WCM Global Equity Fund

1. Summary

The Fund’s Sub-Investment Manager, WCM Investment Management, is an independent asset management firm based in Laguna Beach, California, founded in 1976.

The Sub-Investment Manager (“WCM”) uses a bottom-up approach that seeks to identify companies with attractive attributes, such as long-term historical growth in revenue and earnings, and/or a potential for superior future growth. The Sub-Investment Manager’s investment process, which takes into consideration ESG factors, seeks companies that are industry leaders who are viewed as innovators in their field with business strategies aimed at building on opportunities that have sustainable competitive advantages leading to the outperformance of competitors; corporate cultures emphasizing strong, quality and experienced management, with cultures that help to foster these attributes at management level; low or no debt; and attractive relative valuations.

2. No sustainable investment objective

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

3. Environmental or social characteristics of the financial product

The Sub-Investment Manager believes corporate culture is a critical determinant of the resiliency and trajectory of a company’s competitive advantage, and how a company views and manages ESG issues. As a key component of the Fund’s bottom-up fundamental approach, social criteria such as human capital management and corporate culture analysis are more heavily weighted within the Sub-Investment Manager’s research process, over environmental criteria.

Similarly, companies with good corporate governance practices and strong, quality, experienced management, demonstrate better understanding, monitoring and management of environmental and social risks.

As such, the Fund promotes social characteristics of favouring companies that exhibit sound corporate cultures, excluding companies materially deficient according to the Sub-Investment Manager’s corporate culture rating criteria, and actively engaging with companies on these social issues as further described below.

The Fund also promotes environmental characteristics of avoiding companies that are considered controversial through for example the application of certain fossil fuel screens and exclusions.

No reference benchmark has been designated for the purpose of attaining the E/S characteristics promoted by the Fund.

4. Investment strategy

The Fund aims to achieve its investment objective by investing primarily in equity securities of large cap global companies located worldwide, including in emerging markets, which are listed or traded on Recognised Markets. Large cap global companies are generally considered to be companies that have a market capitalisation in excess of $5 billion. The Fund is a global fund insofar as its investments are not confined to any particular geographic region or market and the Fund may invest in excess of 30% of its Net Asset Value in securities of issuers from emerging markets.

The Sub-Investment Manager will apply a binding and proprietary set of investment criteria in order to own businesses exhibiting sound corporate cultures. Company cultures are evaluated and defined through the Sub-Investment Manager’s corporate culture internal rating criteria.

The sustainability indicator measured is the percentage of companies which:

• fail to meet the Investment Manager’s corporate culture internal rating criteria are classified under the below industries/sub-industries as defined by the Global Industry Classification Standard (“GICS”) classification:
  Oil and gas drilling

• Coal and consumable fuels

• Oil and gas exploration and/or production

• Tobacco

• have direct exposure to power generation (i.e Utilities) via fossil fuel combustion
• have direct involvement in the production and/or distribution of controversial weapons, namely antipersonnel landmines, cluster munitions, biological and chemical weapons

Implementation of selection criteria

• The initial investment universe includes all global equities, which comprises approximately 2100 companies. The first filter removes non-growth industries, exclusion of companies based on ESG criteria and companies with less than $3.5 billion of market cap.

• Further growth analysis from the Sub-Investment Manager is performed on approximately 450 companies, the Sub-Investment Manager looks for companies with high or rising return on invested capital, low or no debt, high or rising margins, high level business review and history of sustainable growth.

• Then an individual company review is performed on approximately 225 companies, the Sub-Investment Manager analyses the moat trajectory, ESG characteristics, corporate culture, theme tailwind, valuation analysis and risks to thesis including sustainability risks.

• A final portfolio of approximately 30-40 companies is constructed, with diversification considerations, position sizing management, portfolio risk profile, moat and valuation comparisons.

When assessing companies, the Sub-Investment Manager also aims to:

• Understand the trajectory of a company´s ESG practices, positive change may reveal a cultural priority within the company that can be value enhancing in the short and long term

• Identify companies with high social standards, as the Sub-Investment Manager believes this is an enhancer of investment value

• Complement the analysis of a company´s moat trajectory

Good governance practices of investee companies

The Sub-Investment Manager is a signatory to the UN Principles for Responsible Investment (the “UNPRI”). As a signatory to the UNPRI the good governance practices of investee companies are assessed by the Sub-Investment Manager prior to making an investment and periodically thereafter. The following factors are typically analysed:

• Board compensation and incentives;

• Board of director composition/contribution;

• Transparency in financial disclosure and accounting policies;

• Core values and behaviours that are aligned with the firm´s strategy;

• Unethical conduct;

• Financial disclosure;

• Shareholder relations; and

• History with regulators

The Sub-Investment Manager favours companies with good corporate governance practices and believes strong, quality, experienced management demonstrates a better understanding, monitoring and management of environmental and social risks.

5. Proportion of investments

Under normal circumstances, the Fund expects to invest at least 80% in companies aligned with the environmental and social characteristics described above. The Fund is mostly exposed to the following sectors; communication services, consumer discretionary, consumer staples, financials, health care, industrials, information technology and materials. The purpose of any investments made by the Fund that may be classified as “#2 other” within the SFDR is mainly for efficient portfolio management, liquidity management or hedging purposes. There could also be investments in companies that may not match the Fund´s ESG criteria in its entirety but have the adequate minimum safeguards, achieved through exclusions at the outset and strict investment screening criteria.

