Regulatory Informations

1/ 2017 Report on intermediary fees

Regulatory reminder

The present report was set up in accordance with Article 314-82 of the AMF’s General Regulations which provides that a management company must draw up a report on intermediary fees when it uses order execution and investment decision support services and when intermediary fees for the previous year amounted to more than EUR500, 000.

2017 Fees statement

During the past financial year, brokerage fees paid by LUTETIA CAPITAL for equities and related instruments amounted to more than 500 000 Euros TTC.

For the shares processed and held through mutual funds, intermediary fees for execution orders represented 100% of total fees paid.

In the context of transactions on listed shares, listed derivatives (futures & options) and corporate bonds done during the 2017 financial year and for the whole set of funds under management, LUTETIA CAPITAL didn’t use order execution and investment decision support services.

None of these services was engaged under any split commission agreement.
In addition, the quality of order execution services is regularly evaluated by LUTETIA CAPITAL and is subject to a specific procedure.

Percentage of fees paid back to third parties in 2017 under split commission agreements

In accordance with its investment policy and with the Best Selection policy, no split commission agreements is in place at the end of the 2017 financial year. As such, from the total intermediary fees paid during year 2017, the percentage of these fees paid back to third parties under the terms of such agreements, as mentioned in article 314-81 of RG AMF is null.

Prevention and handling of conflicts of interests

The selection of services providers and their assessments is duly governed by the intermediary selection policy and the conflict of interest policy. These policies are available upon request by Email at: www.lutetiacapital.com.

Over the past years, LUTETIA CAPITAL has not detected any conflict of interest in the selection its services providers.




2/ Exercise of voting rights policy for 2017

Background and objectives

Pursuant to articles 314-100 à 314-102 of the General Regulations of the AMF, LUTETIA CAPITAL is presenting its voting policy for 2017.

Synthesis of the principles used for the exercise of voting rights

In accordance with its voting policy, for the year 2017, LUTETIA CAPITAL has chosen by default not to participate in general meetings of companies nor to vote, unless the mutual fund holds a position for more than 5% of the capital of the relevant company. The final vote on each proposed resolution is determined by the managers of the relevant mutual fund and will follow the following principles:

  • The main motivation for the exercise of voting rights is the preservation of the interests of the shareholders of the issuer concerned and consequently of the subscribers of the mutual fund and the mandators;
  • Resolutions that are not directly related to the principles set out above are not used for the exercise of voting rights.

 

Results of the year 2017

In accordance with the voting policy that has been implemented, LUTETIA CAPITAL has not exercised any voting rights for the mutual funds it manages.

During the financial year 2017, no securities were invested collectively by LUTETIA CAPITAL’s mutual funds with more than 5% of the capital.

The management company did not participate in any general meeting of issuers present in the mutual funds.

 

Projection

LUTETIA CAPITAL plans to renew the same voting policy in 2018.




3/ Conflict of Interest Policy

Background and objectives

Pursuant to articles 322-33 to 322-38 of the General Regulation of the Autorité des Marchés Financiers (Financial Market Authority) and article L.533-10 of the Monetary and Financial Code, LUTETIA CAPITAL has set up a policy to manage conflicts of interest, enabling the management company to detect situations of conflicts of interest arising in connection with its UCITS management activity.

A conflict of interest is defined as “a prejudicial conflict between interests of the company and those of its customers or between the interests of several customers of the company”. LUTETIA CAPITAL has set up a control system under the supervision of the Head of compliance and internal control (RCCI).

Preventive measures

Ethics/Integrity

The employees of LUTETIA CAPITAL are subject to the rules of integrity defined by the code of conduct given to each of them when they join the company. This Code of conduct is intended to ensure compliance with the principles relating to the primacy of the customer interest and the prevention of conflict of interest.

Control measures

LUTETIA CAPITAL regularly reviews all activities carried out in order to detect situations that may give rise to conflicts of interest. The Company has also implemented specific procedures to manage potential conflict of interest situation in an equitable manner.

