Nikko Asset Management Australia. Fixed Income Proxy Voting Policy & Guidelines

Transcription

1 Nikko Asset Management Australia Fixed Income Proxy Voting Policy & Guidelines December 2013

2 Table of Contents Contents 1. Purpose/Objective.4 2. Scope What does it cover Who does it apply to 4 3. Proxy Voting Policy Principals Voting Policy External Advisors Disclosure Proxy Voting Guidelines Bondholder Rights Linked Proposals Plain English Discloser of Voting Results.7 Page 2 of 8

3 Document History Document Type: Document Owner: Approver: Policy & Guidelines Nikko AM Limited - Fixed Income Board, Head of Fixed Income, Deputy Head of Fixed Income, Head of Credit Review Frequency: 12 Months Amendment History: Date: Comment: Version Stakeholders Consulted: Nov 2013 Establishment of Policy 1.0 Head of Fixed Income, Deputy Head of Fixed Income Sept 2014 Policy amended to reflect the following name changes; 2.0 Head of Fixed Income, Deputy Head of Fixed Income Tyndall Investment Management Ltd to Nikko AM Ltd. Tyndall Asset Management Ltd to Nikko Asset Management Australia Ltd. Page 3 of 8

4 1. Purpose/Objective This policy and guidelines document sets out the general framework and principles for proxy voting matters regarding debt programmes and changes to the terms and conditions of indentures. 2. Scope 2.1 What does it cover It applies to the management of investments in managed investment schemes, discrete mandates, superannuation funds and general and life insurance funds. This policy does not cover any discrete mandates where specific client instructions have been received in relation to proxy voting. 2.2 Who does it apply to This policy is adopted by the following entities that collectively are known as Nikko Asset Management Australia : Nikko Asset Management Australia Limited Nikko AM Limited This policy applies to investment staff(s) acting on behalf of the above entities involved with investment decision making and executing the voting instructions for Nikko Asset Management Australia Fixed Income only. In general, this responsibility resides with Nikko AM Limited Fixed Income Credit Team. 3. Proxy Voting Policy The proxy voting polity includes the principles behind the voting policy as well as the specifics of the voting policy. This policy is reviewed and approved by the Board each year and is made available to our investors on our website: Principles We believe that exercising our entitlement to vote is an import act in fulfilling our fiduciary duty to investors. By voting, Nikko AM Limited Fixed Income can protect the interests of bond holders and investors. As a long-term investor, Nikko AM Limited is focused on each issuer s ability to service and re-pay debt. The fixed interest market is primarily dominated by institutional investors. Therefore institutional investors can influence bond-issuing corporations. While equity Page 4 of 8

5 holders influence corporate governance as owners of the business, bondholders affect corporate governance primarily through the terms of the indentures and indirectly assert influence on the debt issuers. For example, if Nikko AM Limited is concerned with potential negative impacts from climaterelated events (such as flooding, coast line erosion or drought) on an issuer s payment capability, we may, with other institutions, negotiate the terms and conditions in the indenture regarding the interest rate, terms, default and remedy provisions, or other covenants to account for this climate risk. The inclusion or even a proposal of such climate related provisions will influence the borrower s broader corporate position on Environmental, Social and Governance (ESG) factors. Nikko AM Limited supports the consideration of ESG factors by corporations and other debtissuing institutions. By promoting the consideration of ESG factors, Nikko AM Limited aims to positively influence investor returns and corporate decision making. By voting, we can improve corporate governance and communicate the importance of ESG factors. While voting is important, our experience has shown that interacting and communicating with borrowers is equally important. Often borrowers appreciate the insight into investors thinking that meetings enable. Expressing concerns and raising issues in meetings can be more effective in promoting positive changes than waiting until after resolutions are fully formed and a vote is required. Investment personnel are encouraged to communicate with borrowers in which Nikko Asset Management Australia has a material investment and where such interaction can have a positive influence. 3.2 Voting Policy The guiding principle of our voting policy is that voting rights should be exercised in all cases in the interests of investors, unless there is a compelling reason not to. Nikko AM Limited Fixed Income s Credit Team is responsible for researching and proxy voting on behalf of the funds under management relating to fixed income securities and debt programmes. The team considers each proposal on a case-by-case basis, taking into consideration the financial impact it will have on each fund. The decision to vote, or not, and in favour or not, is to be determined by the Nikko AM Limited Fixed Income Credit Team, which will consider all relevant and available information when making a decision. At times, abstaining from voting may be the preferred course of action. Some examples of reasons for abstaining from voting include: Where we are excluded from voting by the Corporations Act, or other always, or where there is a conflict of interest or duty which cannot be appropriately resolved. Where it is in the best interests of investors to abstain. Page 5 of 8

