The “Shareholders’ Rights” Directive transposed into French law aims to strengthen long-term investment in companies and promote the transparency of investments made by “institutional investors”. ARCHIMED SAS is required to describe and make available to the public their long-term commitment to the equity issuers in which it invests its funds.

The shareholder engagement policy describes the way in which the company integrates its role as shareholder into its investment strategy. It therefore targets investments made in shares.

The shareholder engagement policy applies to asset management companies that manage UCITS, AIFs subject to full application of the AIFM directive (Article L 533-22 §I of the French Monetary and Financial Code) and mandates.

AFG note: The inclusion of mandates can be inferred from the directive without appearing explicitly in Article L 533-22 of the French Monetary and Financial Code. However, France specifically targets investment firms providing portfolio management services (see below), thus covering discretionary management.

One or more of these items may be omitted from the shareholder engagement policy if the reasons for their omission are included.

3.1 Monitoring of issuers

Monitoring of strategy, financial performance, risk, capital structure and corporate governance are inherent in the selection of issuers at ARCHIMED SAS.

Prior to each investment decision, ARCHIMED SAS performs comprehensive due diligence involving three or four members of the investment team.

Due diligence is organised in such a way as to validate the investment thesis and obtain a thorough understanding of the business model; the Investment Committee determines the budget allocated to due diligence.

The due diligence procedures include systematic financial, legal, tax and ESG reviews. They may also, where the activity warrants, include an audit of the commercial, HR, information systems, environmental, industrial processes, intellectual property, insurance and other aspects of the business.

The investment team conducts an ESG risk and opportunity assessment using a questionnaire. This questionnaire lists, for each sector, the risk factors categorised according to their severity (low risk, medium risk, high risk). If necessary, an in-depth analysis is carried out by an external service provider.

The action plan is developed in collaboration with the management team based on the results of the due diligence procedure.

The negotiation of the main terms of the legal documentation (deed or protocol of sale/capital increase, commitments, guarantee on reported assets and liabilities, shareholder agreement, articles of association and management package) is conducted by a partner with the assistance of a lawyer.

Debt financing providers must have given a financing commitment (quantum and terms) for the transaction.

During the investment phase, the following actions are implemented:

The portfolio is reviewed each month by the Investment Committee and the ARCHIMED partners during the Monthly ARCHIMED Meeting (MAM) on the basis of the monthly reports provided by each of the companies in the portfolio.

The human resources put in place to monitor the investment are as follows:

The management team consists of seven financial managers, as this job title is defined by the AMF, an investment team, as well as operational partners.

ARCHIMED SAS is committed to fully exercising its responsibility as a shareholder in the interest of the holder, by investing with a long-term outlook and analysing unlisted companies in detail, with the aim of creating value. To this end, the managers analyse the economic and financial performance of the companies in which they invest, and pay particular attention to their good governance, as well as their social and environmental footprint.

The ARCHIMED SAS investment team meets frequently with the management of the companies in which it has invested. These meetings aim to better understand and update the companies’ strategy, opportunities and risks.

An ESG integration policy has been put in place, ensuring that companies are assessed by the manager each year, based on the information provided by the company in its CSR policy. This ambitious approach ensures that non-financial factors are taken into account alongside financial factors when making investment decisions.

3.2. Dialogue with companies held

As a management company investing mainly in unlisted companies, ARCHIMED SAS aims to add value by helping its portfolio companies to benefit from the opportunities available to them, while assisting them in anticipating and preparing for risks. Prior to any investment, ARCHIMED SAS performs various kinds of due diligence (commercial, external growth, tax, financial, social and strategic). The analysis conducted prior to each investment is presented to the Investment Committee and the potential investments are voted on by the committee members.

Post-investment monitoring of these elements continues: managers meet regularly with the directors and key executives of the portfolio companies. Dialogue is structured through governance bodies (board of directors or supervisory board), working meetings or ad hoc requests. During this phase, the business plans defined before the investment are compared with the actual figures, any deviation is analysed and, where necessary, an action plan is drawn up.

The cornerstone of our management company’s approach is therefore the dialogue that ARCHIMED SAS establishes upstream of any investment with the managers of the companies in which we invest on behalf of our clients.

3.3. Exercise of voting rights and other rights attached to shares

General principles applicable to the analysis of resolutions

The Management Company’s principles are:

1) to act in the exclusive interest of the unitholders, in accordance with the Funds’ regulations and applicable conflict of interest rules,

2) to ensure there is transparency in the information given to shareholders,

3) to ensure that the powers of the General Meeting are maintained.

