April 29, 2009

1. Thomas G. Kennedy Chief Compliance Officer Fiduciary & Investment Risk Management Association 23rd Annual National Risk Management Training Conference Conflicts of Interest April 29, 2009 The views presented herein are those of the presenter and do not necessarily represent the views of Arden Asset Management LLC. This presentation should not be considered tax, legal or investment advice.

2. Agenda • Overview of Conflicts of Interest • Effective Conflicts Management Program • Effective Control for Conflicts of Interest/Self Dealing • Investment Management and Trading Conflicts • Conflicts among Clients • Conflicts between the Client and the Adviser • Conflicts between the Client and Adviser’s Personnel • Conflicts of Interest – Disclosure Obligation • How to disclose conflicts in Form ADV • Where else to disclose • Limits of disclosure 1

3. Conflicts of Interest • Advisers can handle their conflicts of interest and remain within an acceptable level of regulatory compliance one of two ways: • Eliminate the arrangements or activities that create the conflict. • Disclose each conflict fully and fairly and then manage the adviser’s affairs so the impact of a conflict on clients and fund investors will be consistent with the disclosures made. 2

4. What is a Conflict? • Any activity or relationship in which an adviser’s interests compete with the interests of its clients • Competing interests that may incline an investment adviser - consciously or unconsciously – to render advice that is not disinterested. • Conflicts may involve divided loyalty as well as self-dealing. • Suggestion: “Follow the Money”- Fee differentials, performance fees, compensation to affiliates, compensation from third parties. 3

5. Conflicts of Interest – Regulatory Focus • Cutler • “[T]here’s another reason why you should be thinking hard about conflicts of interest these days: the SEC and the entire regulatory community are doing so.” • Compliance Program (Rule 206(4)-7) • “[E]ach adviser, in designing its policies and procedures, should first identify conflicts and other compliance factors creating risk exposure for the firm and its clients…and then design policies and procedures that address those risks.” • 2004 Conflicts Inquiry (sweep) 4

6. •Strong management commitment to “Culture of Compliance”. •Qualified sales and investment management staff, committees, product managers, - - and legal, risk and compliance managers. •Well defined risk identification/assessment process, and policies & procedures - applicable to product design & management, sales practices, suitability, portfolio -- management/fiduciary oversight and testing of each that are customized to meet ---- the incremental risks involved in your business. •Effective disclosures, documentation, review, communications & training ---------- programs customized for products and services to ensure that there is no lapse or - diminishment of compliance and control. Robust approvals, monitoring/ surveillance, testing and reporting (including escalation & corrective action follow-up) built into investment and portfolio management sales and trading procedures. Effective Conflicts Management Program 5

7. •Most investment advisers/funds should require board and management delegations of fiduciary investment discretion only to appropriately qualified officers, committees, or agents. •This governance framework must be imbedded in business supervisory procedures that designate/delegate responsibilities to responsible officers and/or committees. They need to be customized to each business, and specify in writing, how such functions and each of the specific risks associated with the functions will be overseen. •Roles and responsibilities of titles and functions like Chief and Senior Investment Officer, Portfolio Team Leader, Portfolio Manager, Investment Committees, Manager Selection Committees, Fiduciary Review Committees, and Product Manager should be defined. •Competent Legal, Risk and Compliance Managers are required to be designated to support these activities with defined roles and responsibilities. Effective Conflicts Management Program 6

8. Compliance Program (Rule 206(4)-7) •An Adviser’s program should proactively identify when interests of the Adviser conflict with those of the fiduciary client or beneficiary. •Use of Risk and Responsibility Matrix Tools. Product Approval (Rule 206(4)-7) •Product approval process can foster development and implementation of appropriate procedures to ensure products/transactions in portfolio management and trading are reviewed for conflicts of interest, including specific legal counsel involvement to determine whether client consent is necessary/possible. •Conflicts disclosed to clients, at minimum where required by applicable law, and ensure that applicable law does not require avoidance by declining a transaction or activity. Effective Controls for Conflicts of Interest/Self Dealing 7

