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Statement of Compliance

Santander Asset Management UK follows the seven principles of the Stewardship Code listed below. Should you wish to download a PDF version of our Statement of Compliance then please click here (PDF 702 KB).

PRINCIPLE 1:
Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.

PRINCIPLE 2:
Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship, and this policy should be publicly disclosed.

PRINCIPLE 3:
Institutional investors should monitor their investee companies.

PRINCIPLE 4:
Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value.

PRINCIPLE 5:
Institutional investors should be willing to act collectively with other investors where appropriate.

PRINCIPLE 6:
Institutional investors should have a clear policy on voting and disclosure of voting activity.

PRINCIPLE 7:
Institutional investors should report periodically on their stewardship and voting activities.


Principal 1
Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.

Santander Asset Management UK (SAM) is committed to the principles of good corporate governance. We recognise our fiduciary obligations to exercise their rights as owners and engage with companies in a responsible way. We aim to achieve best practice in our voting and engagement activities and to align our practices with the Financial Reporting Council’s UK Stewardship Code. Our policy and approach is available on our website.

SAM’s primary activity in the investment chain is as an asset manager for both institutional and retail clients, with retail clients transacting with us via platforms and wealth managers rather than directly.

We directly manage UK Equities and monitor our investee companies with input from PIRC. PIRC is an important supplier whose dedicated resources and industry best practice better informs our voting intentions. PIRC provides us with detailed analysis of the companies in which we invest, highlighting areas of concern and a rating based on their governance risk assessment rating model. These issues can include: audit and reporting; board and committee processes and composition; remuneration balance and outcomes; and shareholders and capital. The issues are accompanied by detailed rationale as to why they have been highlighted and a voting recommendation is provided. SAM regularly reviews all voting and engagement activity provided by PIRC who oversees the proxy votes and reports back with the outcomes, highlighting any key points of note.

Using their own analysis and that provided by PIRC, our Fund Managers actively monitor all of our investee companies and, where appropriate, will initiate meetings and discussions with company boards and management.

The support from PIRC, our voting record and any contentious issues are reviewed within our newly formed Stewardship Forum, chaired by our Head of Strategic Institutional Solutions. This forum reviews engagement, which can be initiated directly from ourselves of leveraging the support provided by PIRC.

It is our policy to vote on every resolution for all UK equities held on behalf of investors, and our quarterly voting reports explain those issues considered during the reporting period. Our voting decisions are shown in the voting report on our website.

When a report comes to our attention that causes significant concern. We initiate direct contact with the company or advisers to discuss the issue, and what remedial action is to be taken. Such contact is with the Chairman or Senior Independent Director, the chairman of a board committee and/or the company’s corporate representatives.

Should such actions not result in a satisfactory outcome, we will consider on a case-by-case basis other approaches, including a formal written communication to the Company Secretary, additional meetings with management, collaboration with other investors and voting against relevant resolutions.

We believe this approach ensures that investors can be satisfied that good governance is at the heart of our UK Equity investment decisions, and we have the structure and mechanisms in place to effectively oversee the companies in which we invest and the processes to engage with them where required.


Principal 2
Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship, and this policy should be publicly disclosed.

Introduction
Conflicts of Interest are inherent in the financial services industry. SAM UK bases its business on a contract of trust with its clients and we owe a duty to manage any known conflicts to ensure they are not disadvantaged by them.

At SAM, we have a number of policies and procedures in place which are designed to manage these conflicts. We have set out below a summary of the conflicts that we experience and how we manage these for you.

Ownership Structure
Santander Asset Management is 50% owned by Banco Santander and 50% owned by two Private Equity Firms, Warburg Pincus and General Atlantic. If a conflict of interest should arise from this ownership, SAM will abstain from voting.

Code of Conduct
SAM values its reputation for integrity and fair dealing. All SAM employees are subject to a Code of Conduct which sets out high level standards of behaviour applicable to all staff, ensuring that they maintain the highest standards of conduct. This Code summarises the policies and procedures that are relevant to all SAM and associated employees and business activities.

Failure to comply with SAM’s Compliance policies and procedures will constitute grounds for disciplinary action, which could potentially include dismissal, and where appropriate, referral to relevant regulatory organisations.

Remuneration
SAM is subject to regulatory requirements to create remuneration practices that are commensurate with maintaining:

  • the best interests of our clients as priority; while
  • providing appropriate incentives for employees and directors; within
  • an appropriately risk managed environment; and
  • managing any conflicts that arise with these objectives

Seed Money
SAM may invest in funds which it manages as seed money. When we do this we aim to ensure it
does not conflict with the interests of existing or potential investors.

Box Management
SAM takes a passive approach to box management and creates or cancels shares in line with Customers’ demands.

