RELATIONSHIP DISCLOSURE INFORMATION

Information about our Relationship with You

In accordance with applicable Canadian securities laws, this document sets out important information concerning our relationship with you, as a client of Harness Investment Management Inc. (“Harness”). It is intended to provide you with information that you will need as we establish or continue our relationship – information about us, the services that we offer and your account(s) with us. If a significant change occurs to any information contained in this relationship disclosure information, we will notify you in a timely matter.

This document should also be read in conjunction with the Investment Management Agreement you signed when you opened your accounts and the Investment Policy Statement to which you and your portfolio manager have agreed. There are a number of cross references between the three documents, so it is important that you read all of them. Important information may also be contained in other documents that we have provided to you or will provide to you in the future. If you have any questions about the contents of this document or any of the other documents, please contact your portfolio manager (“PM”) or Harness.

Who We Are

Harness is registered as a portfolio manager and an exempt market dealer in all Canadian provinces and territories. Our principal regulator is the Ontario Securities Commission as our head office is located in Toronto. As a result, our services are available only for investors who are Canadian residents and permitted to hold Canadian investment accounts.

Harness is part of the corporate group of Purpose Unlimited Inc. The following entities are also part of Purpose Unlimited’s corporate group and are registered under applicable Canadian securities laws (“Affiliated Registrants”):

·        Foundation Wealth Partners LP: Portfolio Manager & Exempt Market Dealer

·        Purpose Investments Inc.: Investment Fund Manager, Exempt Market Dealer, Portfolio Manager & Commodity Trading Manager

See the Conflicts of Interest section below for a list of the funds managed by these Affiliated Registrants.

Accounts, Products and Services

Our business is primarily providing discretionary investment services to individuals, corporations, trusts and other legal entities through introductions from a third-party or affiliated entity that may provide you with financial planning, estate planning, insurance services, or accounting services or other non-securities related financial services (the “Wealth Advisor”). This collaborative approach allows you to leverage the expertise of both specialists working in tandem to integrate financial and investment planning. In addition, we may act as an exempt market dealer by marketing certain investment products to our clients or external clients.

Accounts:

We provide a full range of managed investment accounts including cash or margin investment accounts, U.S. dollar accounts, and registered accounts, like RRSPs, TFSAs and RESPs for which TSX Trust Company acts as fiduciary.  Please note that Harness does not offer Disability Savings Plan (RDSP) accounts.  

Harness offers discretionary investment management via two service channels. Opening a discretionary investment management account means that we will decide what investments to purchase or sell for your account. We will make investment decisions based on your Investment Policy Statement (“IPS”) and prevailing market conditions. These services are fee-based, meaning you pay a monthly fee based on the asset(s) in your account. We will determine which type of service may best suit your needs based on your total household assets.

1.      Harness Digital Services (“Digital”) are generally extended to clients with household investable assets ranging from $50,000 – $250,000.  For these portfolio management services Harness’s process for gathering "know your client" (“KYC”) information sufficient to meet suitability obligations relies primarily on an online questionnaire which is completed prior to account opening and matches the client goal and risk profile to Harness portfolios and is further reviewed annually and throughout the life of the account and in response to changes in client information. The portfolios assigned in this channel are limited to simple investment solutions of Exchange Traded Funds (“ETF’s”) or other investment funds that meet the definition of “mutual fund” under securities legislation or hold cash/cash equivalents. These funds are not alternative mutual funds and cannot short sell or use a leveraged investment strategy. For most clients, the KYC information gathering process will not include discussions between portfolio managers and clients.

2.       Harness Investment Counselling Services (“ICS”) are typically offered to clients with household investable assets totalling $250,000 and above. Client KYC information is generally gathered through an online questionnaire in addition to working one-on-one with a dedicated PM to personalize and manage an investment plan based on the client goals and risk profile. The PM provides ongoing strategic investment advice and guidance.  ICS clients have access to Harness’ full breadth of curated investment solutions including mutual funds (distributed by prospectus or exemption from prospectus) and/or separately managed accounts. Clients may opt out and remain in Digital services if the additional services are not desired.  

It is important to note that commencing your relationship with Harness in a specific service channel does not impose restrictions on future services. Recognizing that client needs are dynamic and evolve over time, our portfolio managers will continuously monitor your service channel to ensure your best interest is being met and at times may offer the option of moving into a different service model than you initially started with. Similarly, in the event net household assets fall below the thresholds described in (1.) and (2.) above, Harness may at its discretion move you to a different service channel or may terminate the relationship.

Products:

Harness offers a limited set of solutions based on model portfolios that have been vetted by a vigorous Know Your Product (“KYP”) process adapted to Harness’ business model. These model portfolios are managed by Harness or by selected investment sub-advisers, and when you “onboard” to Harness, the products you will have access to will be limited to the specific investment sub-adviser that you select. If there is no suitable portfolio available from your preferred sub-adviser, Harness will recommend an alternative solution, which may include referring you to an affiliate entity of ours or away from Harness. Harness reviews its product shelf composed of the Purpose Funds (as defined below) and other products and regularly compares them against investment funds managed by third parties available in the market to ensure you are accessing competitive products.

For our Digital services model, the investment products offered are limited to our “core strategies” – a set of ETFs or mutual funds sub-advised by your selected sub-adviser. In the ICS service model, you have access to the sub-adviser’s core strategies plus Harness’ curated set of “focused strategies” – products such as alternative investments and private assets, that can be used to complement your foundational portfolio of core strategies to meet specific needs and objectives. Information about all our sub-advisers can be found in the appendix of this document, or on our website at www.harnessinvest.ca. If you are interested in investing with a sub-adviser other than the one you initially selected or are interested to obtain information about other products and services offered by Harness, please contact a Harness advising representative at pm@harnessinvest.ca. It is noted that we do offer investment products managed by our affiliated registrants including PI which may qualify as related and/or connected issuers. If we use investment funds managed by Affiliated Registrants to deploy your investment strategies, we will do so only if we believe it is in your best interest.  

