Mandatory Notifications

Table of Contents

1. Purpose of the Policy
2. Scope of the Policy
3. Identification of Conflicts of Interest
4. Prevention of Conflicts of Interest
5. Organisational Arrangements
6. Administrative Measures
7. Officer for the Prevention of Conflicts of Interest
8. Resolution and Monitoring of Conflicts of Interest
9. Disclosure of Conflicts of Interest
10. Measures in the Event of Breaches of the Policy
11. Further Development of the Policy

Section 1: Purpose of the Policy

As an alternative investment funds management company (Kapitalverwaltungsgesellschaft) within the meaning of Sections 20 and 22 of the German Capital Investment Code (KAGB), AIF Kapitalverwaltungs-AG, also referred to as AIF Partner KVG (hereinafter “KVG”), is obliged to conduct its activities honestly, fairly and with the required care and diligence and, in doing so, to act in the best interests of the investment funds managed by it and of the investors in such investment funds, as well as in the interest of market integrity. To the extent that potential or actual conflicts of interest within the meaning of Section 27 KAGB arise in the management of investment funds (hereinafter “AIF” – Alternative Investment Fund), KVG must ensure that such conflicts of interest are handled fairly in the interests of the investors and clients. To achieve this, KVG has set out in this Policy appropriate measures for their identification and handling.

Section 2: Scope of the Policy

1. Wherever business interests are opposed to one another, conflicts of interest may arise. However, this Policy covers only those conflicts of interest that may give rise to a risk of detriment to the clients or to the investors of an AIF managed by the KVG (“potential conflict of interest”) or that actually give rise to such detriment (“actual conflict of interest”).
2. This Policy applies directly to the members of the KVG Management Board and to all KVG employees.
3. The members of the KVG Management Board are responsible for ensuring that the provisions of this Policy are also observed by

• outsourcing service providers, their members of management and all employees involved in the outsourced activity

and/or

• any other natural or legal person directly involved, under an outsourcing arrangement, in the provision of services to KVG that enable KVG to carry out joint portfolio management.

Section 3: Identification of Conflicts of Interest

1. Parties to a conflict of interest

In the management of AIFs, conflicts of interest may arise, among other things,

• between KVG and its executives, employees or any other person who is directly or indirectly linked to KVG by way of control, and the AIF managed by it or the investors of that AIF;
• between any outsourcing service provider appointed by KVG, its executives, employees or any other person who is directly or indirectly linked to the outsourcing service provider by way of control, and the AIF managed by KVG or the investors of that AIF;
• between the AIF managed by KVG or the investors of that AIF and another AIF managed by KVG or the investors of that other AIF;
• between the AIF managed by KVG or the investors of that AIF and another client of KVG;
• between two of KVG’s clients.

2. Diverging interests

A conflict of interest is indicated in particular where the following situation exists:

• KVG, an outsourcing service provider or one of the persons referred to in section 2 obtains a financial advantage at the expense of the AIF or its investors;
• KVG, an outsourcing service provider or one of the persons referred to in section 2 has an interest in the outcome of a service provided for the AIF that does not coincide with the interests of the investors of the AIF managed by KVG in that outcome;
• KVG, an outsourcing service provider or one of the persons referred to in section 2 avoids a financial loss at the expense of the AIF or its investors;
• the interests of KVG, an outsourcing service provider or one of the persons referred to in section 2 in the service provided for the AIF are – apart from remuneration – not aligned with the interests of the AIF;
• the interests of an individual investor, a group of investors or another AIF are favoured to the detriment of the AIF managed by KVG;
• an identical activity is performed simultaneously for several AIFs;
• there is a financial or other incentive to place the interests of one AIF above the interests of another AIF also managed by KVG;
• remuneration is received 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:

a) Conflicts of interest between KVG and one of the persons referred to in section 2 on the one hand and/or investors on the other hand