In accordance with these principles, ARCHIMED SAS examines the resolutions put to vote on a case-by-case basis and in particular:

1) Decisions leading to a modification of the articles of association (Extraordinary General Meetings),

2) Equity issuance and repurchase programmes,

3) Approval of the financial statements and allocation of earnings,

4) Appointment and dismissal of corporate bodies,

5) Regulated agreements,

6) Appointment of statutory auditors.

Structure in place for the exercise of voting rights

The persons entitled to vote are the Chairman, Managing Directors and all employees or Operating Partners who have been given the power to represent the company. They are in charge of examining and analysing the resolutions presented by the senior managers of the companies in which the Management Company’s funds are invested. The investment teams are responsible for organising and reporting on the exercise of voting rights.

Conditions for exercising voting rights

Nationality of the companies:

The voting right will be exercised for all the issuing companies. Regardless of the location of the head office. If, however, the expenses involved are deemed too great, the right to vote will be exercised by means of a proxy.

Holding threshold:

The voting right will be exercised if the managed AIFs hold globally at least 5% of the market capitalisation of the issuer.

Depending on the circumstances, the management team may decide to exercise its voting rights for companies that do not meet the two criteria (nationality and ownership threshold) if it deems it appropriate. The resolutions are analysed by the manager in charge of monitoring the company in question and by the Compliance and Internal Control Officer. They ensure that aspects unfavourable to the interests of the company or minority shareholders are identified.

The principles set out below concern all the securities on which ARCHIMED SAS is required to vote. These principles may be irrelevant, depending on the nationality of the companies, as national laws attribute different prerogatives to shareholders’ meetings.

3.4. Cooperation with other shareholders

ARCHIMED SAS invests mainly in unlisted companies. The dialogue with the company and the shareholders among themselves is governed by the articles of association. Usually, because the number of shareholders is limited in unlisted companies, the articles of association are completed by a shareholders’ agreement. These agreements are complementary to the articles of association and make it possible to define, among other things, the methods for resolving conflicts, protecting minority shareholders, and preventing the sale of shares from leading to a loss of control or liquidation of the company.

Ultimately, shareholders’ agreements cover three types of purposes relating to share capital (e.g. locking in the composition of share capital), voting rights (e.g. prior consultation before each general meeting) and the conditions for organisation and operation of the company (e.g. availability of information at a more regular frequency than required by the regulations).

3.5. Communication with relevant stakeholders

ARCHIMED SAS interacts with various stakeholders: shareholders (co-investors), managers and key executives, bankers, advisors, consultants, etc. Co-investors, managers and key executives represent the first circle of relevant stakeholders in our business, with value being added by both managers and individual financial investors. These exchanges may be part of a broader initiative to address systemic issues, such as climate change, or more company-specific concerns shared collectively by a group of investors.

3.6. Prevention and management of conflicts of interest

Members of the investment team must alert the Compliance and Internal Control Officer without delay of any conflict of interest situation likely to affect the free exercise of voting rights. The Management Company will then assess the usefulness of voting after having first obtained the opinion of the Compliance and Internal Control Officer.

In accordance with its obligations, ARCHIMED SAS reports on the manner in which it has exercised its voting rights and its shareholder engagement policy in a report attached to the annual management report.

ARCHIMED SAS therefore prepares an annual report in which it reports on the application of its voting policy and its shareholder engagement policy. The first publication must be effective no later than three months after the publication of Decree No. 2019-1235 of 27 November 2019.

This report is drawn up by one of the members of the investment team and is sent to the holders within six months of the end of the Management Company’s financial year (at the same time as the annual report). This communication is not compulsory when this information is already available on the Management Company’s website.

In addition, and in accordance with the provisions of the France Invest code of ethics, ARCHIMED SAS reports, in the annual report of the funds it manages, on its practices in terms of voting rights whether or not the securities are admitted to trading on a Market. For securities admitted to trading on a Market, this report may refer to the management report of the Management Company or reproduce the management report.

ARCHIMED SAS makes this policy and the annual reports on its application available to its clients and AIF unit holders on request.

The existence of this policy is also mentioned on the ARCHIMED SAS website: https://www.archimed.group/;

ARCHIMED SAS does not anticipate an annual review of this policy; it will be updated as required.