Proxy Voting

The Canadian Securities Administrators require mutual funds in Canada to disclose how they vote proxies relating to portfolio securities they hold. In accordance with this role, Fidelity has posted its proxy voting records for the most recent 12 month period ending June 30 on Fidelity.ca.

Shareholders in public companies typically have voting rights associated with their shares. These voting rights allow shareholders, including institutions such as Fidelity on behalf of all mutual funds it manages, to vote at annual and special company meetings. Most shareholders, including the Fidelity funds, generally submit votes by proxy rather than attend each meeting.

We manage our mutual funds with one overriding goal: to provide the greatest possible return to shareholders consistent with governing laws and the investment policies of each fund. In pursuit of this goal, the Fidelity funds take two basic types of action:

1. Buy and hold securities they believe will appreciate in value; and sell securities they believe are less likely to appreciate in value.
2. Exercise their rights as shareholders to support sound corporate governance within companies in which the funds invest.

At Fidelity, the first type of action – buying and selling securities – is based on searching the globe for investment opportunities company by company, issue by issue. In that spirit, Fidelity portfolio managers make their investment decisions – to buy, hold or sell – based on this research.

Fidelity exercises its shareholder rights by casting votes by proxy at shareholder meetings on matters submitted to shareholders for approval. At Fidelity,  formal written guidelines have been established for proxy voting by all of the Fidelity funds.

The purposes of the guidelines are simple: to promote accountability of a company’s management and Board of Directors to shareholders; to align the interests of management with those of shareholders; and to promote disclosure of a company’s business and operations.

Finally, these guidelines recognize that a company’s management is entrusted with the day-to-day operations of the company, as well as longer term strategic planning subject to the oversight of the company’s Board of Directors.

The guidelines also recognize that the company’s shareholders – the owners of the company – must have final say over how management and directors are performing, and how shareholders’ rights and ownership interests are handled.
 

Our job is to invest in companies whose prospects we believe are good and which will, over time, provide solid returns to the shareholders of our funds. It’s that simple. It is not our job to become involved in the management of a company. Our approach isn’t to buy a company’s stock for control. Our objective is to buy a company’s stock because we believe that it will increase in value. We generally leave the management of the company to the company’s management.

Yes. However, perspective is important here. We are – at our core – active portfolio managers who invest in companies in which we view the business prospects as highly attractive. Of course, the key to running a successful company is effective management. Therefore, we would expect to vote in favor of management’s proposals most of the time.

When we believe that a company is not being run well, we have the option to sell our shares and, in fact, we’re buying and selling shares of companies every day in the market.

That said, our extensive proxy voting guidelines  lay out a number of specific instances in which we will typically vote against company management or withhold fund votes. Our objective is to vote in accordance with our core principles and beliefs with respect to corporate governance.

Proposals that we most frequently oppose involve the adoption or amendment of equity compensation plans. In this area, we tend to encounter the greatest number of proposals that run counter to our  proxy voting guidelines . For example, Fidelity generally votes against the adoption or amendment of plans that do not:

1. Require shareholder approval for material changes to the plans,
2. Limit potential dilution, and
3. Require grants of restricted stock to have a minimum vesting period of at least three years.

We approach voting proxies in much the same way we approach our investments. We closely examine the economic merits of each proposal and support those that in our judgment are most closely aligned with the advancement of shareholder returns. To the extent that overly dilutive equity compensation plans do not align the interests of company management and shareholders, we'll vote against them.