Introduction
Lancaster Investment Management LLP (‘Lancaster’ or ‘Firm’) is an investment manager authorised and regulated by the Financial Conduct Authority (‘FCA’) as a Full-scope Alternative Investment Fund Manager (‘AIFM’) (CPMI firm). The Firm’s regulatory permissions allow it to provide investment management services to Alternative Investment Funds and separately managed accounts.
Lancaster employs a disciplined approach to managing concentrated, fundamental equity strategies.
This statement sets out Lancaster’s approach in meeting the requirements (‘Engagement Policy’) set out in SRD II and summarised in the FCA Handbook under COBS 2.2B.6 in relation to investments in shares traded on a regulated market (a term which extends to non-EU markets which are comparable to EU regulated markets and where the financial instruments dealt in are of a quality comparable to those in a UK regulated market).
Integration of shareholder engagement in investment strategy
Lancaster’s investment process involves rigorous analysis of potential and ongoing portfolio companies. Such analysis typically involves direct engagement with senior management of companies in order to understand their strategy and approach.
Monitoring and Dialogue with Investee Companies (Strategy, Financial and Non-Financial Performance Risk, Capital Structure and ESG)
Lancaster’s investment team typically conducts regular meetings with the management of portfolio companies. During these meetings we discuss a broad range of issues including, but not limited to, strategies for long term growth, capital allocation, financing plans and corporate governance. We may also address social and environmental issues. For further information see Lancaster’s Responsible Investment Policy.
There have been instances and may be instances in the future where we believe that a portfolio company can make improvements to its governance or to other aspects of its business. In such cases we initially discuss our concerns directly with management. If management do not provide a satisfactory response or fail to respond to our concerns, we will then consider adjustments to our investment thesis. If the issue is deemed significant, we would then decide whether to continue to hold shares in the company and vote against the measure or to sell our shares in the company.
Exercise of Voting Rights
Any resolution proposed by a portfolio company that is subject to a shareholder vote in which Lancaster is eligible to participate will be considered by Lancaster. In arriving at a voting decision, Lancaster acts in accordance with the best interests of its clients (‘Best interests rule’ in COBS 2.1) with the primary aim of enhancing the total return of the assets it manages for those clients. The voting decision may involve abstaining or voting against management if management actions and objectives do not match up with what we believe to be in the best interests of shareholders. Lancaster may also abstain when the vote is deemed to be more administrative than strategic in terms of subject matter, e.g. a vote to approve the appointment of directors, or when our position size is not considered to be significant (where we own less than 3% of share capital). It should be noted that Lancaster may hold positions in portfolio companies in derivative form, in which case we may not be eligible to vote.
Upon request, Lancaster will disclose metrics to demonstrate our broad voting behaviour.
Cooperation with Other Shareholders
Generally, Lancaster does not adopt an activist approach with other shareholders, although the Firm remains open to doing so if this would be deemed to be in the best interests of shareholders.
Communication with Relevant Stakeholders of Investee Companies
Lancaster does not typically communicate directly with other relevant stakeholders of portfolio companies.
Conflicts of Interests
Lancaster maintains a Conflicts of Interest Policy, which is available to clients and potential clients on request.