Status under the EU Sustainable Finance Disclosure Regulation (SFDR) – Pan European Small and Mid-Cap Fund

B. No Sustainable Investment Objective

This financial product promotes environmental or social characteristics but does not have as its objective sustainable investment.

C. Environmental or social characteristics of the financial product

The Fund promotes climate change mitigation, avoiding issuers with a high carbon intensity and which do not have a credible transition strategy, and support for the UNGC Principles (which cover matters including human rights, labour, corruption, and environmental pollution). The Fund also seeks to avoid investments in certain activities with the potential to cause harm to human health and wellbeing by applying binding exclusions. The Fund does not use a reference benchmark to attain its environmental or social characteristics.

D. Investment Strategy

This Fund seeks a combination of capital and income returns through investment in pan European smaller companies equity markets. Investors should read this section in conjunction with the Fund’s investment strategy (as set out in the section ‘Funds’ of the Prospectus).

The binding elements of the investment strategy described below are implemented as exclusionary screens within the Investment Manager’s order management system utilising a third-party data provider on an ongoing basis.

The companies in which investments are made are assessed by the Investment Manager to follow good governance practices.

The good governance practices of investee companies are assessed prior to making an investment and periodically thereafter in accordance with the Sustainability Risk Policy (“Policy”).

The Policy sets minimum standards against which investee companies will be assessed and monitored by the Investment Manager prior to making an investment and on an ongoing  basis. Such standards may include, but are not limited to: sound management structures, employee relations, remuneration of staff and tax compliance.

The Policy can be found incorporated within Janus Henderson’s “ESG Investment Policy” in the “About Us – Environmental, Social and Governance (ESG)” section of the website at www.janushenderson.com.

In addition, the Investment Manager is a signatory to the UN Principles for Responsible Investment (UNPRI). As a signatory, the good governance practices of investee companies are also assessed by having regard to the UNPRI principles prior to making an investment and periodically thereafter.

E. Proportion of investments

No minimum environmental or social safeguards are applied to such investments. A minimum of 75% of the investments of the financial product are used to meet the environmental or social characteristics promoted by the financial product. Other assets may include cash or cash equivalents in addition to instruments held for the purposes of efficient portfolio management, e.g. temporary holdings of index derivatives.

All investments of the financial product that are used to meet the environmental and/or social characteristics promoted by the financial product are direct investments.

F. Monitoring of environmental or social characteristics

The sustainability indicators used to measure the attainment of each of the environmental or social characteristics promoted by this financial product are:

• Carbon – Carbon Intensity Scope 1&2
• Overall UNGC Compliance Status
• % Issuers within the portfolio identified as having a credible transition strategy in accordance with the Investment Manager’s proprietary methodology.
• ESG Exclusionary screens – see “G. Methodologies for environmental or social characteristics?” below for details on the exclusions.

The Front Office Controls & Governance team provide ongoing assurance that investment products are managed in line with documented sustainability commitments. Financial Risk review and challenge investment management in light of ESG-related risks, alongside traditional market risk metrics, and embed sustainability risk into the risk profiles. Investment Compliance implement exclusionary screening and monitor this on an ongoing basis in addition to elements of manual oversight where relevant.

G. Methodologies for environmental or social characteristics

The Investment Manager applies screens to exclude direct investment in issuers based on their involvement in certain activities. Specifically, issuers are excluded if they derive more than 10% of their revenue from oil sands extraction, arctic oil and gas, thermal coal extraction, or tobacco. Issuers are also excluded if they are deemed to have failed to comply with the UNGC Principles (which cover matters including human rights, labour, corruption, and environmental pollution).

The Fund also applies the Firmwide Exclusions Policy, (which includes controversial weapons) as detailed under the section entitled “Investment Restrictions” of Appendix 2 of the Prospectus.

The Investment Manager may invest in issuers with a high carbon intensity¹ (other than those excluded as described above) if it determines that such issuers have a credible transition strategy, based on its proprietary methodology.

In accordance with the Investment Manager’s proprietary methodology, a company will only be considered as having a credible transition strategy if it has at least one of the following:

• a science-based emissions target or a verified commitment to adopt a science-based emissions target²;

or

• a climate score of B or higher³; or
• an ESG rating of A or higher⁴.

Additional criteria may also be applied in assessing the validity of the transition strategy.

