ESG

1. Objective of the guideline
2. Scope of the guideline
3. Identification of conflicts of interest
4. Prevention of conflicts of interest
5. Organizational arrangements
6. Administrative measures
7. Officer for avoiding conflicts of interest
8. Resolution and monitoring of conflicts of interest
9. Disclosure of conflicts of interest
10. Measures in case of violations of the guideline
11. Further development of the guideline

§ 1 Purpose of the guideline

As a capital management company within the meaning of §§ 20, 22 KAGB, AIF Kapitalverwaltungs-AG, also known as AIF Partner KVG (hereinafter “KVG”), is obliged to carry out its activities honestly, fairly and with due care and diligence and act in the best interests of the investment funds it manages and the investors of the investment funds, as well as in the interest of the integrity of the market. Therefore, insofar as potential or actual conflicts of interest within the meaning of § 27 KAGB arise in the management of investment funds (hereinafter “AIF” – Alternative Investment Fund), the KVG must ensure that these conflicts of interest are handled fairly in the interests of the investors and customers. To this end, the KVG has established appropriate measures for their identification and handling in this guideline.

§ 2 Scope of the guideline

1. Whenever business interests are opposed, conflicts of interest may arise. However, this guideline only covers those conflicts of interest that may lead to a risk of damage for the customers or the investors of an AIF managed by the KVG (“potential conflict of interest”) or actually lead to such damage (“actual conflict of interest”).
2. The guideline applies directly to the members of the management board of the KVG and to all employees of the KVG.
3. The members of the management board of the KVG are responsible for ensuring that the provisions of this guideline are also observed by

• Outsourcing companies, their board members and all employees involved in the outsourced activity

and /or

• any other natural or legal person who is directly involved in the provision of services for the KVG within the framework of an agreement for the transfer of tasks to third parties, which enable the KVG to carry out joint portfolio management.

§ 3 Identification of conflicts of interest

Parties involved in a conflict of interest

1. Conflicts of interest may arise in the management of AIF, among others

• between the AIFM and its managers, employees or any other person directly or indirectly linked to the AIFM by means of control, and the AIF managed by it or the investors of that AIF;
• between the outsourcing company, if any, commissioned by the AIFM, its managers, employees or any other person directly or indirectly linked to the outsourcing company by means of control, and the AIF managed by the AIFM or the investors of that AIF;
• between the AIF managed by the AIFM or the investors of that AIF and another AIF managed by the AIFM or the investors of that AIF;
• between the AIF managed by the AIFM or the investors of that AIF and another customer of the AIFM;
• between two customers of the AIFM.

2. Diverging interests

A conflict of interest is particularly indicated when the following situation exists:

• Obtaining a financial advantage for the AIFM, an outsourcing company or one of the persons mentioned in § 2 at the expense of the AIF or its investors;
• Interest in the outcome of a service provided for the AIF by the AIFM, an outsourcing company or one of the persons mentioned in § 2, which is not in line with the interests of the investors of the AIF managed by the AIFM in that outcome;
• Avoidance of a financial loss for the AIFM, an outsourcing company or one of the persons mentioned in § 2 at the expense of the AIF or its investors;
• the interests of the AIFM, an outsourcing company or one of the persons mentioned in § 2 in the service provided for the AIF are not identical with the interests of the AIF – apart from the remuneration;
• Favoring the interests of a single investor, a group of investors, or another AIF to the detriment of the AIF managed by the KVG;
• Simultaneous execution of an identical activity for several AIFs;
• Existence of a financial or other incentive to prioritize the interests of one AIF over the interests of another AIF also managed by the KVG;
• Receipt of a fee from a third party in the context of portfolio management.

3. Examples of conflicts of interest

The following situations are examples of typical conflicts of interest:

1. a) Conflicts of interest between the KVG and one of the persons mentioned in § 2 on the one hand and / or investors on the other hand