A note regarding Suitability:

In determining initial suitability of the investments in your account, Harness will consider your KYC information – the outcome of your risk questionnaire and the information gathered from you at the time of account opening, as well as the KYP related to the products being recommended to you. This comprehensive review considers various factors, including your personal and financial circumstances, needs for current and future cash flow, investment knowledge, objectives, time horizon, and risk profile as well as your current portfolio composition and risk level.  The outcome of this assessment will be the preparation of an IPS that combines this information with key investment principles to provide a framework for management of your investment portfolio. Ongoing, Harness will conduct periodic reviews of your KYC information at least annually. Finally, Harness must ensure that any investment action, recommendation, or decision taken or made for you is suitable and puts your interest first.  Please contact us at any time if you wish to review the suitability of your investments.

Services:

In addition to managed accounts, Harness offers the following financial services:

·        Ongoing portfolio reviews

·        24/7 online account access

·        Electronic delivery of statements, reporting and tax documents

In providing our services to you, we may employ or engage a number of outside service providers to facilitate service delivery. These may include custodians, distributors, brokers, depositories, electronic data processors, and lawyers, amongst others. Our selection process for these service providers is thorough and intended to ensure that they can deliver the services at a level that meets the level that we are required to provide to you. We also have oversight procedures to ensure that they continue to deliver the level of service that we have contractually established with them.

Information We Collect From You

In order to provide you with the best investment advice, we need to have a good understanding about you, your assets and liabilities and your financial goals for the future. This information will help to ensure that the investments we recommend are suitable and in your best interest. The consideration of suitability is an ongoing process, including when you transfer portfolios to us, in our regular portfolio reviews and when you tell us that some of the information about you has changed.

The KYC or personal information that we collect can be broken down into three broad areas:

1.  Your identity

This information includes your name, address, birth date, current employment and social insurance number. For non-individuals, this includes legal name, head office address, type of legal entity (corporation, trust, other entity), constating documents, and whether someone other than the client has financial interest in the account. It helps us verify who you are, if you are an insider of a reporting issuer or a Politically Exposed Person, and your reputation, to meet our obligations under the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”) and other federal laws aimed at the prevention and detection of money-laundering and terrorist financing.

2.  Your financial situation

This information includes your current income level, your existing investment portfolios and other assets, any debt you may have against these and your net worth. We will also collect information about your existing banking relationships. It helps us establish the base line from which we will help you reach your financial goals.

3. Your goals, priorities, liquidity needs, time horizon, investment knowledge, investment objectives and risk assessment

Once we have all of the other information, we can begin to construct a plan. For this step, we need to understand what your financial goals are and when you expect to start taking money out of your accounts.

A crucial part of this analysis is to understand your liquidity needs, time horizon, your understanding of the financial markets, your investment objectives and how comfortable you are with taking risks to achieve your goals. Your investment goals represent the specific outcomes you aim to achieve through your investments, such as preserving capital, generating income, capital growth or speculation. We have developed a multi-dimensional risk assessment tool that helps us to understand this element of who you are by considering if you need access to these funds on an ongoing basis, or in the short term. Once we have determined a risk appetite score and profile for you, we will use it to help assess the suitability of all investment advice or actions we provide to you.

We will make reasonable efforts to keep your KYC information current. If we determine there has been a significant change made to your KYC, such as a change to your risk profile or investment needs, we will review your portfolio to ensure it remains suitable. We will protect your personal information to ensure that only those inside Harness or our service providers who need access to the information to serve you and to meet our regulatory obligations can see it. As well, we will protect it from external parties getting it. Please review our Privacy Policy at https://www.harnessinvest.ca/disclosure/privacy-policy/ for further details on how we deal with your personal information and what your rights are related to the information we collect about you.

Your Role In Our Relationship

It is important that you actively participate in our relationship. In particular, we encourage you to:

Custody of Your Assets

Harness does not maintain physical custody of your investment assets. Instead, your assets are segregated and held by an independent duly qualified custodian and/or it’s sub-custodian, i.e. Fidelity Clearing Canada ULC (“FCC”) located at 483 Bay Street, South Tower, Suite 200, Toronto, ON. This allows for greater protection against theft or loss, subject to regulatory oversight, minimum capital and insurance requirements. FCC may register securities in their name, but you remain as the beneficial owner of those securities. Investment assets held by a custodian may potentially be exposed to a risk of loss under the following circumstances: (i) in the event of the custodian’s insolvency and bankruptcy; (ii) if there is a disruption in the custodian’s information technology system or (iii) loss arising from acts of fraud, willful or reckless misconduct, negligence, or errors from the custodian or its personnel. Harness thoroughly assesses the reputation of FCC, their financial stability, internal controls and ability to deliver custodial services. Each client account held by a custodian is insured by the Canadian Investor Protection Fund (“CIPF”) subject to the following limitations:

 

Limits for individuals

For an individual holding, the limits on CIPF protection are generally as follows:

1.       $1 million for all general accounts combined (such as cash accounts, margin accounts and TFSAs), plus

2.       $1 million for all registered retirement accounts combined (such as RRSPs, RRIFs and LIFs), plus

3.       $1 million for all registered education savings plans (RESPs) combined where the client is the subscriber of the plan.

