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Frequently Asked Questions


1. What is shareholder engagement?

From the investor standpoint, shareholder engagement means demanding that companies adopt a stronger social responsibility policy through direct dialogue and by exercising their voting rights in the general meeting. It is also referred to as “shareholder activism”.

 

2. Why should I invest in a shareholder engagement fund?

Corporate governance is far from perfect, thanks to insufficient shareholder democracy, inadequate supervisory bodies and the dubious practices of certain company directors. Shareholders are aware of this and are increasingly determined to make their voices heard in the general meeting. But the “lone ranger” approach is not the easiest or most effective way of achieving this objective. Through its various funds, PhiTrust seeks to represent the interests of these shareholders. By exercising its voting rights, PhiTrust endeavours to build dialogue and influence corporate behaviour, thus promoting a genuine policy of shareholder activism. PhiTrust has already proved that this approach, which is unique in France, generates tangible results and has enabled constructive dialogue to be set up with a number of company directors. We have expanded our role from that of a financial investor to that of a responsible shareholder providing long-term support to the companies we invest in. The “Active Investors” fund managers are personally engaged in dialogue with directors of portfolio companies and seek to help them to adopt better practices so as to improve financial markets’ appreciation of their strategy and the risks involved.
Direct dialogue before, during and after the general meeting is a tool seldom employed these days, despite the fact that it is the most constructive way of ensuring that the company makes progress in accordance with its investors’ priorities. Voting policies and initiatives go hand-in-hand in a long-term shareholder engagement campaign.

 

3. How can I back a resolution?

-       You can submit a resolution to PhiTrust in order to obtain the number of shares required for filing the resolution (0.5% of the share capital in France)

AND/OR

-       You can vote for a resolutionsubmitted to the general meeting by PhiTrust
 

4. What are the stages involved in filing a resolution?

If the dialogue with company directors and boards proves unsuccessful and the institutional investors with whom we are associated believe that the issue is crucial for the company, PhiTrust, as an active shareholder, may:

·         put a written question to the Chairman during the general meeting

·         put an oral question during the general meeting

·         file a resolution to be submitted to the shareholders for voting at the general meeting

In the opinion of PhiTrust and the investors who support it, filing a resolution is not an act of defiance towards directors and the company’s board. The purpose is to convince them that the issue is regarded as highly important by the shareholders who have raised it and to see whether the resolution is supported by the other shareholders.

 

5. Why not simply seek out financial returns?

Because over the long-term, a company’s stock performance is tied to its ability to create economic, social and environmental wealth. A share price which is only based on financial criteria and which doesn’t take into account the financial, environmental, social and sustainable development risks can not be stable over the medium and long-term.

 

OTHER Frequently asked questions

a. Why bother being an active minority shareholder?

Because if an investor continuously behaves purely as a financial investor, company management understands that it is only the share price that matters and as a consequence will favour short-term strategies which would bring up share prices and satisfy the financial markets.

 

b. Is your financial performance any better than that of other asset managers?  

Our short-term financial performance matches that of any other asset manager which has been undertaking similar strategies for the past four years. We consider however, that our strategies will make a real difference over the medium-term.

 

c. What difference does voting make if one is a small shareholder?

As most shareholders do not vote, company boards have grown accustomed to not taking into consideration their shareholders’ views and recommendations…and as a result sometimes incurring criticism in the financial and economic press. And yet company policy is decided through shareholder vote at AGMs. If all small shareholders voted at AGMs, some of these policies would not be voted in.

 

d. How can you expect to be listened?

We have earned the support of major French and international investors, which have themselves published governance codes and are committed to encouraging company boards to implement their recommendations. Their support has enabled us to change company by-laws at Vivendi and Alcatel and reach majority support from Total’s shareholders. Company management has also recognised that we are a positive driving force for change as we will not bring on lawsuits to achieve our goals but wish only to assume our role as active shareholder.

 

e. How do you choose your engagement issues?

We rely on the major governance codes (OECD, International Corporate Governance Network, French Asset Management Association) and discuss with our main investors the initiatives we wish to undertake.

 

f. Who are your investors?  

Several institutional investors as well as French, European, American and even Australian asset managers.




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