• KVG commissions an affiliated company or one of the persons referred to in section 2 to provide a service within the scope of the business operations of the AIF, such as the asset management of a property.
• KVG invests, for the AIFs managed by it, in investment assets that belong to a company affiliated with it or to one of the persons referred to in section 2.
• KVG appoints an investment adviser for the selection of investment opportunities (e.g. for investments in other funds), where such investment adviser is one of the persons referred to in section 2 or a company affiliated with KVG.
• The percentage-based management or administration fee of KVG is determined by reference to the amount of capital raised by the AIF (“hard cap in fundraising”).
• The term of the AIF managed by KVG is extended without any discernible benefit for the investors in order to be able to collect further fees.
• The AIF participates with capital in a target company. This participation is financed by the granting of a loan by one of the persons referred to in section 2 or by a person who is in a direct or indirect dependency relationship with KVG. KVG has made an investment in a target company and receives ongoing remuneration from it.
• KVG or one of the persons referred to in section 2 receives gifts or invitations that are not merely insignificant in nature and that are capable of influencing their conduct in a manner contrary to the interests of the investors of the managed AIF,
• One of the persons referred to in section 2 invests, where applicable on preferential terms, in AIFs managed by KVG or enters into transactions with them.

b) Conflicts of interest between several AIFs

• Before a first AIF has been fully placed, a KVG or an outsourcing service provider launches a second AIF with a comparable investment strategy. Where investment decisions have to be made, KVG must decide for which of the two AIFs the investment is to be executed.
• KVG simultaneously manages two AIFs between which a business activity is carried out to the benefit of one and to the detriment of the other AIF.
• When managing several AIFs, KVG deploys personnel of one AIF for another AIF.

c) Conflicts of interest between investors

• KVG grants an individual investor special investment rights that are not available to the other investors of an AIF.

d) Conflicts of interest between clients

• KVG brokers the purchase and sale of units or shares in AIFs managed by it between two clients and thereby acts for two clients with opposing interests.

Section 4: Prevention of Conflicts of Interest

1. In order to prevent conflicts of interest from arising, the persons referred to in section 2 must observe high standards. These include lawful and professional conduct at all times and compliance with general market rules, while always taking the interests of investors into account.
2. The organisational arrangements and administrative measures to be taken to avoid conflicts of interest are, applying the principle of proportionality, determined by the size and organisation of KVG and the nature, scope and complexity of its business. Safeguards for the prevention of conflicts of interest must be appropriate and effective.
3. The KVG Management Board or the management of an outsourcing service provider appointed by it must ensure that the persons concerned know and master those procedures that are necessary for the proper performance of their duties.

Section 5: Organisational Arrangements

To avoid conflicts of interest, it must be ensured that the persons referred to in section 2 carry out their business activities independently and, in doing so, take into account potential risks for the AIFs and their investors. The following arrangements have been made for this purpose:

• Independence
  KVG or any outsourcing service provider appointed by it conducts its business activities independently of the interests of third parties and of instructions from shareholders; in particular, the conclusion of control agreements between KVG and the group parent is refrained from, and any other influence on the independent management of KVG within the group is avoided;
• Declaration of Independence
  The declaration of independence attached as an annex to this policy is to be signed by the members of the KVG Management Board and, where applicable, of an outsourcing service provider. The declaration of independence should be submitted at the beginning of each financial year. It shall be updated during the year if the member of the management bodies establishes new relationships with other companies, whether by assuming a function in one of their corporate bodies or by acquiring an interest. Personal relationships established, for example, through an activity or participation of a first-degree relative, must also be taken into account. Activities for property companies and general partner companies of the funds managed by KVG are not to be taken into account.
• Segregation of Duties
  Functional and organisational separation of the various business areas, in particular between portfolio management and compliance, control systems and risk management, as well as separation of tasks and areas of responsibility in relation to own operating processes that are to be regarded as mutually incompatible or that may potentially give rise to systematic conflicts of interest. Spatial separation must be maintained by means of a partially separate IT landscape;
• Employee Remuneration Policy
  Establishment of an employee remuneration policy in accordance with regulatory requirements, which ensures that the persons referred to in section 2 see their incentive in the performance of all AIFs managed by them, thereby counteracting any preferential treatment of individual AIFs or clients;
• 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 permissions;
• Employee/Manager Dealing Policy
  Implementation of codes of conduct and procedures for employee/manager dealing;
• Grant Policy
  Implementation of codes of conduct and procedures governing the acceptance of gifts and other benefits by KVG or by one of the persons referred to in section 2;
• Institutionalised Conflict of Interest Inquiry
  Before carrying out the relevant measure, portfolio management shall in each case examine whether a conflict of interest exists, namely
  
  • upon the establishment of a new AIF
  • upon the acquisition and disposal of assets by an AIF
  • in connection with other investment decisions
  • in connection with administrative measures
  • where a person acts for several AIFs (“multiple activity”).

