Regulatory documents

Conflict of Interest Prevention and Management Policy

Pursuant to the general principles laid down in Directives no. 2004/39/EC of April 21, 2004 ” MiFID ” and no. 2014/65/EU of May 15, 2014 ” MiFID II “, Audacia has formalized a policy for managing conflicts of interest and has put in place specific provisions in terms of organization and control in order to prevent, identify and manage situations of conflict of interest that could harm the interests of its customers in the context of Audacia’s provision of investment services.

Definition

A conflict of interest is defined as ” a prejudicial conflict between the interests of the company and those of its clients, or between the interests of several of the company’s clients “. Thus, a conflict of interest may arise when Audacia or one of the portfolios it manages, or one of its employees or related parties :

is likely to make a financial gain or avoid a financial loss at the expense of one of the managed portfolios or one of the partner companies;
has an interest in the outcome of a service provided to the client or a transaction carried out on behalf of one of the managed portfolios that differs from the interest of the managed portfolio or the partner company in the outcome;
is incentivized, for financial or other reasons, to favor the interests of one of the managed portfolios over the interests of one or more other managed portfolios;
engages in the same professional activity as a partner company;
receives a benefit from a person other than the managed portfolio in connection with the service provided to the managed portfolio, in any form other than the commission or fees normally charged for that service.

In addition, Audacia takes sustainability risks into account throughout its entire system for identifying and managing conflicts of interest.

Prevention

Placing the highest importance on the interests of its clients, and to prevent potential conflicts of interest, Audacia has established a policy and framework that allows it to conduct its activities independently while respecting the primacy of client interests and the confidentiality of information.

The prevention of conflicts of interest is based on the rules of conduct outlined in Audacia’s internal regulations and code of ethics. These provisions, which employees confirm they have reviewed upon joining the company, aim to ensure adherence to principles related to the primacy of client interests and the prevention of conflicts of interest: each employee is required to act with loyalty and fairness in the interest of clients while upholding integrity, transparency, independence, and market security.

This awareness among all employees of the internal rules and codes of conduct is complemented by various measures implemented by Audacia to prevent potential conflicts of interest. In particular, these include strict rules and procedures related to:

the protection of confidential information, insider information, and professional secrecy;
personal transactions conducted for their own account;
to external mandates and functions performed;
to benefits and gifts received from clients or intermediaries.

Detection

Audacia has established an organization to identify situations that could lead to conflicts of interest affecting client interests. This is achieved through the creation of a conflict of interest map that identifies potential types of situations and activities or operations that could generate conflicts, the associated risks, and the procedures in place for managing them.

Gestion

Conflicts of interest are managed in accordance with the principle of client interest primacy, meaning in a fair manner and by providing complete and appropriate information. Thus, depending on the situation, Audacia is authorized to:

carry out the activity or transaction provided that the organization adequately manages the potential conflict of interest situation;
inform the client if certain conflicts of interest may persist and provide the necessary information about their nature and origin;
where appropriate, refrain from carrying out the activity or transaction that gives rise to the conflict of interest.

Corrective actions are proposed to avoid similar conflict situations in the future as much as possible.

Confirmed conflicts of interest are recorded in a register that identifies the conflicts encountered and the appropriate measures taken to resolve them.

Controls

The oversight of the conflict of interest prevention and management system within the management company is the responsibility of the Compliance Officer (RCCI), ensuring adherence to applicable legal, regulatory, and ethical provisions.

The Compliance Officer (RCCI) also conducts an annual review of all activities to identify situations that may lead to conflicts of interest and implements appropriate procedures to manage any potential conflicts in a fair manner.

Furthermore, to avoid self-monitoring, the conflict of interest prevention and management system is included in the outsourced control program. It is integrated into all other control tasks, regardless of their themes, and will be specifically mentioned in the control reports provided by the delegated Compliance Officer (RCCI).

A semi-annual Compliance and Internal Control Committee addresses all issues covered during the period and ensures the implementation of an action plan related to the recommendations made. Any anomalies and areas for improvement identified in the current system will be promptly reported to the Compliance Officer (RCCI) for corrective measures.

Client Information

In the event that Audacia determines that the measures implemented are insufficient to reasonably ensure that the risk of harming clients’ interests can be avoided, it will inform the affected clients in writing. This communication will be complete and objective, avoiding any biased arguments while clearly disclosing the constraints and risks associated with certain products or operations. The nature of the conflict will be explained to enable clients to make informed decisions based on a clear understanding of the situation.

