INOCAP Gestion is an asset management company that manages innovation mutual funds (Fonds Communs de Placement dans l’Innovation, FCPI) and local investment funds (Fonds d’Investissement de Proximité, FIP). INOCAP Gestion may acquire holdings in listed companies through the investments it holds on behalf of these Funds. For this reason, and to comply with the regulations in force (Article 314-100 of the general regulations of the Autorité des marchés financiers [French financial markets regulator]), INOCAP Gestion has drawn up a voting policy that sets out the procedure for casting votes at general meetings of shareholders.
This policy establishes the conditions according to which INOCAP Gestion exercises the voting rights attached to the securities in the funds it manages. The policy was validated by the Management Committee on 25 January 2008.
The voting policy is regularly updated to comply with any changes to the regulations.
1. Exercising voting rights: organisation at the management company
The middle/back office receives voting documents from the custodian (voting form, agenda, resolutions) and then forwards them to the managers. A document called “monitoring votes at general meetings” is updated whenever an invitation to attend a general meeting is received. This document lists the votes cast at general meetings of all INOCAP Gestion’s holdings, and is archived on an annual basis. It contains the following information:
• Date of receipt of invitations to attend, resolutions and forms
• Name of the company concerned
• Type of meeting
• Date of sending (to the custodian) the completed form
• % of capital held by INOCAP Gestion in the company, through all the FCPI and FIP funds managed.
• Attendance or non-attendance at the meeting (with an indication of the reasons)
• Method of participation (physical presence or postal vote)
• Number of resolutions with a proposed vote
• Number of resolutions for which a vote was cast
Each manager is responsible for examining and analysing the resolutions according to INOCAP Gestion’s voting policy.
Before voting, managers must send the “monitoring votes at general meetings” document to the internal auditor for approval.
The fund manager for the holding in question casts the final vote, independently and in the sole interest of the funds’ unitholders.
The middle/back office will request the custodian to freeze the securities, to comply with the regulations in force. It sends the duly completed and signed voting form to the custodian, who will then forward it to the issuing company.
A copy of all these documents is kept.
2. Criteria used to determine the cases when the management company exercises its voting rights
The custodian must send the voting documentation to the asset management company as early as possible.
The following criteria apply to INOCAP Gestion’s votes at general meetings:
INOCAP Gestion is not required to vote at general meetings of companies in which it holds less than 2% of the capital or voting rights, across all the Funds it manages.
Below this threshold, the asset management company considers that it does not possess sufficient or influential holdings in terms of voting rights, and prefers to vote only in companies where its holdings are greater.
Nationality of issuing companies
It does not vote systematically at general meetings of foreign companies, as no satisfactory system currently exists allowing votes to be cast under optimal conditions (i.e. deadlines, costs, etc.).
3. Voting policy guidelines
The management team at INOCAP Gestion adopts a rigorous selection process before taking any decision to invest. Carrying out a fundamental analysis of each file is a core component of the process. Moreover, it believes that it is paramount to develop a close relationship of trust with the leadership team, established through meetings with the management and on-site visits. Managers will focus on the relevance and clarity of the strategy. When taking a decision to invest, they will consider elements such as trust in the management and agreement with the strategy.
This means that, in principle, no fundamental reasons should exist to oppose the resolutions for which the management is seeking approval at the general meetings of shareholders.
Such resolutions may include:
• decisions triggering a change to the articles of association
• approval of accounts, unless the auditors have refused to certify them or have issued a reservation in their report on the annual accounts.
• allocation of results, unless the allocation is inappropriate in view of the company’s financial situation
• appointment and dismissal of corporate bodies. The management team will pay special attention to resolutions on executive remuneration, particularly in terms of the transparency of amounts and the methods of calculating direct, indirect and/or deferred remuneration, and its link to value creation within the company.
• appointment of statutory auditors, unless serious questions exist regarding the independence of the statutory auditors or the financial statements presented.
However, INOCAP Gestion will pay particular attention to certain issues.
The management team will review the resolutions proposed on a case-by-case basis and reserves the right to vote against them. Such resolutions may relate to:
• appointment and dismissal of corporate bodies
• share issues without preferential subscription rights for existing shareholders
• resolutions introducing provisions contrary to the principle of “one share, one voting right, one dividend”. These include resolutions that limit voting rights, increased dividend shares or double voting shares
• capital increases in the case of takeovers
• all “anti-takeover” measures (such as a mechanism called a “poison pill”)
• resolutions whose purpose is to introduce a share subscription plan for managers offering a discounted subscription price compared with the market price.
• issuance of warrants or any other securities giving access to the capital for the exclusive benefit of one class of shareholders (e.g. employees) thereby resulting in a dilution for other shareholders
• approval of ‘regulated’ agreements, when their content is contrary to good governance rules or is not easily accessible.
In general, INOCAP Gestion advocates voting against or abstaining when the vote relates to bundled resolutions that include far-reaching or unacceptable proposals.
4. Method of casting votes
INOCAP Gestion prefers to vote by attending general meetings of shareholders in person. However, the management company reserves the right, depending on the circumstances, to vote using a postal vote or by proxy.
5. Management of conflicts of interest
INOCAP Gestion ensures its staff members are always placed in circumstances that mean they act in the sole interest of fund unitholders while also respecting the integrity of the market.
All members of staff of the management company are signatories to the code of ethics of the AFIC (Association Française des Investisseurs pour la Croissance, French association representing private equity]) and are subject to strict rules of conduct regarding the operations they carry out on financial markets in a personal capacity. Each year, staff members must supply a list of their securities accounts. Transactions involving securities traded on the free market, on Alternext and on Eurolist B and C, whose market capitalisation is less than €150 million, are prohibited.
INOCAP Gestion reasonably believes that it is immune from potential conflicts of interest that may have an impact on the discretionary casting of its votes. If, however, any conflicts of interest occur, the case will be submitted to the Ethics Officer who will decide how to proceed.