For the purposes of the AMF doctrine, the extra-financial analysis or rating is higher than:

a. 90% for equities issued by large capitalisation companies whose registered office is located in "developed" countries, debt securities and money market instruments with an investment grade credit rating, sovereign debt issued by developed countries.

b. 75% for equities issued by large capitalisations whose registered office is located in "emerging" countries, equities issued by small and medium capitalisations, debt securities and money market instruments with a high yield credit rating and sovereign debt issued by "emerging" countries.

The Investment Manager may include positions in the Fund that, based on third-party data or screens, appear to fail the above exclusionary criteria where the Investment Manager believes that the data is insufficient or inaccurate.

The Investment Manager may include positions in the Fund that, based on third-party data or screens, appear to fail the above criteria, where the Investment Manager believes that the data is insufficient or inaccurate.

¹ High carbon intensity refers to the 10% of highest emitting companies in the Western Europe (INC UK) stocks below EUR7bn market cap and a lower bound of EUR1bn
² Approved or verified by SBT – https://sciencebasedtargets.org, or equivalent
³ Score from CDP – https://www.cdp.net/en, or equivalent
⁴ Rating from MSCI – https://www.msci.com, or equivalent

H. Data sources and processing

The Fund has chosen MSCI’s ESG Manager as its primary data source for ESG (Environmental, Social and Governance) research.

Where coverage gaps are identified, specialist ESG Data vendors or inhouse research may be used to complement the ESG research. This ensures consistent data and methodologies are used given an ESG measure per security type and hence can be compared correctly in the portfolio construction process.

JHI has built a centralised proprietary research alignment process; The central research alignment process aligns data at three different levels:

1. Entity Level,
2. Position Level, and
3. Fund Level.

The research alignment and mapping capability is critical to JHI's ESG (Environmental, Social and Governance) methodology, as we recognize a security could inherit the ESG information from the issuing legal entity, however, some ESG risks will be instrument specific.

JHI applies a series of Data Quality rules to ensure the integrity of the data being ingested into the central research alignment solution. JHI data that is not aligned correctly to the definition as provided by the data vendor is not ingested into the central cloud-based data warehouse and exceptions are raised. These exceptions are monitored and remediated by a central support team. Remediation includes challenging the data provider or internal operations supporting internally managed Systems of Records. Where appropriate the Data Owner responsible and accountable for the data is notified through the internal Data Governance process to resolve outstanding exceptions.

JHI receives weekly automated data feeds from external ESG Data vendors, which are ingested into a cloud-based data warehouse. Once the data is ingested and Data Quality checks have been performed the raw data is mapped to JHI’s internal taxonomy structure. This ensures that all ESG data from the data warehouse is made available consistently across all downstream JHI applications supporting the different stages in the investment process.

The proportion of data for a Financial Product that is estimated is constantly evolving. Given the high levels of coverage across corporate Europe, the proportion of estimated data tends to be low for this product.

Positions allocated may be estimated or reported data received from the external data vendor. For positions not covered by the external data provider, proprietary research may be used. This could range from proprietary research alignment against the external data vendor to written confirmation from the issuing entity that it aligns to the binding criteria. The appropriateness of the evidence provided is assessed by an independent body at JHI.

I. Limitations to methodologies and data

Data coverage is directly driven by the coverage of the underlying ESG Data Provider.

JHI’s internal data structure provides sufficient flexibility to incorporate proprietary evidence or adapt evaluations to future requirements.

J. Due diligence

As detailed in the above ‘Methodologies for Environmental and Social Characteristics’ section, the Investment Manager applies screens to exclude direct investment in issuers based on their involvement in certain activities. Specifically, issuers are excluded if they derive more than 10% of their revenue from oil sands extraction, arctic oil and gas, thermal coal extraction, or tobacco. Issuers are also excluded if they are deemed to have failed to comply with the UNGC Principles (which cover matters including human rights, labour, corruption, and environmental pollution).

The Fund also applies the Firmwide Exclusions Policy, (which includes controversial weapons) as detailed under the section entitled “Investment Restrictions” of Appendix 2 of the Prospectus.

The Investment Manager may invest in issuers with a high carbon intensity¹ (other than those excluded as described above) if it determines that such issuers have a credible transition strategy, based on its proprietary methodology.