Limits for Corporations, Partnerships and Unincorporated Organizations

The limit on CIPF protection for a corporation, partnership or unincorporated organization is generally $1 million for all accounts combined. Some exceptions apply – please see the CIPF Coverage Policy for more details: https://www.cipf.ca/Public/CIPFCoverage/CoveragePolicy.aspx

Limits for Testamentary Trusts

For accounts held in the name of an estate, a deceased person (also known as a decedent), or the executor or administrator of the estate of the decedent, the limit on CIPF coverage is $1 million. This limit applies to all accounts held for the same decedent combined.

Limits for Inter-vivos Trusts and Trusts Imposed by Law

For accounts of inter-vivos trusts that are created by a written instrument and trusts imposed by law, the limit on CIPF coverage is $1 million. These accounts are considered to be distinct from accounts of the trustee, the settlor or any beneficiary.

Limits for Other Types of Customers

Please see the CIPF Coverage Policy for complete details.

Accounts held Jointly

Unless otherwise evidenced in writing, proportionate interest in a joint account will be presumed to be equal for all parties with an interest in the account. Each party will have CIPF protection for their interest in the joint account up to the limit that applies to all of their general accounts combined. In most cases, this limit is $1 million.


Fund Securities

Securities of investment funds or other issuers held by you that are recorded in your name on the books of the issuers maintained by the fund company or its transfer agent are not held by a qualified custodian. Fund securities are subject to the custody and recordkeeping arrangements applicable to the fund company and disclosed in the offering document of the relevant fund. Client assets are subject to risk of loss if the fund company or its custodian become bankrupt or insolvent, or the fund company, its custodian or transfer agent experiences a breakdown in its information systems. Harness has reviewed the system of controls and supervision maintained by each fund company and has concluded that their systems are sufficient to manage the risk to a client of loss in accordance with prudent business practice.

Trusted Contact Person and Temporary Holds

We will ask you for the name and contact information for a person you trust to assist us in protecting your

investments. We will also ask for your consent to contact that person in certain circumstances. A trusted contact person is generally someone we would contact to confirm or make inquiries about possible financial exploitation, or if we have concerns about your mental capacity as it relates to your ability to make financial decisions (Trusted Contact Person). Financial exploitation generally means the use or control of, or deprivation of the use or control of, a financial asset through undue influence, unlawful conduct or another wrongful act. We may also contact your Trusted Contact Person to confirm your current contact information if we cannot reach you after multiple attempts, or to confirm the name and contact information of a legal guardian, if any. You can replace or revoke your Trusted Contact Person at any time.

Additionally, should we reasonably believe that you are in a vulnerable position and are being financially exploited or that you are experiencing diminished mental capacity which may affect your ability to make financial decisions relating to your account(s) with us, we may place a temporary hold on a particular transaction. A vulnerable position includes where an illness, impairment, disability or aging-process limitation places you at risk of financial exploitation. If we place a temporary hold on a particular transaction, we will provide you with notice, either written or verbal, explaining our reasons for the temporary hold, and at least

every 30 days thereafter until the temporary hold is revoked. We may also contact your Trusted Contact Person about a temporary hold.

Fees and other expenses

The compensation that we receive for our services differs depending on the type of service you have established, and the fee structure agreed upon your Wealth Advisor. You may be charged a fee that is calculated monthly based on the average of the net asset value of your accounts at the end of each day and paid monthly, with a tiered fee structure that provides reduced rates for household assets surpassing a predefined threshold. For the exact fees you will be paying, please refer to your Investment Policy Statement. Unless you indicate differently, we will deduct our fee from your investment account.  These fees are more fully described in your Investment Management Agreement, Schedule A – Fee Schedule.

In addition to these fees, there are a number of other operating and transaction charges that may apply. These may be for certain actions we undertake for you like account or cash transfers, or for special requests like paper account statements. The Schedule A – Fee Schedule attached to this document outlines our current operating and transactional charges. If we change this Schedule, we will provide you with notice of the changes before they come into effect.

Impact of Fees 

Fees embedded with certain investments (including mutual funds) or charged directly to your account, such as operating and transaction charges, impact the market value of your portfolio. The impact of fees reduces investment returns and this impact, due to the effect of compounding, increases over time.   

Reporting

We will provide statements to you about your accounts quarterly, unless you request them more frequently. The statements that we provide to you will contain (a) information about each transaction conducted for you during the time period covered by the statement, (b) information about each security held in your account and (c) information about performance and charges, if any, relating to your investments. It is important that you carefully review each report that is sent to you and inform us promptly if you feel that there are any errors or discrepancies or if you have any questions or concerns.

We will generally make the reports available to you electronically through our reporting portal. You will be notified by email when the reports are available.  If you would prefer to receive paper copies of any report, we will make them available to you. There will be a charge for paper statements.

Account Statements

We will provide you with account statements on a quarterly basis. You can request to receive account statements monthly. The account statement will include a record of each transaction which took place during the period as well as the name and quantity of each security held in the account. The statement will also outline the market value and position cost of each position, the cash balance in the account and the total value of the account. We may also include additional information on the statements to help you understand the current state of your portfolios.

Annual Statements on Charges and Performance

On an annual basis, we will provide you with a statement on the charges and other compensation that have been paid by you through your investment accounts. This report will include the total amount of our management fee and any other operating and transaction charges. It will also include the amount of any other compensation that we have received related to your account from other parties, including trailing commissions if applicable.

In addition, you will receive an investment performance report annually. It will include the market value of your account assets at the beginning and end of the period as well as all cash flows in and out of the account. It will also provide a percentage return for an account and your portfolio over several time frames. The report will also show the returns for a benchmark if you have chosen to use one for comparison (see below.)

