Sustainability-related disclosures

MRC Magnolia GP SARL

The statements below are made on behalf of MRC Magnolia GP SARL. MRC Magnolia GP SARL (hereinafter "MRC Magnolia GP" or "Company") is registered as an alternative investment fund manager (hereinafter "Registered AIFM") pursuant to Article 3 (2) (b) of the Luxembourg Law of 12 July 2013 on Alternative Investment Fund Managers (hereinafter "AIFM Law"). The Company acts as the AIFM of MRC Magnolia SCS (collectively, the "Fund").

On November 27, 2019, Regulation (EU) 2019/2088 of the European Parliament and of the Council of November 27, 2019, on sustainability-related disclosures in the financial services sector (hereinafter "SFDR") was published and entered into force on March 10, 2021. The European Commission clarified in an official communication in July 2021 that the requirements of the SFDR also apply to registered AIFMs - qualifying as financial market participants under the SFDR. One of these requirements is that registered AIFMs must provide disclosures on the following requirements:

Article 3 - Transparency of sustainability risk policies
Article 4 - Transparency of adverse sustainability impacts at entity level
Article 5 - Transparency of remuneration policies in relation to the integration of sustainability risks

The Company implements the requirements of Articles 3 - 5 SFDR as set out below. It should be noted that required disclosures are kept up to date and are accessible at the Company's registered office at any time and investors will be informed of any changes accordingly. The Company will not create a separate website for the purpose of disclosing this information but ensures that the investors are at all times up to date with respect to the Company’s implementation of the afore mentioned SFDR requirements.

Article 3 SFDR – Transparency of sustainability risk policies

According to Article 2 (22) of the SFDR, a sustainability risk is an environmental, social or governance (hereinafter "ESG") event or condition, if it occurs, could have an actual or potential material adverse effect on the value of the investment.

The sustainability risks deemed relevant according to the investment strategy shall be taken into account in the investment decision. The financial product managed by the Company is qualified as a financial product under Article 8 SFDR and is addressing sustainability risks by applying a defined ESG investment strategy, see pre-contractual disclosure template for further reference, on a consistent basis. The Company incorporates analysis of ESG factors into all stages of its investment management process, from sourcing, through to screening opportunities, and finally monitoring of closed investments. For each investment, the Company is assessing the ESG adoption team before any commitment is made. The assessment is based on a checklist referencing best practices and covers policy, industry association membership, value creation, progress tracking and reporting from an ESG perspective. Fund managers and portfolio companies with significant ESG issues or insufficient commitment to ESG will be excluded from the financial product’s investment universe. The pre-investment ESG assessment will be monitored on an ongoing basis once an investment has been closed. The Company performs a formal assessment based on the ESG questionnaire of each fund manager on an annual basis. This assessment reviews a fund manager’s execution relative to its stated ESG strategy and operations. The Company further monitors and assesses the ESG activities within a portfolio and the fund manager’s ongoing adoption of responsible investing practices. The Companies will engage with fund managers that do not show sufficient commitment to or progress with regards to ESG.

Article 4 – Transparency of adverse sustainability impacts at entity level

The Company has elected not to formally consider principal adverse impact indicators of investment decisions on sustainability factors (i.e., type of assets invested, classification related to SFDR, and unsustainable investment strategies) considering the inherent limitations related to information and data on these principal adverse impact indicators. Nevertheless, the Company is considering the principal adverse impact indicators “Exposure to companies active in the fossil fuel sector” and “Exposure to controversial weapons (anti- personnel mines, cluster munitions, chemical weapons and biological weapons)” within the investment management process through exclusions for all investments of the Company. The information regarding these exclusions is disclosed in the annual report pursuant to Article 11 (2) SFDR. The Company does not intend to consider principal adverse impacts of investment decisions on sustainability factors in the near future.

Article 5 - Transparency of remuneration policies in relation to the integration of sustainability risks

The Company, in accordance with the requirements of the AIFM Law, does not fall within the scope of the provisions of Article 12 of the AIFM Law, among others, which requires the preparation and implementation of a remuneration policy. The Company does not consider it appropriate to draw up a formal remuneration policy, as

the Board of Directors of the Company only receives a fixed remuneration in line with market practice and is basing its formal investment decisions on the work of the investment advisor;
the remuneration of the investment advisor is disclosed transparently to all investors in the Limited Partnership Agreement and the remuneration is materially influenced by the performance of the investments, i.e. also by the materialisation of sustainability risks;
the compliance of the compensation with the requirements of the Limited Partnership Agreement is reviewed annually by an independent auditor.

