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BEST EXECUTION POLICY

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BEST EXECUTION POLICY
Contents
___________________________________________________________________________
BEST EXECUTION POLICY ..................................................................................................... 1
Purpose ......................................................................................................................................... 2
  1.1      Obligations under MiFID ............................................................................................. 2
  1.2      PIKAG’s Duty .............................................................................................................. 2
  1.3      Categorisation of Client................................................................................................ 3
  1.4      Categorisation of PIKAG ............................................................................................. 3
  1.5      PIKAG Activity............................................................................................................ 3
     1.5.1        Fund structures and client mandates..................................................................... 3
     1.5.2        Instrument types ................................................................................................... 3
  1.6      Execution venues .......................................................................................................... 3
  1.7      Factors influencing best execution determination ........................................................ 4
  1.8      Documentation.............................................................................................................. 4
  1.9     Constraints in achieving Best Execution ...................................................................... 4
     1.9.1        Best Execution Minimum Requirements.............................................................. 4
     1.9.2        Specific Instructions ............................................................................................. 5
     1.9.3        Timing .................................................................................................................. 5
     1.9.4        Broker Research / Soft Commission Agreements ................................................ 5
  1.10 Broker Selection and Continuing Assessment.............................................................. 5
     1.10.1       Rationale for Broker Selection ............................................................................. 5
        1.10.1.1          Financial Conditions Assessment ................................................................. 6
        1.10.1.2          Compliance Assessment ............................................................................... 6
        1.10.1.3          Exceptional Circumstances........................................................................... 6
        1.10.1.4          Continuing Assessment and Monitoring ...................................................... 6
  1.11 Trade Management Committee (TMC) ........................................................................ 7
  1.12 Controls to monitor and evaluate Broker performance and execution policy .............. 7
        1.12.1.1          Selection and monitoring of Execution Venues ........................................... 7
  1.13 Soft Commissions......................................................................................................... 7
     1.13.1       Disclosure of Soft Commissions .......................................................................... 9
     1.13.2       Monitoring Soft Commissions.............................................................................. 9
  1.14 Record keeping ............................................................................................................. 9
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Purpose
This document sets out the Pioneer Investments Kapitalanlagegesellschaft mbH (‘PIKAG’) Policy for
obtaining best execution for clients, which is followed when executing trades on behalf of clients.

Best Execution is the term used to describe the obligation to ensure that all reasonable steps are taken
to achieve the best possible result for the client, when either executing trades or passing orders to a
broker to be executed.
Purpose

1.1 Obligations under MiFID
The Markets in Financial Instruments Directive 2004/39/EC (MiFID) introduced European wide
regulatory requirements for the best execution of trading in all MIFID financial instruments. MIFID was
transposed to German legislation under Statutory Instruments (‘S.I.’) No. 60 of 2007 entitled European
Communities (Markets in Financial Instruments) Regulations 2007 (‘the Regulations’). The aim of the
Regulations is to protect investors and foster market efficiency. PIKAG is a German registered company
and therefore must apply the German Regulations, which were implemented based on the guidelines
from the Committee of European Securities Regulators (CESR).

Article 21 (Regulation 106 of the Regulations) applies to firms that execute orders on behalf of clients.
Article 45 (Regulation 98 of the Regulations) applies to investment managers and receivers and
transmitters of orders when they are involved in the execution of a client order, but do not in fact
execute it. The regulators acknowledge that an execution chain frequently exists. They have indicated
that the determining feature is whether the relevant firm gives an order direct to an execution venue, in
which case Article 21 will apply, or whether the firm has the order intermediated in some way, in which
case Article 45 will apply.

An equity market order will always be intermediated by a broker, as the member of the relevant
exchange/ regulated market (execution venue), and will therefore be subject to the regulatory provisions
set out in Article 45. i.e. PIKAG is not market facing. In this case, the broker ultimately controls the
execution of the order through his systems and PIKAG is owed Best Execution by the broker. PIKAG
has requested all brokers to classify PIKAG as a professional client and is therefore owed Best
Execution by all brokers.

In fixed income markets, when PIKAG gives an order directly to a broker, PIKAG will have executed
the order as PIKAG has dealt directly with the execution venue, in this case the broker. PIKAG will, in
relation to this order, be subject to the regulatory provisions set out in Article 21 i.e. PIKAG is Market
Facing. In this case, where PIKAG is market facing, there is a higher onus to achieve Best Execution for
our clients. A thorough process must be completed to ensure this is achieved.

