Additional Information SICAV III

Foreign Accounting Tax Compliance Act

The Foreign Accounting Tax Compliance Act (FATCA) is a law enacted by the United States of America (US). This law is aimed at ensuring 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 this via the requirement that US and foreign persons - including entities and therefore financial institutions such as investment 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 has become Luxembourg domestic legislation. As a Foreign Financial Institution (FFI), Triodos SICAV II qualifies as a participating FFI (PFFI). Triodos SICAV II is registered with the IRS as a PFFI, as a result of which a Global Intermediary Identification Number (GIIN) has been issued. FATCA became effective as of July 1, 2014, and on-boarding procedures are in place to identify (new) investors and debt providers.

Common Reporting Standard

Similar to FATCA, the Organisation for Economic Cooperation and Development (OECD) has developed the Common Reporting Standard (CRS). CRS requires financial institutions, such as investment funds, in participating CRS jurisdictions to identify and report the tax residency and account details of investors and debt providers to the relevant authorities. The respective authorities automatically exchange the aforementioned information with the authorities of other participating CRS jurisdictions on an annual basis. On October 29, 2014, 51 jurisdictions, including Luxembourg, signed the first-ever multilateral competent authority agreement to automatically exchange information. As a Financial Institution (FI), Triodos SICAV II is qualified as a participating FI. CRS is in force as of January 1, 2016, and on-boarding procedures are in place to identify (new) investors and debt providers.

Operational risks

Operational risks are the risks of damage resulting from inadequate or failed internal processes, people and systems or from external events, such as changes in laws and regulations. In order to manage the operational risks, Triodos Investment Management has comprehensively documented its risk management policy. These risks are determined, measured, managed and monitored on an ongoing basis by means of appropriate procedures and reporting methods.

ISAE 3402

As manager of the fund, Triodos Investment Management aims for continuous improvement of the effectiveness and manageability of the processes. This resulted in the start of an ISAE3402 project in 2016. The ISAE3402 report is tangible proof of the organisation and existence of the investment manager’s core processes. This provides the investors in the fund with added assurance that the processes are carried out in a controlled manner.

Solvency

Triodos Investment Management amply meets the minimum solvency requirements for asset managers. This makes Triodos Investment Management a solid party that is sufficiently able to absorb setbacks.

Valuation risk

In order to ensure an independent, sound, comprehensive, consistent and auditor-approved valuation methodology, Triodos Investment Management has implemented a comprehensive valuation framework including valuation methodologies and procedures. This framework sets out general requirements regarding the selection, implementation and application of valuation methodologies and techniques for all asset types, taking into account the varied nature of asset types and the related market practices for the valuation of these assets. In addition, this framework sets out the requirements regarding the valuation function at the sub-fund level. It ensures consistent procedures regarding the selection, implementation and application of valuation methodologies and ensures a consistent approach to the valuation function, independent valuation committees and, in some cases, the use of external valuers at the sub-fund level.

Valuation risk refers to the risk that the values of assets do not reflect their fair market value because valuations are based on infrequent market-based data, assumptions and peer group comparisons. As the sub-funds of Triodos SICAV II invest almost exclusively in assets that are not traded on a regulated market and are not listed on any stock exchange, its investments may not have readily available prices and may be difficult to value. In order to determine the value of these investments, the fund employs a consistent, transparent and appropriate valuation methodology, based on the International Private Equity and Venture Capital Valuation Guidelines (IPEV) as published by the IPEV Board and endorsed by the European Private Equity and Venture Capital Association (EVCA). To the extent that this methodology relies on periodic market-based data and peer group comparisons, the valuation of the assets may fluctuate with the variations in such data.

Risk profile

The sub-funds of Triodos SICAV II each have a sector-specific focus and generally invest in risk-bearing, non-listed assets that cannot be made liquid in the short term and therefore have a relatively high risk profile. In most cases, added value in the sub-funds is generated over the longer term. An investment in the sub-funds of Triodos SICAV II therefore requires a medium to long-term investment horizon of the investor. In general, the sub-funds of Triodos SICAV II will only take on such risks that are deemed reasonable to achieve their investment objectives. The sub-funds of Triodos SICAV II have different risk profiles. There is no guarantee that the sub-funds will achieve their objectives, due to market fluctuations and other risks to which the investments are exposed.

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 wage system used by Triodos Bank does not include bonuses or share option schemes. Triodos Bank considers financial incentives as an inappropriate way to motivate and reward employees. Variable remuneration is therefore limited. The Management Board of the alternative investment fund manager annually assesses the remuneration policy. Identified staff are employees as defined in the AIFM guidelines and include all employees who may influence the risk profile of the fund. Besides the members of the board, these include the fund manager and the managers of support departments.

The table below provides an overview of the total remuneration, broken down into fixed and variable remuneration, and the remuneration of the senior management and the identified staff. The cost allocation model of the investment manager is used for the allocation of staff to Triodos Renewables Europe Fund. In this model, allocations are based on activities of the co-workers (activity-based costing, or the ABC-method).

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Co-workers directly
involved in Triodos
Renewables Europe Fund

‘Identified staff’
in senior management positions

Other
identified staff

(remuneration in EUR)

2016

2015

2016

2015

2016

2015

 

 

 

 

 

 

 

Number of staff involved

25

22

5

5

5

4

Average FTEs

10.2

8.0

0.7

0.6

1.4

0.7

 

 

 

 

 

 

 

Fixed remuneration

954,783

709,041

130,569

97,836

181,684

71,699

Variable remuneration

7,228

13,311

675

8,332

415

201

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total remuneration

962,011

722,352

131,244

106,168

182,099

71,900

 

 

 

 

 

 

As this table is intended to show the remuneration of employees, all other costs incurred by the investment manager of the fund, such as housing, workplace and travel costs and the cost of outsourced activities and external consultants, are excluded. The amounts shown in the tables include income tax, social security contributions, pension contributions and tokens of appreciation.

The largest part of the variable remuneration in 2015 was related to severance payments. Triodos Bank may provide additional individual tokens of appreciation to co-workers up to a maximum of one month salary. These tokens of appreciation are for extraordinary achievements and are at the discretion of management in consultation with Human Resources. Such a token is not based on pre-set targets and always offered in retrospect. An annual, collective token of appreciation may be paid for the overall achievements and contribution of all co-workers. This very modest amount is the same for all co-workers with a maximum of EUR 500 for each co-worker. This can be paid in cash or in Triodos Bank NV depository receipts. End of 2015, the collective end-of-year token of appreciation was determined at EUR 500 and was awarded in 2016. The largest part of the variable remuneration in 2016 was related to the collective token of appreciation.

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