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EU Sustainable Finance Disclosure Regulation (“SFDR”)

The EU Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088) sets out sustainability disclosure obligations for financial market participants, financial advisers and financial products (“SFDR”). Under Articles 3 to 5 of the SFDR, Actis EU Management S.à r.l. (“Actis Luxembourg”), which is authorised by the Commission de Surveillance du Secteur Financier as an alternative investment fund manager in Luxembourg, is required to make the following disclosures on its websites.

A sustainability risk means “an environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of the investment”. In the context of Actis Luxembourg, sustainability risks are risks which, if they were to crystallise, would cause a material negative impact on the value of the portfolios of Actis Luxembourg’s funds.

Actis Luxembourg delegates portfolio management to its affiliate, Actis UK Advisers Limited. Before any investment decisions are made on behalf of any funds that Actis Luxembourg manages, Actis UK Advisers will have completed a process that identifies the material risks associated with each such proposed investment; these may include relevant and material sustainability risks. Consideration of all these risks is part of the risk management processes relating to the relevant fund, starting with an overall assessment of the likely risks associated with investments pursuant to the relevant fund’s investment policy and objectives and leading to specific investment proposals submitted to the investment committee. The investment committee assesses all the identified risks alongside other relevant factors set out in the proposal. Following its assessment, the investment committee makes relevant investment decisions having regard to the relevant fund’s investment policy and objectives. Throughout the entire process, relevant sustainability risks are identified and assessed using the same process as is applied to other relevant risks affecting the funds and investments made on their behalf.

Actis Luxembourg, as a manager investing predominantly outside of the European Union, will require its portfolio manager Actis UK Advisers Limited to consider adverse impacts of its investment decisions as part of the “do not significantly harm” test for investments which are “sustainable investments” as defined in SFDR article 2(17) (“SFDR Investments”).

In addition, Actis integrates environmental, social and governance (ESG) considerations throughout its investment management process. Across all of Actis’s investments, it is committed to promoting world-class standards in health and safety, environmental protection, social engagement and business integrity – as well as sound corporate governance and transparent accounting – right across our portfolio. This commitment manifests itself through: (i) Actis’s full-time, in-house team of sustainability professionals, (ii) a determination to improve ESG and sustainability outcomes for all our portfolio companies, (iii) the integration of ESG into all investment decisions and at all stages of the investment cycle, (iv) the application of proprietary frameworks to better understand climate-related transition risk (Transition Tool) and positive impact (Actis Impact Score), (v) Actis’s approach to sustainability is underpinned by rigorous environmental, social and governance (ESG) guidelines, codified in our Sustainability and Responsible Investment Policy. Actis expects its business partners to understand and share the commitment to integrating the management of ESG practices fully into their business processes.

With regards to investments which are not SFDR Investments, there may be logistical challenges collecting relevant data and assessing the adverse impacts of investment decisions on sustainability factors by reference to the principal adverse indicators set out in the SFDR secondary legislation (the “PAI Regime”). For example, under SFDR, the PAI Regime operates in a specific manner and would require Actis Luxembourg to aggregate data from unlisted companies across a diverse range of jurisdictions. There is currently no certainty that Actis Luxembourg could gather, or measure, all such data that it would be obliged to gather under the PAI Regime across all of its portfolios. This is in part because underlying investments are not widely obliged to report by reference to the same data. This data gap may not change in the foreseeable future. Even if Actis Luxembourg were to be able to gather such data, there is no certainty, (a) that it could do so systematically, consistently and at a reasonable cost to investors across its strategies; or (b) that such data would provide meaningful insight given that Actis Luxembourg’s funds and investment products have different investor constituencies. This position will, however, be kept under review in the light of emerging market practice and data availability. As a result of the foregoing, Actis is required pursuant to SFDR to state that it does not consider, in the manner prescribed by article 4 of SFDR, any adverse impacts of investment decisions on sustainability factors. Notwithstanding this, Actis is committed to instilling world-class ESG standards as part of its overall responsible investment approach, and this is a core lever for risk mitigation and value creation.

Actis Luxembourg maintains a remuneration policy under which the criteria to determine the remuneration level of identified staff take into account relevant sustainability risk. Sustainability risk is treated in the same way as other risks which could cause a material negative impact on the value of a fund or portfolio.

Actis Luxembourg pays staff a combination of fixed remuneration (salary and benefits) and variable remuneration (including bonus). Variable remuneration allocated to investment professionals reflects personal, team and firm performance. Compliance with all Actis’ policies and procedures, including policies and procedures relating to the impact of sustainability risks on the investment decision making process, shall be taken into account as part of that overall assessment.

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