• The KVG assigns an affiliated company or one of the persons mentioned in § 2 with a service within the scope of the AIF’s business operations, such as the asset management of a property.
• The KVG invests for the AIFs it manages in investment objects that belong to an affiliated company or one of the persons mentioned in § 2.
• The KVG appoints an investment advisor for the selection of investment opportunities for investments in other funds), who is one of the persons mentioned in § 2 or an affiliated company of the KVG.
• The percentage commission of the KVG is determined by the amount of capital raised by the AIF (“hard cap at fundraising”).
• The term of the AIF managed by the AIFM is extended without any apparent benefit for the investors, in order to collect further fees.
• The AIF participates with capital in a target company. This participation is financed by granting a loan from one of the persons mentioned in § 2 or from a person who is in a direct or indirect dependency relationship with the AIFM. The AIFM has made an investment in a target company and receives a regular remuneration from it.
• The AIFM or one of the persons mentioned in § 2 receive gifts or invitations of more than negligible nature, which are likely to influence their behavior in a way that contradicts the interests of the investors of the managed AIF.
• One of the persons mentioned in § 2 invests, possibly at preferential conditions, in AIFs managed by the AIFM or conducts business with them.

1. b) Conflicts of interest between several AIFs

• An AIFM or an outsourcing company launches a second AIF with a comparable investment strategy before a first AIF is fully placed. As far as investment decisions have to be made, the AIFM has to decide for which of the two AIFs the investment shall be executed.
• The AIFM manages two AIFs simultaneously, between which a business activity is carried out to the benefit of one and to the detriment of the other AIF.
• When managing multiple AIFs, the AIFM uses staff of one AIF for another AIF.

1. c) Conflicts of interest between investors

The AIFM grants special investment rights to a single investor that are not available to other investors in an AIF.

1. d) Conflicts of interest between clients

The AIFM intermediates the purchase and sale of shares in AIFs managed by it between two clients and thereby acts for two clients with conflicting interests.

§ 4 Prevention of conflicts of interest

1. In order to prevent the emergence of conflicts of interest, the persons referred to in § 2 have to comply with high standards. These include lawful and professional conduct at all times, as well as compliance with the general market rules, always taking into account the interests of investors.
2. The organizational arrangements and administrative measures to be taken to avoid conflicts of interest are based on the principle of proportionality, taking into account the size and organization of the KVG and the nature, scope and complexity of its business. Safeguards to prevent conflicts of interest must be appropriate and effective.
3. The management board of the KVG or the management board of an outsourcing company commissioned by it must ensure that the persons concerned know and master those procedures that are necessary for the proper performance of their duties.

§ 5 Organizational precautions

To prevent conflicts of interest, it must be ensured that the persons referred to in § 2 carry out their business activities independently and take into account potential risks for the AIF and their investors. To this end, the following measures have been taken:

• Independence

The AIFM or the outsourcing company, if any, commissioned by it conducts its business activities independently of the interests of third parties and the instructions of the shareholders, in particular refrains from concluding domination agreements between the AIFM and the parent company and also avoids any influence on the independent management of the AIFM within the group;

• Declaration of independence

Signing of the declaration of independence attached to this guideline by the members of the management board of the AIFM and, if applicable, an outsourcing company;

• Function separation

Functional and spatial separation of the different business areas, especially between portfolio management and compliance, control systems and risk management, as well as separation of tasks and responsibilities in relation to own operational processes that are considered to be incompatible or potentially create systematic conflicts of interest;

• Employee remuneration policy

Establishment of an employee remuneration policy in accordance with the regulatory requirements, which ensures that the persons mentioned in § 2 see their incentive in the performance of all AIFs they manage, thereby counteracting the preference of individual AIFs or customers;

• Chinese Walls

Establishment of confidentiality areas and information barriers with virtual or actual barriers (so-called “Chinese Walls”) to restrict the flow of information, in particular implementation of access rights;

• Employee transactions policy

Implementation of codes of conduct and procedures for employee transactions;

• Inducement policy

Implementation of codes of conduct and procedures on the acceptance of gifts and other benefits by the KVG or by one of the persons mentioned in § 2;

• Institutionalized conflict of interest inquiry

The portfolio management always questions the existence of a conflict of interest before carrying out the relevant measure, namely

–          when founding a new AIF

–          when acquiring and disposing of assets by an AIF

–          when making other investment decisions

–          when taking administrative measures

–          when a person works for several AIFs (“multiple activity”).

