Fund Governance Principles
Deminor Investment Management B.V. ("DIM" or the "Manager")) is the manager of the Deminor Active Governance Fund (the "Fund"). DIM is also the sole director of DAGF N.V. (the "Feeder Fund"). The Fund is a semi-open end mutual fund (fonds voor gemene rekening) under the laws of the Netherlands. The Feeder is an investment institution with variable capital (beleggingsmaatschappij met veranderlijk kapitaal) under the laws of the Netherlands. Investors can invest in the Fund directly, or indirectly, through the Feeder Fund. In what follows, any reference to the Fund, the investors ("unitholders") in the Fund and the management of the Fund will include both the Fund and the Feeder Fund unless provided otherwise.
As manager of the Fund, DIM has the duty to act in the interest of the Fund unitholders. DIM has been incorporated as a Dutch besloten vennootschap. DIM has a one-tier governance structure and is governed by its board of directors.
One of the members of the board of directors of DIM has been designated to act as the Fund's portfolio manager. Another member of the board has been appointed as risk & compliance officer. The board of directors further consists of non-executive directors who currently represent the majority of the board members. A majority of non-executive directors is however not an objective as such and the composition of the board of directors may evolve in time.
The powers and functioning of the board of directors are governed by the applicable legislation and by the articles of association of DIM. The members of the board of directors are also subject to a code of conduct which contains general principles, rules of conduct, prohibitions and requirements, including with respect to the management of conflicts of interests. Other persons involved in the operations of the Fund are also requested to comply with the code of conduct.
As governing body of DIM, the board of directors is responsible for the Fund manager's compliance with the duty of care, including the duty to act in the best interests of the Fund unitholders, as well as with certain principles to safeguard sound business operations and prudent provision of services within the meaning of sections 4:11, 4:14 and 4:25 of the Dutch Act on Financial Supervision (Wet op het financieel toezicht) (the "Principles of Fund Governance"). A copy of the Fund's code of conduct is available on demand.
The Principles of Fund Governance applied by the Fund are primarily aimed at the protection of the interests of the Fund unitholders and the limitation of conflicts of interest. The Principles of Fund Governance applied by the Fund are based on and inspired by the standards of the Dutch Fund Association (Dufas) and follow such standards to the extent these can reasonably be applied to the operations and size of the Fund.
In case a situation would not be dealt with specifically by any of the following Principles, the board of directors of DIM shall endeavour to resolve any governance issue having due regard for the interests of the Fund unitholders and its legal duty to act in their interest and after reasonable and fair consideration of relevant facts and circumstances.
The following is only a summary of the rules and Principles regarding the governance of the Fund established in the Prospectus and in the Terms and Conditions of the Fund. You are therefore invited to read carefully the Prospectus and the Terms and Conditions for further information on the Fund and its governance practices.
1. Supervision and periodic review
Supervision of the manager's compliance with the Principles of Fund Governance may be entrusted to a dedicated committee created by the board of directors or, absent such a committee, to the non-executive members of the Board of Directors or to an independent third party. The board of directors of DIM has decided to assign this task to the non-executive board members who are in charge of supervising the compliance with the Principles of Fund Governance with the assistance of an external advisor, FM&I B.V.
The non-executive board members can have access to all relevant information in order to fulfil their supervisory duties and to check whether DIM complies with its duty to act in the interest of the Fund unitholders.
2. Compliance function
Compliance with the law, regulations, the code of conduct and other applicable rules, among which those that protect the interests of unitholders and mitigate conflicts of interest, is monitored by the risk & compliance officer. The role of risk & compliance officer is incompatible with the role of portfolio manager. The risk & compliance officer has access to all relevant information and reports regularly to the board of directors.
3. Conflicts of interests
The Prospectus of the Fund contains a special section on conflicts of interests. There are also detailed rules and procedures in the code of conduct. The main principles which apply to conflicts of interests are summarized below.
