Proxy Voting Policy and Procedures

Reviewed June 2020

Riverbridge Partners

1200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402

Phone: 612-904-6200
Fax: 612-904-6250
Email: contactus@riverbridge.com

It is the policy of Riverbridge to vote all proxies for the exclusive benefit of the accounts whose assets we manage.  In most, if not all cases, this will mean that the proposals which maximize the value of portfolio securities over the long term will be approved with consideration for the environmental, social, and governance issues that aid in this objective.

The purposes of these proxy voting procedures are to ensure that Riverbridge fulfills our responsibilities to clients in connection with the analysis of proposals submitted by corporate management, and others, to shareholders for approval, and properly executes and delivers proxy ballots in connection therewith.

As long as there is no provision to the contrary in the charter, by-laws, trust agreement, plan documents, partnership agreement or other controlling documents which create the legal entity with which Riverbridge is dealing, the power to vote on proposals presented to shareholders through the proxy solicitation process will be considered by us to be an integral part of our investment responsibility, recognizing that certain proposals, if implemented, may have a substantial impact on the market valuation of portfolio securities. Unless otherwise specifically provided in the agreement between the client and Riverbridge, we will be responsible for evaluating and voting on all proposals.

Riverbridge utilizes the services of two proxy service firms: one for research and a second for casting votes.  Securities in client accounts will be voted based on recommendations received by the proxy research firm.  Their recommendations will be based on the proxy voting guidelines of Riverbridge. In order to ensure the use of the proxy service advice and execution is consistent with our fiduciary obligations, Riverbridge retains the ultimate authority in voting the proxies in client accounts; therefore, Riverbridge may override the recommendation by the proxy research firm when casting votes.

When engaging proxy service firms, Riverbridge’s Investment Team considers factors such as service level, ability to manage the guidelines requested by Riverbridge, research depth and reporting, ability to flag recommendations for further review, pricing, automation, timeliness and the ability to execute, as applicable.

Riverbridge’s proxy voting process includes identified triggers to flag certain recommendations from the proxy firm for further evaluation by Riverbridge if certain criteria are met.  This includes, but is not limited to, votes where the guidelines provided by Riverbridge are not aligned with the recommendations of management.  Flagged votes are reviewed by Riverbridge’s investment team to further evaluate and for ultimate decision making prior to vote casting.

If Riverbridge learns of an error, either by the proxy service firm or by Riverbridge, Riverbridge will investigate the cause and the impact.  Riverbridge will notify the client and modify the process if needed.

The following is further detail of how Riverbridge will generally vote on certain topics.  The following covers many of the common matters but is not intended to be an exhaustive list.

  • Management Recommendations

The quality and depth of a Company’s management team, as well as alignment between the management team and Riverbridge’s investment philosophy, are a primary focus of the investment due diligence process. Therefore, the recommendations of a management team will be given substantial weight. Although proxies with respect to most issues are voted in line with management recommendations, Riverbridge will not automatically vote in favor of management. Riverbridge will not support proxy proposals or positions that are thought to not be in the best interest of the client; meaning not aimed at long-term value creation.

  • Election of Directors

a) Director Criteria

Proxies will typically be voted for a management proposed slate of directors. Riverbridge may vote against directors due to factors such as poor attendance history, lack of independence, inside director committee participation, perceived conflicts of interest or support of anti-takeover actions without shareholder approval.

b) Independence

Riverbridge defines an independent director to have no material relationship with the Company other than his or her directorship. No director should serve as a consultant or service provider to the Company.  Proxies will typically be voted in support of the following principles: two-thirds majority of the board be comprised of independent directors and audit, compensation, nomination, corporate governance, and compliance committees comprised solely of independent board members.

c) Separation of the roles of Chairman and CEO

Recommendations to separate the roles of Chairman and CEO are evaluated on a case-by-case basis as Riverbridge believes that a one size fits all approach is not in the best interest of shareholders. In the absence of an independent chairman, Riverbridge supports the appointment of a lead director with authority to conduct sessions outside the presence of the insider chairman.

  • Executive Compensation

Riverbridge takes a long-term approach in evaluating executive compensation plans and the performance of the compensation committee. Therefore, the underlying fundamental performance of the Company, will be given substantial weight in ‘say-on-pay’ votes and voting on nominees serving on the Company’s compensation committee. Riverbridge generally does not support executive compensation evaluation methods that weight heavily the performance of a security over relatively short periods of time. As a consistent feedback mechanism, Riverbridge generally supports annual “say-on-pay” voting frequency.