A word about benchmarks

It is sometimes helpful to compare the performance of your investments against an external measure. While it is not the only way to assess performance, comparison of your performance against a valid benchmark can be a useful tool. A benchmark is generally a well-recognized and diversified index, like the S&P/TSX Composite index. In selecting a relevant benchmark, it is important that it represents a valid comparison with your investment objectives – you want to ensure that the comparison is apples to apples. Your portfolio manager will be able to advise on what a relevant benchmark might be. It is likely to be a blend of a number of broad asset class specific benchmarks that matches your agreed asset mix.

If you choose to utilize a benchmark for performance validation, the agreed-upon benchmark will be included in your Investment Policy Statement and we will include the performance of the benchmark in our regular performance report to you.

Risks

General Risks of Investing

You should be comfortable about where your money is invested. This requires you to think about and understand your own tolerance for losing money, even temporarily, and the risk level of your investments. It is important that you understand that your investments are not guaranteed. Therefore, the greatest risk to you as an investor is that you could lose all or part of your investment. Unlike bank accounts or guaranteed investment certificates (GICs), stocks, bonds, money market securities and funds are not covered by the Canada Deposit Insurance Corporation or any other government deposit insurer.

Accounts hold different kinds of investments depending on their investment mandate. The value of investments in any account will fluctuate daily, reflecting changes in interest rates, economic conditions and markets as well as company news. Therefore, the value of any portfolio’s securities may go up or down. As a result, the value of your investment when you sell it may be more or less than when you bought it.

Risk-Return Trade Off

Risk and return are closely related. This means that to obtain a higher return, you may have to accept a higher possibility of losing money. A higher risk portfolio is generally less stable, and it goes up or down in value, or “fluctuates” more. The more a portfolio’s return fluctuates, the more risk is associated with the portfolio. High-risk investments generally offer higher long-term returns than safer ones. Since they fluctuate more, high risk investments may post more negative short-term returns, compared to lower-risk investments.

Risks of Using Borrowed Money (Leveraging) to Finance the Purchase of a Security

Using borrowed money to finance the purchase of securities involves greater risk than a purchase using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the securities purchased declines.

Securities may be purchased using available cash, or a combination of cash and borrowed money. If cash is used to pay for the security in full, the percentage gain or loss will equal the percentage increase or decrease in value of the security. The purchase of a security using borrowed money magnifies the gain or loss on the cash invested. This effect is called leveraging. For example, if $100,000 of securities are purchased and paid for with $25,000 from available cash and $75,000 from borrowings, and the value of the securities declines by 10% to $90,000, your equity interest (the difference between the value of the securities and the amount borrowed) has declined by 40% (i.e. from $25,000 to $15,000).

It is apparent that leveraging magnifies gains or losses. It is important that are aware that a leveraged purchase involves greater risk than a purchase using cash resources only if you are interested in using leverage for your accounts. The point at which the additional risk from a leverage purchase becomes excessive is a determination to be made on an individual case basis by you and will vary depending on your circumstances and the security purchased.

It is also important that you are aware of the terms of a loan secured by securities. The lender may require that the amount outstanding on the loan not fall below an agreed percentage of the market value of the securities. Should this occur, you must pay down the loan or sell some of the securities to return the loan to the agreed percentage. In our example above, the lender may require that the loan not exceed 75% of the market value of the securities. On a decline of value of the securities to $90,000 you must reduce the loan to $67,500 (75% of $90,000). If you do not have cash available, you would have to sell securities to provide money to reduce the loan.

Cash is, of course, also required to pay interest on the loan. If you choose to use leverage for your investments, you are advised to have adequate financial resources available both to pay interest and also to repay the loan if the borrowing arrangements require such a payment.

Risks Relating to Currency

Whenever an account buys assets in a currency other than the base currency (for Canadians this is generally Canadian dollars), there are risks relating to exchange rates. As the base currency changes in value against the other currencies, the value of the portfolio securities purchased in those other currencies will fluctuate.

Some client accounts denominate the value of their securities in Canadian dollars but invest in different currencies. The total value of their securities will fluctuate as foreign currencies change value in relation to the Canadian dollar. Some client accounts denominate the value of their securities in both U.S. and Canadian dollars. The total value of their securities denominated in Canadian dollars will fluctuate in relation to the U.S. dollar.

Risks Relating to Interest Rate Fluctuations

Investments are affected by interest rate fluctuations. An increase in interest rates will generally result in a decrease in the value of a fixed income security. An increase in interest rates may reduce the return of accounts holding debt or fixed income securities. On the other hand, a drop in interest rates may reduce the return of money market securities.

Risk Relating to Liquidity

Liquidity refers to the speed and ease with which an asset may be sold and converted into cash. Most of the securities held by an account may be sold easily at a fair price and thus represent investments which are relatively liquid. However, an account may invest in securities which are not liquid, i.e., which may not be sold quickly or easily. Some securities may not be liquid because of legal restrictions, the nature of the investment or certain characteristics of the security. The lack of purchasers interested in a given security or market could also explain why a security may be less liquid. The difficulty of selling illiquid securities may result in a loss or a reduced return for an account.

Risks Relating to Credit

An account can lose money if the issuer of a bond or other fixed income security cannot pay interest or repay the principal when it comes due. This risk is higher if the fixed income security has a low credit rating or no rating at all. This risk also exists if there is a reduction in credit rating or changes in general economic or business conditions result in the market perceiving that the risk of a failure to meet a required payment has increased. Fixed income securities with a low credit rating usually offer a higher yield than securities with a high credit rating but they also have the potential for substantial loss. These are known as “high yield securities”.

Risks Relating to Companies Listed on Stock Markets

The value of an account will increase or decrease with the market value of the securities in it. If an account holds stocks, the value of the account will fluctuate with changes in the market value of the stocks it holds. The market value of a stock will fluctuate according to the performance of the company that issued the stock, economic conditions, interest rates, stock market tendencies and other factors. Historically, equity securities are more volatile than fixed income securities. Securities of small market capitalization companies can be more volatile than securities of large market capitalization companies.

