ASSET MANAGEMENT REMUNERATION POLICY EDMOND DE ROTHSCHILD ASSET MANAGEMENT (LUXEMBOURG) INTRODUCTION In application of the following texts: As a management company of UCITS o CSSF Regulation 10-4 transposing Commission Directive 2010/43/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between a depositary and a management company. o CSSF Circular 10/437 of 1 February 2010 entitled Guidelines concerning remuneration policies in the financial sector o Article 21 of the law of 10 May 2016 transposing Directive 2014/91/EU (inserting article 111a into the law of 17 December 2010, which transposes Directive 2009/65/EC) o Guidelines on sound remuneration policies under the UCITS Directive and AIFMD dated 31 March 2016 (ESMA/2016/411) (hereinafter the ESMA Guidelines ) As a management company of AIFs o Appendix II Remuneration Policy of the law of 12 July 2013 on alternative investment fund managers o Guidelines on sound remuneration policies under the UCITS Directive and AIFMD dated 31 March 2016 (ESMA/2016/411) The purpose of the remuneration policy (hereinafter the Remuneration Policy ) is to maintain a policy that is compatible with sound and effective risk management and does not result in excessive risk-taking that could have an adverse effect on the undertakings for collective investment (hereinafter UCIs ) managed by Edmond de Rothschild Asset Management Luxembourg (hereinafter EdRAML ). It is aligned with the strategy of EdRAML, of the managed UCIs and of those UCIs investors, particularly as regards their objectives, their values, their long-term interests and prospects for sustainable growth. It takes into account the principles governing client and investor protection when services are delivered. This policy also seeks to manage and reduce potential or actual conflicts of interest within EdRAML among its different activities and between the managed UCIs and their managers. The Remuneration Policy describes the basic remuneration principles, indicating the relationship between remuneration and service provision. It also includes criteria for assessing employees against the individual and collective objectives that have been set for them and the relative weighting of the different remuneration components. EDMOND DE ROTHSCHILD 1/10
DEFINITIONS Within the meaning of the regulations, the management body is the body vested with ultimate authority for decision-making within the management company, an investment company or a custodian, including supervisory or management functions, or the management function alone when these two functions are separated. In the case of EdRAML, this is its board of directors (hereinafter the Board ). Identified Staff Members: any employees involved in day-to-day management belonging to one of the categories listed below1: Authorised management (i.e. members of the Executive Committee), (hereinafter the Authorised Management ) Control function managers (internal audit, risk management, compliance, internal control) Managers of the following functions: o Portfolio management o Administration o Marketing o Human Resources Other risk takers (particularly fund managers). This category may also include sales managers. Any member of staff whose total remuneration falls within the same range as that of senior management, control function managers or risk takers, provided that they have an influence on the level of risk associated with the assets under management or with EdRAML. The term UCI (Undertakings for Collective Investment) includes Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs). 1 Article (2) of Directive 2014/91/EU: Those categories of staff should include any employee and other member of staff at fund or sub-fund level who are decision takers, fund managers and persons who take real investment decisions, persons who have the power to exercise influence on such employees or members of staff, including investment advisors and analysts, senior management and any employees receiving total remuneration that takes them into the same remuneration bracket as senior management and decision takers. Those rules should also apply to investment companies that have not designated a management company authorised pursuant to Directive 2009/65/EC. Those remuneration policies and practices should apply, in a proportionate manner, to any third party which takes investment decisions that affect the risk profile of the UCITS because of functions which have been delegated in accordance with Article 13 of Directive 2009/65/EC. EDMOND DE ROTHSCHILD 2/10
REMUNERATION POLICY The basic principles of the Remuneration Policy can be summarised as follows: to foster both the performance and development of employees; to offer overall remuneration prospects that are competitive and which enable EdRAML to attract, retain, motivate and reward employees who are essential for the efficient and effective management and leadership of a management company; to encourage employees to share in the overall success of EdRAML, while continuing to play their part and assume their responsibilities as individuals; to focus on crucial success factors for the growth of EdRAML s activities, in keeping with its short, medium and long-term interests; to maintain and enhance performance by linking remuneration directly to the attainment of ambitious individual and collective performance objectives and to the observance of company values; to establish a sound corporate