Any additional information regarding this conflict of interest prevention and management policy can be obtained by clients by submitting a written request to Audacia or by contacting their usual representative.

Shareholder Engagement Policy

In order to promote long-term shareholder engagement, the European “Shareholder Rights” Directive requires portfolio management companies (i) to develop and publish a shareholder engagement policy describing how they integrate their role as shareholders into their investment strategy, and (ii) to publish an annual report on the implementation of this policy.

As part of its portfolio management activity, the management company AUDACIA (hereinafter the “SGP”) has adopted this shareholder engagement policy, applicable to all portfolios managed by the SGP (management mandates, ‘AIFs’ and ‘Other AIFs’) and invested in equity securities.

In this regard, it is specified that SGP has been a signatory to the Principles for Responsible Investment (PRI) established by the United Nations since 2019. Its approach aims to integrate environmental, social and governance (ESG) criteria into its asset management, to engage in dialogue with the companies in which it is a shareholder, and to systematically exercise its voting rights attached to the shares held.

Engagement with the issuers we invest in is central to Audacia’s investment process and is a key way to protect the long-term interests of our investors and hold the companies in which we invest accountable. Audacia can engage in two ways:

The vote at the general meeting of companies in which we hold shares.
Dialogue with companies on their consideration of ESG issues.

Regulatory Context

Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 known as the “Shareholders’ Rights Directive”;
Monetary and Financial Code – Articles L.533-22 and R.533-16.

Introduction

Audacia’s shareholder engagement policy is defined in this document. Its effects are permanent and apply to the entire range of managed AIFs. This policy sets out the general principles typically applied in the event of a vote. No minimum shareholding threshold, weighting in the funds’ net assets, or geographical limitations have been defined for exercising voting rights.

As a general rule, voting rights are exercised for all shares of companies held in the portfolios of the managed funds.

The shareholder engagement policy is reviewed periodically, and as needed, by the SGP.

Furthermore, SGP publishes annually on its website (www.audacia.fr), within six months of the close of its financial year, a report on its shareholder engagement policy, detailing the implementation of this policy. This annual report includes, in particular:

A general description of how voting rights have been exercised;
An explanation of the choices made on the most significant votes;
Information on the possible use of voting advisory services;
The orientation of votes cast during general meetings, this information being able to exclude insignificant votes due to their purpose or the size of the shareholding in the company;

Practical Application

SGP is committed to fully exercising its shareholder responsibility in the interest of its investors, by carrying out a rigorous analysis of its investments.

As part of its ESG approach, prior to studying potential investments, the SGP investment team completes the ESG questionnaire with the target companies.

Completing the ESG due diligence questionnaire for target companies allows us to verify that the target company does not operate in an excluded sector (as defined in its Group exclusion policy which is available on the Audacia website) because it does not meet the ethical and environmental principles of the SGP and the funds managed.

Audacia’s management team then proceeds to analyze the economic, financial and extra-financial performance of the companies in which it decides to invest, using internally developed tools and discussions with the managers of the investment.

For SGP, the financial and executive independence of its portfolio companies is a matter of good governance, as well as a driver of growth. Therefore, before each investment, SGP enters into an investment protocol/shareholders’ agreement with the portfolio company concerned, which notably includes:

A strengthened right to information whereby the latter undertakes to provide the SGP with a certain number of elements on its activity (at least semi-annual reporting containing the main financial aggregates, …).
Un droit d’information renforcé par lequel celle-ci s’engage à fournir à la SGP sur sa demande un certain nombre d’éléments concernant des éléments ESG (pouvant se manifester (par exemple : l’introduction d’objectifs ESG, mise en place d’un reporting annuel afin de mesurer les progrès réalisés, échanges réguliers sur de meilleures pratiques).

Dialogue with Invested Companies

The key element of SGP’s shareholder engagement stems from the ongoing dialogue it maintains with its portfolio companies.

Indeed, they are regularly questioned, formally or informally (physical meeting, videoconference, telephone exchange or email), on their strategy, opportunities and risks, as well as their financial and extra-financial performance, in addition to the annual general meetings.

Where appropriate, the investment team monitors the financial and extra-financial developments of its investments during committee meetings (monitoring, follow-up, etc.) which are held at least once a year.

Exercise of voting rights and other rights attached to shares

The SGP is systematically summoned to the general meetings of the portfolio companies in which its clients or the AIFs it manages have invested.

Since SGP has the will and the duty to best defend the interests of its investors, it pays particular attention to the votes on resolutions proposed at general meetings, whether ordinary or extraordinary.