The compensation structure of the company thus reflects and takes into account sustainability risks or their occurrence directly in the compensation of the investment advisor.

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MRC Magnolia SCS

Sustainability-related disclosures required for Article 8 financial products Regulation (EU) 2019/2088 (“SFDR”) on sustainability-related disclosures in the financial services sector

Preamble

MRC Magnolia SCS (the “Fund”) promotes environmental (e.g. carbon emissions, fossil fuel exposure) and social characteristics (e.g. training and education initiatives, workplace health and safety considerations) by predominantly investing in target funds that display a strong ESG character and comply with the requirements of the proprietary ESG due diligence of the investment manager.

The ESG investment strategy of the Fund will focus on ESG aligned as well as ESG transitional investments that are selected based on stringent investment due diligence processes.

No reference benchmark has been designated for the purpose of attaining the environmental or social characteristics promoted by the Fund.

The Fund is not considering the EU criteria for environmentally sustainable economic activities as defined under the EU Taxonomy Regulation in its investment decisions.

Website product disclosure for financial products that promote environmental or social characteristics (Article 8 SFDR)

1. Summary

The ESG investment strategy of the Fund will focus on ESG aligned as well as ESG transitional investments that are selected based on stringent investment due diligence processes. The ESG investment strategy of the Fund is based on the following binding elements:

Negative screening;
Target fund manager due diligence regarding ESG capabilities and processes;
Analysis of the classification and disclosure of the Investment according to the Sustainable Finance Disclosure Regulation (“SFDR”) or equivalent standards;
Positive screening (ESG asset due diligence with a focus on activities and behaviours) as applicable.

The Fund aims to create an investment portfolio holding directly or indirectly mainly secondaries. At least 51% of the underlying investments will be aligned with E/S characteristics (# 1) (based on commitments made) and invested in line with the binding elements of the ESG investment strategy. The Fund is focusing on different sustainability indicators to measure the attainment of the promoted environmental and social characteristics. The sustainability indicators may evolve over time to ensure their ongoing relevance with respect to the target investments of the Fund.

No reference benchmark has been designated for the purpose of attaining the environmental or social characteristics promoted by the Fund.

The Fund is not considering the EU criteria for environmentally sustainable economic activities as defined under the EU Taxonomy Regulation in its investment decisions.

2. No Sustainable Investment Objective

The Fund promotes environmental or social characteristics but does not have as its objective sustainable investment.

3. Environmental or social characteristics of the financial product

The Fund promotes environmental (e.g. carbon emissions, fossil fuel exposure) and social characteristics (e.g. training and education initiatives, workplace health and safety considerations) by predominantly investing in target funds that display a strong ESG character and comply with the requirements of the proprietary ESG due diligence of the investment manager.

The ESG investment strategy of the Fund will focus on ESG aligned as well as ESG transitional investments that are selected based on stringent investment due diligence processes.

4. Investment Strategy

The objective of the Fund is to provide investors (directly or indirectly) exposure to a highly attractive investment opportunity set in private equity secondaries transactions. Hence, the Fund will concentrate through its investments directly or indirectly on the more complex, non-traditional transactions, including, amongst others, continuation funds, tender offers, annex funds and preferred equity solutions. The Fund’s investments will primarily focus on small buyout and growth equity investments with quality fund managers.

The ESG investment strategy of the Fund is based on the following elements:

Negative screening;
Target fund manager due diligence regarding ESG capabilities and processes;
Analysis of the classification and disclosure of the Investment according to the Sustainable Finance Disclosure Regulation (“SFDR”) or equivalent standards;
Positive screening (ESG asset due diligence with a focus on activities and behaviours) as applicable.

Good governance practices are assessed at the level of the investment during the due diligence process. Inter alia processes with respect to general governance considerations, compliance with social and labour standards, tax considerations and compensation schemes are assessed taking into consideration the investment focus of the Fund being small buyout and growth equity investments.

5. Proportion of investments

Investments that fall into the category #2 ("Other") refers to investments that are not expected to promote environmental and/or social characteristics, as well as ancillary assets such as cash and other balance sheet items. The planned asset allocation with respect to the split between #1 Aligned with E/S characteristics and #2 Other (see below) is applicable at the latest at the conclusion of the investment period.

The fund manager is striving to reach the split as soon as possible and before the conclusion of the investment period but cannot commit to this timeline due to the nature of the secondary investments made as each secondary investment is in a different phase of its investment lifecycle and the fund manager has no influence over the liquidation schedule of the individual investments.

The fund manager commits to allocate on an overall basis considering the Fund’s lifecycle, 51% of the Fund’s commitments to investments that contribute to the promoted environmental and/or social characteristics. The effective commitments may differ throughout the Fund’s lifecycle as illustrated above, nevertheless ensuring the 51% overall allocation of commitments is complied with.