Section 6: Administrative Measures

To avoid conflicts of interest, the KVG Management Board or an outsourcing service provider appointed by it must take the following administrative measures:

• Establishment of procedures for identifying and resolving conflicts of interest, instruction that such procedures must be complied with without exception, and monitoring of compliance;
• Monitoring of compliance with the codes of conduct and the procedures for dealing with conflicts of interest by Internal Audit and the Compliance function;
• Appropriate documentation of the services and activities of KVG or its management, the employees and the persons referred to in section 2, in each case where a conflict of interest has been identified;
• In the case of investment opportunities that may be considered for several AIFs with the same investment strategy, KVG will offer the investment opportunity, in accordance with the principle of equal treatment, to all eligible AIFs managed by it on the same terms and, where several AIFs managed by it are interested in the investment, allocate the investment opportunity among the interested AIFs or, where allocation is not possible, apply a suitable allocation procedure (rotation procedure or random principle/lottery procedure) and document this accordingly;
• To the extent required for the appropriate resolution or monitoring of a conflict of interest, the persons referred to in section 2 may be requested to discontinue their work on a specific business activity or their participation in management in order to resolve a potential conflict of interest;
• Training of all affected employees of KVG or of the outsourcing service providers appointed by it and of the other persons referred to in section 2. Training should be carried out annually for the employees of KVG and at least every two years for the other groups of persons referred to in section 2.

Section 7: Officer for the Prevention of Conflicts of Interest

The KVG Management Board may appoint an Officer for the Prevention of Conflicts of Interest who reports directly to it. If no conflicts of interest officer has been appointed, the tasks referred to shall fall within the responsibility of the Board Member responsible for Risk Management and Organisation.

1. The conflicts of interest officer is responsible for receiving and reviewing notifications pursuant to section 8 of this Policy.
2. The conflicts of interest officer must ensure that the persons affected by this policy are generally informed about it and are trained regularly.
3. In addition, the conflicts of interest officer is responsible for regularly monitoring compliance with this policy.

Section 8: Resolution and Monitoring of Conflicts of Interest

1. Conflicts of interest must be reported without undue delay and must be handled and resolved in a fair manner.
2. Each of the persons referred to in section 2 is therefore obliged to report without undue delay to the conflicts of interest officer those facts that indicate the existence of a conflict of interest situation within the meaning of section 2 (1) of this policy.
3. The conflicts of interest officer examines whether the facts presented indicate a conflict of interest situation within the meaning of section 2 (1) of this policy. If this is the case, he must inform the KVG Management Board without undue delay of the nature and extent of the conflict of interest and document this accordingly.
4. The assessment and remediation of the conflict of interest is then carried out by the KVG Management Board.
5. To the extent that the existing and ongoing measures are not suitable or not sufficient to resolve a conflict of interest, the KVG Management Board must take additional measures, such as:

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

Section 9: Disclosure of Conflicts of Interest

1. KVG is obliged to inform investors about conflicts of interest as soon as it becomes apparent that the organisational measures taken by KVG 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 of the managed AIF is avoided.
2. The disclosure obligation includes informing investors, prior to the execution of the affected business measure, of the general nature and sources of the conflicts of interest.
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 referred to in section 2 or between closely connected companies or persons that are linked to KVG by a direct or indirect control relationship in connection with a managed AIF must be disclosed.
5. Disclosure shall be made by publication on the website of KVG or by another medium that is accessible to the relevant addressees. For this purpose, KVG must

• • communicate the address of the website to the investors and ensure by appropriate measures that the investor is able to take note of it,
  • continuously update the information posted on the website,
  • ensure that the information stored on the website is accessible to investors at all times.

Section 10: Measures in the Event of Breaches of the Policy

1. In the event of a breach of this Conflicts of Interest Management Policy, the KVG Management Board must without undue delay identify and remedy the cause or the weakness in the working or operational process that led to such breach.
2. A breach of this Conflicts of Interest Management Policy is deemed to constitute a breach of duty and may lead to disciplinary measures and, in serious cases, to termination of the employment relationship.
3. The competent supervisory authority must be informed of a serious breach of the policy.

§ 11 Further Development of the Policy

1. The KVG Management Board is responsible for the ongoing development and maintenance of the Conflicts of Interest Management Policy; in particular, the Management Board will resolve upon and arrange for necessary and appropriate amendments and/or supplements.
2. The ongoing information of employees about all amendments and supplements to this Policy is the responsibility of the conflicts of interest officer who informs the Management Board of necessary updates to the policy.