A. Description of the Advisory Firm Ethic Inc. (hereinafter “Ethic”) is a corporation organized in the State of Delaware and located in the State of New York. Ethic was founded in January 2015 by Douglas Scott, Jordan Lipman, and John Mair. Ethic is a technology-driven asset manager that delivers personalized investment solutions.
B. Types of Advisory Services Portfolio Management Services Ethic offers ongoing portfolio construction and management services based on the investment objectives and risk tolerance of its portfolio management clients (“Portfolio Management Clients”). Portfolio construction and management services include, but are not limited to, the following:
•Investment strategy•Asset allocation
•Asset and security selection•Risk tolerance
•Regular portfolio monitoring Ethic generally requests discretionary authority from Portfolio Management Clients, which allows it to select securities and execute transactions without requiring permission prior to each transaction, so long as such execution is consistent with the stated investment objectives of the Portfolio Management Client. If Ethic’s authority is non-discretionary, we will make recommendations to the Portfolio Management Client, and depending on the terms of the agreement, either Ethic or the Portfolio Management Client will be responsible for execution of the transactions.
Financial guidelines and/or sustainability objectives for the implementation and management of a particular Portfolio Management Client strategy are generally provided via an investment strategy statement. Within the construct of an investment strategy statement, Ethic seeks to provide that investment management decisions are made in accordance with any fiduciary duties owed to its Portfolio Management Clients without consideration of Ethic’s economic, investment, or other financial interests. To meet its obligations, Ethic attempts to avoid, among other things, investment or trading practices that systematically advantage or disadvantage certain Portfolio Management Client portfolios, and accordingly, Ethic’s policy is to seek fair and equitable allocation of investment opportunities/transactions among its Portfolio Management Clients to avoid favoring one Portfolio Management Client over another over time. Ethic’s policy is to allocate investment opportunities and transactions it identifies as appropriate and prudent among its Portfolio Management Clients on a fair and equitable basis over time.
Portfolio Management Clients can choose from Ethic Custom solutions, Ethic Market Theme solutions, and Ethic Active Tax solutions. Ethic Market Theme solutions include sustainability screens preset by Ethic and generally have lower investment minimums than Ethic Custom solutions. Ethic Custom solutions allow Portfolio Management Clients more flexibility in individualizing their strategy settings, including sustainability preferences.
Ethic Active Tax solutions utilize active, event-based tax loss harvesting and tax transitions to seek to achieve additional after-tax performance. Ethic’s Custom solutions and Ethic Market Theme solutions can also incorporate Ethic Active Tax solutions.
Sub-adviser Services Ethic provides technology, research, and resources to other registered investment advisory firms that are not affiliated with Ethic (“Adviser Clients”). Adviser Clients utilize Ethic’s systems and resources to assist them with portfolio research and design for their clients’ (“End Clients”) investment needs.
Ethic's technology-centric portfolio creation engine is underpinned by two key models: ●The Sustainability Model aggregates a number of sources of raw sustainability data points at the issuer-level (company-level) and analyzes the data within the context of the spectrum of environmental, social, and governance (“ESG”) risks and opportunities.
●The Financial Optimization Model is powered by a multi-factor optimization engine, the MSCI Barra Optimizer (“Barra”), to minimize tracking error (active risk) relative to the underlying benchmark. Barra has a quantitative modeling approach that helps manage portfolio objectives and has strict protocols to ensure the integrity of its financial models and analyses.
Ethic also provides its Adviser Clients and End-Clients access to a proprietary technology platform that delivers continuous reporting. Additionally, account statements are generally provided directly to End Clients by the qualified custodian(s) which directly custody the investment assets.
