More on the engagement and exercise of voting rights - VP Fund Solutions (Liechtenstein) AG
VP Fund Solutions (Liechtenstein) AG (hereinafter "VPFLI") is a management company for undertakings for collective investment in transferable securities (UCITS) and alternative investment fund manager (AIFM) under Liechtenstein law. It is a subsidiary of VP Bank AG. In accordance with legal requirements (1), VPFLI has a voting and engagement policy that ensures the exercise of voting rights in the interest of the Funds and their investors as well as the promotion of their long-term engagement.
Scope and aim
This document (hereinafter referred to as the "Policy") describes, without claiming to be exhaustive, in general terms the voting practices of VPFLI at general meetings as well as the participation practices ("Engagement").
The voting policy defines the exercise of investor and creditor rights attached to the assets managed by the Funds. It also contains appropriate and effective strategies for when and how potential voting rights are exercised.
The engagement policy aims to strengthen the engagement of the Funds and their investors as shareholders of the investments.
This policy combines voting rights and participation policies, as shareholder engagement takes place in particular through voting rights at general or shareholders' meetings of public limited companies.
Unless engagement or voting is required by law, this Policy does not apply. For example, there is no participation for public companies that are not listed in the EEA.
Voting Rights Policy
- Direct exercise of voting rights
VPFLI receives notices from the Depositary or a delegate of the Fund of corporate actions, including upcoming general meetings, relating to the assets held by the relevant Fund. If the analysis of the notification leads to a decision to exercise voting rights, VPFLI will submit its vote to the Fund's depositary or authorise a third party to exercise voting rights (in the case of unlisted equity securities).
- Delegation to a third party
VPFLI will receive notices from the Depositary of the Fund of corporate actions, including forthcoming general meetings, in respect of the assets held by the relevant Fund. If the asset management of the Fund has been delegated to a portfolio manager, the latter receives the information from the depositary. The portfolio manager analyses the information and decides whether a vote is in the interest of the Fund. For reconciliation purposes, he prepares his decision and sends it to the Fund's depositary.
If VPFLI itself manages the Fund's assets, it delegates voting at general meetings to a proxy advisor(2). The proxy advisor receives the information about the events from the Fund's depositary and makes its decision through an interface with the depositary.
The decision whether to exercise or refrain from exercising voting rights is based on the following principles
- Cost-benefit analysis: In deciding whether or not to exercise voting rights, VPFLI weighs up the costs and benefits. If the exercise of voting rights is not deemed to be in the best interest of investors, e.g. due to disproportionate cost or effort, VPFLI will refrain from exercising voting rights
- Total assets of the Fund: If the value of the assets attached to voting rights is irrelevant in relation to the total assets of the investing Fund, VPFLI will not exercise voting rights
- In addition, voting rights will not be exercised if the Funds managed by VPFLI have a consolidated voting interest of less than 1% in a company
Voting principles and objectives
The following voting principles and objectives are pursued in the preparation and exercise of voting rights:
- Creation of a long-term and risk-adjusted investment return for the managed Fund
- Independent exercise of the voting rights in the interest of the Fund and its investors
- Exercise of voting rights in accordance with the investment strategy of the Fund
- voidance or monitoring of potential or actual conflicts of interest
If the managed Funds take environmental and social aspects into account or pursue a sustainable investment objective, certain environmental, social and corporate governance principles (ESG principles) are observed in relation to the investee companies when preparing and/or exercising voting rights. A sustainability risk is defined as an environmental, social or governance event or condition, the occurrence of which may have an actual or potential material adverse effect on the value of the Fund.
The term "engagement" is a collective term for company dialogue and the exercise of voting rights. VPFLI may promotes long-term engagement of the Funds invested in EEA-listed public companies by doing the following:
- Monitoring the companies in which the Funds are invested with regard to important matters
- Conducting dialogues with the companies in which the Funds are invested
- Exercising voting rights and other rights attached to shares
- Liaising with other shareholders
- Communicating with relevant stakeholders of the companies in which the Funds are invested
- Management of actual and potential conflicts of interest in connection with the participation.
Monitoring of relevant matters
The companies in which the Funds have invested are monitored by VPFLI, in particular with regard to strategies, financial and non-financial services, risks, capital structures and ultimately social and environmental impacts, as well as corporate governance (ESG criteria).
As part of the investment process, VPFLI actively and carefully monitors the developments of the portfolio companies.
The current analysis includes market data (general market and price developments), the regular reporting of portfolio companies (annual accounts and other publications) and ESG-related developments. The results of the analysis are discussed continuously within the responsible investment teams.
Funds falling within the scope of this policy are fully registered on the ProxyExchange platform of Institutional Shareholder Services Inc. (ISS). The Responsible portfolio managers are automatically informed about upcoming general meetings and the voting points, so that voting rights are exercised within a reasonable time. Each vote will be preceded by a careful analysis of the voting points, which will in principle be guided by ISS recommendations. ISS generates automated tuning according to pre-defined criteria. VPFLI can manually overwrite these voting proposals.
Dialogues with companies
In general, there is no dialog with the companies, since the share of the share capital of the companies is usually not material.
Exercise of voting rights and other rights attached
For the exercise of voting rights, reference is made to the voting policy.
Cooperation with other shareholders
In general, there is no cooperation with other shareholders, since the share of the share capital of the companies is usually not material.
Communication with relevant stakeholders
In general, there is no communication with other shareholders, since the share of the share capital of the companies is usually not material.
Conflict of interest
Potential or actual conflicts of interest that may arise in the engagement of companies are monitored by VPFLI and are covered by the conflict of interest directive.
1 Commission Delegated Regulation (EU) No 231/2013 and Article 367h to 367l Law on Persons and Companies (PGR)
2 Coming: Institutional Shareholder Services (ISS)
More on the exercise of voting rights - VP Fund Solutions (Luxembourg) SA
Voting rights give shareholders the right to take part in annual and extraordinary general meetings and to participate in the making of decisions on weighty issues affecting the company.
Because the funds selected for management by VP Fund Solutions (Luxembourg) SA (hereinafter: VP Fund Solutions) have relatively small positions, VP Fund Solutions will not exercise any voting rights conferred by the assets under management and nor will it delegate the right to exercise those voting rights to any other party. However, in response to an appropriately justified recommendation by a fund manager, VP Fund Solutions may decide to exercise the voting rights of the fund in question or to appoint a representative to do so within limits defined by VP Fund Solutions.
Such exercise of voting rights will be organised by the custodian bank of the fund concerned together with a specialist third party, which will cast the votes according to a standard procedure. For reasons of transparency and investor information the fund managers involved must document the voting appropriately.
At the request of a fund investor VP Fund Solutions will make a brief description of the voting rights strategy available free of charge and release details of its procedures that relate to that strategy.