Order Execution Policy Best Execution Policy

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1 General Order Execution Policy Best Execution Policy MAINFIRST AFFILIATED FUND MANAGERS S.A. As of August 2017 Every employee 1 is encouraged and obliged to observe the Directive fully as part of the company's business operations. The Directive respects the European legislation and the implementation of official CSSF circulars and regulations, in particular the implementation of UCITS IV Directive 2009/65/EC and its regulations, the implementation of AIFM Directive 2011/61/EU, the Law of 17 December 2010 on Undertakings for Collective Investment (in the current version in each case), the Law of 13 February 2007 on Luxembourg Special Investment Funds (in the current version in each case) and the Law of 12 July 2013 on Alternative Investment Fund Managers. The Directive aims to protect investors and create binding common rules in order to implement the aforementioned statutory and regulatory requirements relating to ensuring and improving investor protection, to increase market efficiency and to reduce administrative barriers within the European financial market. Responsibilities People responsible for the area of compliance are available to answer any questions in relation to the Directive. The responsible persons are listed in Annex 1 to this Directive. Subject-Matter Subject to any deviating, individual and written agreements with the client/single investor, the management company shall apply the following principles in the execution of buy or sell orders for financial instruments or other assets, acting in the name and on behalf of investment funds (UCI and UCITS) as well as for Managed Accounts in the framework of the individual portfolio management (Art. 5(4) of the Law of 2013): As part of a commitment to safeguarding the interests of investors and investor protection, the management company has made arrangements to ensure the best possible outcome for investors in the execution (so-called "best execution") of investment decisions (buy and sell orders of authorised assets) within normal business operations. The aim is the best execution of trading decisions made by the management company, acting in the name and on behalf of the investment funds (UCI and UCITS) managed by it. If the portfolio management has been outsourced to third parties, these are contractually bound to comply analogously and fully with the standards of the management company. A verification of the compliance with the standards is carried out at the start and then on a yearly basis The execution principles of the management company are documented in this Directive. The management company considers these principles to be suitable and sufficient to ensure the best execution of trade decisions in the exclusive interest of investors. The management company shall consider the following processes and criteria for the decision carefully, use the technologies, resources and information channels available to it and control and monitor the general quality of execution regularly. 1 The term "employee" includes both male and female employees and is used without discriminatory intent for the purpose of standardisation 1

2 Assets of an investment fund (UCI/UCITS) as well as assets acquired through individual portfolio management that are eligible and regulated by the Directive include in particular: securities money market instruments structured finance instruments investment fund units/shares exchange-traded derivatives Forward Rate Agreements and all other OTC derivatives, which relate to eligible assets alternative assets, provided they are eligible assets other authorised and eligible assets of a UCI/UCITS other authorised and eligible assets related to the individual portfolio management/managed accounts Decision-Making Process and Assessment Criteria In the view of the management company, the best outcome for the investor is not determined solely by the price and the cost of a trade order. It requires the combined consideration of a variety of factors and criteria. Therefore, the factors and criteria may vary and differ depending on the trade order. In principle, the management company views the following factors as critical in the respective decision on the execution of the trade order. Price and Costs The management company tries to achieve price and cost efficiency for the trade orders by transmitting the orders to those execution venues which offer, in the opinion of the management company, more attractive prices and/or costs than the market average. According to experience this is usually the local stock exchange of a security or - if different - the most liquid market of the security. Speed and Security of Order Execution The speed and security of the execution are particularly important in volatile and non-regulated markets ("Over-The-Counter" or "OTC"). The management company makes every effort to use all the means and resources available to carry out the trade orders as quickly and reliably as possible. In periods of unusual market conditions, which are often characterised by high volumes and high volatility, the management company, within the framework of existing funds and resources and in compliance with the principles described, will seek to achieve the best outcome in the context of execution of trade orders as in periods of normal market conditions. However, it is possible that under these circumstances other criteria and factors for related trade orders temporarily prevail in the decisionmaking process, in order to safeguard investor interest as a result. The management company documents the execution. General Quality of Execution The management company has extensive experience with various markets, so-called "market makers" and electronic communications networks and trading platforms. Using this experience - and the aim of a quick and reliable execution - the management company decides, after due consideration, how and where an order is to be executed or to which intermediaries the order is to be sent. The management company uses existing electronic systems or telecommunications systems to transmit and execute trade orders. A trade order is transmitted directly to an execution venue or an intermediary which, in the view of the management company, offers the best execution. If there are reasons that require "careful handling", trade orders can be routed to one or more "market makers". The management company regularly monitors other potential execution venues and can conduct on-exchange or off-exchange (OTC) orders at such execution venues assumed by it to be consistent with its principles of best execution. 2