1.2 PIKAG’s Duty
PIKAG is obliged to take all reasonable steps to obtain the best possible result for clients when
executing orders. This does not mean achieving the best price for every client order, but rather the best
possible result that we can reasonably be expected to achieve with the resources available to PIKAG.
We also have an obligation to implement procedures, which provide for the prompt, fair and expeditious
execution of client orders in relation to other client orders or PIKAG’s own trading interests.

This document will detail;
     • the chain of execution for instrument types traded by PIKAG (detailed workflows will be
        delivered separately)
     • when in the chain of execution the duty of care is owed by the counterparty and when PIKAG is
        directly responsible for best execution
     • how PIKAG achieves Best Execution in instances where it relies on a counterparty or if the
        obligation rests with PIKAG, by applying its own internal processes and procedures
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1.3 Categorisation of Client
In accordance with Article 81 of the German legislation, PIKAG must notify new and existing clients of
the categorisation which best reflects the trading relationship with the respective clients in this process.
MIFID is just focussed on clients where PIKAG offers discretionary portfolio management services.
Thus, all insourcing as well as advisory mandates are in scope.
PIKAG has identified all of its clients in scope as Professional and notified each client of this
classification accordingly.

1.4 Categorisation of PIKAG
With regard to market execution PIKAG itself is categorised as Professional Client. If clients
categorises PIKAG differently, PIKAG gainsays in a written form. If the client would not accept the re-
classification for PIKAG to professional client, the relationship should be terminated.
Where PIKAG is the client of a broker, it is the broker’s responsibility to communicate the classification
the broker has applied to PIKAG. In an effort to ensure PIKAG is accurately categorised, PIKAG has
written to all brokers to confirm that PIKAG is a Professional Client. In brief, a Professional Client is a
client who possesses the experience, knowledge and expertise to make its own investment decisions
and properly assess the risks that it incurs.

1.5 PIKAG Activity
PIKAG’s trading activity spans across a number of fund structures, mandates, jurisdictions, instrument
types and execution venues. The Portfolio Managers will consider various aspects when determining
the investment strategy behind trading in various instruments and jurisdictions; the fund/mandates
objectives, investment policy, specific risks of the fund as indicated in the prospectus and client specific
instructions as included in the respective mandate. In order to meet the obligation of obtaining the best
possible result in the execution of orders, PIKAG may use one or more of the following;

1.5.1 Fund structures and client mandates
    •   UCITS Funds,
    •   Non-UCITS Funds (mutual funds, such as Gemischte Sondervermögen,
        Altersvorsorgesondervermögen; dedicated funds) and
    •   Advisory and insourcing mandates

1.5.2 Instrument types
    •   Equity
    •   Fixed Income (including Money Market Instruments)
    •   FX trades
    •   Derivatives (Futures & Options)

1.6 Execution venues
When selecting execution venues, PIKAG selects those execution venues that are competitive primarily
on price, cost, speed of execution, likelihood of execution and size of the order. Examples of execution
venue are;
    • markets having regulated market status under MiFID
    • trading platforms having multilateral trading facility (“MTF”) status under MiFID;
            o Bloomberg
            o Reuters
    • Market Makers or other liquidity providers
    • Over The Counter (OTC) Markets
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1.7 Factors influencing best execution determination
Through its trading process, PIKAG will take all reasonable steps to obtain the best possible result in
the execution of client orders, taking account of all relevant execution factors. Those factors which must
be accounted for in any best execution determination include:

        •   price, which may include explicit transaction costs, bid-asked spread or net price
        •   implicit transaction costs or market impact
        •   potential speed of execution
        •   likelihood of execution and settlement
        •   size and nature of the order
        •   price momentum before and during order execution
        •   broker’s willingness to share information and commit capital
        •   confidentiality provided by the broker
        •   any other considerations relevant to the execution of the order
        •   soft commission arrangements

The relative importance of these factors may change depending on the specific order at hand. PIKAG
has established a process (pre- / post trade check) that considers these factors in light of:

        •   Information about market conditions
        •   characteristics of the client order
        •   nature of the financial product
        •   characteristics of the client
        •   characteristics of the potential execution venues

Each of these factors will play a part in determining the priority of the execution factors for any specific
order. While price will often have a priority ranking, the ultimate transaction price is a function of the
priority given to the other factors.

