BEST EXECUTION POLICY

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2 TABLE OF CONTENTS I. INTRODUCTION... 2 II. BEST EXECUTION AND EXECUTION FACTORS... 2 III. SECURITIES SUBJECT TO THE POLICY... 5 VI. METHODS OF EXECUTION... 8 V. EXECUTION VENUES VI. ORDER ALLOCATION AND AGGREGATION POLICY VII. EXEMPTIONS FROM THE PROVISION OF BEST EXECUTION VIII. MONITORING AND REVIEW info@constancei.com Page 1 of 15

3 I. INTRODUCTION Constance Investment Ltd (Constance Investment or We, Us) provides those investment and ancillary services and/or perform those investment activities in relation to those financial instruments, as specified in its authorization, always on the condition that it holds such an authorization from the Commission. Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC, as the same may be in force from time to time and modified or amended from time to time, which was implemented in the Republic of Cyprus by the Investment Services and Activities and Regulated Markets Law of 2007 (Law 144(I)/2007) and the Cyprus Securities and Exchange Commission DIRECTIVE DI and /or as the same may be in force from time to time and modified or amended from time to time and as amended and supplemented by the directives adopted by the Cyprus Securities and Exchange Commission (we will further refer to them as the Law). Following the requirements of the Law, when executing client orders and for the purposes of ensuring that Constance Investment takes all reasonable steps to obtain the best possible result for its clients, Constance Investment shall at all times comply with this Best Execution Policy. The Constance Investment is obliged to execute order on the most favorable terms whenever executing orders on financial instruments on behalf of Clients classified as Professional or Retail Clients. The purpose of this document is to inform Clients about the Constance Investment s order execution policy. II. BEST EXECUTION AND EXECUTION FACTORS The Constance Investment's intention is to apply consistent standards and operate the same processes across all markets, clients and financial instruments. We have also made plans to provide you and other market participants with access to tradable prices on a nondiscriminatory basis whenever possible. However, the kinds of orders that you may place, what Constance Investment understands of your intentions as well as the diversity of markets and instruments, mean that different factors play a role in relation to any particular transaction. info@constancei.com Page 2 of 15

4 When establishing its best execution policy, Constance Investment determines the relative importance of the factors related to execution and implements effective arrangements in order to deliver the best possible result to its clients, meaning such result that is determined by Constance Investment to be obtainable with due regard to and after taking such reasonable steps as are provided in this Best Execution Policy. Subject to any specific client instruction, when executing client orders (meaning where Constance Investment directly executes client orders, directly executes discretionary investment management decisions to deal on behalf of clients, transmits client orders to other entities for execution, places discretionary investment management decisions to deal on behalf of clients with other entities) Constance Investment takes into account the following execution factors (unless otherwise instructed by you, as discussed in Section III below): Price; Costs; Speed; Likelihood of execution and settlement (liquidity); Size; Nature; Type and characteristics of financial instrument; Characteristics of the possible execution venues; and Any other consideration relevant to the execution of the order. While price is generally a key factor, the overall value to a client of a particular transaction may be affected by the other factors listed above. Constance Investment exercises discretion, in the absence of express client instructions stating otherwise, in determining the relative importance of the execution factors by using its professional judgment and experience in light of market information available and taking into account the execution criteria which are the characteristics of: the characteristics of the client, including the categorization of the client as retail or professional; info@constancei.com Page 3 of 15

5 the characteristics of the client order; the characteristics of the financial instrument that is the subject of the order; the characteristics of the execution venues or entities to which that order can be directed. For example, there is no formalized market or settlement infrastructure for some over-thecounter transactions, in some markets price volatility may mean that the timeliness of execution is a priority, whereas on an illiquid market the fact of execution may in itself constitute best execution. For Retail Clients we will focus on the net cost (or net proceeds in the case of a sale) of executing the order on the venues available, and will direct the order to the execution venue or entity providing the best possible result in terms of total consideration when selecting the possibilities to execute the Order. The total consideration also comprises, in addition to the price of the financial instrument, the costs associated with executing the order and other factors, for example - speed, likelihood of execution and settlement, the size and nature of the order, market impact and any other implicit transaction costs, clearing and settlement fees as well as other fees paid to third parties participating in the execution of the order and give them precedence over the immediate price and cost factors if they are instrumental in delivering the best possible result in terms of the total consideration to the retail client. Ordinarily, price will merit a high relative importance in obtaining the best possible result for professional clients. The concept of total consideration is relevant for the assessment of best execution for professional client orders too, as it is unlikely to act reasonably to give a low relative importance to the net cost of a purchase or the net proceeds of a sale. There may be circumstances, however, where other factors will be more important for professional clients and MiFID clearly allows firms flexibility in this regard. In our experience, the next most important factor after price is typically liquidity of the market. However, in certain circumstances, for some client orders, financial instruments or markets, we may decide that other factors may be more important in determining the best possible execution result in line with our order execution policy. Where you provide us with a specific instruction in relation to your entire order, or any particular aspect of your order, including selection of a particular venue, we will execute the order in accordance with your instructions. For instance, we will deem the receipt of orders via Direct Market Access systems where you have selected the execution venue as a "specific instruction" to execute your order on that venue. Please note that a specific instruction may info@constancei.com Page 4 of 15