9. Investment Management and Trading Conflicts • Conflicts Among Clients, Rule 206(4)-7 • Allocation of investment opportunities. - Look for opportunities to formalize recordkeeping. - Disclose how trades are allocated. - Test for dispersion among accounts, between higher fee accounts and lower fee accounts, and accounts managed for insiders. • Batching of client trades. - Ensure clients are getting best execution. • Trade sequencing. - Ensure no accounts are disadvantaged. 8

10. Conflicts Between Clients and the Adviser • Gifts and entertainment. Rule 206(4)-7 • Review and approve all gifts and monitor business entertainment. • Valuation. • Ensure valuation procedures provide for fair valuation and have sufficient independence from portfolio management. • Recommendation of securities in which adviser has a financial interest. • Ensure identified, disclosed and understood. 9

11. Conflicts Between Clients and the Adviser (continued) • Trading with affiliates. • Ensure brokerage transactions are disclosed and not directed to affiliates inappropriately (best to avoid). • Test commissions paid. • Trading in affiliated securities. • Disclose in the IM, PPM, and ADV. • Test for best execution. • Use of affiliated service providers. • Ensure disclose, ensure arms length demonstrate selection criteria. • Application of overhead expenses to funds. • Ensure reasonable and disclosed. 10

12. Code of Ethics (Rule 204A-1) • Adoption of methods that prevent the use of material non-public information in connection with the purchase, sale or other disposition of fiduciary assets. •Preference is to keep those engaged in discretionary fiduciary activities on the public side of the bank’s information barriers, separate from the investment banking activities of the firm. •Maintain Codes of Ethics for asset management businesses that require pre-clearance, blackout periods and surveillance. These same procedures are often used to prevent conflicts of interest, such as front running. •Code of Ethics disclosure of outside activities, with emphasis on capacities that may involve exercise investment discretion or business ventures that conflict with Adviser’s fiduciary roles. Conflicts Between Clients and Advisory Personnell 11

13. Conflicts of Interest – Disclosure Obligation • Fiduciary Duty • Affirmative duty to act in utmost good faith and provide full and fair disclosure of all material facts. • Regulatory Requirements • Affiliated transactions. • Cash referral fee arrangements. • Proxy voting procedures. • Code of Ethics • Form ADV, Part 2 • 2008 Proposal – Focus on disclosure of policies and procedures. • 2008 Proposal – Focus on identifying conflicts of interest and then explaining how the investment adviser address or attempts to mitigate those conflicts. - “describe generally how you address these conflicts” 12

14. Conflicts of Interest – Disclosure • How to Approach Disclosure • Start with Form ADV and form agreements (and for Funds, PPM). • Consider whether there are additional issues not covered in Form ADV etc. • Augment conflicts assessment/inventory to create map of relevant disclosures. • Consider any updates to disclosure as part of annual testing under Rule 206(4)-7. • How to Disclose • In writing. • In plain English. • Taking into consideration client’s level of financial sophistication. • Narrative brochure designed to provide advisers with sufficient flexibility to present and explain their business practices in a clear and meaningful way. 13

15. Conflicts of Interest – Form ADV Disclosure • Item 5 – Fees and Compensation • Disclose receipt of compensation attributable to the sale of securities or other investment products, including mutual and distribution and service fees. • Explain that this practice creates an incentive to base investment recommendations on the amount of compensation received. • Part 2B, Item 4 – Other investment-related business or occupation. - Disclose the receipt of commissions, bonuses or other compensation (including mutual fund distribution or service fees) based on the sale of securities or other investment products, including as a broker-dealer or registered representative. • Item 6 – Performance Fees and Side-By-Side Management • Disclose receipt of performance fees. • Explain conflicts associated with side-by-side management, including incentive to favor accounts that pay performance fees. 14

16. Conflicts of Interest – Form ADV Disclosure (continued) • Item 10 – Other Financial Industry Activities and Affiliations • Disclose relationship or arrangements with related persons that are material to your advisory business or to clients. • Disclose the receipt of direct or indirect compensation or business relationships with other investment advisers you may recommend or select for your clients. • Part 2B, Item 4 – Other investment-related business or occupation. - Describe any material conflicts of interest with clients caused by the supervised person’s other financial industry activities. 15

