Status under the EU Sustainable Finance Disclosure Regulation (SFDR) - Flexible Income Fund

Janus Henderson Flexible Income Fund

A. Summary

The Fund is categorised as one which meets the disclosure provisions set out in Article 8 of SFDR as a product which promotes environmental and/or social characteristics and invests in companies with good governance practices.

The Fund promotes the following environmental and/or social characteristics: -

• Support for UNGC principles (which cover matters including human rights, labour, corruption and environmental pollution).
• JHI leverages a proprietary ESG framework, utilising both third party data and proprietary insights, that incorporates at least 20 metrics across environmental, social, and governance factors to produce country-level ESG ratings ranging from AAA to CCC. To encourage the adoption of better environmental and/or social practices the Fund will only invest in sovereign issuers rated B or higher.
• JHI leverages a proprietary ESG framework, utilising both third party data and proprietary insights, to produce company ratings for corporate credit issuers. To encourage the adoption of better environmental and/or social practices the Fund will only invest in corporate credit issuers falling within the top 5 of the 6 ratings produced.
• JHI leverages a proprietary ESG framework, utilising both third party data and proprietary insights, to produce agency mortgage-backed securities issuer ratings. To encourage the adoption of better environmental and/or social practices the Fund will only invest in agency mortgage-backed securities issuers falling within the top 5 of the 6 ratings produced.
• Avoidance of investments in certain activities with the potential to cause harm to human health and wellbeing by applying binding exclusions.
• Climate change mitigation.

The Fund does not use a reference benchmark to attain its environmental or social characteristics.

This Fund primarily seeks to obtain maximum total return, consistent with preservation of capital.

Total return is expected to result from a combination of current income and capital appreciation, although income will normally be the dominant component of total return. The Fund pursues its objective by investing in income producing securities of US Issuers which will normally make up 70%, but at all times not less than 60% of the Fund’s net asset value. The binding elements of the investment strategy described below that are implemented as screens are coded into the compliance module of an order management system utilising third-party data provider(s) on an ongoing basis. The exclusionary screens are implemented on both a pre and post trade basis enabling any proposed transactions in an excluded security to be blocked and to identify any changes to the status of holdings when third-party data is periodically updated.

The Sub-Investment Adviser will:

• Apply screens so that the Fund does not invest in issuers that are in breach of the UNGC Principles (which cover matters including human rights, labour, corruption, and environmental pollution).Leverage a proprietary ESG framework, utilising both third party data and proprietary insights, that incorporates at least 20 metrics across environmental, social, and governance factors to produce country-level ESG ratings ranging from AAA to CCC. To encourage the adoption of better environmental and/or social practices the Fund will only invest in sovereign issuers rated B or higher.
• Leverage a proprietary ESG framework, utilising both third party data and proprietary insights, to categorise corporate credit issuers against six ratings from “Category 1” (the highest) to “Category 6” (the lowest). To encourage the adoption of better environmental and/or social practices the Fund will only invest in the top 5 of 6 category ratings, i.e. it will not invest in “Category 6” (the lowest) rated issuers as such issuers have been evaluated as having insufficient management of sustainability risks. The category ratings reflect the Sub-Investment Adviser’s view of the most relevant level of ESG risk for most companies within the sector and can help inform portfolio construction in terms of exposure to a certain sector. Leverage a proprietary ESG framework, utilising both third party data and proprietary insights, to categorise issuers of agency mortgage-backed securities against six ratings from “Category 1” (the highest) to “Category 6” (the lowest). To encourage the adoption of better environmental and/or social practices the Fund will only invest in the top 5 of 6 category ratings, i.e. it will not invest in “Category 6” (the lowest) rated issuers as such issuers have been evaluated as having insufficient management of sustainability risks. The category ratings reflect the Sub-Investment Adviser’s view of the most relevant level of ESG risk for most companies within the sector and can help inform portfolio construction in terms of exposure to a certain sector.
• Apply screens to exclude investment in issuers if they derive more than 10% of their revenue from tobacco, or adult entertainment.
• Apply screens to exclude investment in issuers if they derive more than 10% of their revenues from oil sands extraction, arctic oil and gas, thermal coal extraction.
• The Fund also applies the Firmwide Exclusions Policy, which includes controversial weapons, as detailed under the Prospectus section entitled “Investment Restrictions” in the Prospectus.
• The Sub-Investment Adviser may include positions in the Fund that, based on third-party data or screens, appear to fail the above criteria, where the Sub-Investment Adviser believes that the third-party data is insufficient or inaccurate.

The Fund also applies the Firmwide Exclusions Policy (the “Firmwide Exclusions Policy”), which includes controversial weapons.

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

1. 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;
2. 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.

Investors should note that a specific index is not designated as a reference benchmark to determine whether the Fund is aligned with the environmental characteristics promoted.

JHI has chosen MSCI’s 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 helps ensure that consistent data and methodologies are used given an ESG measure per security type and hence can be compared correctly in the portfolio construction process.

The JHI ESG Investment Policy, which incorporates JHI’s Sustainability Risk Policy, sets out the firmwide approach to ESG Integration Principles, including JHI’s Responsible Investment Principles for long-term investment success, our approaches to Stewardship and Engagement and Baseline Exclusions applied to investee companies.