In its Guidelines for Avoiding Conflicts of Interest and Dealing with Gifts and Benefits, MEAG has documented rules that MEAG MUNICH ERGO AssetManagement GmbH (“MEAG AMG”) and MEAG MUNICH ERGO Kapitalanlagegesellschaft mbH (“MEAG KAG”) have adopted with regard to the identification, documentation, escalation and management of conflicts of interest.

As an asset management company, MEAG KAG is required by law to act solely in the interests of its investors. MEAG KAG conducts its business honestly and with the care and diligence required to act in the best interests of the investment funds and portfolio management mandates it manages, its investors and the integrity of the market. Due to internal company processes, MEAG AMG also applies the Guidelines for Avoiding Conflicts of Interest and Dealing with Gifts and Benefits.

At an asset management company such as MEAG KAG, which provides a wide range of services to a large number of investors and clients, conflicts of interest cannot always be avoided. In accordance with the relevant statutory requirements, we have provided information about the precautions we take to deal with conflicts of interest below:

Possible conflicts of interest

A “conflict of interest” is a situation in which one or more natural or legal persons have conflicting interests and the pursuit of one interest could be detrimental to another interest.

Conflicts of interest may arise, for example,

• between MEAG, other companies in the Munich Reinsurance Company Group (“Munich Re Group”), management, MEAG employees, external companies and persons contractually associated with MEAG, and other third parties and the investment funds and portfolio management mandates managed by MEAG KAG, investors and clients, or
• between investors and clients themselves, or
• between investors and the investment funds managed by MEAG KAG or
• between different investment funds managed by MEAG KAG.

There may also be potential conflicts of interest between MEAG and the asset managers and other outsourcing companies, investment advisory firms or custodians it commissions.

Conflicts of interest also include those that may arise from the integration of sustainability risks into processes, systems and internal controls.

For example, conflicts of interest may arise within organisational units and process interfaces for the following reasons:

• receipt of benefits from third parties in the form of gifts, dinner invitations, trips or in connection with investment services;
• information is obtained that is not public knowledge (“insider information”);
• personal relationships of employees or members of management or persons associated with them;
• participation of these persons in supervisory or advisory boards;
• position as a group company vis-à-vis clients;
• reallocations of investment funds;
• multiple clients with identical interests (e.g. fund/portfolio management) in the purchase or sale of a certain property;
• multiple clients with identical interests in acquiring a stake in investment projects;
• grouping of related buy and sell orders (“block trades”);
• investors attempting to execute transactions in fund units at known unit prices in order to gain an advantage over other investors.

Organisational measures, guidelines and rules for the general management of conflicts of interest

Through organisational measures, guidelines and rules (“mitigating measures”) including those described below, MEAG strives to ensure that potential conflicts of interest are avoided as far as possible or, where they are unavoidable, that they are disclosed and resolved appropriately, with due regard to the interests of investors, investment funds or portfolio management mandates.

• To prevent potential conflicts of interest from emerging in the first place, the company structure has been specifically designed to ensure the separation of functions, in particular those that are incompatible with each other. The principle of the separation of functions applies all the way up to management board level.
• In addition, a Compliance function has been set up to monitor the precautions taken against conflicts of interest in all company divisions and to provide regular training to all employees, for instance on legal requirements. The Compliance function for MEAG KAG is outsourced to MEAG AMG’s Compliance function.
• By implementing a combination of preventive measures, including physical separation, restricted access and appropriate organisation of communication and documentation between business units and with third parties (“Chinese walls”), MEAG adheres to high standards in its dealings with investors, clients and business partners.
• MEAG has introduced and is firmly committed to the Munich Re Group Code of Conduct, which holds its employees to high ethical standards. MEAG expects its employees to act diligently and honestly, lawfully and professionally at all times, to observe market standards and, in particular, to always consider the interests of its clients.
• Since remuneration cannot be excluded as a factor that may influence employee behaviour, MEAG KAG has established remuneration principles, guidelines and directives which together form an appropriate set of rules to prevent remuneration structures that could offer employees an incentive to act in contravention of their responsibilities, the legal and regulatory requirements or the Munich Re Group’s Code of Conduct.
• Private investment transactions by employees (“employee transactions”) can lead to conflicts of interest. MEAG has therefore issued rules on employee transactions.
• MEAG maintains a “Restricted List” to counter possible conflicts of interest, e.g. by banning certain business transactions.
• Furthermore, it has established rules for the acceptance and granting of gifts and benefits and their disclosure (e.g. EUR 40.00 acceptance limit for gifts /ban on accepting travel invitations, etc.).
• To avoid potential conflicts of interest when commissioning third parties, a procurement policy is in place to ensure that those involved in the procurement process do not create a basis for conflicts of interest.
• MEAG maintains an insider/watch list to monitor sensitive information and prevent the misuse of insider information.
• When delegating tasks, MEAG ensures that investor interests are safeguarded.
• Measures have been implemented to avoid churning and window dressing. Churning is the frequent reallocation of investments by an asset manager. Window dressing refers to measures that are designed to artificially improve the financial situation of a company or a fund at the end of a reporting period, such as targeted accounting interventions or reallocations of investments to present a more positive picture of the financial situation than is actually the case.
• MEAG has taken the necessary measures to ensure that all investors in its investment funds or portfolio management mandates are treated equally, e.g.
  • A clearly defined and documented process for allocating investment opportunities, using an allocation scoring system with predefined criteria to break score ties in the case of real estate assets;
  • Pro rata reduction of holdings in investment projects in the event of an allocation that is lower than the offers submitted, as well as organisational measures to ensure a fair flow of information among the parties involved in the project;
  • Rules for dealing with block trades.
• MEAG checks for conflicts of interest when designing new products;
• In addition, the depositaries have been given specific order acceptance deadlines (cut-off times) to prevent investors from gaining an advantage over other investors by knowing unit prices;
• Furthermore, the Compliance function conducts regular compliance training seminars for employees.

Management of specific conflicts of interest

By identifying, preventing and managing conflicts of interest, MEAG strives to ensure that conflicts of interest do not adversely affect the interests of clients, MEAG, its owner or other stakeholders.

The following measures may be taken to manage a specific conflict of interest (individually or in combination):

• Adjusting organisational measures, guidelines and requirements;
• Not providing or avoiding the service, activity or situation that triggers the conflict of interest, if the conflict cannot be prevented or effectively dealt with by other means, or
• Disclosing the conflict of interest to inform the parties concerned about the conflict and its likely impact on them.

If there is a conflict of interest between MEAG and an investor, the investor's interests take precedence. If, in individual cases, the investor’s reasonable interests cannot be given precedence, the investor must be informed of the nature and origin of the specific conflict of interest (i.e. for example in the sales documents or the sales prospectus of the investment fund) before the respective transaction is carried out.

MEAG KAG would like to draw particular attention to the following:

In the case of portfolio management services, MEAG KAG’s clients have delegated the management and thus the decisions on the purchase and sale of financial instruments to their asset manager. This means that within the framework of the agreed mandates MEAG KAG makes decisions on specific purchase and sale transactions without first obtaining the client’s consent.

This configuration can intensify an existing conflict of interests. MEAG KAG counters risks that may arise in this regard by taking suitable organisational measures (see above), in particular by selecting investments that are aligned with the client’s interests.

This enables us to ensure that performance, continuity of portfolio management and compliance with the investment objectives agreed with the client are prioritised when selecting financial instruments.