# OBJECTIVE AND INVESTMENT POLICY
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## Sub-Fund management objective


The Sub-Fund is a feeder compartment that invests at least 85% of its net assets in the French ERAAM PREMIA Low Vol mutual fund (the “Master Fund”), and more specifically in Class ID of the Master Fund.
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## Sub-Fund investment policy and restrictions

The Sub-Fund invests at least 85% of its net assets in the Master Fund.
The Sub-Fund may invest the remaining assets, i.e. up to 15% of net assets, in cash in accordance with Article 41, paragraph 2, second subparagraph of the Law of 17 December 2010 and/or in derivative instruments used for hedging purposes, in accordance with Article 41, paragraph 1, point g) and Article 42, paragraphs 2 and 3 of the Law of 17 December 2010.
The Sub-Fund is a feeder compartment of the Master Fund and is subject to the restrictions set out in section G of Chapter 5.
The performance of the Sub-Fund may differ from that of the Master Fund due to (i) the costs borne by the Sub- Fund or (ii) the liquid assets held by the Sub-Fund.
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## Information on the Master Fund

The Master Fund is a French mutual fund managed by the French management company ERAAM.
The latest prospectus (including the data sheet relating to the Master Fund), KIID and annual and semi-annual reports for the Master Fund are available from ERAAM’s registered office on request and online at www.eraam.com. The website of the AMF, the French Financial Markets Authority, at www.amf-france.orgprovides additional information on the list of regulatory documents for the Master Fund and all provisions relating to investor protection.
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## Investment strategy of the Master Fund

The objective of the Master Fund investment strategy is to capture:
- the yields or “risk premiums” of equity markets (increase in the return of equities in relation to the risk- free rate) and bond markets (increase in the return of bonds in relation to the money market); and
- the yields or “risk premiums” related to risk factors/management styles, such as “Value”, “Carry”, “Momentum”, “Defensive”, “Short-term reversal”, “Trend” and “Implied volatility premium” (non- exhaustive list):
	- “Value”: this strategy consists of buying assets deemed to be undervalued in relation to their fundamentals and simultaneously selling assets deemed to be overvalued,
	- “Carry”: this strategy consists of buying assets with the highest yields and simultaneously selling assets with the lowest yields,
	- “Momentum”: this strategy consists of buying assets that have outperformed their medium-term universes and simultaneously selling assets that have underperformed their medium-term universes,
	- “Defensive”: this strategy consists of buying the least risky assets and simultaneously selling the most risky assets of the same asset class (for example: high-beta shares versus low-beta shares),
	- “Short-term reversal”: this strategy consists of buying assets that have recently underperformed their universes and simultaneously selling assets that have recently outperformed their universes,
	- “Trend”: this strategy consists of taking tactical directional positions on assets or asset classes (long positions on assets that have had a positive medium-term performance or short positions on assets that have had a negative medium-term performance),
	- “Implied volatility premium”: this strategy consists of selling options on traditional asset classes (equities, bonds, foreign exchange, commodities) and hedging the delta to benefit from the difference between implied volatility and realised volatility.


The list of “risk premiums” is not exhaustive. ERAAM is constantly analysing new “risk premiums” in each eligible asset class. ERAAM is therefore likely to extend the management strategy on this Master Fund to new risk premiums.
The investment process aims to allocate the portfolio on a discretionary basis to the various “risk premiums” selected for the greatest possible diversification.
These strategies are based in particular on forecasting models and risk models developed internally. In order to implement its strategy, the Master Fund may expose itself to “risk premiums”:
- via performance swaps on “risk premiums” strategy indices,
- and/or via long positions on direct investments in securities, combined with short positions on derivatives,
- and/or via long positions on derivatives, combined with short positions on other derivatives.

