Ground Rules

August 1, 2013

Our goal with our monthly letters has been to describe the philosophy that underpins our investment operation in a relatively brief but frequent manner.  We have outlined the “Ground Rules” of the Ewing Morris Opportunities Fund LP.  These “Ground Rules” provide us with the core principles that underpin our firm and provide our investors with a framework to think about our operation.

Ewing Morris Ground Rules

1. We believe a common sense approach to investing in a limited number of carefully-selected and understandable businesses, run by able management and purchased at appropriate prices, is the best way to generate sustainable long-term results.

2. We will communicate candidly with our investor base whether good news or bad.
The most important asset we have as a firm is the limited partners that are invested in the Partnership.  Anything we do that might compromise your trust and confidence undermines our entire operation.

3. We will make operational excellence and best-in-class service a priority. This includes protecting confidential client information, safeguarding assets, minimizing reporting errors and tax mistakes, and partnering with first-rate service providers.

4. The Partnership’s rate of return will be shown net of all fees and expenses.  Many investment firms show returns gross of fees which we believe is misleading.  You should keep this in mind when you are comparing our results to others.

5. We believe a 10-year Government of Canada bond represents a “risk-free” long-term investment.  In the last decade, the average yield on this bond is 2.7%.  Consequently, we believe 4% is a reasonable hurdle rate.

6. Our Fund provides for a perpetual highwater mark. This means we only get paid for “new” results, not for recovering losses. We believe this is a fair way to share in true long-term investment success.

7. We cannot guarantee any rate of return, but we can promise that:

a. We will protect capital and minimize the probability of permanent capital loss by investing with a large margin of safety.

b. We will invest the bulk of our net worth into the Partnership on exactly the same terms as our limited partners.

c. We will measure our success based on the absolute returns provided to limited partners over time.

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