§ 6 Administrative measures

To avoid conflicts of interest, the management of the KVG or a commissioned outsourcing company must take the following administrative measures:

• Establishment of procedures for identifying and resolving conflicts of interest, instruction to comply with them without fail and monitoring of compliance;
• Monitoring of compliance with the code of conduct and the procedures for dealing with conflicts of interest by the internal audit and the compliance function;
• Appropriate documentation of the services and activities of the KVG or its management, the employees and the persons mentioned in § 2, respectively in the cases where a conflict of interest was identified;
• In the case of investment opportunities that are suitable for several AIFs with the same investment strategy, the KVG will offer the investment opportunity in accordance with the principle of equal treatment of all eligible AIFs managed by it under the same conditions and, in the event of investment interest from several AIFs managed by it, allocate the investment opportunity to the interested AIFs or, in the event of indivisibility, apply a suitable allocation procedure (rotation procedure or random selection / lottery procedure) and document accordingly;
• Insofar as the appropriate resolution or observation of a conflict of interest requires it, the persons mentioned in § 2 can be asked to terminate their work on a specific business activity or their participation in the management to resolve a potential conflict of interest;
• Training of all affected employees of the KVG or the outsourcing companies commissioned by it and the other persons mentioned in § 2.

§ 7 Officer for the prevention of conflicts of interest

1. The management board of the KVG has appointed an officer for the prevention of conflicts of interest, who reports directly to it.
2. The officer for the prevention of conflicts of interest is responsible for receiving and examining reports according to § 8 of this guideline.
3. The officer for the prevention of conflicts of interest has to ensure that the persons affected by this guideline are generally informed and regularly trained about it.
4. Furthermore, the officer for the prevention of conflicts of interest has to monitor the compliance with this guideline on a regular basis.
5. The officer for the prevention of conflicts of interest reports directly to the management board regularly, at least annually, on the performance of his duties.

§ 8 Resolution and monitoring of conflicts of interest

1. Conflicts of interest must be reported and handled in a fair manner and resolved without delay.
2. Each of the persons mentioned in § 2 is therefore obliged to report immediately to the conflict of interest officer any facts that indicate the existence of a conflict of interest situation within the meaning of § 2 (1) of these guidelines.
3. The conflict of interest officer examines whether the presented facts indicate a conflict of interest situation within the meaning of § 2 (1) of these guidelines. If this is the case, he/she must inform the management board of the AIFM about the nature and extent of the conflict of interest without delay and document this accordingly.
4. The assessment and resolution of the conflict of interest is then carried out by the management board of the AIFM.
5. If the existing and ongoing measures are not suitable or sufficient to resolve a conflict of interest, the management board of the AIFM must take additional measures, such as:

• careful examination of all available measures and implementation of AIF-specific information restrictions or other additional measures for information separation;
• transfer of the conflict of interest management to a higher management level, which is responsible for the business strategy of the AIFM and is able to assess the possible risks;
• termination of the activity.

§ 9 Disclosure of Conflicts of Interest

1. The AIFM is obliged to inform investors about conflicts of interest as soon as it becomes apparent that the organisational measures taken by the AIFM to identify, prevent, resolve and monitor conflicts of interest are not sufficient to ensure with reasonable certainty that the risk of impairment of the interests of investors and/or the managed AIF is avoided.
2. The obligation to disclose includes informing investors about the general nature and sources of conflicts of interest before executing the affected business measure.
3. The disclosure obligation also covers potential conflicts of interest that may arise in connection with the delegation/outsourcing or sub-delegation of activities.
4. Furthermore, any transactions between one of the persons mentioned in § 2 or between closely associated companies or persons who are connected by a direct or indirect controlling relationship with the AIFM in connection with a managed AIF must be disclosed.
5. The disclosure shall be made by publication on the AIFM’s website or another medium that is accessible to the relevant addressees. For this purpose, the AIFM shall

– make known the address of the website to the investors and ensure by appropriate means that the investor can also take note of it,

– continuously update the information posted on the website,

– ensure that the information deposited on the website is always accessible to the investors.

§ 10 Measures in case of violations of the guideline

1. In the event of a violation of this conflict of interest management guideline, the management board of the KVG must immediately identify and eliminate the cause or the weakness in the work or process flow that led to this violation.
2. A violation of this conflict of interest management guideline is considered a breach of duty and may result in disciplinary action, in serious cases even a termination of the employment relationship.
3. The competent supervisory authority must be informed of a serious violation of the guideline.

§ 11 Further development of the guideline

1. The management board of the KVG is responsible for the continuous further development and maintenance of the conflict of interest management guideline; in particular, the management board will decide and implement necessary and appropriate changes and/or additions.
2. The ongoing information of the employees about all changes and additions to this guideline is the responsibility of the conflict of interest officer. He draws the management board’s attention to necessary updates of the guideline.