1.8 Documentation
In order to demonstrate and evidence that Best Execution has been obtained and this procedure has
been adhered to, in all defined cases records and evidence will be retained by the individual
responsible for carrying out the Best Execution Assessment. This documentation and evidence will be
retained in a manner which is easily accessed and retrieved.

This documentation will be available in the investment management systems.

1.9 Constraints in achieving Best Execution
1.9.1 Best Execution Minimum Requirements
        Best Execution Policy from Equity Broker must be existent


        Minimum BE Info required:
        Date and Timestamp of the Trade
        ISIN/WKN ( clearly identification of the security / transaction )
        Counterpart
        failed Competition Price
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1.9.2 Specific Instructions
    Where PIKAG is given specific instructions with regard to the execution of an order, PIKAG will
    execute the order in accordance with the specific instruction(s) given. Such instructions may prevent
    PIKAG from taking the steps set out in the policy to obtain the best possible result for the execution
    of the order in respect of the elements covered by those instructions e.g. restricted Brokers/timings.
    On such occasions, executing such instructions satisfies PIKAG’s obligation to take reasonable
    steps to obtain the best possible result for the execution of the order.

1.9.3 Timing
    Timing of trade e.g. late dealing instructions may cause the trading desk to have difficulty in
    achieving optimum price.

1.9.4 Broker Research / Soft Commission Agreements
    These are agreements in which goods or services (e.g. research services) are provided in return for
    a certain volume of client orders. Soft Commission Agreements are permitted only if they comply
    with internal and external rules. All such agreements must be in writing and pre-approved by the
    responsible Board of directors-member and Legal.
    In general, soft commissions can be paid from the transaction of the corresponding mutual funds 1 ,
    but not from the dedicated funds.

1.10 Broker Selection and Continuing Assessment
PIKAG’s policy seeks to achieve the best possible result for the funds and client mandates managed by
taking into account the execution policy of the broker. PIKAG monitors the execution quality of entities
used and examine the execution approaches of these entities prior to selection. Therefore, the
execution policy provided by the Broker must be consistent with PIKAG’s execution policy. The
execution policy of the broker must enable PIKAG to satisfy its obligations on orders transmitted for
execution.

PIKAG will ensure by requesting a copy of the brokers Best Execution Policy that the selected brokers
have appropriate arrangements in place to enable PIKAG’s requirement of best execution to be
accomplished. This review is carried out by Compliance.

For new counterparties / brokers through whom PIKAG wishes to execute security transactions on
behalf of PIKAG funds under management the broker take-on process applies.

1.10.1 Rationale for Broker Selection
When a new broker is proposed, a Broker Approval Form must be completed by the Portfolio Manager
and approved by the Head of Portfolio Management. The Portfolio Manager must assess the broker and
outline the rationale for choosing the Broker which includes an assessment of the following factors;
     • Ability to minimise total trading costs i.e. minimise number of incomplete trades etc.
     • Level of trading expertise i.e. ability to obtain liquidity, maintain anonymity of the investment
         manager etc.
     • Infrastructure i.e. offers access to good trading systems, reporting applications etc.
     • Ability to provide good information and services i.e. access to research, access to broker staff
         etc.
     • Ability to accommodate special transactions i.e. obtain IPOs etc.
     • broker’s willingness to share information and commit capital
     • confidentiality provided by the broker
     • soft commission arrangements
     • any other considerations relevant to the execution of the order


1
 Not all mutual funds should be used; a check of the underlying prospectus is necessary in advance. Commission
Sharing Agreements for dedicated funds are currently not in scope.
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1.10.1.1         Financial Conditions Assessment
The broker selection process includes reasonable enquiries into the broker’s financial status.

For counterparties with whom we intend to trade OTCs the same approval process applies. All OTC
trades an ISDA agreement or “Deutscher Rahmenvertrag” is required to be in place prior to any
transactions being executed. For each proposed OTC counterparty the negotiated ISDA or “Deutscher
Rahmenvertrag”. Once approved by the respective departments and the ISDA is signed, the
counterparty is made available for the Portfolio Managers to trade.

1.10.1.2         Compliance Assessment
When selecting a broker, PIKAG carries out appropriate due diligence (as required by the PGAM Best
Execution Policy) to ensure the broker is compliant with regulatory obligations including Anti-Money
laundering regulations.

In this regard, the broker must undergo a compliance assessment. Investment Services arranges for
completion of the Broker Questionnaire which is reviewed by the Compliance Department. If
Compliance is not satisfied with the quality of the responses received, the compliance team will
investigate further directly with the Broker. Compliance performs an assessment based on the
information received and recommends approval or rejection of the Broker.

