Proxy Voting Guidelines
July 31, 2020
1832 Asset Management L.P. ("1832"), in its capacity as manager, provides investment management and administrative services to, the Dynamic and Scotia Funds (each a "Fund", collectively the "Funds"). 1832 also provides investment management and administrative services to institutional clients.
Subject to compliance with applicable securities legislation, 1832 acting on each Fund's behalf, has the right to vote proxies relating to the issuers of each Fund's portfolio securities. In certain circumstances, 1832 may delegate this function to a Fund's portfolio advisor or sub-advisor as part of such advisor's discretionary authority to manage the Fund's assets. In all cases, proxies must be voted in a manner consistent with the best interests of the Fund and its security holders.
The proxy voting guidelines described below form an important part of 1832's fiduciary duty to maximize the long term value of each Fund for the benefit of its security holders. The voting of proxies is a pillar of 1832’s active investment management approach, and a key part of the engagement process with security issuers.
Routine and Non Routine matters
On routine matters, proxies will typically be voted with management. For securities to be held in the Funds the portfolio manager(s) will generally have a constructive view of management strategy and corporate governance, otherwise a Fund will not own or maintain a position in the securities of that issuer. Examples of routine business applicable to an issuer are: voting on the size, nomination and election of the board of directors, and the appointment of auditors. However, in some instances portfolio managers may still vote against management on routine matters, where it is believed to be in the interest of security holders.
Special or non-routine matters are brought to the attention of the portfolio manager(s) of the applicable Fund, and, after assessment, the portfolio manager(s) will direct that such matters be voted in a way that he or she believes will better protect or enhance the value of the investment for the Fund. Without limiting the generality of the foregoing, examples of special or non-routine business are: stock-based compensation plans, executive severance compensation arrangements, ESG related issues, shareholders rights plans, corporate restructuring plans, going private transactions in connection with leveraged buyouts, lock-up arrangements, crown jewel defenses, supermajority approval proposals, and stakeholder or shareholder proposals.
1832 will not vote proxies received for issuers of portfolio securities which are no longer held in a Fund.
Environmental & Social Considerations
As part of our active investment management approach1832 believes that it is important to engage with issuers on all relevant Environmental & Social factors, with proxy voting forming an essential part of that engagement. We view effectively dealing with material ESG issues as a signal of management and governance quality in a business. Accordingly, special or non-routine matters related to Environmental & Social issues are brought to the attention of portfolio manager(s) of the applicable Fund. Portfolio managers assess such matters, and direct votes in a way that he or she believes will better protect or enhance the value of the investment for the Fund.
Conflict of Interest
Upon receipt of approval from the Canadian securities regulatory authorities, some of the Funds may hold common shares of Scotiabank or other related entities. There is the potential for a conflict of interest between the interests of the Funds and the interests of 1832 or its employees in connection with the exercise of voting rights of the Funds attached to the shares of Scotiabank or other related entities. There is also the potential for a conflict of interest in connection with the exercise of the Funds' voting rights attached to the shares of another issuer, where the outcome of the vote may directly impact the price of the shares of Scotiabank or other related entities.
Where proxy voting could give rise to a conflict of interest or perceived conflict of interest, 1832 has instituted procedures to help ensure that a Fund's proxy is voted:
- In accordance with the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund; and
- Free from any influence by Scotiabank or another related entity and without taking into account any consideration relevant to Scotiabank or any of its associates or affiliates.
The procedures for voting issuers' proxies where there may be a conflict of interest include escalation of the issue to members of the Independent Review Committee, all of whom are independent of 1832, for its consideration and recommendation, although the responsibility for deciding how to vote a Fund's proxies and for exercising the vote remains with 1832.
In addition, pursuant to the requirements of securities legislation, 1832, on behalf of a Fund, will not vote any of the securities a Fund holds in underlying mutual funds managed by 1832 or any of its affiliates or associates (as such terms are defined in the Securities Act (Ontario)). However, 1832, in its sole discretion, may arrange for security holders of a Fund to vote their share of those securities of the underlying mutual fund.
Documentation and Proxy Voting Records
1832's policy is that proxies must always be voted in a manner consistent with the best interests of the Fund and its security holders. If proxies are voted against the management of an issuer on any particular proposal, whether routine or non-routine, and the Fund continues to own the security of such issuer, documentation of that vote is required along with an explanation to be kept on file.
The portfolio managers of the various Funds at 1832 have the intellectual freedom to make different investment decisions based on what they believe is in the long term interests of the Funds that they manage, which includes proxy voting decisions. In situations where a portfolio manager decides to vote proxies for his or her Fund(s) differently from a portfolio manager(s) who holds the same security in another Fund(s), the rationale for the differing votes is documented and kept on file.
On occasion, a portfolio manager may abstain from voting a proxy or a specific proxy item when he or she concludes that the potential benefit of voting the proxy of that issuer is outweighed by the cost of voting the proxy. In such instances an explanation for the abstention will be kept on file.
All documentation and proxy voting records will be submitted to 1832's Portfolio Administrator of Proxy Voting (the "Portfolio Administrator") for filing and record-keeping.
Role of Portfolio Administrator and ISS Proxy Exchange
Under continuous oversight of the Manager of Portfolio Administration, the Portfolio Administrator is responsible for monitoring receipt of all proxies for securities for which 1832 has voting responsibility on behalf of a Fund. The Manager of Portfolio Administration is responsible for ensuring that the Portfolio Administrator votes the Funds' proxies in accordance with 1832's established instructions. If a Fund participates in a securities lending program, the Portfolio Administrator will work with the custodian, on a best efforts basis, to recall securities before the appropriate date so that the proxies can be voted.
Generally, all proxy voting is done by the Portfolio Administrator using ISS Proxy Exchange, on behalf of 1832, or by the sub-advisor. ISS Proxy Exchange offers transparency into the life cycle of ballots, meetings and accounts. ISS Proxy Exchange provides an automated solution to proxy voting and reporting. 1832 can audit, review and modify its voting at various stages in the voting process. Such proxy voting information compiled by ISS Proxy Exchange will be included in each Fund's annual proxy voting record ("Proxy Voting Record") for the period ending on June 30th of each year.
External research and recommendations that help inform proxy voting decisions are delivered through ISS Proxy Exchange to 1832 portfolio managers. ISS Proxy Exchange permits 1832 to review voting policy recommendations and control our final vote decisions, while outsourcing the processing and coordination of the proxy voting process. ISS receives 1832’s proxy ballots, works with 1832’s custodian banks, facilitates submitting votes on 1832’s behalf, maintains vote records and provides 1832 with reporting.
1832’s proxy voting guidelines are maintained by the 1832 Compliance Department and are reviewed on an annual basis.
A copy of these proxy voting guidelines and the most recent Proxy Voting Record for each Fund for the most recent period ended June 30 of each year will be available on www.dynamic.ca or www.scotiafunds.com by August 31 of that year. This information will be sent, upon request, to security holders of the Funds at any time after August 31 of that year.
If you have any questions, please contact the Legal & Compliance Department, 1832 Asset Management L.P., Dynamic Funds Tower 7th floor, 1 Adelaide Street East, Toronto, Ontario, M5C 2V9.