Dealing
SAM aims to process all customer instructions fairly and in due turn. When dis-aggregating deals, we will do so in a manner that does not favour the interests of one customer over those of another.

Gifts and Entertainment
SAM has established strict procedures and policies in place designed to ensure that no employee accepts any gift or inducement which is likely to conflict with their duties to any customer of SAM.

Register
SAM keeps and regularly updates a record of the types of regulated business activities carried out by or on behalf of SAM UK in which potential Conflicts of Interest entailing a material risk of damage to the interests of one or more clients has arisen or, in the case of an ongoing regulated business service or activity, may arise. The information contained within the register facilitates the effective identification and management of any potential Conflicts of Interest.

Our commitment to you
SAM is committed to monitor types of conflicts that may arise within our business and in our relationship with you. We will endeavour to manage those conflicts in accordance with our regulatory and fiduciary obligations. If we become aware of a situation where we are unable to satisfactorily manage any conflict we shall disclose it to you before we do business with you.

Where conflicts arise, these will be logged and escalated. Those impacting on voting intentions will be escalated to the Stewardship Forum, whilst broader conflicts will be managed through our Risk & Control Committee.

SAM is currently updating our Conflicts of Interest policy document as part of our ongoing risk management framework. We will be publishing the revised version here on our website upon completion.


Principal 3
Institutional investors should monitor their investee companies.

SAM believe that effective monitoring of the companies in which we invest on behalf of our clients has the ability to improve investment outcomes. SAM work with PIRC to provide us with detailed reports on the companies in which we invest, and which drive our approach to voting. Our approach follows the framework of the Corporate Governance Code, which itself suggests a flexible approach based on individual company circumstances. This input then drives our engagement and voting activity, which is agreed within the SAM Stewardship Forum. As such, whilst we have positions on a number of governance areas, our approach is individual and based on insight, rather than regimented. We believe that this approach will best serve the needs of our investors.

SAM fund managers monitor investee companies on an ongoing basis, including discussions with company boards and management. This is done through our Risk and Control team located on the same floor as our analysts and portfolio managers to ensure effective interaction regarding governance and stewardship.

Detailed engagement notes are recorded by the team and held in our confidential database to ensure we have a clear audit trail. The notes are added to over time and evolve in line with our engagement with companies. Explanations of any departure from market best practice is sought. Meetings may be chaired by the Head of UK Investment Division with participation of the relevant Fund Managers.

SAM will enter into active dialogue with companies when needed, however we aim to avoid becoming insiders or acquiring material that is not yet in the public domain which may prevent us from dealing in the shares of the company/funds concerned. If we decide that knowing certain information is beneficial to our clients then we do have in place a Chinese wall that will still allow us to trade in the underlying assets.

Should SAM feel that a company has an issue with their governance, we will discuss this with the lead non-Executive in order to get the matter resolved. However, if the issues raised concerned shareholder value, then this will be discussed with the Company’s executive board directly.

Where appropriate, SAM will send our outsourced Proxy voting company, PIRC, to attend key AGMs. However in general this is not always possible due to the number of shareholder meetings we are required to vote at.

When engaging with PIRC, a meeting is held between PIRC representatives and SAM representatives to discuss SAM’s current approach to stewardship and explore particular requirements to ensure we build on and develop existing practices. This will include gaining an understanding of current governance and responsible investment policies and procedures, engagement priorities, appetite for AGM attendance and particular engagement outcomes sought. In this way, PIRC will ensure a thorough understanding of Santander’s mandate and expectations of the engagement experience. Following this consultation, a review will be made of SAM’s stewardship code statement with any initial suggestions for amendments provided.

Once the suggestions have been made, PIRC will then identify an engagement strategy based on SAM portfolio holdings and a governance risk assessment based on the PIRC rating model. A shortlist of companies from the SAM portfolio would be identified to prioritise for engagement. The selection will initially be based on the ratings data and the governance reports. PIRC will then submit those companies and issues to SAM to review and decide which to pursue. The initial selection is likely to comprise of ten companies based on the corporate governance ratings which assess audit and reporting; board and committee processes and composition; remuneration balance and outcomes; and shareholders and capital.

Based on the agreed engagements, following the consultation with SAM, briefing notes and letters will be prepared. The notes will contain critical information required prior to engagement, including, as relevant, board structure and key personnel, critical governance risks, comparisons with industry peers, past environmental and social performance, and any recent news or controversies. In preparing the brief, PIRC will consider factors such as the weighting of SAM holdings in the company and the comparative level of governance risk exposure of the company. Meeting objectives will be set and focus on improving company practices.


Principal 4
Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value.

SAM will regularly meet with investee company management in order to ensure we are happy our clients’ interests are protected. Where we have concerns, either with their strategy or responsiveness, we will initiate contact with either the lead non-Executive or the Executive Board, as appropriate.