17. Conflicts of Interest – Form ADV Disclosure (continued) • Item 11 – Code of Ethics, Participation or Interest in Client Transactions and Personal Trading • Disclose whether you recommend to clients, or buy or sell for client accounts, securities in which you or a related person has a material financial interest. • Disclose whether you invest in the same securities (or related securities) that you or a related person recommends to clients. • Disclose whether you recommend securities to clients, or buy or sell securities for client accounts, at or about the same time that you or a related person buys or sells the same securities for your own account. 16

18. Conflicts of Interest – Form ADV Disclosure (continued) • Item 12 – Brokerage Practices • Research and other soft dollar benefits. • Brokerage for client referrals. • Directed brokerage. • Trade aggregation and bunching practices. • Item 14 – Payment for Client Referrals • Describe any arrangement where a non-client provides an economic benefit (including sales awards or other prizes) to you for providing investment advice or other advisory services to your clients. • Describe any arrangement where you or a related person directly or indirectly compensates a third party for client referrals. • Part 2B, Item 5 – Additional Compensation. - Describe any arrangement under which a non-client provides an economic benefit (including sales awards or other prizes) for providing advisory services. 17

19. Conflicts of Interest – Form ADV Disclosure (continued) • Item 17 – Voting Client Securities • Describe how you address conflicts of interest between you and your clients with respect to voting their securities. • Describe whether you pay for proxy voting services with soft dollars or pass the cost to clients. • Appendix 1 – Wrap Fee Brochure • Disclose whether any of your related persons act as portfolio managers. • Disclose whether related person portfolio managers are subject to the same selection and review as the other portfolio managers that participate in the program. If they are not, describe how you select and review related person portfolio managers. 18

20. Conflicts of Interest – Disclosure • Where to disclose • Form ADV. • Advisory agreements. • Fund offering documents. • Prospectuses and statements of additional information. • “Relationship” brochures. • Website disclosure. • Client inquiries and RFPs or RFIs. - Describe your firm’s overall philosophy regarding conflicts and how they are managed (e.g., oversight committee, new product committee, governance committee). - Describe your firm’s process for identifying and evaluating c conflicts. - Describe how your compliance program is designed to identify, monitor and address those conflicts. 19

21. Conflicts of Interest – Disclosure (continued) • Limits of Disclosure • Client consent. • Retirement accounts – prohibited transactions. • Disclosure generally cannot cure breach of duty of care. • Can disclosure cure a conflict that is ultimately unfair? 20

22. Regulators expect you to be on top of conflicts Strong commitment to “Culture of Compliance” Design program to identify and manage conflicts, and then test it. Disclose, Disclose, Disclose. Disclosure doesn’t always do it. Conclusion 21

23. IMPORTANT DISCLOSURE INFORMATION The views presented herein are those of the presenter and do not necessarily represent the views of Arden Asset Management LLC.. The accompanying material is was intended for information purposes only, and does not constitute a description of Arden’s investment or risk management processes. In addition, the opinions, forecast, assumptions, estimates and commentary contained in this presentation are based on the presenter’s varied experience and provided on an informal basis. This presentation should not be considered tax, legal or investment advice Further, any opinions, forecasts, assumptions, estimates and commentary are made only for information, and are subject to change at any time without prior notice. Nothing herein constitutes an offer to sell, or solicitation of an offer to purchase, any securities, nor does it constitute an endorsement with respect to any investment area or vehicle. The presenter has no obligation or responsibility to update or supplement these materials. No warranty is given as to whether any information contained herein is current and the presenter assumes no obligation or responsibility for the accuracy of the information. Some information contained herein has been obtained from third-party sources, and such information has not been independently verified. No representation, warranty, or undertaking, express or implied, is given as to the accuracy or completeness of the information contained in this material; no reliance may be placed for any purpose on such information; and no liability is accepted by any person for the accuracy and completeness of any such information. 22