In accordance with the Investment Manager’s proprietary methodology, a company will only be considered as having a credible transition strategy if it has at least one of the following:

• a science-based emissions target or a verified commitment to adopt a science-based emissions target²;

or

• a climate score of B or higher³; or
• an ESG rating of A or higher⁴.

Additional criteria may also be applied in assessing the validity of the transition strategy.

For the purposes of the AMF doctrine, the extra-financial analysis or rating is higher than:

a. 90% for equities issued by large capitalisation companies whose registered office is located in "developed" countries, debt securities and money market instruments with an investment grade credit rating, sovereign debt issued by developed countries.

b. 75% for equities issued by large capitalisations whose registered office is located in "emerging" countries, equities issued by small and medium capitalisations, debt securities and money market instruments with a high yield credit rating and sovereign debt issued by "emerging" countries.

The Investment Manager may include positions in the Fund that, based on third-party data or screens, appear to fail the above criteria, where the Investment Manager believes that the data is insufficient or inaccurate.

The JHI Sustainability Risk Policy sets out the firmwide ESG Integration Principles, Sustainable Investment Principles and Baseline Exclusions applied to investee companies. These exclusions are based on classifications provided by third-party data ESG data providers. This classification is subject to an investment research override in cases where sufficient evidence exists that the third-party field is not accurate or appropriate.

Each Investment desk completes their own due diligence processes ahead of making any investment decisions within their Article 8 funds, using internal and external tools and research. The Front Office Controls & Governance team provide ongoing assurance that investment products are managed in line with documented sustainability commitments. Financial Risk review and challenge investment management in light of ESG-related risks, alongside traditional market risk metrics, and embed sustainability risk into the risk profiles. Investment Compliance implement exclusionary screening and monitor this on an ongoing basis in addition to elements of manual oversight where relevant.

¹ High carbon intensity refers to the 10% of highest emitting companies in the Western Europe (INC UK) stocks below EUR7bn market cap and a lower bound of EUR1bn
² Approved or verified by SBT – https://sciencebasedtargets.org, or equivalent
³ Score from CDP – https://www.cdp.net/en, or equivalent
⁴ Rating from MSCI – https://www.msci.com, or equivalent

K. Engagement Policies

In addition to the binding elements of the investment strategy described above, stewardship forms an integral and natural part of Janus Henderson’s long-term, active approach to investment management. Details of JHI’s approach to Engagement can be found in the ‘ESG Investment Policy’ published under the ‘ESG Resource Library’ on the Janus Henderson website.

The Firm supports a number of stewardship codes and broader initiatives around the world and is a signatory to the UK stewardship code.

Janus Henderson has a Proxy Voting Committee, which is responsible for establishing positions on major voting issues and creating guidelines overseeing the voting process. The Committee is comprised of representatives of investments portfolio management, corporate governance, accounting, legal and compliance. Additionally, the Proxy Voting Committee is responsible for monitoring and resolving possible conflicts of interest with respect to proxy voting.

L. Designated Reference Benchmark

No index has been designated as a reference benchmark to meet the environmental or social characteristics promoted by this Article 8 Financial Product.

M. Principal adverse impacts (PAI)

PAIs are considered at the product level.¹ The table below sets out where PAI is considered through the use of exclusionary screens:

Adverse Sustainability Indicator		Metric	How is PAI considered?
Greenhouse gas emissions	GHG Emissions	Scope 1 GHG emissions	Exclusionary screen
		Scope 2 GHG emissions	Exclusionary screen
	Carbon footprint	Carbon footprint	Exclusionary screen
	GHG Intensity of investee companies	GHG intensity of investee companies	Exclusionary screen
	Exposure to companies active in fossil fuel	Share of investments in companies active in the fossil fuel sector	Exclusionary screen
Social and employee matters	Share of investments in investee companies involved in the manufacture or selling of controversial weapons	Exposure to controversial weapons (anti-personnel mines, cluster munitions, chemical weapons and biological weapons)	Exclusionary screen
	Violations of UN Global Compact principles and Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises	Share of investments in investee companies that have been involved in violations of the UNGC principles or OECD Guidelines for Multinational Enterprises	Exclusionary screen

¹ This was effective as of 31 October 2022 and periodic reporting will commence from 1 January 2023 for the first reference period from 31 October 2022.

'Where the translated version of this disclosure text differs from the English version, the original English version prevails'