SAM are most likely to intervene with issues such as splitting the role of the Chairman from the Executive Board, remuneration policy and whether a company would like to make political donations. Should any of these issues arise, our approach is one of a direct and constructive dialogue with investee companies. As mentioned in Principle 1, where initial discussions fail, we will consider other options including:

  • Writing to the full board through the office of the Company Secretary
  • Collaborating with other investors
  • Voting against relevant resolutions at general meetings

Where the above fails, we will consider submitting a shareholder resolution, or requisitioning an EGM in order to bring about change, or to protect our clients’ interests.

If we engage via our proxy provider, PIRC, then in order to progress company engagement SAM will review the companies shortlisted by PIRC as well as briefing papers and letters in the Stewardship Governance Forum. Following this review, SAM will indicate which companies we wish to engage with directly, based on scale and access. For these companies, the PIRC letter will be signed off and issued by SAM, with the meeting to be held between the company and SAM representatives. Alternatively, SAM may choose to join with fellow investors on the issue where PIRC has identified there is a possible coalition. Where SAM indicates that we do not have scale/access, the letter would come from PIRC and the meeting held by PIRC, which SAM may choose to attend. Engagement will be structured to encourage positive dialogue aiming at building a long-term relationship with the company.

A detailed meeting note will be provided to SAM subsequent to the meeting if it was led by PIRC. This will serve as an official record of the topics covered. If SAM participated in the meeting, the meeting note will be agreed between PIRC and SAM prior to sending to the company for any comments or clarifications. Engagement will be reviewed for any relevant follow-up, such as providing voting recommendations for the AGM. For those meetings led by SAM, PIRC will not be able to report back outcomes, unless SAM wish PIRC be in attendance for the purpose of support and recording the meeting.

The final step in the engagement process is that PIRC will report on a ‘per meeting’ basis providing an assessment of outcomes. At the end of the twelve month period, a final review of SAM’s stewardship code statement will be made, and if necessary any amendments suggested in light of the engagement experience.

Principal 5
Institutional investors should be willing to act collectively with other investors where appropriate.

SAM will primarily engage collectively through its relationship with PIRC, but is happy to work with other investors on a case by case basis where we believe such collective action will enhance our engagement efforts. This is usually done when PIRC has identified there is a possible coalition between SAM and other investors. Should the scale/access be significant via the collaboration, SAM will choose this option as it will ensure that we are more likely to achieve our goals. The dedicated individual to deal with this area at SAM is Rob Askham (rob.askham@santanderam.com).


Principal 6
Institutional investors should have a clear policy on voting and disclosure of voting activity.

SAM has developed a voting policy and believes that voting at company meetings is an important part of our fiduciary duty to our clients. It is our policy to vote on every resolution for all UK equities held on behalf of investors, and our quarterly voting reports explain those issues considered during the reporting period. Our voting decisions are shown in the voting report included on the website. Within here, investors can see the range of issues where we have voted against the company. Typically, this can cover reappointment of auditors and directors, and share issuance / repurchase where we believe these do not meet governance standards or are not in the interests of investors.

SAM has engaged with a recognised proxy voting organisation, PIRC, to provide research, analysis and voting advice on the resolutions proposed at general meetings in order for us to best serve our clients (see www.pirc.co.uk). PIRC then votes on all UK shares for which it has an authority to do so.

If SAM chose to vote against a resolution, SAM will write a letter to the company in advance of the meeting to inform them of our voting intentions.

Another way in which we are transparent is that we do not engage in stock lending and therefore are not able to hide our voting rights. This means that our votes are always public.

Our voting records are publicly disclosed on the website to ensure transparency and can be found here.

Principal 7
Institutional investors should report periodically on their stewardship and voting activities.

The results of our stewardship and voting activities are communicated to our clients in client reports. The voting reports are available on the website.

SAM holds a full record of our proxy voting and engagement activity as well as producing a detailed quarterly voting and engagement activity report for our clients via our website. A more detailed report, at a company level, is under development and available upon request. However, if it is believed that disclosure of certain ongoing engagement with companies would be prejudicial to that engagement activity and therefore not in the best interests of our clients, then we may decide not to disclose that activity until after the event. This could be the case if publication of the activity damaged the ongoing dialogue with the company.

SAM does not currently seek independent assurance, for example through external audits, of our Stewardship activity. At this point, we do not believe that external review would significantly add value given the support we already receive from external suppliers, which is monitored and reviewed via our Outsourcing Policy. Additionally, our Risk & Control monitor compliance and activities as part of an annual review process.

Our approach is reviewed within the Stewardship Forum which meets quarterly and provides oversight of our activities, policies and approach across all aspects of governance.

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