Register and Conflict of interest mapping

LUTETIA CAPITAL is subject to organizational and administrative provisions designed to prevent conflicts of interest or to manage situations of conflict of interests. These provisions have been drawn up by the Management Company itself and are recorded in a conflict of interest register.

LUTETIA CAPITAL has also drawn up a mapping, in view of its size and the nature of its activities, to identify situations which, to its knowledge, may give rise to a conflict of interest.

Customer Information

Finally, if LUTETIA CAPITAL finds that the measures implemented are insufficient to ensure with certainty that the risk to prejudice interests of customers can be avoided, the Company would inform the customer concerned in writing of the nature of the conflict or its source to enable them to take an informed decision.

For any additional information on our conflict of interest policy, customers can contact LUTETIA CAPITAL by email at: sec@lutetiacapital.com or by mail at the following address: Lutetia Capital, 7 place Vendome, 75001 Paris.




4/ Best selection policy

Context

In application of articles 314-69 to 314-75 of AMF General Regulation, LUTETIA CAPITAL takes all measures to select brokers and counterparties able to ensure the best execution on behalf of the clients.

Intermediates are principally selected from a cost perspective, but other criteria are also considered in the general assessment, including execution capacity, execution quality, post-trade quality and reactivity, reputation.

New relationship

When establishing business relationships, LUTETIA CAPITAL ensures brokers / counterparties have the required regulatory approval and technical ability to deliver the service agreed. The contractual and commercial relationship is key in the broker selection.

The opening of a new relationship requires first the collection of the following documents:

  • legal contract,
  • documentation relative to the identity and the approvals of the broker / counterparty,
  • best execution policy,
  • conflict of interests policy,
  • applicable fees,
  • list of authorized dealers.

LUTETIA CAPITAL has also defined criteria for selecting and assessing third parties, depending on the service given:

  • execution quality (Weight used for the annual review: 9)
  • execution cost (Weight: 5)
  • post-trade quality (Weight: 3)
  • counterparty risk quality (Weight: 3)

Brokers review

LUTETIA CAPITAL assesses the quality of service delivered by the broker on an ongoing basis but formally reviews their performance on a yearly basis, based on various qualitative and quantitative criteria. This control is used to update the list of authorized counterparties / brokers.

If LUTETIA CAPITAL considers a counterparty / a broker does not fulfill its obligation towards one or several criteria anymore, all transactions with this third party should be unwound.

The best execution criterion is crucial in the process of selecting counterparties.




5/ Voting policy

Contexte et objectifs

Conformément aux articles 314-100 et suivants du Règlement Général de l’Autorité des Marchés Financiers (RG-AMF), LUTETIA CAPITAL présente dans ce document la politique qu’elle entend adopter pour l’exercice des droits de vote attachés aux titres détenus par les OPCVM dont elle assure la gestion.

Organization

At LUTETIA CAPITAL

The custodian of the funds notify LUTETIA CAPITAL of general meetings (see below). The financial media may also provide useful information regarding when and how the AGM will be held.

LUTETIA CAPITAL do not generally attend physically to general meetings, unless portfolio managers decide otherwise. Exercising voting rights will depend on the specific criteria detailed below.

Role of the custodian

As at the time of writing this report, RBC IT&S France and Caceis Bank France are the custodians for the collective investment schemes managed by LUTETIA CAPITAL.

Portfolio managers receive from the custodian the agenda and documentation of the general meetings and the convocation notice.

Policy for exercising voting rights

The general rule observed by LUTETIA CAPITAL consists in exercising the voting rights linked to the securities held in the collective investment schemes it manages, under the conditions detailed below.

Holding threshold

5% or more of the market capitalization of the company are held by one or several collective investment schemes.

Types of resolutions

LUTETIA CAPITAL may decide to vote in some particular resolutions regarding corporate governance and strategy:

  • setup of anti-takeover measures,
  • voting rights limitation,
  • generally speaking every resolution that may not be suitable for minority shareholders, including unit holders of collective investment schemes managed by LUTETIA CAPITAL.