In case of a (potential) conflict of interests between DIM and the Fund, DIM will, at all times, have regard in such event to its obligations as manager of the Fund and will endeavour to ensure that such conflict is resolved fairly. DIM shall resolve any such situation having due regard for the interests of the Fund unitholders and in accordance with its legal duty to act in the interest of the unitholder, after reasonable and fair consideration of relevant facts and circumstances. Any transaction between DIM and the Fund itself will be carried out as if effected on normal commercial terms negotiated on an arm's length basis.
All members of the board of directors of DIM, as well as other persons involved in the operations of the Fund must adhere to a code of conduct, outlining the rules and regulations as regards the trade of securities that form part of the Fund's assets. One of the purposes of the code of conduct is to prevent conflicts of interests to the extent possible and to manage such conflicts of interests when they occur.
DIM, the members of its board of directors, as well as certain of its employees, officers or agents may also invest in, directly or indirectly, or manage or advise other investment funds or accounts which invest in assets which may also be purchased or sold by the Fund. At present, DIM does not manage any other assets than the Fund's assets.
Furthermore, active engagement programs which are part of the investment policy of the Fund typically involve contacts with other investors or potential investors in portfolio companies. DIM as well as other persons connected with it may advise such other investors in connection with their investments or engagements with target companies.
Neither DIM nor any person connected with it is under any obligation to offer investment opportunities of which any of them becomes aware to the Fund or to account to the Fund in respect of (or share with the Fund or inform the Fund of) any such transactions or any benefit received by any of them from any such transaction, but will allocate such opportunities on an equitable basis between the Fund and other clients.
4. Price sensitive information - Confidentiality
DIM has established rules and procedures in order to manage the flow of price-sensitive information and other confidential market or internal information. Those rules and procedures are included in the code of conduct.
The code of conduct contains prohibitions such as the prohibition to perform securities transactions (i) on securities in which the Fund has invested, (ii) based on price sensitive information, (iii) in connection with or in anticipation of securities orders or transactions of the Fund, (iv) based on an unpublished internal analysis, as well as the prohibition to disclose confidential information to third parties.
5. Third party relations
The selection of counterparties for trade execution (brokers) depends on the execution capability and - in the case of bundled services - the quality of the research provided.
6. Asset Valuation
The valuation of assets and calculation of the Net Asset Values (NAV) is performed independently from the portfolio management function by Fastnet Netherlands B.V. who has been appointed as administrator of the Fund.
7. Shareholder Rights
DIM is in charge of implementing the Fund's active voting policy as part of its active engagement programs. The active engagement programs may take various forms and will differ depending on the objectives to be achieved. Details on pending engagement programs is described in the quarterly reports transmitted to the Fund unitholders.
8. Transparency and reporting
In addition to (semi-)annual accounts, the Fund unitholders are informed on a monthly and quarterly basis on inter alia the Fund's performance, the composition of the Fund's assets and the net asset value of the Fund, by means of a Monthly Investor Report and a Quarterly Investor Report.
The Prospectus of the Fund contains detailed information on the investment policy, the risks, the costs and management fees, the affiliated parties, the outsourcing and the other characteristics of the Fund.
9. Change in the terms and conditions of the Fund
The Prospectus and the Terms and Conditions of the Fund may be amended. A proposed amendment of the investment policy of the Fund, of the Terms and Conditions or of the Articles of Association of the Feeder Fund will be notified to each unitholder. It will also be published and explained on the Website.
Notice of the fact that the investment policy of the Fund, the Terms and Conditions or the Articles of Association of the Feeder Fund have been amended will be notified to each unitholder at its e-mail address and/or by mail and will be published and explained on the Fund's website.
An amendment causing a reduction of a unitholder's rights or security, imposing costs on a unitholder or causing a change to the investment policy of the Fund, will only become effective vis-à-vis the concerned unitholder after the lapse of a period of three months following the date of the notification thereof. During said three months period, unitholders have the right to redeem their investment at their respective net asset value without a redemption charge being payable. If the dates fixed for redemption in accordance with the Terms and Conditions are not sufficient to allow unitholders to redeem their investment during such (full) three months period, DIM will fix one or more additional dates for redemption.