The Master Fund will use long or short positions on various asset classes: equity markets and interest rate markets (government bonds and/or private bonds), currencies, commodities and volatility.
| Net exposure range per asset class | Directional exposure | Minimum threshold/Maximum threshold (as a percentage of net assets) |
| --- | --- | --- |
| Equities | Yes | -25%/+75% of net assets |
| Of which small- and mid-caps | Yes | -25%/+50% of net assets |
| Government bonds and bonds from private issuers | Yes | -7/+12 (sensitivity rate) |
| Including bonds that are speculative in nature (high yield) | Yes | 50% of net assets |
| Currencies | Yes | -50%/+50% of net assets |
| Commodities: | Yes | -50%/+50% of net assets |

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## Description of Master Fund asset classes
- Equities: YesMinimum/maximum level of investment in securities: 0%/100%Equity exposure via investment in securities and/or in UCIs and/or listed or over-the-counter derivatives is not intended to expose the Master Fund to equity risk exceeding 75% of net assets (i.e. between -25% and +75% of net assets).

The Master Fund may be exposed to any type of geographical area, any type of accumulation and any type of sector.
- Debt securities and money market instruments: YesMinimum/maximum level of investment in securities: 0%/100%
- Negotiable debt securities: Yes
- Government bonds: Yes
- Private bonds: Yes
- Treasury bills: Yes
- Short-term negotiable securities: YesExposure to interest rates through investment in securities and/or in UCIs and/or listed or over-the- counter derivatives is not intended to expose the Master Fund to interest rate risk above the sensitivity range set between -7 and +12.

All types of issuer (irrespective of their sectors, ratings and geographical locations) are envisaged. ERAAM does not automatically and exclusively use the ratings issued by rating agencies, but carries out its own analysis in order to judge the credit quality of debt securities.
- Currencies: YesMinimum/maximum investment level: 0%/100%Investments will be carried out on exposure, hedging or arbitrage via currency positions (spot foreign exchange/forward foreign exchange/investment in assets denominated in currencies other than the euro), UCIs and/or derivatives.

Currency exposure will be within a range of -50% and +50% of net assets.
- Commodities: YesMinimum/maximum investment level: 0%/100%The Master Fund will be exposed to commodities exclusively via derivative instruments on commodity futures indices within a range of -50% and +50% of net assets. The commodity indices will comply with the guidelines set out by ESMA in terms of representation, correlation and diversification. All types of commodities are envisaged.
- Shares or units of UCIs: YesMinimum/maximum investment level: 0%/10%The portfolio may invest up to 10% in units or shares of UCITS and AIFs under French or foreign law, in compliance with the provisions of Article R. 214-13 of the French Monetary and Financial Code regarding AIFs.

The Master Fund may invest in UCIs managed by ERAAM. The Master Fund may use exchange traded funds (ETFs).
- DerivativesThe investment process includes the use of financial futures and options, traded on regulated, organised or over-the-counter markets. The Master Fund may use derivatives to over-expose its portfolio.

Forward contracts (futures or performance swaps) are used in order to:
- provide general hedging of the portfolio or of certain asset classes held in the portfolio,
- obtain exposure to an asset class or index,
- synthetically reconstitute specific assets,
- enable the use of arbitrage strategies between asset classes or indices,
- increase exposure to the risk of certain asset classes or indices. Options on futures markets and currency options are used in order to:
- protect the portfolio from an increase in market volatility,
- enable the use of arbitrage strategies between asset classes or indices,
- expose the portfolio to a fall in market volatility.

The use of derivatives is not intended to expose the Master Fund to interest rate risks beyond the sensitivity range set between -7 and +12, and to equity risk exceeding 75% of the net assets.
The risks to which the Master Fund will be exposed through derivatives are:
- Equity: Yes
- Interest rate: Yes
- Currency: Yes
- Credit: Yes
- Commodities: Yes
- Implied volatility: Yes.