6 prevent us from following some or all of the steps in our order execution policy designed to achieve the best possible result for your orders. In following your instructions, we will be deemed to have taken all reasonable steps to provide the best possible result in respect of the order or aspect of the order covered by your specific instructions. Therefore, if you require your order to be executed in a particular manner and not in accordance with our order execution policy, you must clearly state your desired method of execution when you place your order. To the extent that your specific instructions are not comprehensive, we will determine any non-specified components in accordance with our order execution policy. Therefore, you have been warned that the specific instructions provided by you in relation to an entire order or any particular aspect of an order may prevent Constance Investment from taking the steps that it has designed and implemented in this Best Execution Policy to obtain the best possible result for the execution of the orders in respect of the elements covered by those instructions. III. SECURITIES SUBJECT TO THE POLICY Constance Investment execution policy addresses the different classes of instrument for which Constance Investment carries out orders, including, but not limited to: Transferable securities and units in collective investment schemes, for which the Constance Investment carries out orders. For the purposes of best investment protection the Constance Investment strongly recommends the clients or potential clients qualified under the Law rules as retail customers to enter in the most part into transactions in exchange listed securities the volatility of which is under control of the relevant market regulators. Assessing the risks involved in relation to various financial instruments the Constance Investment advises the clients falling within a retail customer category to assume for trading the noncomplex financial instruments, including but not limited to shares and depositary receipts in respect of shares admitted to trading on a regulated market or in an equivalent third country market, money market instruments awarded the highest available credit rating by relevant competent rating agencies, bonds or other forms of securitized debt (excluding those bonds or securitized debt that embed a derivative), UCITS, etc. info@constancei.com Page 5 of 15

7 Constance Investment acting in best interests of the clients suggests to the clients or potential clients who are classified as retail clients under the Law refrain from execution of trades either in exchange tradable vanilla instruments, that is in the most basic or standard version of a derivative instruments admitted to trading on a regulated market or in an equivalent third country market, or in exotic derivative instruments, which alter the components of a traditional derivative instrument, resulting in a more complex security where an additional contingency is added. The clients are warned that complex financial instruments are not appropriate for all categories of investors and retails clients are requested to seek professional advice before instructing Constance Investment to execute any order in respect of complex financial instruments. The evaluation should assess the intelligibility of the risk-reward profile, the level of leverage, and all the various risk components of the product (including market risk, credit/counterparty risk and liquidity risk). The following categories of financial instruments are considered to be complex financial instruments, financial instruments that have any of the following characteristics or a combination of such characteristics of complex products. Complexity is a relative term, and depends on the risk-reward profile and other characteristics of the product. The products should generally be considered as complex when: (i) they are derivatives, or embed a derivative; and/or (ii) they are made up of one or more underlying financial instrument(s) that are difficult to value, or are combined in such a way so as to make it difficult to assess the risks involved and the likely performance scenarios; and/or (iii) they use more opaque indices that are for example set up by the product manufacturer, rather than using standard market indices; and/or (iv) have a fixed investment term of a number of years with barriers to exit (that are not clearly explained) - whether that is due to the lack of a secondary market, or significant penalties or losses on early exit; and/or (v) have returns/pay-off structures involving multiple variables or complex mathematical formulas; and/or (vi) include capital protection that may be conditional or partial, or that can be withdrawn on the occurrence of certain events. The following specific products should be considered as examples of complex products: info@constancei.com Page 6 of 15