governance framework, as well as strict compliance with procedures, internal regulations and corporate and financial sector legislation. Remuneration depends on the function held, on the level of responsibility, on experience and on individual and collective performance. It must be compliant with relevant practices in the sector, taking into account the nature and importance of the position and of the specific characteristics of the business sector in which EdRAML operates. Other factors, such as fairness and balanced treatment within EdRAML, present and future risks associated with performance, and the alignment of individual objectives with EdRAML s long-term interests, are also taken into consideration. CATEGORIES OF STAFF COVERED AND CONFERRED POWERS In this context, the Remuneration Policy applies to Identified Staff Members, i.e. employees involved in day-to-day management belonging to one of the categories listed below, in accordance with the ESMA Guidelines: Authorised management ( Executive Committee) Other members of a management committee Senior management Control function managers (internal audit, risk management, compliance, internal control), as well as those reporting directly to them and exercising managerial functions Heads or members of the Risk Committee Department heads (Private Banking or Asset Management heads) Sales and marketing heads EDMOND DE ROTHSCHILD 3/10
Traders and employees performing market operations Portfolio/fund managers (except for junior staff) Employees with total remuneration greater than or equal to EUR 500,000 Managers of risk takers, or any employees with a significant impact on the risk profile not mentioned above Any member of staff whose total remuneration falls within the same range as that of the Authorised Management, control function managers or risk takers, provided that they have an influence on the level of risk associated with the assets under management or with EdRAML. EdRAML s directors are therefore not covered by this Remuneration Policy, with the exception of directors participating in the day-to-day management of EdRAML for the proportion of their remuneration that corresponds to this activity. Dividends liable to be paid to the company s shareholders are not covered by this Remuneration Policy either. DECISION-MAKING AND IMPLEMENTATION PROCESSES Within its area of responsibility, the Board has the power to approve the overall remuneration policy (fixed and variable remuneration) for all of EdRAML s remunerated staff. It reviews the general principles of the Remuneration Policy at least once per year, is responsible for their implementation and supervises it. Thus, it alone is authorised to decide, where applicable subject to the General Meeting of Shareholders approval, on the remuneration pool containing the fixed and variable parts. The Board relies on the Authorised Management to implement the Remuneration Policy and the associated procedures. When establishing and monitoring the Remuneration Policy, the Board may base its decisions on the recommendations of a remuneration committee (hereinafter Remuneration Committee ), composed of directors who are not involved in day-to-day management, of whom the majority must be independent. The chairman of the Remuneration Committee must be an independent director with no involvement in day-to-day management. The Board shall adopt the Remuneration Policy following consultation with the Remuneration Committee of its parent company, Edmond de Rothschild Europe (hereinafter EdRE ), insofar as the rules applicable to the Remuneration Committee of EdRE are equivalent to those provided for in the ESMA Guidelines. The EdRE Remuneration Committee is composed of the following members: Emmanuel Fievet, chairman François Pauly Jacques-Henri David EDMOND DE ROTHSCHILD 4/10
Each year, the Authorised Management shall determine the individual remuneration of staff covered by the Remuneration Policy. The Authorised Management shall present to the Remuneration Committee the remuneration proposals for the persons covered by the Remuneration Policy, with the exception of those concerning them personally. The Remuneration Committee shall draw up remuneration proposals for the Authorised Management and, following deliberation, shall present the remuneration proposals for employees covered by the Remuneration Policy to the Board, which shall make the decision. Directors responsible for day-to-day management shall abstain from voting. Each year, the implementation of the Remuneration Policy is audited internally and independently by the Internal Audit department of the parent company to ensure compliance with the remuneration policies and procedures. Internal Audit may seek the advice of other control functions if necessary. A report on this audit is sent to the Board and a copy of it is made available to the Commission de Surveillance du Secteur Financier (Luxembourg financial supervisory authority CSSF) and the Independent Auditor, at their express request. STRUCTURE AND COMPONENTS OF REMUNERATION Within the meaning of this policy, remuneration is composed of one or more of the following items: Any form of payment or benefit paid or granted by EdRAML; Any amount paid by the UCI itself, including any performance fees paid directly or indirectly to the categories of staff covered; Any transfer of UCI units in exchange for professional services rendered by the categories of EdRAML