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EMPLOYEE REMUNERATION POLICY

I. GENERAL PROVISIONS

1.1. This Employee Remuneration Policy (hereinafter – the Policy) sets out the procedure, terms and conditions of work remuneration and incentives applicable to employees of UAB Lords LB Asset Management (hereinafter – the Management Company) whose professional activities and/or decisions can have a considerable impact on the nature and level of risk assumed by the Management Company or by the collective investment undertakings it manages, in order to attract, motivate and retain the best employees who would help implement the long-term goals and business strategy of the Management Company.
1.2. The Policy aims at promoting reliable and effective risk management, responsible business, fair treatment of clients and at avoiding conflicts of interest in relationships with clients so that financial and/or non-financial forms of remuneration do not become an incentive for employees to satisfy their own interests or the interests of the Management Company in breach of the clients’ interests.
1.3. The Policy is in line with the business strategy chosen by the Management Company, its goals, values and long-term continued business interests, such as sustainable growth prospects, which aim at avoiding conflicts of interest, promoting reliable and effective risk management, as well as reliable management of money laundering and terrorist financing risks.
1.4. The Policy has been drawn up with reference to Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010, Guidelines on sound remuneration policies under the AIFMD of 3 July 2013 (ESMA/2013/232), Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision, Commission Recommendation of 30 April 2009 on remuneration policies in the financial services sector, the Republic of Lithuania Law on Collective Investment Undertakings, the Republic of Lithuania Law on Management Companies of Collective Investment Undertakings, Rules for the Organisation and Pursuit of Activities of Management Companies as approved by Resolution No 03-144 of 12 July 2012 of the Board of the Bank of Lithuania (with subsequent amendments and/or supplements), and provisions of other legal acts laying down the requirements applicable to the content of and drawing up the remuneration policy of employees of management companies, its implementation and disclosure.
1.5. The terms used in the Policy:
Remuneration – work remuneration of a specific employee that can consist of Fixed and Variable Remuneration or only of Fixed Remuneration.
Employees – employees of the Management Company whose professional activities and/or decisions can have a considerable impact on the nature and level of risk assumed by the Management Company or by the collective investment undertakings it manages.
Fixed Remuneration – the Remuneration part, which is provided for in the employment contract made between the Management Company and the Employee, is paid under the procedure established by laws and does not depend on performance results.
Variable Remuneration – the Remuneration part allocated according to performance results, including bonuses, other financial or non-monetary allowances provided to Employees for performance results.
Control Functions – risk management, compliance assurance and internal audit (if any in place in the Management Company) and similar functions of the Management Company.
Instruments – securities of the collective investment undertakings managed by the Management Company.
1.6. Other terms defined herein shall be understood as defined in legal acts referred to in paragraph 1.4 and in other related legal acts unless this Policy clearly states otherwise.

II. GENERAL PRINCIPLES OF THE POLICY

2.1. This Policy shall be approved by the Board of the Management Company (or its authorised person), which shall also be responsible for the implementation and regular review of the Policy.
2.2. The Policy shall:
2.2.1. be consistent with and promote sound and effective risk management, not lead to excessive risk;
2.2.2. be transparent with respect to the Management Company;
2.2.3. be consistent with and promote reliable and effective risk management and business continuity of the Management Company;
2.2.4. ensure that excessive risk is not encouraged;
2.2.5. be in line with the business strategy, objectives, values and long-term interests (such as consistent growth prospects, etc.) of the Management Company and of the collective investment undertakings its manages or their investors, as well as ensure the principles of protection of the collective investment undertakings it manages in the provision of management services by the Company;
2.2.6. seek alignment of the activity objectives of the Employees of the Management Company with long-term interests of the Management Company and the collective investment undertakings it manages;
2.2.7. be accessible to the Employees of the Management Company to whom it applies;
2.2.8. be regularly (at least once a year) reviewed and, if necessary, updated to be appropriate to the situation of the Management Company;
2.2.9. not encourage additional risk which would be incompatible with the objectives, nature of risk and incorporation documents of the Management Company and the collective investment undertakings it manages;
2.2.10. seek that the Employees engaged in Control Functions are remunerated according to the achievement of the objectives linked to their functions, independent of the performance of the business units they control, and that the method for determining their Remuneration should not have (and would not be likely to have) any effect on their objectivity;
2.2.11. seek that risk-taking incentives provided by Remuneration practices are consistent with the risk tolerance of the Management Company;
2.2.12. seek to align remuneration incentives with sustainable performance;
2.2.13. equal remuneration system shall apply to Employees without discriminating them on the grounds of sex, age, nationality, race, social status, religion, etc.
2.3. This Policy shall be integrated into the risk management system of the Management Company and shall supplement the policy of the Management Company for the avoidance of conflicts of interest; they shall, respectively, be applied together in order to promote reliable and effective risk management and avoidance of conflicts of interest.
2.4. The decision-making process related to the Remuneration Policy of the Management Company shall be transparent with respect to the Management Company and has been designed so as to avoid conflicts of interest and ensure impartiality of the persons involved in the process.

