Middlefield ESG Policy

It is Middlefield’s responsibility to employ a disciplined investment process that seeks to identify attractive investment opportunities and evaluate material risks that could impact portfolio returns. Middlefield believes that Environmental, Social and Governance (“ESG”) factors have become an important component of a thorough investment analysis and that the integration of ESG factors will result in a more comprehensive understanding of a company’s strategy, culture and sustainability. Consistent with these objectives, Middlefield integrates ESG considerations into its investment process and these considerations are significant factors in selecting portfolio companies for its ESG-focused mandates. The integration of ESG considerations is integral to Middlefield’s investment decision-making and ongoing portfolio monitoring process.

In addition to Middlefield’s integration of ESG considerations into our investment process, our affiliate Middlefield Limited (a registered Canadian investment fund manager) has adopted Stewardship Principles in order to effectively steward the assets we manage for our clients. The Stewardship Principles are attached as Appendix 1 and our stewardship activities carried out pursuant to the principles are complementary to our ESG integration process.

ESG considerations are integral to Middlefield’s investment decision-making, as well as our ongoing portfolio monitoring process. Our current ESG integration process includes the following:

1. Middlefield incorporates ESG scores and other ESG data in our multi-disciplined investment process to evaluate investments. Our methodology includes a qualitative review and assignment of ESG scores to individual holdings. Each company is analyzed on an absolute basis and measured relative to its peers. The ESG scores and other ESG data are not the sole factors that govern our investment decisions, however, but rather constitute part of the information we review and consider alongside our fundamental, quantitative and qualitative research.
2. Our ESG scoring framework considers the average ESG scores from several reputable third-party data providers. In addition, we cross-reference potential investments with the constituents of relevant ESG indexes to assess their eligibility in ESG-focused mandates. The data providers we have chosen to incorporate into our ESG analysis currently are Sustainalytics, S&P, Bloomberg and Refinitiv.
3. Negative screening is implemented in ESG-focused mandates to exclude companies that operate in ethically-contentious industries (e.g. tobacco products and military weapons) as well as those involved in severe business controversies.
4. Positive screening is used to select companies that possess positive ESG characteristics. This process involves analyzing sustainability data provided by reputable third-parties to determine how companies are ESG-rated and ranked relative to peers.
5. ESG considerations also are integrated into our investment process by, among other things:

• reviewing companies’ public disclosure, including annual reports, proxy circulars, and, if available, sustainability or ESG reports
• conducting research and analysis on companies’ ESG policies and practices
• obtaining third party research on companies
• engaging with companies, including from time to time having discussions with management teams (both before purchasing shares for the portfolios and while our portfolios own such shares) on topics such as what initiatives and strategies have been put in place by the companies to deal with ESG considerations material to such companies
• monitoring shareholder meetings and voting proxies.

Many countries have established or are in the process of establishing standardized ESG disclosure requirements for corporate issuers. When enacted, these are expected to enhance the efficiency of our ongoing review and monitoring of a company’s ESG practices.

Middlefield’s approach to ESG integration may evolve over time as more ESG and sustainability research and data become available.

Middlefield’s Stewardship Principles

Middlefield Limited (“Middlefield”), as a Canadian asset manager, understands we have the responsibility to be an effective steward of the assets we manage for our clients in order to enhance the value of those assets for the benefit of our clients. The Canadian Coalition for Good Governance (“CCGG”) has published a set of seven stewardship principles which have become recognized as Canada’s stewardship code for institutional asset owners and asset managers. Middlefield believes that CCGG’s stewardship principles should be tailored for asset managers depending on various factors, such as the size of the asset manager and the type of assets managed. Set out below are CCGG’s seven stewardship principles and a description of how Middlefield, as an independent Canadian asset manager whose predominant assets are public and private investment funds that invest in Canadian and international equities, carries out or intends to carry out such principles.

Principle 1.

Develop an approach to stewardship: Institutional investors should develop, implement and disclose their approach to stewardship and how they meet their stewardship responsibilities.

Middlefield integrates stewardship into our investment process. Such integration includes:

• a procedure for voting proxies (see Principle 3 below)
• monitoring companies (see Principle 2 below)
• engaging with companies (see Principle 4 below)
• outsourcing stewardship activities (by among other things utilizing a proxy advisory firm to assist in monitoring companies and voting proxies)
• reporting to our clients (as required by law)
• managing potential conflicts of interest (via Middlefield’s Independent Review Committee mandated by National Instrument 81-107 as well as Middlefield’s Code of Conduct)

Principle 2.

Monitor companies: Institutional Investors should monitor the companies in which they invest.

Middlefield monitors the companies in which we invest, including as follows:

• we review companies’ public disclosures, including annual reports and proxy circulars
• we conduct research and analysis on companies
• we obtain third party research on companies
• we engage with companies (see Principle 4 below)
• we monitor formal shareholder meetings and, if there is a particularly important matter and we believe it is practical and appropriate to do so, we attend formal shareholder meetings

Principle 3.

Report on voting activities: Institutional investors should adopt and publicly disclose their proxy voting guidelines and how they exercise voting rights.

Middlefield exercises voting rights attached to the securities held by the funds we manage as follows:

• Middlefield uses the following proxy voting guidelines:
  A) proxies will be voted in a manner that seeks to enhance the long-term sustainable value of the funds we manage
  B) proxies will be voted in a manner consistent with leading Canadian and international corporate governance practices
• on routine matters, Middlefield generally supports management and the board unless there are unusual circumstances
• Middlefield uses the services of a proxy advisory firm to assist in voting proxies. Middlefield assesses the voting recommendations of the proxy advisory firm but Middlefield also monitors leading Canadian and international corporate governance practices. Middlefield does not automatically follow the recommendations of the proxy advisory firm, but in most cases, we vote as recommended. Middlefield retains ultimate responsibility for all proxy voting decisions.

In addition, the public funds managed by Middlefield follow the proxy voting requirements of Part 10 of National Instrument 81-106 in regard to establishing policies and procedures for proxy voting and in regard to preparing and disclosing their proxy voting records.

Principle 4.

Engage with companies: Institutional investors should engage with portfolio companies.

Middlefield engages with portfolio companies as follows:

• Middlefield engages with management of portfolio companies regularly, both before shares are purchased for the funds we manage and also while our funds own shares of the portfolio companies
• when Middlefield believes it is warranted, we may escalate engagement activities by engaging with directors, by voting against or withholding votes from directors or by voting against companies’ say on pay resolutions

Principle 5.

Collaborate with other institutional investors: Institutional investors should collaborate with other institutional investors where appropriate.

Middlefield collaborates with other institutional investors through investor associations to which Middlefield belongs such as the Responsible Investment Association (RIA)

Principle 6.

Work with policy makers: Institutional investors should engage with regulators and other policy makers where appropriate.

Middlefield’s professional advisors, such as the law firms and accounting firms we retain, assist to keep us up to date on developments that are material to us as an asset manager. We utilize our professional advisors, and we also rely on the organizations to which we belong, to engage on our behalf with regulators and policy makers where appropriate.

Principle 7.

Focus on long-term sustainable value: Institutional investors should focus on promoting the creation of long-term sustainable value.

Middlefield focuses on a portfolio company’s long-term success and sustainable value creation, including as follows:

• Middlefield focuses on a company’s management and strategy, as well as its risks (both company specific and systemic)
• Middlefield considers environmental, social and governance factors that are relevant to a company and integrates such factors into our investment activities