Sustainable Finance Disclosure Regulation

The Sustainable Finance Disclosure Regulation ("SFDR") came into law on 10th March 2021 in Europe. Article 23 of the AIFMD requires that disclosures must be made regarding (i) the manner in which sustainability risk management is integrated in the investment decision making process and (ii) the Manager's assessment of the likely impact of sustainability risks on the returns of each Sub-Fund.

Sustainability risk is defined as an environmental, social or governance event or condition which, if it occurs, would cause a material negative impact on the value of investments held in a Sub-Fund.

The Manager has chosen not to incorporate the assessment of sustainability promotion or sustainability risks into their investment decision making process as would be required to meet the terms of an Article 8 or Article 9 product under SFDR. All products currently offered by the Manager are therefore categorised as Article 6 products.

The reason behind this decision is practicality and not that the Manager has actively rejected the principles of ESG. The Manager pursues a thematic investment approach which is implemented through the selection of fund managers with fund vehicles. The Manager has no direct control over the process of selection and screening of individual investments in these fund vehicles and compliance with the SFDR law under current interpretation would place on the Manager the obligation to collect line by line investment information from each fund vehicle and screen this dataset for its ESG credentials. While in many cases the Manager believes the investments comprised within fund vehicles would meet ESG criteria, the screening exercise has been judged not to be economically worthwhile for investors.

Notwithstanding the above, the Manager in its normal course of business conducts its own assessment of the ESG characteristics of each chosen fund manager and the ESG characteristics of the fund vehicle they are managing where relevant and appropriate. Historically the Manager has for decades promoted the principles of ESG within the limits of what is practical and realistic.

The Manager thinks about sustainable investments within the following framework. Financial market instruments are diverse but may be thought of as being distributed along a "sustainability impact spectrum" ranging from those which have clearly negative sustainability characteristics through those which are neutral to those which are likely to have a strongly positive effect on sustainability. The instruments used in the investment programme of each fund vehicle are identified and located on this spectrum to help inform an assessment of the proportion of the investment programme that may be targeting positive ESG characteristics. This exercise will be incomplete and is conducted on a best-efforts basis only. As such it is not being held out to meet the standards likely required by SFDR.

In short the Manager will continue to strive to avoid or hold short investments in blatantly negative impact investments or businesses and support and invest in fund managers and fund vehicles who promote the broad principles of ESG but within the Manager’s own definitions and interpretation of those principles.

To be clear the Manager is making no attempt to conform and comply with any of the regulatory requirements of SFDR but pursues its own approach to ESG investing which has been embedded in the firm’s culture and investment process from the start and continues to evolve. The Manager has always taken great care to promote sustainability and ESG but it uses its own procedures, policies and metrics to assess the possible benefits and adverse impacts of its investment decisions on sustainability factors as it sees fit. More explanation and details are always available from the Manager on request.

• SFDR Statement