This Policy describes the approach adopted by Midmar Capital LLP as an investment manager in relation to industry legislation and guidance related to engaging with shareholders.

EU Shareholder Rights Directive

The EU Shareholder Rights Directive (‘SRD II’) was implemented in the UK on 10 June 2019 and requires asset owners (institutional investors) and asset managers of securities which are traded on EU regulated markets to make disclosures about their long term investment strategies, their arrangements with each other and their engagement with the companies they invest in. The new rules build on previous legislation and seek to improve transparency by enhancing the flow of information across the institutional investment community, and by promoting common stewardship objectives between institutional investors and asset managers.

As a result of this, also from 10 June 2019, the Financial Conduct Authority (‘FCA’) amended its rules at COBS 2.2 rules to implement SRD II for the asset managers it regulates, with the key rule changes at COBS 2.2B as follows:

• New requirements regarding the public disclosure of their shareholder engagement policies, and periodic public disclosure of the implementation of such policies.
• New requirements regarding the disclosure to asset owners of the manager’s shareholder engagement activities.
• For UK companies with shares admitted on a regulated market, requirements regarding the disclosure and approvals required for related party transactions.

The transparency requirements apply to asset managers, including MIFID investment firms, alternative investment fund managers (AIFMs) (excluding ‘small’ AIFMs), UCITS management companies, self-managed UCITS funds and FCA-regulated insurers.

Whilst this may not cover the full universe of institutional investor, the SRD II requirements should also be considered alongside the Financial Reporting Council’s Stewardship Code as described below.

Therefore in accordance with COBS 2.2B, as a UK MiFID investment firm, where Midmar Capital is providing portfolio management services, (but not where it is acting as a small authorised (subthreshold) alternative investment manager under the AIFMD), it is required by the Financial Conduct Authority (FCA) as the UK regulator to disclose on its website either:

• an Engagement Policy describing how it conducts and monitors shareholder engagement on behalf of its investee companies, and an annual update on how this policy has been implemented; or
• a clear explanation of why it has chosen not to comply with these requirements.

Midmar Capital acts as an adviser and/or investment manager to a number of clients including predominantly collective investment vehicles. These include private equity investment funds where the investments made are normally either loans based or investments in unlisted securities. When doing so, the Firm normally acts as a manager under the Alternative Investment Fund Managers Directive (‘AIFMD’). However on occasions, it will alternatively provide services under the Markets in Financial Instruments Directive (‘MiFID’). But in either case, it will only act for professional clients as defined by FCA rules at COBS 3.5.

Due to the nature of the Firms’ clients, which are predominately private equity funds, and where investments are often made in new business start-ups, the Firm does not advise on or manage any investments relating to any securities which are trading or listed on EU regulated markets.

Therefore whilst the Firm supports the principles and intended outcomes as described under the SRD II, its specific provisions are not deemed to be appropriate or proportionate to the type of investment strategy, vehicles and activities currently undertaken by the Firm. Should this change in the future, the Firm will review its compliance requirements under SRD II and update any disclosures and procedures appropriately.

Stewardship

Stewardship is the process of intervention to make sure that the value of the assets is preserved and enhanced over time. Good stewardship seeks to discourage short-termism and influence the numerous factors that impact long-term value, such as: effective management of conflicts of interest, risk management, operational performance, remuneration, corporate governance, reporting and disclosures of material financial and non-financial factors.

UK Stewardship Code

Under FCA rules COBS 2.2A.5 and 2.2.3, the FCA requires investment managers (both MiFID and AIFMD managers) to publicly disclose the extent of their commitment to the UK Stewardship Code (‘the Code’). This is a voluntary code which was originally published by the Financial Reporting Council (‘FRC’) in July 2010 and last updated with effect from 1 January 2020[1]. It aims to enhance the quality of engagement between institutional investors and investee companies to help improve long term returns to shareholders and the efficient exercise of governance responsibilities.

