Purpose and scope
FundRock Management Company (“FRMC”) as Management Company under Chapter 15 of the Law of 17 December 2010 (“Management Company”), as amended from time to time, and Alternative Investment Fund Manager (“AIFM”) under Chapter 2 of the Law of 2013, as amended from time to time, shall develop adequate and effective strategies for determining when and how voting rights attached to instruments held in its managed portfolios are to be exercised, to the exclusive benefit of its funds and their investors concerned (CSSF Regulation 10-04, article 23, EU Commission Delegated Regulation 231/2013).
Key Principles
FRMC shall develop a strategy for the monitoring of relevant corporate actions and ensuring that the exercise of voting rights is in accordance with the investment objectives and policy of the relevant UCITS/AIFs and prevents any conflicts of interest arising from the exercise of voting rights.
Voting rights mainly impact the portfolio/investment manager’s activities.
Under its third party management company model (i.e. oversight business model), FRMC generally delegates, under its responsibility, the portfolio management function to third parties (‘delegate’), including the determination of the voting strategy and the exercise of voting rights.
As such, the voting rights powers are handled by the appointed delegate. Therefore, FRMC retains the right to obtain from the appointed delegate information on how the voting right power is exercised.
However, in some exceptional cases, FRMC does not apply fully its delegation model and retains the portfolio management function. In these limited cases, portfolio management team applies the provisions of the portfolio management procedure.
Responsibilities
The Management Committee of FRMC makes sure that the oversight framework over voting rights of funds under management is defined and maintained by the department in charge of the monitoring.
The compliance function must:
- Ensure that the oversight framework regarding voting rights defined at the level of the management committee is cascaded down to all FRMC staff and in particular to the team(s) in charge of the oversight of the delegate.
- Ensure that any new rules concerning voting rights are analysed and communicated.to FRMC staff and notably to the teams in charge of the oversight of the delegate.
- Monitor compliance with regulatory requirements via its compliance monitoring plan.
The investment management oversight (“IMO”) must:
- Ensure that the delegate defines its voting rights procedure and its monitoring;
- Ensure that the delegate provides a copy of its voting rights procedure;
- Ensure that the delegate complies with SRD II and has implemented an engagement policy accordingly;
- Ensure that the delegate complies with the disclosure requirements in accordance with SRD II and shareholder engagements.
Ongoing due diligence by IMO
IMO have established the ongoing due diligence procedure in order to meet the above mentioned requirements as possible. The main oversight processes are:
- The initial due diligence
In addition to explaining and describing the voting process, the delegate shall provide a copy of its voting right policy. IMO shall for the review of the policy can check whether the policy describes or includes at a minimum, but not limited to the following:
- A description of the corporate actions that are linked with the instruments held in the relevant fund;
- A description of the approach taken to exercising or not the voting rights;
- Alignment of the exercising voting rights in accordance with the investment objectives and policy of the relevant fund;
- Prevention and management of any conflicts of interest arising from the exercise of voting rights;
- Assurance that the exercising of voting rights is deemed appropriate and/or in the best interest of investors/fund;
- A description of the record keeping and governance of potential exercise of voting rights;
- Availability of the information about the actions taken on the basis of the policy to the investors, free of charge upon request. - The annual compliance confirmation
The review shall provide the confirmation that the exercise of voting rights has been done in accordance with the policy or procedure. - The thematic review
The review shall provide detailed information and evidences of the exercising of voting rights.
IMO must also escalate any breach detected to the management committee and to the boards of funds under management.
Disclosure
A summary description of the Policy is made available to the investors on FRMC’s website.
Details of the actions taken on the basis of the Policy is made available to investors on their request.
Review and update
The Policy is subject to annual review and update by the Management Committee and the IMO of FRMC.
A paper version of this Policy is made available free of charge to investors at FundRock’s registered office.