The planned asset allocation remains in any case applicable, considering the above, until the Fund begins liquidating its investments.

#1 Aligned with E/S characteristics includes the investments of the financial product used to attain the environmental or social characteristics promoted by the financial product.

#2 Other includes the remaining investments of the financial product which are neither aligned with the environmental or social characteristics, nor are qualified as sustainable investments.

6. Monitoring of environmental or social characteristics

The Fund is focusing on different sustainability indicators to measure the attainment of the promoted environmental and social characteristics. The sustainability indicators may evolve over time to ensure their ongoing relevance with respect to the target investments of the Fund. As the sustainability indicators to be assessed may differ from investment to investment, the sustainability indicators detailed below are to be understood as in principle relevant and dependent on the specific investment. Other sustainability indicators might be more relevant and suitable to assess the level of contribution to the promoted environmental and/or social characteristics.

Sustainability indicators – Negative Screening

The Fund has defined certain exclusion criteria with respect to major business activities of the investments relate to:

trading or production of weapons (incl. controversial weapons) or munitions
manufacture or sale of tobacco
pornography or the sex industry
gambling, casinos and equivalent enterprises
fossil fuel exploration, extraction, production, transportation, power generation and distribution

The Fund has defined certain exclusion criteria with respect to behaviours of the investments:

Severe and systematic violation of the UN Global Compact

Sustainability indicators for promoted environmental characteristics

(Estimated) greenhouse gas emissions

Sustainability indicators for promoted social characteristics

Instances of confirmed non-compliance with human rights

Sustainability indicators for target fund manager and ESG asset due diligence

The Fund is focusing on the ESG target fund manager and ESG asset due diligence assessment results in combination with the results of the disclosure assessment of the investments to promote the environmental and/or social characteristics. The environmental and/or social characteristics focus with respect to the sustainability indicators underlying the target fund manager and asset due diligence may differ within the limits of the investment objective for the investments allocated to # 1 (see overview for asset allocation).

7. Methodologies

The Fund seeks to attain the promoted environmental and/or social characteristics by focusing on the following binding elements.

Negative Screening

The Fund has defined certain exclusion criteria with respect to major business activities (>25 % of revenues) of the investments relate to:

trading or production of weapons (incl. controversial weapons) or munitions
manufacture or sale of tobacco
pornography or the sex industry
gambling, casinos and equivalent enterprises
fossil fuel exploration, extraction, production, transportation, power generation and distribution

The Fund has defined certain exclusion criteria with respect to behaviours of the investments:

Severe and systematic violation of the UN Global Compact [1]

The exclusion criteria are relevant and applicable for all investments of the Fund.

Target fund manager due diligence

The Fund has developed a proprietary framework to classify target fund managers and strategies on their approach to ESG. The scores represent the Fund’s assessment of the degree to which ESG factors are incorporated within a target fund manager’s investment philosophy.

ESG asset due diligence with a focus on activities and behaviours

The Fund is – based on information provided by the target fund manager – assessing the underlying portfolio companies based on a proprietary ESG due diligence assessment with a focus on the activities and behaviours of the company. Besides the negative screening requirements, the ESG due diligence may inter alia consider

a stranded asset risk assessment;
ESG data reporting capabilities and governance processes;
Relevant ESG policies and processes;
Greenhouse gas emissions;
Instances of confirmed non-compliance with human rights;
Severe environmental or social controversies.

The environmental and/or social characteristics focus may differ within the limits of the investment objective from investment to investment based on geography and sectoral considerations.

Disclosure assessment

Further the following elements are assessed during the investment due diligence:

the classification of the Investment under the SFDR or equivalent disclosure standards (where available);
the contribution of the Investment to the promoted environmental and/or social characteristics measured by the relevant sustainability indicators (see above).

In case the investment is not regulatory required to provide a relevant disclosure, the Fund will consider, as feasible and required to conclude on the ESG assessment, different options available for the assessment of the contractual alignment with the investment through means such as side letter requests.

Investments contributing to the attainment of the promoted environmental and/or social characteristics are required to pass the good governance requirements detailed below.