Derivative instruments are not used for investment purposes. However, the Fund may employ techniques and instruments for the purposes of efficient portfolio management and hedging under the conditions and within the limits laid down by the Central Bank.

6. Monitoring of environmental or social characteristics

The environmental and social characteristics promoted by the Fund, together with governance factors, support the attractiveness of companies as long-term portfolio holdings for the Fund and complement the assessment of corporate culture and management by the Sub-Investment Manager on each of the investee companies.

The Sub-Investment Manager believes corporate culture is a critical determinant of the resiliency and trajectory of a company’s competitive advantage, and how a company views and manages ESG issues. As a key component of the Fund’s bottom-up fundamental approach, social criteria such as human capital management and corporate culture analysis are more heavily weighted within the Sub-Investment Manager’s research process, over environmental criteria. Similarly, companies with good corporate governance practices and strong, quality, experienced management, demonstrate better understanding, monitoring and management of environmental and social risks.

When assessing the environmental and social indicators, together with the consideration of governance factors, the Sub-Investment Manager also aims to:

1. Understand the trajectory of a company´s ESG practices, positive change may reveal a cultural priority within the company that can be value enhancing in the short and long term
2. Identify companies with high social standards, as the Sub-Investment Manager believes this is an enhancer of investment value
3. Complement the analysis of a company´s moat trajectory.

7. Methodologies

Materiality of environmental and social indicators analysed to measure the attainment of the environmental and social characteristics may vary considerably from industry to industry and from company to company and may be dependent on data availability. These may include, but are not limited to:

• Companies with good corporate governance practices and strong, quality, experienced management.

• Social characteristics of favouring companies that exhibit sound corporate cultures, excluding companies materially deficient according to the sub-Investment Manager’s corporate culture rating criteria, and actively engaging with companies on these social issues

• Environmental characteristics of avoiding companies that are considered as controversial through for example the application of certain fossil fuel screens and exclusions.

The methodology to measure the attainment of the environmental and social characteristics focuses primarily on identifying the trajectory of a company’s ESG practices, positive change may reveal a cultural priority within the company that the Sub-Investment Manager believes can enhance the short and long-term value of a company. This analysis may also reveal areas for improvement, which may lead to further engagement with investee/potential companies.

8. Data sources and processing

The data sources used to analyse each of the environmental or social characteristics promoted by the Fund may include:

• Bloomberg data;
• Factset data;
• ISS data;
• Glass Lewis data;
• MSCI data;
• Various company reports; and
• Monitoring of articles and news.

The Sub-Investment Manager believes that analysing relevant ESG factors is important to gaining a holistic understanding of the companies in which the Fund invests. Therefore, the Sub-Investment Manager believes that doing the research themselves and relying on their own judgement is critical in order to integrate ESG into company analysis and decision making, this also ensures data is up to the quality standards expected by the Sub-Investment Manager to support investment decision making.

Third party data providers are used to support some aspects of the in-house research as well as for reporting purposes.

9. Limitations to methodologies and data

Limitations on methodologies and ESG data include the lack of consistency, reliability, comparability, and quality of the data available. This is driven by issues including, but not limited to:

• Lack of common methodology;
• Lack of standardised reporting by companies;
• Different estimation models and analytical tools for unreported data;
• Difficult to quantify factors and unverified or unaudited information; and
• Backward looking information that fails to capture “direction of travel”.

These limitations are addressed by:

• Use of varied data sources;
• Company engagement to understand data at source; and

Reliance on internal research and analysis using third party data as complementary information.

10. Due diligence

The Sub-Investment Manager assesses sustainability risks at the pre-investment stage and on an ongoing basis as follows:

Pre-investment - due diligence assessment:

Any business identified as having a high probability of a potential sustainability risk impacting future returns would not be included in the final portfolio. This pre-investment due diligence assessment, together with adherence to exclusion criteria and selection process, decreases potential negative impacts of sustainability risks on returns at the outset.

Ongoing assessment:

Where there is a marked deterioration in sustainability of a business, evidenced both by quantitative factors such as a decline in ESG risk ratings noted by an independent global provider and factors such as negative perceptions over a business’ operating practices, the Sub-Investment Manager will seek to engage with the business’ management, and if unsatisfactory, potentially exit from the investment.

11. Engagement policies

Throughout the research process, the Sub-Investment Manager meets with management and prospective portfolio companies to raise issues, including ESG-related issues, in order to enhance their understanding of the issuer’s practices and goals in creating shareholder value. Engaging with the companies that the Sub-Investment Manager analyses not only helps with the assessment of a company’s sustainability risks and ESG challenges and opportunities, but also allows the Sub-Investment Manager to express their views and attempt to create positive change for the benefit of all stakeholders. The Sub-Investment Manager further seeks to monitor and engage with companies for ESG accountability through the use of proxy voting and shareholder engagement. The Sub-Investment Manager engages with companies on ESG issues that they think may prove material to the long-term sustainability of a company’s business. The Sub-Investment Manager may also identify sustainability risks or opportunities that they believe are material to their investment theses and encourage investee companies to refine their practices around a given issue.

12. Designated reference benchmark

The Fund does not have a sustainable designated reference benchmark.