AFG (French asset management industry association) recommendations may also be considered.

Beyond these criteria, LUTETIA CAPITAL may also chose to vote, especially if there is a public consensus against a specific resolution.

Exercise of voting rights

In case LUTETIA CAPITAL agrees with the proposed motions:

  • the proxy is given to the Chairman of the shareholders’ meeting.

In case LUTETIA CAPITAL does not agree with the proposed motions:

  • the voting by post form is made on a motion by motion basis.

LUTETIA CAPITAL will generally not attend shareholders’ meetings and the postal voting will be preferred.

Conflicts of interest

In order to prevent any potential conflict of interest, the Head of Compliance and Internal Control reviews the agenda of the General Meeting. He is responsible to define with the management team the best in the interest of the investors. Any such decision is recorded.




6/ Integration of ESG Criteria:

In accordance with article L.533-22-1 of the French Monetary and Financial Code, LUTETIA CAPITAL shall inform investors as regards to the integration of Social, Environmental and Corporate Governance criteria within the investment policy of the company.

Investment policy within all funds managed by LUTETIA CAPITAL does not formally and systematically integrate criteria linked to Environmental, Social and Corporate Governance (E.S.G.) although the management team will in some particular investment opportunities pay a special attention to manager’s ethic, financial transparency, information and independency of their audit structures.

The management company does not currently belong to any association specialized in sustainable development and does not delegate to any third party the extra-financial notation of companies. LUTETIA CAPITAL does not manage any E.S.G funds.




7/ Customer Complaints Management

Background and objectives

This procedure is established in accordance with the provisions of article 313-8 of the General Regulations of the AMF and instruction n°2012-07 of 17 October 2014. It is intended to inform customers from LUTETIA CAPITAL on the complaints processing.

A claim is a statement affirming the client’s dissatisfaction with the Management Company. A request for information, notice, clarification, service or performance is not a complaint.

Information and organization of the customer complaints management

Customers can enter LUTETIA CAPITAL of any claim as follows:

  • By mail at the following address: 7 Place Vendôme, 75001 Paris. The complaint is addressed to the Head of Compliance and Internal Control (RCCI);
  • By phone (non-surcharged call) at the following number: + 33 (0) 1 79 97 97 97;
  • By fax at the following number: + 33 (0) 1 79 97 97 92.

 

If the customer wishes to meet LUTETIA CAPITAL, the latter can call + 33 (0) 1 79 97 97 97.
An appointment will be proposed to the customer in the offices of the Management Company.

As part of its customer complaints management procedure, LUTETIA CAPITAL commits itself to:

  • Acknowledge receipt of the complaint within 10 working days of receipt, unless the response itself is made within this time limit;
  • Respond to the complaint within a maximum of two months from the date of receipt of the complaint, except in the event of the occurrence of special circumstances duly justified.

 

If the complaint is rejected or refused in whole or in part, the customer may contact a mediator, such as the AMF Ombudsman by mail or electronic form.

The Ombudsman may be seized of all disputes concerning banking and financial products and services offered by LUTETIA CAPITAL. It reviews each application submitted to it, impartially and fairly. This is a totally free service which is also the last resort for an amicable dispute resolution.

The AMF Ombudsman may be entered in writing to the following address:

By Mail :
Ms. Marielle Cohen-Branche
The Ombudsman – Autorité des marchés financiers
17, place de la Bourse
75082 Paris Cedex 02
By E-mail:
By filling the AMF mediation request form available at:
http://www.amf-france.org/Formulaires-et-declarations/Contact.html?lst_select_form_theme_id=mediation

 

The Mediation Charter is available online at:
http://www.amf-france.org/Le-mediateur-de-l-AMF/Le-mediateur-mode-d-emploi/Charte-de-mediation.html

The processing of a complaint by LUTETIA CAPITAL is free of charge, the customer will not bear any specific costs (fees, search or other...) related to the processing of his complaint.