Description of the procedure for selecting counterparties:
ERAAM selects its counterparties in accordance with the applicable regulations and the counterparty selection procedure implemented within the Management Company, in compliance with its obligations under the principles of “Best Selection” and “Best Execution”. The objective selection criteria applied by ERAAM are, in particular, the procedures for order execution, the prices applied, and the financial strength of each counterparty.
- Securities with embedded derivativesNone.
- DepositsThe Master Fund may make deposits with a maximum maturity of twelve months. These deposits contribute to achieving the management objective of the Master Fund by allowing it to manage its cash flow up to a maximum of 10% of net assets.
- Cash borrowingsThe Master Fund may momentarily be in a liability position due to transactions related to its flows (investments and divestments in progress, subscription/redemption transactions, purchase/sale, etc.) up to a limit of 10% of the net assets.
- Temporary purchases and sales of securitiesNone.
- Information on the use of performance swaps (or total return swaps)The use of performance swaps (or total return swaps) will be systematically undertaken with the sole aim of achieving the management objective: their use facilitates access to exposure to risk premium strategies.

These transactions will be subject to compensation fully payable to the Master Fund. In the context of these transactions, the Master Fund may receive or pay collateral, the operation and characteristics of which are presented in the following section entitled “Collateral”. The types of assets that may be subject to performance swaps are indices of risk premium strategies.
The assets subject to performance swaps will be retained by the counterparty to the transaction or the depositary.
The expected proportion and the maximum proportion of assets under management that will be subject to performance swaps is 100%.
The selection of counterparties for performance swaps will be carried out within the main investment banks. The evaluation criteria include the scope of the strategies proposed, the flexibility to rebalance strategies, the costs associated with these strategies, and the financial quality of the counterparty. These transactions will be formalised using International Swaps and Derivatives Association, Inc. (ISDA) master agreements or their equivalent. These framework contracts will include a list of acceptable collateral as regards asset types, issuers, daily valuation conditions according to maturity, as well as the conditions for margin calls.
- CollateralIn any cases where the investment strategy used causes the Master Fund to bear a counterparty risk, particularly in the context of the Master Fund using over-the-counter forward swaps, the Master Fund may receive cash or securities that are considered as collateral in order to reduce the counterparty risk associated with these transactions. The collateral portfolio received may be adjusted daily to reduce the counterparty risk borne by the Master Fund within the maximum regulatory limits.

Any collateral received by the Master Fund in this context must comply with the criteria defined by the laws and regulations in force, particularly in terms of liquidity, valuation, issuer credit quality, correlation, risks associated with the management of collateral, and applicability. Reinvestment of collateral received:
Collateral received in the form of securities will not be sold, reinvested or pledged.
Collateral received in cash form will be invested in money market instruments or in short-term deposits.
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## Risk profile of the Master Fund

The main risks to which investors are exposed by subscribing to units of the Master Fund are as follows:
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## Risk of capital loss

The Master Fund offers no guarantees or protection. Therefore, investors may not recoup the full amount of their initial capital invested.
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## Discretionary management risk

The discretionary management style applied to the Master Fund is based on anticipating the development of different markets and on the selection of various securities. However, there is a risk that the Master Fund may not be invested in the best-performing markets at all times.
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## Equity risk

Equity risk corresponds to the risk encountered in the event of fluctuations in equity markets. As the Fund may take “short” or “long” positions on equity markets, its net asset value may fall in the event of equity markets rising or falling.
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## Small- and mid-cap equity risk

Equity exposure may be undertaken on any type of capitalisation level, including small and medium caps. However, the exposure of the Master Fund in small- and mid-cap equities will be limited to 50% of net assets.
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## Risk of overexposure

The Master Fund may be exposed to the risk of overexposure insofar as it may use derivatives with a leverage effect. This risk results in a faster drop in net asset value in the event of downward movements in the market.
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## Interest rate risk

Interest rate risk corresponds to the risk that interest rate movements may cause the value of the interest rate instruments to fall. When interest rates rise (in the case of positive sensitivity) or fall (in the case of negative sensitivity), the net asset value may fall significantly. Furthermore, the Fund may use derivatives in addition to securities in the portfolio. In the event of unfavourable trends in the markets, the Fund’s net asset value may fall.
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## Liquidity risk