Also, the SGP is particularly vigilant on the following agendas: decisions leading to a change in the articles of association, company accounts, appointment or dismissal of company bodies, regulated agreements, securities issuance and repurchase programs, appointment of statutory auditors.

The decision on the direction of the vote is made by the member of the investment team in charge of monitoring the participation concerned, and this is done in the exclusive interest of the unit holders of the managed funds or managed mandates.

In order to be effective in this approach, the SGP participates in meetings and takes part in votes without applying any criteria (ownership, geographical, etc.).

If the SGP is required to participate in a general meeting of a company listed on a regulated or organized market (limited application within the SGP), it must:

Will ensure that the depositary transmits to him the documents necessary for the exercise of the right to vote within the prescribed time limits;
It will primarily ensure respect for the interests of the fund’s unit holders and minority shareholders, who are considered similar to its investors;
It may turn its attention to other points, such as the approval of the accounts and their discharge, the approval of regulated agreements, the election of corporate officers, capital transactions or statutory amendments.

When the SGP has to participate in a general meeting of a non-listed company (majority within the SGP) which does not present any particular difficulties, the SGP favours voting by mail.

However, a member of the investment team attends general meetings identified as sensitive either in person or via videoconference, regardless of the company’s financial situation. Meetings with an agenda that has a significant strategic impact on the company’s operations (asset sales, etc.) are considered sensitive. The same applies to general meetings of companies experiencing temporary or structural difficulties.

In general, the SGP strives to participate in all votes in order to ensure the exclusive interests of the holders and to best represent the investors, without seeking to obstruct the proposed resolutions, but on the contrary to contribute to strengthening the general interest of the company, by bringing its skills and experience while proposing innovative solutions.

The SGP’s policy is based on two main objectives:

Preserving and defending the interests of fund unit holders: the management company participates in votes on proposed resolutions with a long-term perspective, ensuring the sound financial health of the investment to allow for (i) the effective payment of any dividends when due, and (ii) the liquidity of the securities held at maturity and at the agreed price. Therefore, the management company carefully analyzes resolutions that could impact the company’s financial situation or strategic direction, in order to prevent any future difficulties that could arise and hinder the liquidity of the securities it holds.
Not to hinder the proper functioning of portfolio companies: as a shareholder (direct or indirect), the SGP has a constant concern not to adopt an attitude contrary to the general interest of the company.

Cooperation with Other Shareholders

In general, SGP rarely cooperates with other shareholders or in any form of collective engagement in the investments in which it is invested.

However, in the future, on a case-by-case basis and in due course, it could participate in shareholder coalitions on initiatives aimed at improving the ESG practices of a stake, particularly in the case of co-investments.

Communication with Relevant Stakeholders

The SGP interacts with various stakeholders (investors, companies, regulators, professional organizations, etc.) with the aim of raising awareness among the investment team about long-term issues and better understanding all the financial and non-financial risks that companies may face.

In particular, the SGP regularly takes part in industry discussions and participates in certain working groups in order to take into account the expectations of the various stakeholders regarding sustainable investment.

Prevention and management of actual or potential conflicts of interest related to shareholder engagement

In accordance with applicable regulatory and ethical provisions, SGP has adopted a policy for the prevention and management of conflicts of interest and has put in place specific provisions in terms of organization and control in order to prevent, identify and manage situations of conflict of interest which may affect the interests of its clients in the context of the implementation of investment services (see procedure ‘Prevention and management of conflicts of interest’).

The SGP conducts an annual review of all its activities to identify situations that could lead to conflicts of interest. It has also implemented appropriate measures to manage any potential conflicts fairly. Specifically, these measures include strict rules and procedures relating to:

the protection of confidential information, insider information, and professional secrecy;
personal transactions conducted for their own account;
to external mandates and functions performed;
to benefits and gifts received from clients or intermediaries.

The policy for preventing and managing conflicts of interest is available on the SGP website (www.audacia.fr).

Audacia’s shareholder engagement policy

Download the shareholder engagement policy

Report on the implementation of the shareholder engagement policy

Audacia publishes an annual report on its website, within six months following the end of its fiscal year, detailing the implementation of its shareholder engagement policy. This annual report includes:

A general description of how voting rights have been exercised;
An explanation of the choices made on the most significant votes;
Information on the possible use of voting advisory services;
The orientation of the votes cast during general meetings, with this information potentially excluding insignificant votes due to their nature or the size of the stake in the company;