For firms that are committed to the Code, this is applied on a ‘comply or explain’ basis. Compliance with this Code is not mandatory and the FRC recognises that not all parts of the Code will be relevant to all institutional investors.

The FCA requires all regulated firms which manage investments on behalf of professional clients (including collective investment vehicles) to disclose the nature of their commitment to the Code or where they do not commit to the Code, their alternative investment strategy.

The 2020 Code focuses on outcomes for investors and defines stewardship as: “the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society”.

It lists the following activities as coming within the meaning of the above term:

• Analysis before investment.
• Monitoring assets and service providers.
• Engaging issuers and holding them to account on material issues.
• Working with others to influence issuers, and with others to manage market-level risks.
• Publicly reporting on the outcomes of these activities.

The 2020 Code has been restructured so that it follows a similar structure to that of the 2018 UK Corporate Governance Code. It is divided into five main sections covering the core areas of stewardship responsibility: (i) purpose, objectives and governance; (ii) investment approach; (iii) active monitoring; (iv) constructive engagement and clear communication; and (v) exercise rights and responsibilities.

The Code follows an ‘apply or explain’ model setting out twelve principles (compared to the previous Code which contained seven) for asset owners and asset managers and six principles for service providers with both sets of principles being supported by reporting expectations.

A link to the most recent Code is attached here including a description of the 12 principles that apply to asset managers and reflecting the activities listed above.

The Firm supports the aims set out within the Code and, where relevant to its activities, a number of its Principles. Whilst its specific provisions are largely not deemed to be appropriate or proportionate to the type of investment strategy and dealing in investments currently undertaken by the Firm, it has identified areas where some of the principles could be applied at a high-level, as set out below. In addition, the Firm invests in a variety of different jurisdictions and therefore does not consider it appropriate to commit further to any particular voluntary code of practice relating to individual jurisdictions at this stage. Should this change in the future, the Firm will review its commitment to the Code at that time and make appropriate further disclosure.

Midmar Capital acts as an adviser and/or investment manager to a number of clients including predominantly collective investment vehicles. These include private equity investment funds where investments involved are often investing in start-up businesses and normally involve either loans based investments or in unlisted securities. The Firm does not advise on or manage any investments relating to listed securities.

Where the Firm acts as investment manager, if relevant, it determines its approach to stewardship generally on a case by case basis, taking into account the actions that will lead to the most favourable outcome for the value of our clients’ investments. It also follows industry standards for investment management. The Firm also has a written conflicts of interest policy in relation to any conflicts that may arise between the Firm and its clients and also when relevant between different clients, and this policy is monitored and reviewed regularly and at least annually.

As detailed above, the Firm manages investments in different asset classes including those where shareholder voting rights do not apply. The Firm does not have a fixed policy for proxy voting and would only vote where we believe it is in our underlying investor’s interest to do so.

Good stewardship in private markets, such as venture capital and private equity, is considered inherent due to the long-term nature of investments and the absence of short-term results pressure compared to other asset classes, such as listed securities. However, the lack of and varying degrees of disclosure and relative opaque nature of private markets presents challenges to stewardship. To overcome these challenges, the Firm requires fund advisers to implement robust due diligence and ongoing monitoring processes, which incorporate detailed assessments of financial and non-financial factors, as appropriate.

The Firm may act as manager to funds with sustainability characteristics, including funds that use a sustainability label under the FCA’s Sustainability Disclosure Requirements and Investment Labels Regime (“SDR Regime”), and unlabelled sustainability funds. Where the Firm acts as manager for labelled funds, in accordance with the requirements of SDR Regime, the Firm ensures appropriate engagement and escalation tools (as described below) are available in addition to routine portfolio monitoring.

The Investor Forum defines engagement as “active dialogue with a specific and targeted objective.” Engagement activity is primarily aimed at helping portfolio companies understand a Fund’s expectations including progress on any agreed KPIs and targets including those relating to sustainability, where applicable.