The Master Fund invests in financial instruments that may have low liquidity depending on certain circumstances. These market conditions may impact the prices at which the manager initiates or liquidates positions and lead to a decline in the Master Fund’s net asset value.
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## Credit risk associated with issuers of debt securities

This is the risk that the credit rating of an issuer of a debt security is downgraded. If an issuer’s credit rating is downgraded or they are at risk of default, the value of their assets will fall. It is measured by sensitivity to credit spreads. Consequently, as a result of exposure to this risk, the Master Fund’s net asset value may fall.
However, the Master Fund’s exposure to securities that are speculative in nature (high yield) will be limited to 50% of its net assets. These securities that are speculative in nature (high yield) present an increased risk of default and a more pronounced and/or more frequent fall in valuations.
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## Volatility risk

An increase or decrease in volatility may lead to a decrease in the net asset value. The Master Fund is exposed to this risk, particularly through derivatives.
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## Risk associated with commodity futures indices

Variation in the price of commodities and this sector’s volatility may lead to a fall in the net asset value.
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## Risks associated with emerging markets

Operating and oversight condition in these markets may deviate from the standards prevailing on major international exchanges. In the event of unfavourable trends in emerging markets, the net asset value may fall.
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## Risk associated with currency exposure

The exposure is calculated as the sum of the absolute values of the net exposures in each currency. Rises or falls in currencies may pose the risk of a drop in the net asset value.
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## Counterparty risk

The Master Fund is exposed to counterparty risk due to the use of over-the-counter financial futures. This is the risk that the counterparty with which a contract has been concluded does not honour its commitments (delivery, payment, redemption, etc.). In such a case, a counterparty default could result in a decrease in the net asset value of the Master Fund.
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## Conflict of interest risk

The Master Fund may be exposed via one or more performance swaps on indices and/or a basket of indices with one or more banking counterparties. These banking counterparties may have other roles, including as promoters, calculation agents or distributors of all or part of sub-indices that constitute the performance swap index. These counterparties are also likely to be investors in the Master Fund and may cover their exposure to the market risk arising from their investments in the Master Fund. Transactions handled with these counterparties are governed by standard contracts. As counterparty to the Master Fund, bank counterparties are not required to take into account the interests of investors in the Master Fund in order to undertake their counterparty roles. These situations may create conflicts of interest, particularly between the interests of counterparties and the interests of investors. Counterparties may at any time decide to terminate their prerogatives in relation to the Master Fund, which may lead to a risk of a fall in the net asset value.
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## Fees charged by the Master Fund

The Sub-Fund shall bear its own expenses and operational costs, as well as the operational costs of the Master Fund, such as the administrative, depositary bank and statutory auditor fees, in proportion to the units it holds in the Master Fund. In addition, the Sub-Fund shall bear the costs and expenses incurred by the Master Fund for services performed in favour of the Master Fund and its shareholders; such costs include, but are not limited to, the costs of preparing reports and other specific administrative costs. These charges are given in section IV. “Classes” below.
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## Relationship with the Master Fund

In accordance with Directive 2009/65/EC, the following contracts have been set up with a view to coordinating relations between the Master Fund, the Sub-Fund, the Management Company and certain other service providers:
- An agreement has been signed between ERAAM as the management company of the Master Fund, the Company (on behalf of the Sub-Fund) and the Management Company whereby ERAAM undertakes to provide the Management Company and the Company (on behalf of the Sub-Fund) with all the necessary documents and information to enable them to comply with the obligations and requirements set out in the Law of 17 December 2010 (the “Information-sharing Agreement”). In addition, on behalf of the Master Fund, the Management Company and the Company (on behalf of the Sub-Fund) ERAAM has agreed to appropriately coordinate the frequency of calculation and the publication of their respective net asset value in order to avoid Market Timing practices and prevent arbitrage of their units or shares between book value and market value.