10. Best execution
In implementing and executing investment decisions, DIM shall as a general rule take reasonable steps to obtain the best possible result, taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other relevant consideration. Transactions with related parties will be executed at arm's length terms customary in the market.
11. Securities borrowing/lending
As explained in the Prospectus, the Fund may (up to a maximum of 50% of the portfolio) enter into securities borrowing transactions with the following objectives:
• to finance the Fund's long positions, i.e. by means of a securities finance trade
• to borrow stocks in order to execute a shareholder engagement programme at a corporate event (e.g. general meeting of shareholders)
• to short sell certain securities as part of a specific hedging strategy
The Fund may (up to a maximum of 50% of the portfolio) enter into securities lending transactions with the objective of increasing its portfolio returns. The Fund will only contract with respected parties (financial institutions in the European Union, supervised by the relevant authorities) under conditions customary in the market for similar transactions, including the providing of sufficient collateral to the satisfaction of the Manager (such as liquidities, state bonds and listed shares).
The Fund will not engage in securities borrowing and lending because of special situations, i.e. "specials/hot stocks" in the securities lending market nor will the Fund engage in specialised arbitrage strategies based on securities borrowing and lending.
12. Remuneration and Personal interest
The Management Fee and the Performance Fee to which DIM is entitled as manager of the Fund are clearly described and explained in the Prospectus.
Directors and shareholders of DIM as well as other persons connected with DIM may invest in the Fund.
The code of conduct provides rules and prohibitions in order to ensure that the Fund can steer clear of appearing to act with inside information.
13. Costs and damages as a result of operational errors
In case of any errors in the calculation of the Net Asset Value, DIM will within three business days prepare a report on the errors that were made and which correction will need to be made to the Net Asset Value. If a correction is required of more than 3% of the Net Asset Value, and a unitholder incurred losses by a subscription or redemption against the erroneously calculated Net Asset Value, DIM will provide compensation (in cash or in units) for the relevant unitholder for the actual losses incurred, provided such damages are the direct result of the gross negligence (grove schuld of toerekenbare nalatigheid), fraud or wilful misconduct (opzet) of DIM in the performance or non-performance by it under the Terms and Conditions.
14. Shareholder / participants meetings of the Fund
The Fund
Within four months following the close of the Fund's fiscal year, a meeting of Fund unitholders will be held to consider and discuss the Fund's audited annual accounts. Additional meetings of Fund unitholders may be convened if such is considered desirable by DIM, the depositary, or by one or more unitholders representing (directly or indirectly, through the Feeder) at least 75% of the Fund units on issue. Each Feeder unitholder will be invited to visit such meetings.
According to the Terms and Conditions, no initiative, veto- or consensual rights are conferred upon the meeting of Fund unitholders. The meetings of Fund unitholders shall be of an informative nature.
Meetings of Fund unitholders will be convened through a notice to each Fund unitholder and Feeder unitholder and publication on the website, at least fourteen days in advance, the day of publication of the notice and the day of the meeting not included. The issues to be discussed at the meeting are mentioned in the notice convening said meeting.
The Feeder
Meetings of Feeder unitholders shall be convened in accordance with the Articles of Association of the Feeder in the same manner as the meetings of Fund unitholders and will always coincide with meetings of Fund unitholders.
According to the Articles of Association of the Feeder the following rights are inter alia conferred upon the meeting of Feeder unitholders:
• the appointment, suspension, dismissal of the Manager*
• the amendment of the Articles of Association with the prior approval of the board of directors*
• the adoption of the annual accounts of the Feeder
• the allocation of profits at the proposal of the Manager
• the dissolution of the Feeder with the prior approval of the Manager*
Meetings of Feeder unitholders may only take resolutions provided at least 50% of the issued share capital is present or represented. Resolutions of the meeting of Feeder unitholders are taken with a simple majority vote, In respect of inter alia the resolutions marked with an asterix (*), a qualified majority of at least two thirds of the votes cast is required (representing at least 50% of the issued share capital) in a meeting where at least 50% of the issued share capital is present or represented. When the presence quorum requirement as referred to in the preceding sentences is not met a second meeting shall be held where no such quorum requirement shall apply.