Escalation is considered good stewardship and is generally used by relevant firms to reinforce the seriousness of an issue and apply more pressure, where needed, on portfolio companies to address concerns raised by a Fund’s General Partner (“GP”), the Investment Adviser and/or the Fund Manager.

When a fund uses a sustainability label, the range of engagement tools the Firm expects the fund’s adviser and GP to consider using to bring about understanding of concerns and necessary changes to preserve/enhance value and maintain alignment with the Fund’s Objectives are as follows and in no particular order:

1. Routine and relatively general dialogue with relevant portfolio companies to help maintain and enhance relationships with limited goals in mind.
2. Voting (or abstention) at board meetings, where applicable.
3. Generic letter/email linked to housekeeping/general factors or issues to one or more companies to inform and achieve general awareness of high-level expectations.
4. Tailored letter/email to one or a small number of companies regarding one or more specific issues or concerns with clear objectives and timeframes.
5. Active private engagement with a specific portfolio company to achieve greater understanding and traction on explicit issues with clear objectives and timeframes. (Given the nature of the funds the Firm manages, public engagement is not considered appropriate or relevant.)
6. Collaborative engagement with other investors, which could take the form of the following, but always being mindful of relevant restrictions on collaboration:
   1. Informal discussions with other investors
   2. Collaborative letter/email-writing or campaigns
   3. Follow-on dialogue led by one or more investors
   4. Formal group meeting, possibly with a follow-up, co-signed letter
   5. Concert party using a formal agreement with concrete objectives and agreed steps such as on voting, where permitted by relevant laws and regulations.

The Firm encourages advisers and GPs of funds with sustainability labels to preserve the relationship with portfolio companies that are identified for escalation.

For a fund with a sustainability label, the range of escalation tools the Firm expects the fund’s adviser and GP to consider using to bring about necessary changes within an agreed timeframe where engagement tools have been unsuccessful are as follows:

1. Holding additional, private meetings seeking to persuade the management to take steps to address concerns, either those that have previously been raised as part of engagement or which fit into the following ‘Escalation Triggers’:
   1. A material deviation from, or conflict with, a fund’s Sustainability Objective and/or the sustainability characteristics of an unlabelled fund.
   2. Continued failure to meet agreed key performance indicators (KPIs) linked to a fund’s Sustainability Objectives and/or sustainability characteristics.
   3. Concerns regarding a portfolio company’s data accuracy, completeness, or methodology used in assessing and reporting on sustainability and/or financial performance.
   4. Unresponsiveness or unsatisfactory responses from portfolio companies to engagement tools following identification of issues or concerns.
   5. Material governance issues at portfolio companies.
2. Unilateral, private letter(s)/email(s) to senior management and/or the board. (Given the nature of the funds the Firm manages, public action to bring about change is not appropriate.)
3. Meeting with chair or board members.
4. Where applicable, submitting resolutions or speaking at general meetings.
5. Where applicable, private pre-disclosure of voting intentions.
6. Where applicable, seek board seat or step down from board.
7. Call an extraordinary general meeting.
8. Privately disclose proposed litigation.
9. Flag for and consider passive opportunities for divestment/exclusion.
10. Legal processes to seek governance improvements or damages through litigation or other legal remedies such as arbitration.
11. Actively seek divestment/exclusion from Fund.

In its role as manager of a sustainability labelled fund, the Firm will review and approve engagement and escalation plans.   

Where there are concerns the sustainability label criteria is no longer being met or is at risk of not being met, the Manager will promptly determine appropriate action to take, which may include the Manager notifying the FCA that the label needs to be revised or that it can no longer use the label.

When the concerns relating to a fund with a sustainability label are considered resolved, the Firm will require a detailed report to be submitted outlining the issue(s), actions taken, and outcomes. The report will also confirm if the Fund continues to meet the label criteria, where applicable.

May 2025

[1] Publication of the FRC’s UK Stewardship Code 2026, effective from 01/01/2026, is noted by the Firm and this policy will be updated, where applicable, in due course.