Complaints

We encourage you to contact any member of the Harness team on a regular basis to discuss your accounts and the services we are providing to you, raising any questions you might have about them. We welcome your positive comments but more importantly we welcome your negative comments. Negative comments help us to improve the quality of our products and services.

If you have a problem with your accounts, do not hesitate to contact us. Once you have contacted us, we have established policies and procedures to ensure that your complaint is dealt with promptly.

For more information about our complaint process and your options, please refer to the “What to do if you have a complaint” Appendix B at the end of this document. If you require more information about our handling of complaints, you may contact our Chief Compliance Officer directly.

Conflicts of Interest

What is a Conflict of Interest?

In the course of providing services to you, there may be situations in which there is an apparent difference between our interests and yours. A conflict of interest exists where the interests of different parties, such as the interests of clients and those of Harness Investment Management or the interests of two or more clients, diverge or are inconsistent. When faced with such a conflict, we will exercise the business judgement of a reasonable person, uninfluenced by considerations other than the best interests of our clients. If we determine that we cannot address a material conflict of interest in a client’s best interest, we will avoid that conflict. In exercising our judgement, we consider whether a real or perceived conflict of Interest can best be dealt with by 1) Avoiding the conflict, 2) Controlling the conflict through policies and procedures or 3) Disclosing the conflict to clients. Once we determine our course of action for an identified conflict of interest, we update our policies and procedures to ensure that all employees are familiar with their responsibilities in relation to the conflict. Some of the measures we may use include controlling the sharing of information within the company, segregating tasks and the supervisory responsibility for them and adjusting financial incentives. Finally, we may also require that the conflict be disclosed to you and that you provide us with your consent to proceed.

Conflicts of Interest related to portfolio management services

Harness performs investment advisory and portfolio management services for various accounts other than your accounts. Our services are not exclusive, and we will provide similar services to other clients and engage in other activities. We may give advice and take action concerning our other clients, which may be the same as, similar to or different from the advice given, or the timing and nature of action taken, for you. While we strive to put your best interest first, this situation could affect you through the possibility of certain clients being prioritized over others. We strive to ensure preferential treatment is avoided and that all clients are treated fairly and in accordance with their individual risk and financial goals.

Conflicts of Interest related to Related, Connected Issuers and Purpose Funds

There is a potential for conflicts of interest to arise in situations in which Harness advises or trades in the securities of issuers which are related to or connected to us. We are required to disclose to you any related or connected issue in writing, before we make a trade or provide advice to you and, in a timely manner thereafter if there are any significant changes to this disclosure. In addition, we are required to disclose to you whether any security we recommend for you to buy, sell or hold are securities issued by Harness Investment Management, a related issuer or a connected issuer. 

A person or company is a “related issuer” of another person or company if:

· The person is an “influential security holder” of the other person or company,

·  The other person or company is an “influential security holder” of the person or company, or

· Each of them is a related issuer of the same third person

An “influential security holder” controls more than 20% of an issuer either alone or with others. 

A “connected issuer” is one that has a connection to a person or company through common shareowners, directors or officers.

Harness would be considered a “connected issuer” to Purpose Investments Inc. (“Purpose”) and Purpose Investment Partners (“PIP”) since the two companies, respectively, have certain shareholders that would be considered “influential security holders” of each entity.

The following are considered our related issuers under Canadian securities laws (collectively the “Purpose Funds”)

· Purpose Mutual Funds: Purpose acts as investment fund manager and portfolio manager of these mutual funds/investment vehicles established as trusts or corporations under Ontario Laws. 

· Purpose Exchange Traded Funds: Purpose acts as investment fund manager and portfolio manager of these investment funds established as trusts or corporations under Ontario Laws the securities of which are listed on the TSX.

· PIP Mutual Funds: PIP acts as investment fund manager and portfolio manager of these mutual funds established as trusts or corporations under Ontario Laws.

The following is a list of related and/or connected issuers known to Harness. All of the following are related and/or connected issuers solely because of our relationship with the Corporate Issuer.

Corporate Issuers:

·  Purpose Unlimited Inc.

Investment Funds:

  1. Canadian Investment Grade Preferred Share Fund

  2. Big Banc Split Corp.

  3. Purpose Structured Equity Yield Portfolio (formerly Purpose Structured Equity Yield Portfolio II)

  4. Purpose Money Market Fund

  5. Purpose Cash Management Fund

  6. Purpose USD Cash Management Fund

  7. Foundation Wealth Equity Pool

  8. Foundation Wealth Income Pool

  9. Foundation Wealth Diversifier Pool

  10. Purpose Credit Yield Plus Fund

  11. Purpose Monthly Yield Plus Fund

  12. Black Diamond Impact Core Equity Fund

  13. Purpose Core Dividend Fund

  14. Purpose Tactical Hedged Equity Fund

  15. Purpose Monthly Income Fund

  16. Purpose Total Return Bond Fund

  17. Purpose Best Ideas Fund

  18. Purpose Real Estate Income Fund

  19. Purpose Canadian Equity Growth Fund

  20. Purpose Canadian Income Growth Fund

  21. Purpose Tactical Asset Allocation Fund

  22. Purpose Core Equity Income Fund

  23. Purpose Canadian Preferred Share Fund

  24. Purpose Marijuana Opportunities Fund

  25. Purpose Strategic Yield Fund

  26. Purpose Multi-Asset Income Fund

  27. Purpose Energy Transition Fund (formerly Purpose Climate Opportunities Fund)

  28. Purpose Enhanced Premium Yield Fund

  29. Purpose Global Resource Fund

  30. Purpose Special Opportunities Fund

  31. Purpose Global Bond Class

  32. Purpose Global Innovators Fund

  33. Longevity Pension Fund

  34. Purpose Silver Bullion Fund

  35. Purpose Diversified Real Asset Fund

  36. Purpose Multi-Strategy Market Neutral Fund

  37. Purpose Credit Opportunities Fund

  38. Purpose Select Equity Fund

  39. Purpose Structured Equity Yield Plus Fund (formerly Purpose Structured Equity Yield Plus Portfolio)

  40. Purpose Structured Equity Growth Fund

  41. Purpose Global Flexible Credit Fund (formerly Purpose Floating Rate Income Fund)

  42. MLD Core Fund

  43. PK Core Fund

  44. Purpose Gold Bullion Fund

  45. Purpose Healthcare Innovation Yield Fund

  46. Stonecastle Global Tactical Asset Allocation Fund

  47. Black Diamond Global Equity Fund

  48. Black Diamond Global Enhanced Income Fund

  49. Purpose High Interest Savings Fund

  50. Purpose US Dividend Fund

  51. Purpose International Dividend Fund

  52. Purpose Global Bond Fund

  53. Purpose US Cash Fund (formerly known as Purpose US Cash ETF)

  54. Purpose International Tactical Hedged Equity Fund

  55. Purpose Premium Money Market Fund

  56. Purpose Canadian Financial Income Fund

  57. Purpose Conservative Income Fund

  58. Purpose Premium Yield Fund

  59. Purpose Enhanced Dividend Fund

  60. Purpose Emerging Markets Dividend Fund

  61. Purpose U.S. Preferred Share Fund

  62. Purpose Bitcoin ETF 

  63. Purpose Ether ETF 

  64. Purpose Bitcoin Yield ETF

  65. Purpose Ether Yield ETF

  66. Purpose Crypto Opportunities ETF

  67. Apple (AAPL) Yield Shares Purpose ETF

  68. Amazon (AMZN) Yield Shares Purpose ETF

  69. Tesla (TSLA) Yield Shares Purpose ETF

  70. Berkshire Hathaway (BRK) Yield Shares Purpose ETF

  71. Alphabet (GOOGL) Yield Shares Purpose ETF

  72. Microsoft (MSFT) Yield Shares Purpose ETF

  73. Exxon Mobil (XOM) Yield Shares Purpose ETF

  74. JPMorgan Chase (JPM) Yield Shares Purpose ETF

  75. Johnson & Johnson (JNJ) Yield Shares Purpose ETF

  76. UnitedHealth Group (UNH) Yield Shares Purpose ETF

  77. Absolute Income Fund

  78. Purpose In-Kind Exchange Fund

  79. Purpose Specialty Lending Fund

  80. Purpose Specialty Lending Trust

  81. Sabius Private Institutional Mandate

  82. Purpose Bluerock Private Real Estate Fund

  83. Purpose Apollo Private Credit Fund

  84. Purpose Balanced Pool Fund

  85. Purpose Active Balanced Fund

  86. Purpose Active Growth Fund

  87. Purpose Active Conservative Fund

  88. Purpose Private Debt Fund L.P.

  89. Purpose Tactical Thematic Fund

  90. Purpose Pantheon Private Equity Fund

 

As a part of our business activities, we may buy or sell the securities of related/connected issuers including securities of the Purpose Funds or other securities offered by Purpose and/or PIP, or their affiliates, on behalf of our clients, exercise our discretionary power to buy or sell these securities pursuant to discretionary management agreements, or make recommendations in respect of these securities.  Before we exercise discretionary authority over securities of related or connected issuers including the Purpose Funds we are required to obtain your written consent. By entering into a discretionary investment management agreement with us at the time of account opening, you consent to Harness investing your assets in securities of related and connected issuers listed above including the Purpose Funds if such investment is suitable for you. We will do so in accordance with applicable securities laws and always in your best interests.  Nevertheless, it is important to note that Purpose and PIP may generate revenue as a result of our decision to invest your assets in Purpose Funds. We regularly assess the available Purpose/affiliate securities (including the Purpose Funds) to make sure our offerings remain appropriate and meet your financial needs.  We evaluate these securities using the same due diligence processes and ongoing monitoring as we use to evaluate non-Purpose funds and securities. We have compliance systems in place that review the suitability of the products and securities you hold in your account to ensure they are suitable for you and prohibit recommendations of products or services solely for the purpose of generating revenue for us or our affiliates without any benefit to you. We maintain a list of related/connected issuers which is updated regularly and is available on our website www.harnessinvest.ca/disclosure/related-issuers/.

For client referred by Purpose Financial Planning - Conflicts of Interest related to Related Wealth Advisor

In addition to the conflicts related to the types of securities Harness may invest in being issued by Purpose Investments Inc. and related companies, the client’s Wealth Advisor is also part of Purpose Unlimited acting in the capacity of Financial Planner.  The Wealth Advisor is paid from the assets under administration at Harness, at the client’s direction.    

Allocation of Investment Opportunities

We act for many clients and endeavour to allocate investment opportunities among all of our clients in a fair manner and not intentionally favour one client over another.  We have a trade allocation policy that is intended to ensure that allocations are determined on a basis that is fair, reasonable and equitable for all clients.

Security purchases and sales for multiple accounts may be grouped and submitted to the market together. The decision to group orders will take into consideration the investment profile of each client. When trades are grouped, each account will generally receive its pro rata share and the same blended price of each fill wherever practicable. In the event that securities are purchased for the accounts of more than one client and an insufficient number of securities are available to satisfy the purchase order, the securities available will be allocated pro rata based on the size of the accounts to the extent reasonably possible.  Trading commissions, if any, will be allocated to client account in the same manner as the security allocation.           