1.10.1.3         Exceptional Circumstances
Where a Portfolio Manager requests that a broker be urgently approved due to a specific short-term
corporate event that would be of benefit to the client i.e. an Initial Public Offering (IPO), this broker can
be approved outside the normal process for a specified period. The principles of Broker Selection under
the Exceptional Circumstances procedure continue to apply. The choice of using a non-approved broker
must be approved by the Chief Investment Officer.

1.10.1.4         Continuing Assessment and Monitoring
The continuing assessment process includes the following monitoring processes;
   1. A review of the list of brokers is performed annually
   2. Performance analysis of Broker Commission is performed. This analysis includes review of
       trends and comparison of commission forecasts with actual commission paid.
   3. There is a comprehensive process of gathering feedback from Portfolio Managers and
       operations personnel regarding trade execution and quality of service.
   4. Trade Evaluation Process to monitor Broker Performance is performed by the Trading Desk
   5. Counterparty exposure – Risk Management uses a daily Business Objects report to monitor
       counterparty exposure.
   6. A review of the Broker list is carried out by the Trade Management Committee (TMC) – Brokers
       are added / removed as necessary.

Specific Responsibilities
   • The TMC meets regularly to review the operation of Broker Selection and Assessment process -
        the results will be part of the Compliance reports.
   • The Compliance reports to the TMC on a semi-annual basis, on the correct implementation and
        operation of the policy - this involves documenting controls and implementing a testing
        programme (sample basis) and presentation of results to the TMC.
   • Where PIKAG relies on the best execution of a counterparty, all counterparty Best Execution
        policies are received and reviewed by Compliance retains Best Execution Policy of approved
        brokers.

NOTE: Negative Market News
If a Portfolio Manager or Trader becomes aware of negative market news regarding an existing broker,
it is their responsibility to inform their immediate Head (Head of Equities, Head of Fixed Income, or
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Head of Trading) and the Head of Portfolio Management, Head of Compliance, Head of Investment
Operations and Head of Risk Management. Once advised, a communication will be prepared and sent
by the Compliance to the entire investments division. The communication will highlight the situation and
inform the Portfolio Managers and Traders that they are not permitted to execute any new trades with
the troubled broker unless written approval has been given by the Head of Portfolio Management and
Compliance. Trading with the broker will remain restricted until advised otherwise by Compliance.

1.11 Trade Management Committee (TMC)
The TMC is a forum for reviewing trade management issues and convenes on a quarterly basis. The
Head of Compliance will escalate any issues arising from the TMC to Senior Management and or the
relevant Boards & Committees. The following details the Mandate and terms of reference of the TMC:

    •   To monitor the process of allocating brokerage commissions across the list of institutions
        currently on the approved broker list. This process is to include business allocated to fixed
        income brokers.
    •   Implement criteria for broker selection and assessment and ensure there is an adequate broker
        selection and monitoring process in place.
    •   To monitor the approved broker list and to ensure that it is sufficient & adequate for the
        company’s trading requirements. At various stages, this may involve formally adopting recently
        added brokers, removing brokers not regularly used and considering different criteria for
        adopting new brokers.
    •   To address the issue of counterparty risk monitoring.
    •   To monitor the company’s efforts of ensuring that best execution is achieved on all transactions.
    •   To monitor any conflicts of interest that arise within the trading process (e.g. in dealing with
        group brokers).
    •   To monitor any soft commission arrangements and to review any proposed arrangements.
    •   To review trends in trade allocation procedures and any trade reversals.
    •   To agree policy on cross trades and to review activity in this area.
    •   To co-ordinate policies with respect to other conduct of business issues including Timely
        execution, Pioneer’s and other codes of ethics and price averaging.
    •   To review and liaise with any issues arising out of the Trade error committee
    •   Report to PIKAG Compliance and Risk Management on a semi-annual basis -> results will be
        announced within the PIKAG Compliance report to PGAM Compliance.

1.12 Controls to monitor and evaluate Broker performance and
     execution policy

1.12.1.1        Selection and monitoring of Execution Venues
Where PIKAG’s execution arrangements include other firms e.g. Brokers, the execution results
achieved by these firms are monitored manually (from PM / Trading Desk). Where PIKAG does not deal
through an executing broker, instead accessing the execution venue directly e.g. in the Fixed Income
Market -, an annual assessment is carried out by the relevant investment team to assess whether
these venues continue to provide the best possible result.