6 Where the alternative option is not preferred. We may be faced with the choice of either voting for a resolution or abstaining. If we do not want to vote for the resolution and there is no option to vote against, we may choose to abstain. Where there is a conflict between our fiduciary duty and the Proxy Voting Guidelines, our fiduciary duty will take precedence. Legal requirements will take precedence over other duties. 3.3 External Advisors No external advisors are engaged in the decision of how and whether to vote. However, if relevant information emerges from an external party, it will be considered. Issues raised by external advisors will be considered, but the Nikko Asset Management Australia Proxy Voting Guidelines will take precedence. 3.4 Disclosure A voting record is kept of all proxy voting activities. The voting record will be disclosed at least annually on our website in a form consistent with FSC Standard 13 Voting Policy. As required by FSC Standards 13 Voting Policy, no later than 3 months after the close of the financial year, as summary of our proxy voting activity will be published on our website at Disclosure of proxy voting activity is consistent with FSC Standard 13 Voting Policy. It will include the following: The name of the entity; The ASX or equivalent code of the security (if listed); The meeting date; Whether the resolution is a General or Special one; A brief summary of the resolution Whether the resolution was proposed by the entity or a debt holder; and How a resolution was voted upon or abstained, if appropriate. Best efforts will be employed to ensure that the disclosed activity is correct. Page 6 of 8

7 4. Proxy Voting Guidelines The guidelines below are not intended to operate as a prescriptive set of rules for proxy voting. They have been designed to provide a general framework for clients to understand our views and our likely response when asked to vote. Naturally, they will evolve as time passes and circumstances change. It is inevitable that we will be presented with situations in future that deviate from those outlined here, but we hope that guidelines make clear our general though processes and approach. 4.1 Bondholder Rights We are strong advocates for the protection of bondholder rights. We generally do not support any proposal that removes or dilutes these rights. We recognise that there may be any proposal that removes or dilutes these rights. We recognise that there may be competing interests between shareholders and bondholders. We will endeavour to support a course of action that is in the best long-term interests of our clients as bondholders. For example, if a company increases its credit line, this may have negative consequences for its bonds since it increases the risk of the borrower being unable to repay its outstanding debt. On the other hand, shareholders may encourage an increase in debt since the use of funds may allow company expansion and a potential increase in revenue. The cost to shareholders is an increase in interest payments, which will negatively affect earnings per share (EPS). But these interest payments may be acceptable to shareholders since the issuance of debt does not dilute shareholder wealth through an issuance of more shares. Likewise, an increase in dividends will be favourable to shareholders but will put pressure on cash available to meet the company s debt obligations. In addition, a share buyback would also be considered favourable to shareholders while unfavourable to debt holders since the debt-to-equity ratio increases. There are just some examples of where the motive of debt holders are at odds with those of shareholders. Nikko AM Limited will always act in favour of our clients as debt holder, all things considered. 4.2 Linked Proposals We recommend that proposals be submitted to bonds holders in separate resolutions. A resolution should cover no more than one specific subject matter. 4.3 Plain English Proposals should be written in plain English. This increases the likelihood that all bond holders will understand the proposals. 4.4 Disclose of Voting Results Page 7 of 8

8 A company should disclose the results of the vote in a report to the ASX (if listed) or through our Custodian. The report should include the aggregate proxy votes validly received, the total eligible votes and in case of a resolution submitted, the aggregate number of votes fast For and Against the resolution and any abstentations. Page 8 of 8