CIBC Mellon and by our external auditors – Segal LLP, is a strong safeguard against misappropriation of these assets. • Paragraph 8 of your Managed Account Agreement prohibits Toron,

without your express consent from acting as principal in any transaction involving your portfolio, so we are neither a counterparty to nor do we have any financial interest in any transaction we conclude on your behalf. • Toron’s Investment Committee annually reviews each client’s Investment Policy Statement. • Toron requires an additional partner to attend every alternate review meeting with each client. • All withdrawals from client accounts must be approved by at least one partner with additional approvals required for withdrawals exceeding specified amounts. We trust you find this information useful and welcome your queries and comments. Peter Sacks Managing Partner