8 derivatives relating to underlying securities units currencies interest rates yields or commodities; etc. Overall, the vast majority of structured products can be considered as complex products. Therefore, to enter in the transaction with the complex products the retail clients shall demonstrate that they have sufficient financial knowledge and experience to understand the key features, benefits and risks involved in an investment and such evidence shall be provided to Constance Investment, whether the retail client has experience from past transactions regarding the same or similar complex in which the client is willing to trade. For the purposes of best investment protection the Constance Investment strongly recommends the clients or potential clients qualified under the Law rules as retail customers to enter in the most part into transactions in exchange listed equities the volatility of which is under control of the relevant market regulators. Assessing the risks involved in relation to various financial instruments the Constance Investment advises the clients falling within a retail customer category to assume for trading the noncomplex financial instruments, including but not limited to shares and depositary receipts in respect of shares admitted to trading on a regulated market or in an equivalent third country market, money market instruments awarded the highest available credit rating by relevant competent rating agencies, bonds or other forms of securitized debt (excluding those bonds or securitized debt that embed a derivative), UCITS, etc. However, if the Constance Investment has received a sell order from its client for securities that are not regularly traded on regulated markets (financial instruments exchanges), the Constance Investment has discretion to forward such orders to other financial firms that solicit investment in such securities on the terms most favorable to the client. Further it should be noted that Constance Investment may not be able to accept certain orders of the said type, depending on the issue of the order for instruments that are not regularly traded on regulated markets: info@constancei.com Page 7 of 15

9 Options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash. Constance Investment acting in best interests of the clients suggests to the clients or potential clients who are classified as retail customers under the Law refrain from execution of trades either in exchange tradable vanilla instruments that is in the most basic or standard version of a derivative instruments admitted to trading on a regulated market or in an equivalent third country market or in exotic derivative instruments, which alter the components of a traditional derivative instrument, resulting in a more complex security where an additional contingency is added. In situation where the client proceeds with the execution of a trade in an instrument found by Constance Investment to be unsuitable for the client and confirms its instruction to proceed with unsuitable trade in writing Constance Investment may at its sole discretion execute such trade on an execution only basis VI. METHODS OF EXECUTION When executing orders on your behalf in relation to financial instruments as defined by MiFID, we will take all reasonable steps to achieve what is called "best execution" of your orders. This means that we have in place a policy and procedures designed to obtain the best possible result for your orders, subject to and taking into account any specific instructions from you, the nature of your orders and the nature of the markets and products concerned. We have set out below information on the factors taken into account in selecting the types of venues on which we will most regularly seek to execute your orders. While we will take all reasonable steps to satisfy ourselves that we have processes in place that can reasonably be expected to lead to the delivery of the best possible result for our clients, we cannot guarantee that we will always be able to provide best execution of every order executed on your behalf, particularly where you give us specific instructions as to all or part of your order. info@constancei.com Page 8 of 15

10 a) Exchange trading In situations where the security is listed on one financial instruments exchange (single listing), Constance Investment forwards the order to such financial instruments exchange or if the security is listed on two or more financial instruments exchanges (multiple listing), forwards the order to any financial instruments exchange at its discretion based on the available market price, trading volume and other factors for a certain period of time. However, the foregoing does not apply in exceptional circumstances including, but without limitation, where Constance Investment determines based on the trading volume and other factors related to the security during a certain period of time that there is no substantial difference in liquidity among the financial instruments exchanges, and where the trading volume on a particular financial instruments exchange is expected to be larger than usual due to certain market factors. In such a case, the order is forwarded to a financial instruments exchange selected by Constance Investment taking into account the liquidity and expected market impact of the order. Constance Investment will provide detailed information about its selection to clients upon request. If Constance Investment is not a participating member nor has a membership in a financial instruments exchange to which the client order is to be forwarded under best execution policy Constance Investment will forward such order to that financial instruments exchange through an exchange participating member with whom Constance Investment has made a relevant prior agreement. Nevertheless there may be other factors that may influence choice of exchange which are described in Terms of Business. b) The Execution Policy on derivatives trading outside regulated markets. Where we execute an order on your behalf in respect of derivatives, such as forwards, futures and options on a regulated exchange, multilateral trading facility or OTC, we also will apply the same approach to achieving best execution as when we execute orders on your behalf in other financial instruments on such venues. Upon relevant client instruction Constance Investment may execute client orders outside a regulated market or MTF against a principal position, thereby acting for the client as an execution venue where prices shall reflect the current market prices Constance Investment info@constancei.com Page 9 of 15