1.13 Soft Commissions
PIKAG shall not consider the broker research as a factor of best execution, since it’s not related to the
execution of the orders. Nevertheless, once the selection process has been concluded and the brokers
able to obtain best execution have been individuated, then it is possible to allocate orders taking into
account the quality of the research provided, since the best possible result for the funds and for the
client accounts has been guaranteed.

PIKAG may pay more than the lowest possible commission rates available for trade execution, given
the existence of:
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    1. Bundled brokerage arrangements
    2. Soft dollar arrangements

Bundled brokerage and soft dollar arrangements could imply an implicit commitment on the part of
PIKAG to direct a certain level of business to the Broker, giving rise to potential conflicts of interest
between PIKAG and its Clients or Funds, in terms of:

    1. Lack of transparency of commissions cost since the record of the transaction will state only the
       overall amount of commission actually charged and makes it difficult to identify which additional
       services were purchased for each portfolio.
       A conflict could arise if PIKAG finances some of the management expenses.
    2. Over-consumption of additional services, given the lack of explicit costs of each service but
       increasing the cost to portfolios under management.
    3. Excessive trading (and consequently higher level of commissions) to obtain higher level of
       additional services.
    4. Influence to approach to Broker selection and best execution, in terms of basing trading
       decisions on the additional services rather than the most advantageous trading outcome for
       Clients and Funds.

PIKAG will evaluate soft commission and bundled brokerage arrangements according to these
fundamental principles:

    1. Soft commission arrangements must be in writing and formally approved by CIO or the TMC in
       order to ensure that the amount of commissions are reasonable in relation to the services
       received.
    2. The payment of the fee must be designed to enhance the quality of the relevant service to the
       client and not impair compliance with the firm's duty to act in the best interests of the client.
    3. Commissions paid when executing a transaction on behalf of Client or Fund are the property
       and assets of such Client or Fund; consequently, PIKAG entering into soft dollar arrangements
       or selecting Brokers which provide a bundled brokerage service will always act for the direct
       and exclusive benefit of Clients or Funds placing their interests before PIKAG’s in the sense
       that any services to be provided must be to the benefit of the investors. Subject to applicable
       regulatory requirements and to the obligation to obtain best execution, PIKAG may pay higher
       commissions to acquire investment research than the amount that would have been paid for the
       only execution service.
    4. Evaluation of research will be done through the following criteria:
            o Research under consideration meet the above definition of research;
            o Research benefits asset under management;
            o Pioneer Investment Firms are able to document the basis for the determination.
       PIKAG will not pay for such research if research does not meet the above criteria, since only
       appropriate research would be paid with Client or Fund assets. Brokerage commissions
       attributable to specific Clients or Funds will only be used to pay for research that is reasonably
       related to the investment decision-making process for the benefit of such Clients and Funds.
    5. A process to assure the allocation of the cost of the products in case of mixed-use will be in
       place.
    6. The use of bundled brokerage or soft dollar to offset costs arising from trading errors is
       prohibited.
    7. Proper disclosure to Clients of commissions paid and the value of bundled or soft services
       received for each portfolio under management with respect to all bundled or soft dollar
       arrangements will take place.

Please be aware, that for dedicated funds, soft commissions are not allowed, just for some mutual
funds.
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1.13.1 Disclosure of Soft Commissions
PIKAG Firms will disclose:
       i. The types of research or services received;
       ii. The extent of use;
       iii. Whether an affiliated Broker is involved;
       iv. If requested by a Client, the aggregate amount of brokerage paid for specific accounts;
     v. If requested, additional information on soft dollar arrangements.

1.13.2 Monitoring Soft Commissions
The TMC or CIO shall review a semi annual report of all approved soft dollar arrangements, which
includes:
     • The name of the product or service;
     • The name of the broker providing the service;
     • Total commissions expected for the current year;
     • The amount of commissions paid year-to-date;

Annually, the Trade Management Committee will review Pioneer’s soft dollar arrangements to
determine (i) if the products or services are needed; (ii) whether they provide legitimate assistance in
the investment decision-making process, and (iii) the reasonableness of the commissions paid to soft
dollar brokers in relation to the value of the products or services. As part of its soft dollar evaluation, the
Trade Management Committee or CIO also evaluates the reasonableness of any cost allocation
between hard and soft dollars.

1.14 Record keeping
PIKAG secures, that all transactions in scope are archived in a minimum of 5 years in order to be
compliant with regard to the MiFID requirement.

				
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