staff covered. Any payments (excluding refunds of fees and expenses) made by the UCI to EdRAML for the benefit of categories of staff covered or made directly by the UCI to the categories of staff covered are considered remuneration. The remuneration of the employees covered by this Remuneration Policy consists of fixed remuneration and variable remuneration. The composition and the amount of total remuneration are reviewed each year, ensuring that there is a fair balance between its components. Fixed remuneration accounts for a sufficiently high proportion of the total remuneration to enable real flexibility in terms of the payment of variable remuneration and in particular the possibility to pay no variable component. The fixed part (base salary) is paid monthly and is composed of a basic monthly remuneration, which does not take into consideration performance criteria, plus a thirteenth month. Other benefits, the most common of which relates to the supplementary pension scheme, are also granted. The pension scheme is a regulated plan and has no discretionary aspect. It is the result of the strict application of formulae defined in the plan regulations, which are issued to all employees. The fixed part is reviewed each year but is not necessarily revised. EDMOND DE ROTHSCHILD 5/10
The variable part is dependent on all of the objectives set during the annual appraisal being met. It also changes according to the performances of EdRAML and of the business sector and the employee s individual performance. Guaranteed variable remuneration is limited to the first year of employment. Variable remuneration typically consists of the following: a part paid directly, composed o of an amount payable in cash o and/or in financial instruments made directly available to the employee (all or part of which can take the form of the granting of warrants), another part, of which the definitive vesting and payment can be deferred o the definitive vesting of the deferred variable part depends in particular on the financial situation of EdRAML during the vesting period. o the deferred variable part comprises an amount payable in cash or short-term financial instruments, and at least 50% in equities and other similar financial instruments o all or part of the deferred variable part payable in cash may take the form of the granting of warrants, Variable remuneration cannot be paid through instruments or methods that facilitate the circumvention of requirements established in the law of 10 May 2016 transposing the UCITS V Directive. Beneficiaries are not permitted to use personal hedging strategies or remuneration- and liability-related insurance to undermine the risk alignment effects. This prohibition does not apply to any specific hedging against foreign exchange fluctuations, concerning employees whose fixed remuneration is expressed in a reference currency other than the euro. The Board, at the proposal of the Remuneration Committee, may decide to apply the proportionality principle at an individual level (variable remuneration < EUR 100,000.00) and not to pay a part of the variable remuneration in the form of financial instruments and/or as a deferred payment for these employees. The remuneration of employees involved in day-to-day management consists of fixed remuneration and variable remuneration. The composition and the amount of total remuneration are reviewed each year, ensuring that there is a fair balance between its components. The variable part may not exceed 100% of the fixed part. It may be increased up to 200% at the discretion of the General Meeting of Shareholders. This must be a reasoned decision taken annually and in advance. For information purposes, the variable remuneration may be broken down as follows: EDMOND DE ROTHSCHILD 6/10
Cash Instrument Max. 50% Min. 50% Upfront Deferred 60% 40% Max. 30% Max. 20% Min. 30% Min. 20% For the highest levels of variable remuneration, for which the threshold is determined by the Board upon the recommendation of the Remuneration Committee, the deferred proportion will amount to 60%. The Remuneration Committee may decide on a new breakdown each year in accordance with the ESMA Guidelines. The variable remuneration of control function managers is set in accordance with the achievement of the objectives linked to their functions, independently of the performance of the business sectors they control. The remuneration of managers responsible for risk management, compliance and internal audit functions is directly supervised by the Remuneration Committee, which checks that the level of remuneration of employees in control functions is sufficient to ensure the recruitment and retention of employees with the required skills and qualifications. The remuneration of directors is composed of a fee (or percentage) decided on each year by the General Meeting of Shareholders, convened to approve the annual financial statements of the last financial year, at the proposal of the Board ruling on the basis of a recommendation of the Remuneration Committee, if necessary. Directors may not receive any variable remuneration linked to the results or to any other performance criteria. They are not entitled to stock options or to a non-statutory pension scheme. EdRAML shall bear the cost of directors subsistence expenses for the meetings they attend in carrying out their duties on the Board and its committees. Directors participating in day-to-day