General Developments Triodos SICAV II

Alternative Investment Fund Managers Directive (AIFMD)

Following the implementation of the Alternative Investment Fund Managers Directive (AIFMD) on July 22, 2014, the Board of Directors appointed Triodos Investment Management, having previously acted as the Investment Manager of Triodos SICAV II, as its external Alternative Investment Manager within the meaning of article 4 of the AIFM Law (the “AIFM”). The distribution structure has also been modified further to the appointment of the AIFM; the Board of Directors appointed Triodos Investment Management as distributor. The Board of Directors continued its relationship with RBC Investor Services Bank S.A as depositary bank and paying agent. The depositary bank and paying agent agreement as well as the investment fund services agreement with RBC Investor Services Bank S.A. have been updated to comply with the AIFM environment. An updated prospectus incorporating the AIFM changes was published on August 2014.

On October 16, 2014, an extraordinary general meeting of shareholders adopted the amendments to the articles of incorporation of Triodos SICAV II incorporating the required AIFM elements.

Foreign Accounting Tax Compliance Act (FATCA)

The FATCA is a law issued by the United States of America (US) and has been enacted to ensure that income earned and assets held by US persons in offshore accounts or indirectly through ownership of foreign entities is reported to the US tax authorities (IRS). FATCA achieves aforementioned via the requirement that US and foreign persons – being also entities and thus financial institutions, such as funds – identify and document payees and ultimately disclose information to the IRS. To mitigate foreign legal impediments due to FATCA compliance, intergovernmental agreements (IGA) with the US are being negotiated. Luxembourg has agreed an IGA with the US. Consequently and due to the specific nature of the IGA, which can be qualified as a model I, FATCA should become Luxembourg domestic legislation.

Triodos SICAV II as a Foreign Financial Institution (FFI) is qualified as a participating FFI (PFFI). Triodos SICAV II has been registered with the IRS as a PFFI, which resulted in the issuance of a Global Intermediary Identification Number (GIIN). As of July 1, 2014, FATCA is in force and on boarding procedures are in place to identify (new) shareholders.

Risk profile

All investments in the sub-funds of Triodos SICAV II are exposed to a variety of risks. The sub-funds generally invest in risk-bearing, most often non-listed assets that cannot be made liquid in the short term. In most cases, added value in the sub-funds is generated over the longer term. Thus, investments in a sub-fund of Triodos SICAV II require a medium- to long-term investment horizon of the investor.

In general, the sub-funds will only take on risks that are deemed reasonable to achieve their investment objectives. The sub-funds have different investment strategies and therefore different risk profiles. There is no guarantee that the sub-funds will achieve their goals, due to market fluctuations and other risks to which the investments are exposed.

Risk management

Triodos Investment Management has implemented an integral risk management framework throughout its organisation, in order to adequately monitor and manage the risks related to the sub-funds (as determined in the sub-funds’ Particulars in the prospectus of Triodos SICAV II). This risk management framework is based on the COSO (The Committee of Sponsoring Organisations of the Treadway Commission) framework for integral risk management, and furthermore contains policies and procedures designed in accordance with European regulations, best market practices and a permanent, independent risk management function, in compliance with the AIFMD.

The risk management framework describes, amongst others, the roles and responsibilities of the risk management function, risk governance (the ‘three-lines-of–defence’ model) at the level of both the Investment Manager and the sub-fund, and the risk management process to identify, measure, mitigate, monitor, report and evaluate all relevant risks related to the sub-funds.

The permanent risk management function is responsible for the implementation and execution of the risk management process and policies and serves as a risk consultant. The risk management function is functionally and hierarchically separated from the portfolio management function.

Valuation framework

Triodos Investment Management has implemented a comprehensive valuation framework of requirements to ensure a sound, independent, comprehensive and appropriate use of valuation methodologies and procedures. This framework sets out general requirements regarding the selection, the implementation and the application of valuation methodologies and techniques for all asset types, taking into account the different nature of asset types and the accompanying market practices in the valuation of these assets. In addition, this framework sets out the requirements for or with regard to the valuation function at the fund level. It ensures consistent procedures regarding the selection, implementation and application of valuation methodologies and, moreover, ensures a consistent approach of the valuation function, valuation committees and the use of external valuers at the fund level.