3 Probability of Execution and Settlement, Order Size and Boundary Conditions of the Trade Order Especially when trading in volatile markets, various methods of execution can be used to limit risks. In a "limited order", an applicable maximum or minimum selling price for the trade order is fixed. If the market does not permit execution of an order at the fixed limit, the trade order will not be executed unless the market price reaches the limit again. It is therefore possible that the trade order is not executed. Within the context of the best execution, for every trade order ordered by the management company the trading partner will be duly instructed by the management company in order to achieve the best outcome. The execution can be documented by the management company. Furthermore, in individual cases, other factors may be considered which, at the discretion of the management company, may be considered to safeguard the interests of investors. Choice of Execution Venue and Choice of Intermediary The management company undertakes to select only trading partners and trading venues whose trading model and execution behaviour enable the management company to achieve the best outcome for the orders transmitted on behalf of the investment fund and the investors. It is ensured that the trading partners and the trading venues apply comparable principles and guidelines in relation to the "best execution". As a result, the management company has compiled a list of suitable and approved trading partners and trading venues. If required and necessary, the list of suitable and approved trading partners and trading venues will be adjusted. The regulations for the "ongoing monitoring and control of the Directive" will apply analogously. If there are several possible suitable trading partners or execution venues, the one that offers the best conditions for the respective business will be chosen so that the management company acts in accordance with the standardised obligation and the principles adopted here in the best and the sole interest of the investors and the investment funds managed by it. Examples of Order Execution for the Following Assets: a) Shares/derivatives which are listed on stock exchanges in Germany (German and non-german issuers) Shares/derivatives of German and non-german issuers that are listed on a stock exchange in Germany are usually listed on a German exchange. To determine the best execution venue for securities that are listed on more than one German exchange, the management company compares the execution price and the execution costs. If several execution venues offer a similar quality of execution, additional factors such as speed and probability of execution and settlement can be taken into account during the decision-making after due consideration. b) Shares/derivatives which are not listed on the stock exchange in Germany To determine the best execution venue for shares/derivatives that are not listed on exchanges in Germany, the management company takes into account speed and probability of execution and settlement in addition to price and costs. According to experience, the best outcome in the interest of investors and the UCI under management is at the local exchange of the security, or, in the case of derivatives, at the single execution venue at which the derivative is traded. c) Investment fund units/shares Buy and sell orders for investment fund units are transmitted to the transfer agent designated by the respective fund company, either directly or indirectly through a fund platform or broker or something else. The orders will be executed at the price of the respective net asset value (buying and selling price). d) OTC (1) Bonds/Money Market Instruments 3