management are entitled, in addition to this fee, to a remuneration as stipulated for employees covered by this Remuneration Policy. Variable remuneration is only paid if the results of the management company and of the Group so allow. The management company has the right to not grant this additional variable remuneration if the criteria for performance, risk management and/or observance of compliance rules are not met by the person in question, the business unit in question, the management company or the Group. In the event of substantial losses or a significant downturn in the economic environment, the Board reserves the right to reduce or eliminate the payment of variable remuneration for the period concerned. Within the limits of the applicable law, the Board may request that its members of staff repay all or part of bonuses that were awarded for performance on the basis of data that has subsequently proven to be fraudulent. EDMOND DE ROTHSCHILD 7/10
A golden parachute clause may not be granted to an employee if it would reward failure in the event of early termination, except where the compensation is to reward actual performance. In the event that guaranteed variable remuneration is granted as part of the recruitment of a new employee, it will be granted on an exceptional basis and will be limited to the first year of the employment contract. PERFORMANCE MEASUREMENT The Performance Management process is ongoing and a formal appraisal to review performance takes place annually for each employee and is then taken into account when determining remuneration (particularly the variable part). This appraisal2 is based on the criteria listed below with a significant weighting given to each: objectives (Group, bank, department/team, individual, quantitative and qualitative, for the year or over the longer term); fit with the corporate culture (client focus, results focus, entrepreneurial spirit, team spirit, compliance, ethics and observance of values, management if applicable). This approach allows a remuneration policy to be adopted that is flexible and unique. The key indicators taken into account for staff covered by the Remuneration Policy are: alignment with business objectives, taking into account the performance of EdRAML, the business units, and both individual and team performance, the adjustment between current and future risk taking, taking into consideration the long-term outlook, the fostering of the development of skills and expertise, 2 Article 14b (g) of Directive 2014/91/EU: Where remuneration is performance-related, the total amount of remuneration is based on a combination of the assessment as to the performance of the individual and of the business unit or UCITS concerned and as to their risks and of the overall results of the management company when assessing individual performance, taking into account financial and non-financial criteria Article 14 ter (h) of Directive 2014/91/EU: the assessment of performance is set in a multi-year framework appropriate to the holding period recommended to the investors of the UCITS managed by the management company in order to ensure that the assessment process is based on the longer-term performance of the UCITS and its investment risks and that the actual payment of performance-based components of remuneration is spread over the same period EDMOND DE ROTHSCHILD 8/10
The variable amount is determined by the following factors: annual employee appraisal the scores of all other employees score distribution the table for calculating the individual variable parts the budget available for variable remuneration depending on the performance of EdRAML and of the Group. For the members of the Authorised Management, EdRAML s results, as well as the long-term qualitative and quantitative objectives (looking more than one year ahead) are assessed and determine together with the other factors the variable remuneration. DELEGATION OF CERTAIN FUNCTIONS When the management company delegates some of its functions, such as portfolio management or risk management, the management company must ensure that: The delegates apply an equivalent remuneration policy within the meaning of the ESMA Guidelines or of Directive 2013/36/EU CRD IV The agreements established between the management company and the delegates provide that the rules on remuneration stipulated in the ESMA Guidelines are not circumvented and cover all forms of payment made to the Identified Staff Members. DISTRIBUTION OF THE REMUNERATION POLICY The Remuneration Policy and the associated implementation procedures will be available to EdRAML employees. Employees will be notified of future amendments as quickly as possible. Useful information concerning the Remuneration Policy will be published in the financial statements or in the form of a separate statement, as well as in the prospectuses and annual reports of the UCITS and AIFs. More detailed information may be published on the management company s website. EDMOND DE ROTHSCHILD 9/10
Approved by the Board on 30/11/2016 Date of entry into force: first full year including 1 January 2017 Drafted by SKE and SMU 16/07/2014 + updated 13/06/2016 03/10/2016 Approved by Board of Directors on 01/07/2013 + updated 30/11/2016 EDMOND DE ROTHSCHILD ASSET MANAGEMENT (LUXEMBOURG) 20, boulevard Emmanuel Servais L-2535 Luxembourg Grand Duchy of Luxembourg Tel. +352 24 88 1 Fax +352 24 88 84 02 www.edram.lu EDMOND DE ROTHSCHILD 10/10