III. EMPLOYEES

3.1. The Management Company shall approve and regularly update the list of positions of Employees whose professional activities and/or decisions can have a considerable impact on the nature and level of risk assumed by the Management Company or by the collective investment undertakings it manages; the list shall be attached as Annex No 1 to this Policy and shall be revised and updated:
3.1.1. annually;
3.1.2. after each change in the organisational structure of the Management Company.
3.2. Each Employee shall be familiarised individually with the criteria set out in paragraph 6.4 of this Policy with reference to which his/her Variable Remuneration can be determined (if it is decided that it should be applied).

IV. APPLICATION OF THE PRINCIPLE OF PROPORTIONALITY

4.1. When approving and implementing the requirements of this Policy, the Management Company shall adhere to the principle of proportionality. In order to apply this principle, the Management Company shall take into consideration the following criteria:
4.1.1. Size of the Management Company and the collective investment undertakings under its management: the Management Company does not have many employees, activities of the Management company do not become complex due to the management of collective investment undertakings, the collective investment undertakings managed by the Management Company due not assume high risk, each collective investment undertaking managed by the Management Company invests in a small number of investment objects (real estate, private capital and other objects) for which decisions are not made often. Neither the Management Company nor its Employees have any incentives to undertake highly risky complex investment solutions that considerably deviate from the market practice and could lead to a higher investment risk than stated in the documents of the collective investment undertaking;
4.1.2. Internal organisation: the internal organisation of the Management Company is not complex, the Management Company manages collective investment undertakings whose securities are not traded on regulated markets, the activity forms of the collective investment undertakings managed by the Management Company are clearly regulated in legal acts (their legal structure is not unusual);
4.1.3. Nature, scope and complexity of activities: the Management Company is not engaged in any other activities (for example, does not provide investment services) except for the management of collective investment undertakings, the collective investment undertakings managed by the Management Company are of several types (real estate, private capital, investing into infrastructure facilities), the Management Company does not distribute collective investment undertakings in other Member States of the European Union, the Management Company does not manage harmonised collective investment undertakings, the strategies of the collective investment undertakings managed by the Management Company are not complex.
4.2. In the application of the principle of proportionality, the Management Company shall be guided by the following approach:
4.2.1. It can be that Variable Remuneration will be paid not to all Employees;
4.2.2. Variable Remuneration shall normally be paid in cash. Variable Remuneration may be paid in cash and in Instruments or only in Instruments with respect to individual Employees;
4.2.3. The Management Company shall not apply any deferral period and deferral of a Variable Remuneration part;
4.2.4. The Management Company shall not apply any retention period;
4.2.5. The Management Company shall not take into account any ex post risk to adjust Variable Remuneration;
4.2.6. The Management Company shall define the content of information subject to public disclosure (Section VIII of this Policy);
4.2.7. The Management Company shall not form a Remuneration Committee.

