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DISCLAIMER (U.S.)Last updated 13th March 2018

This website is issued and approved by Lofoten Asset Management Limited (LAM), authorised and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom with registration number 501341. LAM is also a registered investment adviser with the Securities and Exchange Commission of the United States.

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Investors should consider carefully all specific risks of the products described in this website carefully prior to making an investment. Some general risks to consider include: Past performance of an investment is not a guide to any future performance; the value of investments and any income generated may go down as well as up and is not guaranteed; changes in exchange rates may have an adverse effect on the value, price or income of investments.
Some funds e.g. investment trusts have the ability to borrow money in order to make further investments. This is known as “gearing” and can improve returns of an investment in rising markets but can reduce returns in falling markets. Shares in investment trusts can fluctuate in accordance with demand and supply and may not reflect the underlying net asset value of the shares. Depending on market conditions, the spread between a purchase and sale price can vary widely.

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Institutional Investors & Consultants – United Kingdom

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Stewardship - Lofoten Asset Management

Stewardship Code

Introduction

The Stewardship Code (“the Code”) was published by the Financial Reporting Council (“FRC”), the UK’s independent regulator responsible for promoting high quality corporate governance and reporting in order to foster investment.  The Code sets out good practice for institutional investors in their dealings with the companies in which they have invested.  It is important to note, in compliance with the aims of the Stewardship Code, that Lofoten Asset Management will always seek to enhance the quality of engagement between its clients and companies to enhance long-term returns.

Currently Lofoten Asset Management only acts a discretionary portfolio manager at the fund level.  The FRC have noted that certain aspects of the Code are not directly relevant to all institutional investors and we have therefore explained below how each of the Code’s seven principles is applied at Lofoten Asset Management.

Principle 1 – Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.

Lofoten Asset Management has a Proxy Voting Policy, which is disclosed publicly in the Form ADV and is available to clients. Lofoten Asset Management’s investment process requires that the management of any potential investee company is normally visited or interviewed prior to a decision to invest.  The purpose of these meetings is to determine the potential for strategic development and earnings potential over the mid to long term.  Particular focus is also given to the way companies interact with all of their stakeholders (customers, employees and shareholders) to ensure that all are treated fairly and a positive relationship is maintained with the company.

In addition to this programme of regular visits, Lofoten Asset Management actively votes all proxies in line with the firm’s voting policy or a client’s lawful instructions.  Voting is carried out on a case by case basis. We now utilise proxy voting and research services from Institutional Shareholder Services (ISS) who spend significant time and resource engaging with companies regarding corporate governance and remuneration policies.

Principle 2 – Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publically disclosed.

Lofoten Asset Management has a documented Proxy Voting Policy and a documented Conflicts of Interest Policy, both designed to meet the expectations of the FCA and the SEC. Lofoten Asset Management is a privately owned company focusing solely on investment management, with the interests of its clients paramount at all times. We have a fiduciary responsibility to act in our clients best interests at all times. As a smaller and independent firm we don’t have the conflicts larger, non-independent and complex competitors may face. Our investment team all sit together in one location and are totally focused on stock selection and portfolio management. We see the possibility of any conflict of interests as low and we take all appropriate steps to identify any potential conflicts of interest that may lead to any material risk in the interest of our clients. Our Conflicts of interest policy operates across the firm and is reviewed by senior management and Compliance regularly and signed by all staff when they join and on an ongoing basis. The firm only deals on behalf of its clients, in the funds we manage for them and not on its own behalf. We have a strict PA dealing code, in line with FCA requirements, and any deals have to be countersigned before instructing. As mentioned above our investment team are focused on portfolio management and therefore in our interaction with companies and advisers we typically do not wish to be made insiders and therefore expect investee companies and their advisers to ensure that information that could affect our ability to deal in the shares of the company concerned is not conveyed to us without our prior agreement.

Principle 3 – Institutional investors should monitor their investee companies.

As described above, our investment team are totally focused on stock selection and portfolio management and a crucial part of the investment research process has always been to meet with or interview the management of a company prior to making an investment and throughout the “lifetime” of the holding in that company.  Even after a position has been sold we continue to monitor those companies. Comprehensive and continuous research and monitoring of investee companies is essential to Lofoten Asset Management’s investment process and Lofoten Asset Management utilises various research and support tools to meet this principal.

As a general point, we typically do not wish to be made insiders and therefore expect investee companies and their advisers to ensure that information that could affect our ability to deal in the shares of the company concerned is not conveyed to us without our prior agreement.

Principle 4 – Institutional investors should establish clear guidelines on when and how they will escalate their stewardship activities.

Lofoten Asset Management will undertake to escalate its involvement with client companies where it is felt that it is required.  Engagement could be through contact with the company’s brokers, direct engagement with senior management, non-executive directors or other investors depending on the specific circumstances and need to protect or enhance shareholder value. In addition, we may also consider other actions including voting against management resolutions or submitting resolutions at shareholders’ meetings as we aim to deal effectively as possible with concerns regarding performance. We believe our approach is measured by the positive performance over time of the share price, and our approach does not preclude us from selling a position if we believe this to be the most effective course of action.

Principle 5 – Institutional investors should be willing to act collectively with other investors where appropriate.

In applying client policies and best practice guidelines, Lofoten Asset Management considers each vote on an individual basis in the light of the relevant circumstances at the company.  Where appropriate Lofoten Asset Management will act in co-operation with other investors to promote good governance of the investee company. Utilising ISS will allow us and other investors, where appropriate, to act collectively and send clear messages to investee companies.

Principle 6 – Institutional investors should have a clear policy on voting and disclosure of voting activity.

Lofoten Asset Management has a documented Proxy Voting Policy, which documents how the firm will manage conflicts of interest and disclose both the policy and voting record to clients. Lofoten Asset Management maintains a policy of voting at company meetings.  Lofoten Asset Management does not publicly disclose voting records as we believe that information to be confidential to our clients.

With respect to stock lending Lofoten Asset Management will pay due regard to the interests of its clients. There is therefore no presumption in favour of either continuing to lend securities or recalling securities to vote. Each situation is analysed based on the nature of the voting item and we would recall our securities where we consider it to be in our clients’ best interests. We now utilise proxy voting and research services from Institutional Shareholder Services (ISS) who spend significant time and resource engaging with companies regarding corporate governance and remuneration policies.

Principle 7 – Institutional investors should report periodically on their stewardship and voting activities.

As a registered investment adviser with the SEC, Lofoten Asset Management is required to keep records of its proxy votes and disclose them to clients upon request. Due to underlying client confidentiality and investment or engagement strategy reasons, it may not always be appropriate to disclose voting actions at a detailed level.  Upon request or as required by law or regulation Lofoten Asset Management will report in full to clients on its relevant voting activity.

Summary

Lofoten Asset Management has a business structure and investment approach that complies with The Stewardship Code. We aim to align the objectives of our investee companies with those of our clients through constructive engagement. The investment professional responsible for co-ordinating issues in relation to The Stewardship Code is Willem Vinke.