11 can obtain taking into account the factors and criteria described above or may cross/match the client order with a relevant order of another Constance Investment client in which case Constance Investment will only give prices that have been communicated to Constance Investment by other clients operating in the same market and therefore any best result of such trade will solely be within these limits. No orders for the execution of trades outside regulated markets or MTF can be executed in the absence of the prior client instruction reflecting client express consent to enter into this type of transaction. c) Margin trading Margin trading is more aggressive and involves a higher degree of risk than an ordinary trading. A client may use margin to purchase securities for which it does not have available cash or borrow them on naked shortselling. These activities could lead to substantial losses on the client s account in the event of a market downturn or uprise. Margin trading is suitable only for those clients who fully understand its nature and who can bear the responsibility and increased risk. In this light, Constance Investment acting in best interests of the clients suggests to the clients or potential clients who are classified as retail customers under the Law refrain from margin trading for the purposes of best investment protection. In all cases Constance Investment risk management policies and procedures shall apply. The clients or potential clients who are qualified as retail customers under the Law are kindly requested to note that Constance Investment negotiates a margin level with clients on the case-by-case basis. V. EXECUTION VENUES In order to give effect to the execution policy Constance Investment selects the execution venues that enable it to obtain on a consistent basis the best possible result for the execution of client orders and decisions to deal in financial instruments listed in Part III of the Law 144(I)/2007. The execution venues are the sources of liquidity that Constance Investment accesses for each of the financial instruments in respect of which Constance Investment execute client orders. These venues include: Regulated markets and other exchanges to which Constance Investment has permanent access; Multilateral trading facilities operated either by Constance Investment or a third party; info@constancei.com Page 10 of 15

12 Systematic internalisers; Market makers and other liquidity providers; Non-EEA entities performing a similar function to any of the above. The aforesaid obligation to take all reasonable steps to obtain the best possible result for the client should not be treated as requiring Constance Investment to include in its execution policy all available execution venues. Constance Investment may therefore place client orders at other execution venues in order to provide best execution and investment protection to its clients. There may be situations when we pass an order to another entity of our group or a third party broker for execution. We may pass an order to an affiliated entity in cases where we do not have the ability to execute the order but the affiliated entity does have that ability, in order to execute orders in financial instruments traded on execution venues where Constance Investment is not a member, we may execute your orders by transmitting them to intermediaries with membership on or access into these marketplaces. The choice of these intermediaries is performed through a continuous evaluation of the intermediaries ability to offer quality execution and service. These financial intermediaries are selected by means of an evaluation process that takes into account their ability to offer the best possible result in the execution of orders transmitted to them. In such cases, we have standard procedures and integrated systems for passing orders to our affiliate for execution. Moreover the Constance Investment will ensure that these third parties have an order execution policy enabling the Constance Investment to fulfil its general obligation to execute orders on the most favourable terms for its Clients. In cases where our affiliate is outside of the EEA and we do not have an entity that can execute the order from within the EEA our non-eea affiliate may not be subject to requirements similar to the best execution requirements under the Cypriot Law. We may nevertheless execute your order through our affiliate unless either the circumstances require otherwise or you explicitly instruct us otherwise and we are able to follow your instructions to use an alternative venue. If we are not able to follow your instructions, we may not be able to accept your order. We may pass an order to a non-affiliated third party broker or dealer to execute your order. In such cases, we have processes to review periodically our choice of third party brokers and dealers to ensure that, taking into account all the relevant factors, the third party broker or dealer is providing best execution on a consistent basis. In some cases, info@constancei.com Page 11 of 15

13 however, we may make this determination on the basis of a review of the best execution policy of the relevant broker or dealer. We may also transmit orders to exchanges via direct market access (DMA) connectivity provided by other brokers. This list contains those intermediaries that Constance Investment uses as execution venues and on which Constance Investment places significant reliance. Constance Investment will regularly assess the list of intermediaries available and update it where necessary. Constance Investment may use other execution venues and venue types where we deem it appropriate in order to provide Best Execution on a consistent basis. Constance Investment utilizes the services of the following prime brokers: - Interactive Brokers LLC - Interactive Brokers (U.K.) LTD - BrokerCreditService (Cyprus) Limited - Otkritie Capital International Limited - Castle Harbour Securities Limited Clients should, therefore, periodically refer to this TOBs Appendix for any updates. VI. ORDER ALLOCATION AND AGGREGATION POLICY Constance Investment keeps the record of all client orders, including precise date and time of receipt. Upon receipt of client order Constance Investment proceeds with transmitting the order to a relevant organized market and arranges for a practicable soonest execution of the order. All orders are executed on First come, first served criteria with respect to the mode in which the order is communicated, e.g. in case when two equivalent market orders are transmitted through the electronic trading system, the first received order must be transmitted or executed before the second (save that all other things equal), but in case when one order is communicated by phone and the second is transmitted through electronic info@constancei.com Page 12 of 15