V. REMUNERATION STRUCTURE

5.1. The Remuneration for the CEO of the Management Company shall be determined by the Board of the Management Company.
5.2. Tantiems for members of the Board of the Management Company shall be determined and paid in accordance with the Republic of Lithuania Law on Companies of 13 July 2000 and shall be considered equivalent to Variable Remuneration.
5.3. The Board of the Management Company shall task the CEO of the Management Company to determine the Remuneration for Employees not referred to in paragraphs 5.1 and 5.2 of the Policy.
5.4. The Remuneration of Employees shall normally consist of Fixed Remuneration only.
5.5. The Remuneration of Employees, if the Board of the Management Company and/or the CEO of the Management Company so decides, may consist of Fixed Remuneration and Variable Remuneration (most often, in the form of a bonus provided on the initiative of the Management Company in order to provide an incentive to an Employee for good work performance, performance results, etc.).
5.6. In case one of the Remuneration components of an Employee is Variable Remuneration, the Remuneration shall be determined so as to ensure appropriate balance between Fixed and Variable Remuneration components. Proper balance between the Remuneration components may be different with respect to different Employees depending on the market conditions and specific circumstances in which the Management Company operates. In any case the part of the Fixed Remuneration component shall be a sufficiently large part of the total Remuneration. This paragraph shall not apply if only tantiems are paid to Board members of the Management Company and if the Board members of the Management Company do not get any Fixed Remuneration for their fulfilment of Board member duties.
5.7. Variable Remuneration (if any decided to be paid to a specific Employee) shall be paid in the Management Company:
5.7.1. only in cash; or
5.7.2. both in cash and in Instruments. In such a case, the Variable Remuneration part paid in Instruments shall constitute not less than 50% of the whole Variable Remuneration. Variable Remuneration in cash and in Instruments can normally be paid to fund managers (in such a case, Instruments shall be securities of the collective investment undertaking that the relevant fund manager deals with); or
5.7.3. only in Instruments: investment units or shares of a specific collective investment undertaking managed by the Management Company that the specific Employee works with and with whom his/her functions are associated.
5.8. The Management Company may pay contributions to pension funds for the benefit of Employees referred to in Annex No 1. Variable Remuneration shall not be paid by granting the rights to the shares of the Management Company and in financial instruments related to shares.
5.9. The Management Company shall have the right not to pay the whole or part of Variable Remuneration (if any is decided to be applied for a specific Employee) if the relevant Employee or the Management Company does not achieve the expected performance results. Variable Remuneration shall be reduced or withheld taking into consideration the performance results of the Management Company and of all the collective investment undertakings managed by the Management Company, as well as taking into account the individual performance of the Employee and of the specific collective investment undertaking that the specific Employee works with or with whom the functions of the specific Employee are associated with.
5.10. Variable Remuneration (if any is decided to be applied for a specific Employee) shall be allocated and/or paid only if the financial situation of the Management Company is sustainable and shall be linked with the performance results of the Company, the relevant collective investment undertaking and the specific Employee.
5.11. The benefits provided for on the basis of contractual relations and allocated for Employees as a result of early termination of employment relations shall be linked to performance results of such Employees achieved over the period of time not less than two years, except for the mandatory benefits referred to in effective legal acts. Poor performance shall not be remunerated with such benefits.
5.12. The Board of the Management Company shall be entitled to request a specific Employee to refund the whole or part of the Variable Remuneration (if any is decided to be applied) paid, if it later transpires that the Variable Remuneration has been paid to him/her due to the Employee’s negligent, dishonest conduct or due to accounting errors.
5.13. Variable Remuneration (if any is decided to be applied) may not be paid by instruments or measures aimed at avoiding the provisions of this Policy.

VI. ASSESSMENT OF PERFORMANCE RESULTS

6.1. Variable Remuneration of Employees (if any is decided to be applied to specific Employees) shall be linked to performance results, and the whole amount of the Variable Remuneration to be paid out shall be determined with reference to the assessment of individual performance results of the Employee and the performance results of the whole Management Company and the collective investment undertakings it manages.
6.2. In order to ensure that the assessment process is geared towards performance over a longer period and that the pay-out of Variable Remuneration that depends on performance results is spread out over the business cycle of the Management Company and over the period that matches its operational risk, the performance results of several years may also be assessed. In addition, account may be taken of the duration of operations of the collective investment undertakings managed by the Management Company.
6.3. In performance assessment where such assessment is the basis for Variable Remuneration or for the formation of Variable Remuneration funds, it shall also be necessary to take into consideration the existing and future risk associated with the performance under assessment and measure it, as well as take into account the costs of working capital and liquidity support. The Variable Remuneration fund and its size shall not limit the capacity of the Management Company to strengthen its capital base.
6.4. Assessment of the performance results of an individual Employee and the amount of Variable Remuneration allocated for this Employee (if it is, in general, decided to allocate Variable Remuneration to a specific Employee according to the overall performance result of the Management Company) shall not rely on an opinion but on the following criteria:
6.4.1. Non-financial (qualitative) criteria: the Employee operates in accordance with the requirements set out in legal acts and internal procedures of the Management Company; the Employee’s input into the overall performance of the Management Company and of a specific collective investment undertaking (where an estimation in financial terms is not possible), compliance with the rules of communication with investors, initiative, responsibility, performance improvement, team work, creativity, cooperation with other employees of the Management Company, etc.; and
6.4.2. Financial (quantitative) criteria: total performance result of the Management Company and of a specific collective investment undertaking.
6.5. General principle – the amounts of Variable Remuneration for Employees shall not be predefined. The issue of Variable Remuneration shall be considered during Quarter 1 of a calendar year for the preceding financial year taking into consideration the overall performance result of the Management Company and of the collective investment undertakings it manages, as well as of the Employees. The purpose of Variable Remuneration is to remunerate Employees for the total successful result of collective performance, i.e. for successful development and expansion of investment objects, sustainable and reliable operation of the Management Company and compliance with legislative requirements. Negative non-financial performance results, in particular, unethical and non-compliant behaviour should outweigh any good financial performance results achieved by an Employee and, as a result, the Variable Remuneration of such Employee should be reduced or not allocated at all.