Given the special liquidity characteristics of the investments, the risk management function has a specific liquidity (risk) management policy framework applicable to the sub-funds (see Liquidity management).

Liquidity management

Triodos Investment Management has established a liquidity management policy framework, in accordance with European regulations and best market practices, to ensure that liquidity risk is appropriately measured, monitored and managed at sub-fund level. The framework contains policies and procedures to:

  • Ensure the availability of sufficient liquidity to meet financial obligations and adequately manage excess liquidity to act in the best interest of investors in the sub-funds. Investors should carefully take note that given the type of assets, there is no guarantee that there are sufficient funds to pay for the redemption of shares of the sub-fund and there is no guarantee that the redemption can take place at the requested date.
  • Assess the risk of insufficient liquidity by regularly conducting tests under normal and exceptional (stress test) liquidity conditions.
  • Provide adequate escalation measures in case of liquidity shortage or distressed situations (liquidity contingency plan).
  • Ensure the coherence of the sub-funds’ investment strategy, their liquidity profile and their redemption policy.

Triodos Investment Management has implemented standardised methods to monitor the liquidity position of the sub-funds and to assess near-future developments regarding liquidity, including early warning parameters. The liquidity position of the sub-funds is monitored at both the sub-fund level and the Investment Manager level.

In accordance with the Law of 12 December 2013 on alternative investment fund managers, Triodos Investment Management conducts stress tests on a regular basis in order to evaluate and measure the liquidity risk of the sub-funds. Its manual for liquidity stress testing includes a standardised approach for conducting liquidity stress testing at the sub-fund level, simulating normal and exceptional liquidity circumstances.

The liquidity stress testing approach is derived from the Basel III legislation on liquidity management for banking. Several liquidity metrics are adjusted to be appropriate for the sub-funds and are subject to predetermined historical and/or hypothetical stress events and scenarios. These stress events and scenarios are determined by the risk management function together with the portfolio management function.

In accordance with the Law of 2013, both the liabilities side (funding) as the asset side (market) are subject to stress tests. A-typical redemption requests from investors and a shortage of (market) liquidity are, amongst others, simulated in the stress tests. However, given the relative illiquid nature of the sub-funds’ assets, the market side in terms of liquidity time and liquidity value is incorporated in a conservative manner.

Specific risk factors for the sub-funds

As the sub-funds differ significantly in their investment policy and associated risks, it is important to study the specific risk factors for each sub-fund. Please refer to the relevant sub-fund Particulars in the prospectus of Triodos SICAV II for specific risk factors applying to each sub-fund.

Remuneration policy

Based on Article 22(2) of the AIFMD and section XIII (Guidelines on disclosure) of the ‘ESMA Guidelines on sound remuneration policies under the AIFMD’, management companies are required to at least disclose information about their remuneration practices for employees whose professional activities have a material impact on its risk profile (so-called “identified staff”).

All of the staff members of Triodos Investment Management are employed by Triodos Bank. Triodos Bank believes good and appropriate remuneration for all its employees is very important. The core elements of the international remuneration policy of Triodos Bank are set out in the Principles of Fund Governance, which can be accessed via www.triodos.com.

The following table shows the total remuneration, broken down into fixed and variable remuneration, for all the staff that works for Triodos Investment Management, categorized into senior management and other identified staff.

Download XLS

(amounts in EUR)

All staff
of Triodos
Investment
Management

Identified staff
in senior
management
positions

All other
identified staff

 

 

 

 

Source: Triodos Investment Management

Number of staff (average over 2014)

113

6

28

 

 

 

 

Remuneration

 

 

 

Total fixed remuneration (over 2014)

8,916,911

995,936

2,581,671

Total variable remuneration (over 2014)

49,925

12,800

10,825

 

 

 

 

Luxembourg, March 31, 2015

The Board of Directors of Triodos SICAV II

Pierre Aeby (Chairman)
Marilou van Golstein Brouwers
Patrick Goodman
Olivier Marquet
Garry Pieters
Alexander Schwedeler (until May 12, 2014)

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