4 Since a significant number of bonds/money market instruments are traded over the counter and exchanges are not yet able, as a rule, to offer execution at the best price, the management company acts as a counterparty and offers the best price based on the offers of the market maker accessible to it. This information is obtained via electronic platforms (such as Bloomberg) or by telephone. In the event that the management company does not find an execution party for the trade, it turns to the issuer of the security in order to be able to give the client a price. (2) Derivatives For derivatives that are not listed on a regulated market, the management company acts as a counterparty and offers the best price based on the offers of the market maker accessible to it and its own position. (3) Structured Products For structured products the management company acts as a counterparty and offers the best price based on the offers - corresponding to the structuring conditions - of the structurer accessible to it. This information is obtained via electronic platforms (such as Bloomberg) or by telephone. (4) Foreign Exchange Transactions The management company acts as a counterparty and offers execution conditions that are adapted to the market conditions applicable at the time of execution. In principle, the management company works together with brokers/intermediaries who have many years of experience and expertise with the respective asset and the execution venue. If, after consideration of the aforementioned criteria, several brokers/intermediaries are selected, the management company shall draw on additional selection criteria such as the existence of a long-term and successful business relationship in the selection process in order to achieve the best outcome for the investors and the UCI managed by it. Exclusion of the General Rankings and Defined Weighting of Individual Criteria The commitment to the best execution relates not only to the price, but also includes other criteria such as costs, speed, probability of execution and various other factors that are involved in the decision concerning the execution of the trade order. If an execution does not deliver the best price, it is not necessarily associated with a breach of the statutory obligation. Other factors and criteria then justify the choice of execution. In principle, the result of combining a variety of factors and criteria is decisive in terms of the decision concerning the order execution. Order Execution The management company ensures prompt and honest order execution for the UCI and UCITS managed by it. Order routes and settlement routes are defined as early and as quickly as possible so as to ensure that orders to be executed are registered and allocated promptly, without delay and accurately. Orders from outsourcing partners (delegation of portfolio management to authorised portfolio manager) are forwarded promptly, without delay, after the required check of the respective trading partner has been carried out. The executions are forwarded promptly, without delay, after being received, to the custodian bank of the UCI/UCITS and other interested parties. Accumulation and Allocation of Trade Orders In principle, the management company will not accumulate and execute any trade orders for an investment fund with trade orders for another investment fund or an order for its own account (proprietary trading) and perform a joint execution, unless the aggregation is not detrimental overall for any investment fund or investor. 4

5 If in this case a partial execution were to result, the following procedure would be performed: a) Collective Orders from Various Investment Funds The orders for the individual investment fund are executed pro rata (p.r.) at the rate of the collective order. b) Collective Orders with Proprietary Trading of the Management Company The management company ensures that the collective order does not have a detrimental effect on the investment fund. In the event of a partial execution the orders are always settled and executed in favour of the investment fund as a priority over the proprietary trading of the management company. In cases where without an aggregation of orders for investment funds with proprietary trading of the management company the individual orders cannot be executed or cannot be executed under the same conditions, the individual orders, including the proprietary trading of the management company, are executed pro rata (p.r.) at the rate of the collective order. Technical Problems/Force Majeure In rare cases which are not part of normal business operations, in particular due to a technical system failure or in the event of force majeure, the management company may be forced to execute a trade order in derogation of the principles adopted here. The basic execution of the trade order would, however, correspond to the interests of investors as a result. Even in consideration of more challenging and unusual circumstances and special situations the management company will make every effort with the resources available to it to execute the trade orders as consistently as possible under the best possible conditions. Ongoing Monitoring of Internal Policy The management company will continually monitor the effectiveness of its order execution arrangements and its execution policy in order to be able to identify defects and, where necessary, correct them. It will therefore make an annual assessment as to whether the principles contained in the Directive provide the best outcome for its investors in general or whether the order execution arrangements need to be changed. Additional examinations of the Directive are always then performed when a significant change in the market situation means that in general the best execution of client orders is no longer guaranteed with the execution venues and intermediaries listed in the Directive. Compliance with the principles and regulations will be regularly monitored and controlled. An inspection will be carried out at least once a year on a rotational basis. The Compliance Department sets the date for the inspection in consultation with the executive management. A report on the results of the inspections will be compiled and submitted to the executive management for the purposes of information. Unless it has been or is otherwise stipulated, the periodic inspection takes place in May of each calendar year. Reporting of Events and Situations that Violate the Principles and Rules of the Directive Every employee is encouraged to report promptly to those responsible for compliance any events and situations that violate the principles and rules of the Directive. Violations/Penalties Disregard and violations of this Directive may result in work sanctions. 5

6 Document History Version Entered into force on: Comments: August 2014 // May 2015 New company name (MAINFIRST AFFILIATED FUND MANAGERS S.A.) August 2016 Annual update August 2017 Annual update Annex 1 This Annex is an integral component of the Directive Area Contact Person Representative Management Anja Richter Björn Kogler Compliance Department n.a. n.a. 6