Adviser Clients can choose from Ethic Custom solutions, Ethic Market Theme solutions, and Ethic Active Tax solutions. Ethic Market Theme solutions include sustainability screens preset by Ethic and generally have lower investment minimums than Ethic Custom solutions. Ethic Custom solutions allow Adviser Clients and End

Clients more flexibility in individualizing their strategy settings, including sustainability preferences. Ethic Active Tax solutions utilize active, event-based tax loss harvesting and tax transitions to seek to achieve additional after-tax performance. Ethic’s Custom solutions and Ethic Market Theme solutions can also incorporate Ethic Active Tax solutions for an additional fee (see Item 5: Fees and Compensation below).
When an Adviser Client creates and/or determines a strategy for their End Client, the Adviser Client will generally provide Ethic the financial guidelines and sustainability objectives for the implementation and management of the strategy via an investment strategy statement.
For sub-advisory relationships, Ethic’s management of the strategy on the Adviser Client’s behalf will be conducted on a discretionary sub-advisory basis. To do this, Adviser Clients and their End Clients grant Ethic access to execute trades in the accounts where the investment assets are custodied.
Model Manager Services Ethic can provide model manager services to Adviser Clients by providing them with systems and resources to assist them with model portfolio research and design for their End-Clients’ investment needs.
Ethic's technology-centric portfolio creation engine is underpinned by two key models: ●The Sustainability Model aggregates a number of sources of sustainability data points at the issuer-level (company-level) and analyzes the data within the context of the spectrum of ESG risks and opportunities.
●The Financial Optimization Model is powered by a multi-factor optimization engine, the MSCI Barra Optimizer (“Barra”), to minimize tracking error (active risk) relative to the underlying benchmark. Barra has a quantitative modeling approach that helps manage portfolio objectives and has strict protocols to ensure the integrity of its financial models and analyses.
When an Adviser Client creates and/or determines a strategy for their model portfolio the Adviser Client will generally provide Ethic the financial guidelines and sustainability objectives for the implementation and management of the strategy via an investment strategy statement.
For model manager services, Ethic’s management of the strategy on the Adviser Client’s behalf will be conducted on a discretionary basis and result in a model portfolio delivered to the Adviser Client. Trading and oversight of individual End Client accounts will be the sole responsibility of the Adviser Client. Ethic will have no access to End Client accounts at the respective custodians.
Portfolio Management Clients and Adviser Clients are hereinafter referred to as “Clients.” Educational Seminars/Workshops Ethic provides educational seminars and workshops for Clients and prospective Clients. These are general in nature and focused on various sustainability and ESG related topics. No personalized advice is provided to attendees.
These seminars and workshops are currently offered at no charge.
Services Limited to Specific Types of Investments Ethic generally limits its investment portfolios to securities of both U.S. and non-U.S. companies, although Ethic primarily utilizes individual equities. Ethic also uses other securities to help diversify a portfolio when applicable.
C. Client Tailored Services and Client Imposed Restrictions For Portfolio Management, Sub-adviser, and Model Manager Services, Clients provide input of their (or their End Clients’) sustainability and/or financial preferences, which are collated into a format used by Ethic’s portfolio construction engine. Portfolios are then managed on an ongoing basis through the Ethic investment platform.
Portfolios are monitored and maintained in line with such Client preferences.
D. Wrap Fee Programs A wrap fee program is an investment program where the investor pays one stated fee that includes management fees, transaction costs, fund expenses, and other administrative fees. Ethic can serve as a portfolio manager for wrap fee programs sponsored by other unaffiliated investment advisory firms (also referred to as wrap fee programs sponsors). These wrap fee program sponsors hire Ethic to manage assets within the wrap fee programs in the same manner described in the Sub-adviser Services section above. For providing this service as portfolio manager, Ethic would charge Portfolio Management Fees to the wrap fee program sponsors. More information on Ethic’s fees can be found in Item 5: Fees and Compensation.
E. Assets Under Management Ethic has the following assets under management: Discretionary:Non-Discretionary:As of: $4,907,799,279$0March 27, 2024 F. Assets Under Advisement Ethic also advises on (but does not manage) the following assets: Assets Under Advisement:As of: $78,897,420March 27, 2024