8. Data sources and processing

The Fund may consider different data sources to attain the promoted environmental and social characteristics. Assessments may be based on information that is provided by the fund manager of the target fund, publicly available information and information from a specialised provider. The Fund aims to implement a data quality process. In doing so, the Fund shall amongst other considerations take into account the data used is relevant to the ESG investment strategy, appropriate regarding the considered period as well as consistent and comparable over time, as relevant. The Fund is collecting and assessing data during the due diligence phase in different ways (e.g. via questionnaires, self-research). This data is then assessed from a qualitative point of view and considered in the ESG investment strategy. The data and results of the due diligence are centrally stored and maintained. Relevant data is at least updated with respect to the annual reporting of the Fund. With respect to the initial due diligence, the Fund may use proxy information or estimates regarding greenhouse gas emissions.

9. Limitations to methodologies and data

The Fund has implemented an SFDR process. In relation to this process, the Fund checks that there are no material limitations at this stage. Potential limitations may arise in relation to data quality and completeness, which may vary between investments. The Fund, see above, establishes measures related to data quality.

The Fund does not expect that these restrictions will

i. materially affect the achievement of the Fund's promoted environmental and social characteristics; or

ii. materially adversely affect the qualification of the investments under #1 as described in the section "Proportion of investments".

10. Due diligence

A detailed due diligence of all investments, including ESG aspects, is an integral part of the investment process. The Fund is – based on information provided by the target fund manager – assessing the underlying portfolio companies based on a proprietary ESG due diligence assessment with a focus on the activities and behaviours of the company. Besides the negative screening requirements, the ESG due diligence may inter alia consider

A stranded asset risk assessment;
ESG data reporting capabilities and governance processes;
Relevant ESG policies and processes;
Greenhouse gas emissions;
Instances of confirmed non-compliance with human rights;
Severe environmental or social controversies.

The environmental and/or social characteristics focus may differ within the limits of the investment objective from investment to investment based on geography and sectoral considerations.

11. Engagement policies

No dedicated engagement policy has been established for the Fund.

12. Designated reference benchmark

The Fund does not use a benchmark.

[1] Assessment is based on available information from the investment and considers results adverse (media) screening.

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Mill Reef Capital GP SARL

The statements below are made on behalf of Mill Reef Capital GP SARL. Mill Reef Capital GP SARL (hereinafter "MRC GP" or "Company") is registered as an alternative investment fund manager (hereinafter "Registered AIFM") pursuant to Article 3 (2) (b) of the Luxembourg Law of 12 July 2013 on Alternative Investment Fund Managers (hereinafter "AIFM Law"). The Company acts as the AIFM of Mill Reef Capital Fund SCS and WUP Investment Opportunity SCS (collectively, the "Fund").

Article 3 - Transparency of sustainability risk policies
Article 4 - Transparency of adverse sustainability impacts at entity level
Article 5 - Transparency of remuneration policies in relation to the integration of sustainability risks

Article 3 SFDR – Transparency of sustainability risk policies

The financial product managed by the Company is qualified as a financial product under Article 6 SFDR.

Sustainability due diligence may be conducted on an ad hoc basis for the Fund before making an investment to assess potential ESG risks, the status of regulatory compliance, determine the potential for positive contribution to social and/or environmental issues and set up the management structures to measure, report and verify performance. There can be no assurance, however, that such due diligence will reveal all ESG risks or sustainability liabilities relating to an investment that could emerge from adverse impact or from the failure to perform and positively contribute to environmental or social issues.

Based on the Fund’s investment objective and investment strategy, the Company considers that ESG risks will have a limited impact on the returns of the Fund.

Article 4 – Transparency of adverse sustainability impacts at entity level

Although ESG and sustainability risks are important to the Company, the latter does not consider the adverse impacts of investment decisions on sustainability factors in the manner prescribed by article 4(1) SFDR, in particular due to the fact that (i) no reliable and sufficiently available or accessible data are available to perform such impact measurement and provide the mandatory reporting imposed by the regulatory technical standards in a consistent manner; (ii) the investment strategy and objectives of the Fund and thus its overall portfolio are neither ESG-focused nor, in the opinion of the Company, likely to have an impact on sustainability factors; and (iii) the underlying investments are not generally required to, and may not currently, report on such factors.

The Company does not intend to consider principal adverse impacts of investment decisions on sustainability factors in the near future.

Article 5 - Transparency of remuneration policies in relation to the integration of sustainability risks

the Board of Directors of the Company only receives a fixed remuneration in line with market practice and is basing its formal investment decisions on the work of the investment advisor;
the remuneration of the investment advisor is disclosed transparently to all investors in the Limited Partnership Agreement and the remuneration is materially influenced by the performance of the investments, i.e. also by the materialisation of sustainability risks;
the compliance of the compensation with the requirements of the Limited Partnership Agreement is reviewed annually by an independent auditor.

The compensation structure of the company thus reflects and takes into account sustainability risks or their occurrence directly in the compensation of the investment advisor.