The basic purpose of this policy is to ensure fair treatment of all accounts and to avoid the appearance of favoritism or discrimination. There may be times, however, where strict application of this policy would not lead to a fair, practical and reasonable allocation. In such circumstances, allocation by a method other than this policy will be permitted, provided that such allocation produces a more fair and reasonable result.

Use of Client Brokerage Commissions/Soft Dollars

When placing orders for and on behalf of clients’ accounts, we will select brokers and dealers from whom we reasonably expect to obtain the best execution (after considering all transactions costs, research or other benefits.) Some brokers and dealers will make available research and trade execution services to us at no cost in exchange for executing a trade with them. This practice is commonly known as “soft dollar” arrangements. The use of these arrangements is permitted under applicable securities laws as long as we determine that the arrangements will be beneficial to our clients. The regulations also define what type of services can be provided to us under a soft dollar arrangement.

We have established a policy to assess when a proposed soft dollar arrangement would be beneficial to our clients. Any arrangement to which we agree is reviewed on an annual basis by senior management including the Chief Compliance Officer to ensure that the clients continue to receive a reasonable benefit from the services in relation to the total commission dollars paid.

Costs associated with soft dollar arrangements will not be applicable to investors participating in Harness’ online advice model.

Referral Arrangements

Your Wealth Advisor and Harness are parties to an agreement (the “Shared Services Agreement”) pursuant to which your Wealth Advisor will provide valuable services outside of investment related services to you, which may include financial planning, accounting or other such services to which Harness will satisfy itself are being performed from time to time, both at the entering into of this agreement and thereafter during the term of the agreement (the "Services").  Similarly, your Wealth Advisor may introduce clients to Harness and who may then receive PM Services from Harness. The role of your Wealth Advisor as part of this arrangement is to introduce prospective clients to Harness only. Your Wealth Advisor is not permitted to have any involvement with respect to the PM Services resulting from this introduction.

In making an introduction under the Shared Services Agreement, your Wealth Advisor shall not:

a) provide any advice to you about the suitability of the products or services provided by Harness;

b) monitor the progress or performance of products of Harness which you select or are invested in; or

c) be responsible or liable in any way for the PM Services provided to you by Harness.

This arrangement has the potential to create a conflict between your interests and those of your Wealth Advisor and its representatives because it could create an incentive for your Wealth Advisor and its representatives to introduce you to Harness regardless of whether the services offered by Harness are appropriate for you.  A select number of portfolio managers employed by Harness are also employed by a Wealth Advisor Firm. If your Portfolio Manager (a) earns all or part of the Services Fee paid from your Harness Account; and (b) is employed as an advising representative of Harness and receives an annual salary from Harness and may receive a bonus fee from Harness, this is a conflict of interest as the Wealth Advisor firm is incented to recommend Harness as portfolio manager. Harness will manage this conflict on review of the suitability of each account and will not onboard accounts not aligned to the service offering of Harness as Portfolio Manager. 

Furthermore, a conflict of interest also arises in certain circumstances where incentive compensation programs introduced by Harness from time to time, provide compensation to your Wealth Advisor out of Harness’ profits. These incentive programs may be related to an increase in Harness’ overall invested assets or other similar measures. However, the Shared Services Agreement creates no obligation, legal or otherwise, for your Wealth Advisor to refer you to Harness, and Harness is under no obligation to provide PM Services to you.

Additionally, Harness may occasionally be engaged in activities with your Wealth Advisor related to marketing and growth which may give rise to a perceived or real conflict of interest.  Harness will manage this conflict through reviews of marketing materials and oversight of practices related to client interactions with respect to marketing activities.

All PM Services will be provided by Harness in its capacity as portfolio manager receiving the introduction from your Wealth Advisor.

Finally, in certain circumstances, Harness may refer prospects or clients to Wealth Advisors also creating a conflict of interest.  In such circumstances, a specific disclosure will be provided to the prospect or client at the time of onboarding with the Wealth Advisor.

Personal Trading by Employees

Harness abides by a code of ethics which establishes standards of business conduct to prevent possible conflicts of interest between clients and employees, including receiving gifts and entertainment and trading for personal accounts. Every Harness employee is subject to our personal trading policies and procedures. The policies are intended to ensure that employees do not put their personal interests ahead of our clients. We encourage employees to invest alongside of our clients, but there are controls in place to ensure that they do not take advantage of their knowledge by trading in a manner that is inconsistent with our obligations to clients. The risk and impact to you is the potential for employee front running, and other prohibited trading practices. We mitigate this risk by ensuring employees who have direct knowledge of client assets, like portfolio managers, are required to request approval for trades in their personal accounts, or accounts in which they have a beneficial interest, for most securities.

Outside Activities

We have developed policies and procedures to cover any activities that employees may undertake outside of Harness, including directorships and volunteer positions. These policies are intended to ensure that any outside activity does not interfere or give the appearance of interfering with the employee’s ability to act in your best interest. Employees are required to notify and have the activity approved by the Chief Compliance Officer before undertaking the outside activity.

Multiple Entities (Mind and Management)

Officers and directors of Harness may hold additional roles with our affiliated entities in a dual capacity. This may potentially be a conflict due to the time commitment required by each role, and the handling of client information from one entity. To manage these conflicts, individuals are allotted sufficient time to responsibly discharge their duties with both entities and are bound by a strict prohibition from disclosing any confidential client information to any party other than the personnel of the respective entity.  