In cases in which the Company has engaged in what we judge to be unsatisfactory compensation practices, we may vote against nomination of members of the Company’s compensation committee, its entire board of directors and/or its chief executive officer. Examples of compensation practices generally considered unsatisfactory include but are not limited to: practices commonly referred to as “options backdating,” stock option grants at less than fair market value, exchange of underwater stock options, pyramiding of stock options, “pay-for-failure” executive severance provisions, change-in-control payments which are either excessive or which are not tied to loss of job or significant reduction in duties, excessive executive perquisites, and unjustified changes in the performance metrics applied to performance-based compensation.

  • Ratification of Independent Auditors

Management recommendations regarding selection of an auditor are generally supported; however, Riverbridge will not support the ratification of an auditor when there is a lack of independence, accounting irregularity, or negligence by the auditor. Reasons Riverbridge may vote against an auditor appointment include but are not limited to: auditor has a financial interest in or association with the Company that suggest the auditor is therefore not independent, auditor bears responsibility for a restatement by the Company, auditor support of aggressive accounting policies, there is reason to believe that the auditor has rendered an opinion which is neither accurate nor indicative of the Company’s financial position, when a Company changes auditors as a result of a material disagreement between the Company and the auditor regarding accounting principles or disclosures.

  • Shareholder rights

Riverbridge will generally not favor proposals which are designed to make it difficult for a Company to be acquired or which tend to entrench current management at the expense of securities holders. Therefore, we will generally be expected to vote against proposals approving classified boards of directors, blank check preferred stock, unequal voting rights plans, elimination of shareholder action by written consent, and unreasonable restrictions on shareholders’ rights to hold special meetings.

  • Changes in Capital Structure or State of Incorporation

Proposals to increase the number of authorized shares will be evaluated on a case-by-case basis. In general, Riverbridge supports the authorization of additional common shares. Factors evaluated include specified purpose of the proposed increase, explanation of risks to shareholders of failing to approve the request, assessment of potential dilution, recent track record for using authorized shares, and overall corporate governance track record. Riverbridge will generally vote against reincorporation where the financial benefits are minimal and there is a dilution of shareholder rights.

  • Mergers and Acquisitions, Corporate Restructuring

Merger and Acquisition proposals will be evaluated on a case-by-case basis, considering factors such as projected financial and operating benefits, offer price, prospects of the combined companies, negotiation process, and changes in corporate governance. Corporate restructuring in the form of leveraged buyouts, spin-offs, liquidations, and asset sales will be evaluated on a case-by-case basis.

  • Environmental, Social, and Governance (ESG) Issues

Riverbridge views strong environmental, social and governance practices as crucial input to long-term value creation. In most, if not all cases, this will mean that the proposals which maximize the value of portfolio securities over the long term will be approved with consideration for the ESG issues that aid in this objective.

Riverbridge believes policy decisions are typically better left to management and the board and will evaluate shareholder proposals regarding ESG issues on a case-by-case basis. Riverbridge will generally vote consistent with management’s recommendation on such proposals.  Examples where Riverbridge may vote otherwise include a reasonable proposal with a clear and direct positive financial effect on shareholder value that would not be burdensome or impose unnecessary or excessive costs on the issuer, and a reasonable proposal that mitigates significant risk to long-term shareholders stemming from governance practices, environmental regulation, or legal or reputational issues.

While Riverbridge views strong ESG practices as crucial input to long-term value creation, we recognize that some clients may approach these issues from a different perspective. As such, rather than having Riverbridge vote on behalf of the client, a client may retain the right to vote their own proxies.

Riverbridge’s Investment Team is responsible for identifying material conflicts of interest when voting proxies.  Examples include voting on a security held in a company where we also manage that company’s pension assets, an officer or director of a corporation in which Riverbridge invests is also a client of Riverbridge; a principal of Riverbridge has a personal relationship with an officer or director of a corporation in which Riverbridge invests that would bias Riverbridge’s ability to vote without conflict, Riverbridge has a financial interest in the outcome of a proxy vote. If a conflict is identified, Riverbridge will use an independent third party to recommend how the proxy involving the conflict should be voted, solely in the interest of the client, generally meaning in the interest of maximizing portfolio assets over the long term.  Riverbridge will record the security involved, the basis for the conflict and our proxy votes as they relate to this security.

This is also the proxy voting policy and procedures for the Riverbridge mutual funds.