Conflicts of Interest Policy

Introduction

This policy has been put in place under the Markets in Financial Instruments Directive (“MiFID”) to meet our obligations to maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to identify, monitor and manage conflicts of interest.

What is a “conflict of interest”? A conflict of interest under MiFID is a conflict that arises, in any area of our business, in the course of providing a client with a service that may benefit us (or another client for whom we are acting) whilst potentially materially damaging that client’s interests where we owe a duty to that client.

There may be a conflict where we (or anyone connected to us including an affiliate):

• Are likely to make a financial gain (or avoid a loss) at a client’s expense;
• Are interested in the outcome of the service provided to a client where our interests are distinct from that client’s interests;
• Have a financial or other incentive to favour the interests of one client over another;
• Carry on the same business as a client; or
• Receive money, goods or services from a third party in relation to services provided to a client other than standard fees or commission.

Neptune is authorised and regulated by the Financial Services Authority (“FSA”). As such, we are required to conduct our business in accordance with the eleven Principles for Business laid down by the FSA. The principles primarily relevant to this policy include:

• Conducting our business with integrity (Principle 1);
• Exercising due skill care and diligence (Principle 2);
• Paying due regard to the interests of our clients and treating them fairly (Principle 6);
• Communicating information to our clients in a way that is clear, fair and not misleading (Principle 7); and
• Managing conflicts of interest fairly (Principle 8).

This document provides key information designed to enable you to understand the measures we may take to safeguard a client’s interests.

Neptune provides a range of services to a number of different clients. It is therefore feasible to suggest that circumstances might arise whereby the interests of a client may conflict with the interests of Neptune or with those of another client.

At Neptune we are commited to treating our clients fairly. Neptune will never knowingly put itself in a position whereby its own interests, or its duty to another party, prevent it from discharging its duty to its clients.

If Neptune has a relationship that gives rise to a conflict with the interests of any of its clients, it will not knowingly act for that client without taking reasonable steps to ensure the fair treatment of that client.

Similarly, if Neptune has an interest in a transaction that gives rise to a conflict with the interests of any of its clients, it will not knowingly advise the client, or exercise discretion on behalf of that client, without taking reasonable steps to ensure the fair treatment of that client.

For these reasons, Neptune has produced a Conflicts of Interest Policy that takes a three-stage approach to managing any actual or potential conflicts of interest. These three elements are as follows:

• Maintaining a policy of independence from issuers to ensure that independent advice is given at all times and that clients are treated fairly;
• Disclosing potential or actual conflicts to clients where we are not confident that they can be adequately managed by our internal controls. The client will be provided with sufficient information so that they are able to make an informed decision on whether or not to proceed;
• Declining to act for a client where we have disclosed the conflict but feel it may entail a material risk of damage to that client’s interests.

These three elements combine with more specific policies for areas of the business where we have identified that potential conflicts are most likely to occur. These policies are summarized below.

Research

The FSA has distinguished between “impartial” (or “objective”) and “non-impartial” (or “non-objective”) research. Impartial research can only be produced by persons who do not have responsibilities that might conflict with the interests of the clients who may rely upon that piece of research. Conversely, non-impartial research is categorised as such because persons who may be exposed to such conflicts of interest have prepared it.

The Neptune policy covers material that may fall within the FSA definitions of impartial research. Neptune does not produce “non-impartial” material.

However, not all types of reports and recommendations on investments present the same potential for conflicts of interest.

This policy does not therefore relate to the following (which will not be presented as non-impartial research reports and which Neptune believes will not be perceived by recipients as non-impartial research reports):

• Analyst’s personal recommendations, trade execution ideas and other written or electronic analyses prepared for a current or prospective investor or counterparty (or group of current or prospective investors or counterparties) by a salesman or other non-analyst who is not engaged principally in the preparation of communications that would be considered by recipients as research reports; and
• Technical analysis concerning the demand and supply for a security or industry based on trading volume and price without any analysis of the specific security itself.

Documents so published will make clear in a disclaimer that they are the analyst’s personal recommendations; are not research reports (“non-impartial”); and, even if they could be deemed to fall under the regulatory definition of research, are not objective research.

These documents will be the only investment research produced by the analysts. Investment research will always be published or distributed through Neptune’s usual channels i.e. email, website and hard copy.

The Neptune analysts report to the Head of Research who, in turn, reports to the Chief Executive. The Chief Executive, in conjunction with the Head of Research, takes decisions on the remuneration of analysts.

There may be occasions when an analyst becomes aware of unpublished or confidential price-sensitive/relevant information, very often from the company that the analyst is researching. Until the information has been made public, an analyst should not publish an opinion based on the information and not speak to clients, dealers or salesmen to give an opinion based on the information.

Share Allocation

Neptune must deal with client orders sequentially and in accordance with the timing of their reception. They must be accurately recorded and allocated. Neptune and its employees must not misuse information relating to client orders.

If one or more client orders are aggregated with a transaction for Neptune, the trades must not be allocated in a manner detrimental to any client. If the aggregated order is only partially executed, the trades must be allocated to the clients in priority to Neptune. Unfair precedence should not be given to Neptune or to any particular client.

Investment Decisions

Neptune manages multiple accounts and makes decisions for each account based on the investment objectives, policies, practices and other relevant investment considerations that it believes are applicable to that account. Consequently, Neptune may purchase securities for one account and not another account, and the performance of securities purchased for other accounts may be affected.

Neptune place transactions on behalf of other accounts that are contrary to investment decisions made on behalf of another account, or make decisions that are similar to those made for another account, both of which have the potential to influence the price paid, received or the current value.

Neptune has adopted policies and procedures that it believes address the conflicts associated with managing multiple accounts for multiple clients, although there is no assurance that such policies and procedures will adequately address such conflicts.

Personal Account Dealing (“PAD”) and Outside Business Interests

All directors and employees of Neptune are subject to the Neptune PAD policy. A key feature of the policy is to ensure that there are no conflicts of interests between the individuals’ PAD and that of Neptune’s clients. Neptune employees are also required to declare certain Outside Business Interests.

Remuneration, Commission and Bonus Structures

Remuneration, commission and bonus structures are deigned so as not to create any incentive for a director or employee to act contrary to a client’s interests.

Record Keeping

Records of actual and potential conflicts and the procedures in place to manage them are kept centrally for a minimum of five years.

There may be circumstances where the arrangements that Neptune has in place with respect to conflicts management are insufficient to entirely cure a particular conflict of interest. In those circumstances Neptune may, in the best interests of a client, disclose the potential or actual conflict of interest to the client. In some situations, Neptune may decline to act where a conflict of interest may damage the interests of a client.


Karen Barker
Compliance Officer
Neptune Investment Management Limited
1 Hammersmith Grove
London
W6 0NB
Karen.barker@neptune-im.co.uk