Service Arrangements with Affiliates

Harness engages the services of Advisor Solutions by Purpose (“ASP”) (at market rates or better) pursuant a Master Services Agreement. ASP operates as a service provider, delivering a range of shared services to its affiliates which may include, but are not limited to, technology, client support, human resources, and product development. In order to prevent the exchange of sensitive information among these entities, employees are committed to upholding the strictest standards of confidentiality, limiting information sharing only to authorized individuals. To mitigate different level of services provided to each entity, an employee of ASP does not receive compensation based on their service to one entity over another. As an additional measure, the compensation of compliance or supervisory staff is not linked to sales, revenue generation for the overall firm, or the individuals under their supervision.  

Shared Premises  

Harness shares premises with Purpose Unlimited and its affiliated entities, including Purpose Investments Inc., Advisor Solutions by Purpose, Foundation Wealth Partners Inc., and Driven by Purpose. Harness may also share premises with non-affiliated entities including Wealth Advisors. It is important to note that client information for each entity is held in strict confidence and is maintained separately, unless expressly authorized by law or with your consent to share such information. 

Marketing Incentive Practices  

From time to time, Harness may engage in sponsorship or extend donations to events, charities, or various organizations. This involvement places Harness in a situation where external factors might influence our contributions, potentially leading to motivations beyond pure philanthropy. The risk to you is the potential for us to introduce biases into our decision-making process. In response, Harness has implemented comprehensive guidelines to ensure contributions are executed in a transparent and ethical manner, while preserving integrity. 

Conflicts related to Margin Accounts

Harness reserves the right to exercise its discretionary authority to place your account in a debit position. This action may pose a heightened risk to you, including an increased exposure to market risks, the inherent leverage associated with margin trading, and additional operational charges such as interest fees. While the use of margin can enhance returns, it also amplifies potential losses. To mitigate these risks, we have implemented a robust framework of controls. These controls are designed to mandate that our portfolio managers diligently weigh these factors, ensuring alignment with your investment objectives and risk tolerance. Additionally, this approach is implemented in strict adherence to regulatory guidelines, further safeguarding your financial interests.

RELATIONSHIP DISCLOSURE INFORMATION

APPENDIX A

Sub-Adviser Details

This Appendix provides further details regarding the investment manager/sub-advisers offered by Harness service channel.  As outlined in the Relationship Disclosure Information document, the products available to you will be limited to those under the investment manager or sub-adviser you were referred to and your Harness service channel – Digital or ICS. If there is no suitable portfolio available from your preferred sub-adviser, Harness will recommend an alternative suitable solution.  At any time, please let Harness know if you want to know more about the available solutions.

* High Interest Savings account is available to all clients – regardless of Investment Manager/Sub-Adviser

**Management Fees and other Costs of your Account

Please refer to Schedule A of your Investment Management Agreement and your Investment Policy Statement for the specific fees and total costs associated with your account. For example, Harness Management Fees (i.e. for Digital or ICS Services) and Wealth Advisor fees may also apply. As well, your investment holdings may have management and/or operating expenses (i.e. fund MERs/TERs) associated with ETFs, mutual funds and/or pooled funds.

RELATIONSHIP DISCLOSURE INFORMATION

APPENDIX B
What to do When You Have a Complaint

Filing a complaint with Harness

If you have a complaint about Harness services or a product, contact us at:

Harness Investment Management Inc.

1128 Yonge Street, Suite 300

Toronto, Ontario M4W 2L8

(647) 417-0227

Attention: Compliance

You may want to consider using a method other than email for sensitive information.

Tell us:

Help us resolve your complaint sooner

Harness will acknowledge your complaint

Harness will acknowledge your complaint in writing, as soon as possible, typically within 5 business days of receiving your complaint. Harness may ask you to provide clarification or more information to help Harness resolve your complaint.

Harness will provide our decision

Harness normally provides the decision in writing, within 90 days of receiving a complaint. It will include:

If the decision is delayed

If Harness cannot provide you with the decision within 90 days, Harness will:

You may be eligible for the independent dispute resolution service offered by the Ombudsman for Banking Services and Investments (OBSI).

If you are not satisfied with Harness’ decision

You may be eligible for OBSI’s dispute resolution service.

If you are a Québec resident

You may consider the free mediation service offered by the Autorité des marchés financiers.

A word about legal advice

You always have the right to go to a lawyer or seek other ways of resolving your dispute at any time. A lawyer can advise you of your options. There are time limits for taking legal action. Delays could limit your options and legal rights later on.

Taking your complaint to OBSI

You may be eligible for OBSI’s free and independent dispute resolution service if:

·     Harness does not provide the decision within 90 days after you made your complaint, or

·     you are not satisfied with Harness’  decision

OBSI can recommend compensation of up to $350,000.

OBSI’s service is available to Harness clients. This does not restrict your ability to take a complaint to a dispute resolution service of your choosing at your own expense, or to bring an action in court. Keep in mind there are time limits for taking legal action.

Who can use OBSI

You have the right to use OBSI’s service if:

Time limits apply

Filing a complaint with OBSI

Contact OBSI

Email: ombudsman@obsi.ca

Telephone: 1-888-451-4519 or 416-287-2877 in Toronto

Information OBSI needs to help you

OBSI can help you best if you promptly provide all relevant information, including:

OBSI will investigate

OBSI works confidentially and in an informal manner. It is not like going to court, and you do not need a lawyer.

During its investigation, OBSI may interview you and representatives of our firm. Harness is required to cooperate in OBSI’s investigations.

OBSI will provide its recommendations

Once OBSI has completed its investigation, it will provide its recommendations to you and to Harness. OBSI’s recommendations are not binding on you or Harness.

OBSI can recommend compensation of up to $350,000. If your claim is higher, you will have to agree to that limit on any compensation you seek through OBSI. If you want to recover more than $350,000, you may want to consider another option, such as legal action, to resolve your complaint.

 

For more information about OBSI, visit www.obsi.ca