In addition, the Information-sharing Agreement describes, among other things, the means to be used to mitigate cases of conflict of interest that may arise between the Management Company, the Company, ERAAM and the Master Fund, the rules regarding investment and divestment initiated by the Sub-Fund in the Master Fund, the standard deadlines for transactions and the events that may affect these standards include the deadlines for preparing the audited financial reports. The Information-sharing Agreement is available at the registered office of the Company and the Management Company upon request.
- A contract between the Depositary and the custodian Bank of the Master Fund to organise information sharing between both depositaries. This contract describes in particular the documents and categories of information to be communicated in a regular manner between the parties or made available on request, the method and frequency of communicating information, the coordination of the involvement of each depositary on operational aspects so that they can perform their tasks in accordance with their national legislation, the coordination of procedures concerning the review of the annual financial statements and the declaration of violations or breaches committed by the Master Fund.
- A contract between the Company’s statutory auditor and the auditor of the Master Fund to organise information sharing between these two entities. This contract describes in particular the documents and information to be shared between these two entities so that they can perform their tasks in accordance with the provisions of their national legislation and in particular in accordance with Article 81 of the Law of 17 December 2010.
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Translation (ENFR, 2021-04-01):
# OBJECTIF ET POLITIQUE DE PLACEMENT
## Objectif de gestion
L’objectif de ce Compartiment est d'obtenir, à long terme, une croissance optimale du capital investi et à cette fin de gérer activement, selon les conditions de marché, une exposition aux marchés actions.

## Politique de placement
Le Compartiment investit Principalement ses actifs nets en actions de sociétés de grandes, moyennes et petites capitalisations admises à une cote officielle ou négociées sur un Marché Réglementé.
Les avoirs du Compartiment pourront être investis soit directement dans des actions, soit être utilisés dans le cadre d'investissements au travers d’une sélection d’OPC ou de FIA, de type ouvert, qui respectent les exigences de l’article 41(1)(e) de la Loi du 17 décembre 2010, y inclus les ETF investissant en actions. Des investissements dans des OPC de type fermé, ayant pour politique de placement d'investir dans des actions ou dont le portefeuille est composé d’actions, ne sont possibles que dans les limites mentionnées au chapitre 5 (« Restrictions d'Investissement »).
L’allocation pourra être globale sans restriction particulière d’un point de vue géographique. Le Compartiment considérera aussi toutes les capitalisations boursières dans tous les secteurs économiques sans restriction et pourra investir dans des valeurs libellées dans des devises autres que l’euro.
A titre accessoire, les actifs nets du Compartiment pourront être composés des placements suivants :
- instruments financiers reproduisant la performance et/ou la composition d'indices sur actions. Cette exposition sera notamment obtenue via des investissements dans des ETFs ou d'autres OPCVM, FIA ou OPC de type ouvert éligibles,
- jusqu'à 10% des actifs nets du Compartiment, en actions de grandes, moyennes et petites sociétés qui ne sont ni admises à une bourse, ni négociées sur un Marché Réglementé,
- Instruments du Marché monétaire.

L’allocation des avoirs du Compartiment sera activement adaptée en termes de style de gestion selon les environnements de marchés. Dans des circonstances exceptionnelles et/ou lorsque les conditions des marchés financiers le requièrent, le Compartiment peut, dans un but de protection des intérêts des actionnaires, investir la totalité de ses actifs dans des dépôts à terme ou dans des Instruments du Marché monétaire.
Le profil de risque sera élevé du fait de l’exposition aux marchés boursiers et de la gestion de type opportuniste exprimant des convictions fortes et des positions concentrées. Le turnover qui en résulte pourrait être élevé.
Le Compartiment pourra utiliser les techniques et instruments financiers mentionnés au chapitre 5 du Prospectus dans un but de couverture, d’investissement ou dans un but de bonne gestion du portefeuille.
Le Compartiment n’utilisera pas de SFT ou de TRS.
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