8/ Remuneration policy

Background and objectives

The UCITS V Directive provides that management companies shall implement a remuneration policy in order to ensure sound risk management and a control of the risk-taking behavior of the staff members.

In this context, LUTETIA CAPITAL has established a remuneration policy compliant with a sound and efficient risk management which applies to categories of staff whose professional activities affect the risk profile of managed UCITS.

Given the small number of staff, the remuneration policy is common to all employees.

General Principles

This policy promotes sound and effective risk management consistent with management guidelines and constraints of UCITS managed by LUTETIA CAPITAL.

It aims to ensure the interests of unitholders while meeting the long-term objectives of the management company.

The fixed part of the employees’ remuneration will reflect the responsibilities and obligations associated with their position as well as their competence and experience.

The distribution of variable remuneration is inherently discretionary but obeys to the following general principles:

  • It is not indexed to fund performance;
  • It favors behaviors aiming at the development of the management company in the long term;
  • It takes into account the financial situation of the management company, particularly when it is bad.

Staff concerned

The remuneration policy is applicable to all employees.
Special provisions are made for categories of employees whose professional activities have a significant impact on the risk profile of the management company or the UCIs they manage.

Thus, the remuneration of staff is structured as follows:

For the Managing Partners:

  • Annual fixed compensation;
  • Variable remuneration mainly composed by dividends.


For other employees:
  • Annual fixed compensation;
  • A non-contractual variable premium.

Assessment criteria of the remuneration

Given the size of the structure (less than 1 billion of AUM, fewer than 10 employees), LUTETIA CAPITAL applies the proportionality principle concerning the setting up of a remuneration ad hoc Committee.

Thus, the remuneration is fixed by the Chairman of the board of directors by withholding the following elements:

  • LUTETIA CAPITAL ensures that the remuneration envelope is not readjusted a posteriori to meet the remuneration requirements;
  • The measurement of individual performance is based on both quantitative criteria (notably collection, revenues of the management company) and qualitative (achievement of objectives, compliance with procedures including risk management policy, teamwork, cooperation with other functions…), the qualitative criteria have predominance over the financial criteria in order to not favor a reckless risk-taking in the management.;
  • Compliance with these criteria is assessed annually at a meeting with the employee concerned in order to determine the appropriate level of variable remuneration;
  • The annual review of the implementation of the remuneration policy is carried out by D2R-CAPSI as part of its outsourcing mission of compliance and internal control tasks;

It is recalled that the variable component of the employee’s remuneration is guaranteed neither in its amount nor even in its existence. The variable remuneration can be exceptionally guaranteed only at the entrance of a new employee, and for his only first year of presence in the company.

Payment terms of the variable remuneration

In order to align the remuneration payment with the recommended holding period for investors of UCITS managed by LUTETIA CAPITAL and the related investment risks, the variable remuneration is subject to an adequate payment mechanism.

Deferred payment of the variable remuneration

Half of the variable component of compensation is deferred over a three-year period. This period corresponds to the recommended investment horizon for unitholders of UCIs managed by LUTETIA CAPITAL.

Payments in the form of instruments

Half of the variable component of remuneration is indexed to the performance of the UCIs for which the persons concerned are responsible. This performance is acquired by the employee according to the timetable described above.

LUTETIA CAPITAL ensures that employees’ share of variable remuneration in managed funds remains ancillary.

Adjustment of the variable remuneration

Variable remuneration, including the deferred portion, is paid or earned only if:

  • Its amount is compatible with the financial position of LUTETIA CAPITAL as a whole, and;
  • If justified by the performances of the operational unit, the mutual fund and the person concerned.

In particular, the total amount of variable remuneration for year N is generally lower when the manager or the UCIs concerned record poor or negative performances.

This system applies to all variable remuneration of an employee exceeding a threshold defined annually by the Chairman of the Board of Directors.

This threshold may not exceed EUR 100K.