14 trading system, faster execution of the second order is more probable by virtue of speed advantages attributable to electronic trading system. In general, Constance Investment shall act according to client trade Order as soon as practically possible and within a time frame reasonably seen in the context of the nature of the Order. Unless otherwise agreed between Constance Investment and the Client, Constance Investment shall exert all reasonable efforts to execute trade Orders within the business day when Constance Investment receives the respective Order. If Constance Investment fails to execute the Order within the abovementioned term such Order shall be considered cancelled upon closing of a relevant trading session. However if, after the Order is received, Constance Investment believes that it is not reasonably practicable to act upon such Order within a reasonable time, Constance Investment may defer acting upon this Order until it is, in Constance Investment reasonable opinion, practicable to do so provided that immediate notification is made to the Client over phone or in writing and the Client expressly consents to deferred execution of such Order. In certain market circumstances Constance Investment may aggregate client orders related to the same financial instrument due to the following reasons: Execution of an aggregated order may result in lesser execution costs; Execution of an aggregated order is the most suitable type of execution due to certain characteristics of the transaction, i.e. the transaction is based upon a takeover or mandatory bid, etc.; The large size of aggregated order may result in more advantageous prices for the clients. By consenting to this Best Execution Policy, the client consents to aggregation of client order with client orders of other clients of Constance Investment, provided that Constance Investment determines, with regard to the information available, that such conditions have been satisfied. In case of partial execution of the aggregated order, the trade shall be allocated among the clients, whose orders were aggregated, on sequential basis as described above, irrespective of price and volume of each client order. Where it is not possible to allocate any part or all (as applicable) of the trade on sequential basis as described above, Constance Investment shall allocate such part or all (as applicable) of the trade: info@constancei.com Page 13 of 15

15 equally among the clients whose orders were aggregated, irrespective of price and volume of each client order, provided that such part or all (as applicable) of the trade is capable of being allocated equally; or to such clients, whose client orders permit allocation of such part or all (as applicable) of the trade to them by reference to volume of each client order, but irrespective of the price of each client order, provided that such part or all (as applicable) of the trade is not capable of being allocated equally and such allocation is performed on sequential basis as described above. By providing express consent to aggregation of any client order, the client confirms its understanding that the effect of aggregation may work to its disadvantage in respect of a particular order, including that it may not be possible to cancel the client orders that have been aggregated, that the speed and likelihood of execution may be reduced, that settlement reliability may be negatively affected, that the difference in price and costs may not be significant or may not convey sufficient benefit to the client and that, in case of partial execution, Constance Investment shall allocate the trade in accordance with the principles described above. In case of partial execution of the aggregated order, the trade shall be allocated among the clients on a pro rata basis irrespective to price and amount of each client order. Constance Investment may not aggregate client orders and transactions for own account unless such aggregation is unlikely to result in disadvantages for any client or each client is notified on possibility of his or her disadvantages caused by aggregation and agreed to proceed. Anyway, in case of partial execution of aggregated order Constance Investment is prohibited to allocate the trades concluded on the basis of aggregation of client orders with transactions for own account in a manner detrimental to the client. info@constancei.com Page 14 of 15

16 VII. EXEMPTIONS FROM THE PROVISION OF BEST EXECUTION Notwithstanding the intentions expressed above, the Constance Investment does not undertake to provide "best execution" if you are classified as an Eligible Counterparty. This is in line with MiFID Article 24, which stipulates that the best execution obligation under Article 21 does not apply to Eligible Counterparties. Constance Investment ascertains that Eligible Counterparties have full knowledge and understanding of MiFID and the corresponding national legislation. VIII. MONITORING AND REVIEW Constance Investment will monitor the effectiveness of its Order execution arrangements and Order execution policy to identify and, where appropriate, correct any deficiencies. Constance Investment will assess whether the execution venues included in the Order execution policy provide the best possible result for you or whether we need to make changes to our execution arrangements. We will review our order execution arrangements and Order execution policy at least annually or whenever a material change occurs that affects our ability to obtain the best result for the execution of your Orders on a consistent basis using the venues included in our Order execution policy. We will notify you of any material changes to our Order execution arrangements or Order execution policy. info@constancei.com Page 15 of 15