VII. INTERNAL CONTROL

7.1. The Board or the CEO of the Management Company shall, taking into consideration the long-term interests of the shareholders of the Management Company and other persons concerned, at least once a year:
7.1.1. in a competent and independent manner, assess the Remuneration practice and incentives developed in order to manage the operational risk, capital and liquidity of the Management Company;
7.1.2. directly supervise the Remuneration determined to managing Employees in charge of risk management and legislative compliance, its payment and other related issues;
7.1.3. draft decisions related to the Remuneration of Employees.

VIII. DISCLOSURE OF INFORMATION

8.1. This Policy shall be accessible to the Employees to whom it applies; each Employee of the Management Company shall be personally familiarised with this Policy and its amendments and shall acknowledge this by signature in the form set out by the CEO of the Management Company.
8.2. Without breaching confidentiality and data protection provisions, the Management Company shall disclose the underlying principles of the Policy and the information related to their changes to the public and persons concerned in a clear and easily understandable form. The Management Company shall provide such information annually for the preceding year in a separate notification, annual report or in any other form of its choice. The content of disclosed information shall be defined by the Management Company with reference to the principle of proportionality.
8.3. The disclosure notification shall state:
8.3.1. information related to the decision-making process concerning this Policy;
8.3.2. information on the relationship between Remuneration an performance results;
8.3.3. ratio between Fixed and Variable Remuneration;
8.3.4. general qualitative information about Remuneration:
8.3.4.1. the total Remuneration amount received over a financial year, divided into Fixed and Variable Remuneration components that the Management Company pays to its Employees and the number of Employees;
8.3.4.2. the total Remuneration amount distributed to the management of the Management Company and its employees whose actions have a considerable impact on the nature of risk of the Management Company or the collective investment undertakings it manages.
8.3.5. other information considered relevant by the Management Company.

IX. FINAL PROVISIONS

9.1. This Policy shall enter into effect as of the date of its approval and may be cancelled, modified and/or amended only by a decision of the Board of the Management Company. Amendments and/or supplements to the Policy shall become effective as of the day of approval of the revised Policy, unless another effective date is stated in the amendments and/or supplements.
9.2. The CEO of the Management Company shall be in charge of control over compliance with and effectiveness of this Policy.

Additional comments

1. Regarding carried interest
Documents (rules, articles of association and prospectuses) of the collective investment undertakings managed by the Company may envisage carried interest that a collective investment undertaking undertakes to pay to the Company in the case of successful investments. Carried interest amount normally is in line with the carried interest rule 80/20 applied in international practice. Taking into consideration the fact that, e.g., 20 % of carried interest is not guaranteed and depends on the overall investment result of the collective investment undertaking, carried interest should, in principle, be treated as a varied part of the remuneration paid to the Company (and later may be allocated to the Employees by a decision of shareholders or the Board). As provided for in the ESMA Guidelines, the Company shall not apply the requirements (remuneration pay-out deferral, retention duration in time, proportions, etc.) for the pay-out process with respect to carried interest because such restrictions of the pay-out process, in view of the Company, would not be proportionate to the activities of the Company considering its size, internal organisation as well as nature, scope and complexity of its activities:
Size: the Company and each of the collective investment undertakings it manages invest into a small number of investment objects which are often illiquid (real estate, private capital and other objects). Neither the Management Company nor its Employees have any incentives to undertake highly risky complex investment solutions that considerably deviate from the market practice and could lead to a higher investment risk than stated in the documents of the collective investment undertaking;
Internal organisation: not a single collective investment undertaking managed by the Company has been listed on regulated markets and the internal structure of the Company is not complex.
Nature, scope and complexity of activities: the Company does not manage harmonised undertakings for collective investment in transferable securities (UCITS), the Company does not operate on a large international scale, and the strategies of the collective investment undertakings managed by the Company are not complicated. The amount of carried interest is disclosed to investors in advance in documents (prospectuses) of collective investment undertakings.

Annex No 1

List of positions of Employees whose professional activities or decisions can have a considerable impact on the nature and level of risk assumed by the Management Company or by the collective investment undertakings it manages

12th January, 2021

Positions:
– Chairperson of the Board;
– Board member(s);
– CEO;
– Investment Manager;
– Fund Manager(s);
– Finance Director (CFO);
– Financial Controller (if any);
– Risk Manager (CRO);
– Compliance Officer;
– Internal Auditor (if any).

Contacts

Phone No.:+370 5 261 94 70
E-mail:info@lordslb.lt
Address:Jogailos str. 4, LT-01116 Vilnius, Lithuania
Press:press@lordslb.lt