jarislowsky fraser funds proxy voting policy and procedures

JARISLOWSKY FRASER FUNDSPROXY VOTING POLICY AND PROCEDURESJarislowsky, Fraser Limited (“JFL”), the portfolio manager of the Funds, is responsible for managing the voting ofall proxies for each Fund and has established proxy policies and guidelines ("guidelines") to provide generalguidance, in accordance with applicable laws, for the exercise of voting rights attached to proxies and for thecreation of policies concerning proxy voting. The guidelines put forward voting procedures which must beobserved for common or uncommon items subject to a vote as well as general guidelines suggesting how toproceed when determining if and how to exercise proxies. Although the guidelines allow the creation of apermanent policy regarding the vote on some common items, each current and non current question must beindividually assessed, to determine if it must follow the permanent policy or the general guidelines. The guidelinesalso specify situations where the portfolio manager might not be able to exercise its right to vote as well assituations where the fee attached to a particular vote would exceed the benefits of it being exercised.We receive proxies for each of the companies held within the Funds we manage.Our goal is to accrue and enhance economic value for our clients. This entails voting along with the board ofdirectors (or independent board members in cases where a conflict of interest with management or a significantowner are evident), who as shareholder representatives must act in the best interest of the shareholder.In cases where we strongly believe that a certain proposal will unduly increase the risk level or reduce theeconomic value of the relevant security, and that value will be enhanced by voting against a board of directors, wewill do so. In the same vein, if we believe that the voting of a particular proxy may reduce the economic value ofthe security, then we may elect not to participate in such a vote.Jarislowsky, Fraser Limited generally votes with the Board on the following issues:Stock splitsRegular annual meetingsElection of directorsRe-appointment of auditorsJarislowsky, Fraser Limited generally votes against the Board on the following issues:Board Structure: Jarislowsky, Fraser Limited generally discourages the existence and creation ofboards that: are not independent from management; lack a distinction between the CEO and theChair; and, have key sub-committees, such as the nominating, audit, or executive compensationcommittees, dominated by management, a controlling shareholder or non-independent directors.Poison Pills: Otherwise known as shareholder rights plans, are where the shareholder is notallowed or is severely restricted in his/her ability to vote on any takeover offer or any othersignificant issue. The policy of Jarislowsky, Fraser Limited is to vote against such poison pills ifthe shareholder does not retain the ultimate decision making authority.Dual Capitalization: Any new attempts to create a two class common share structure from asingle class, or consolidate a two class structure into a single class subordinated class.Blank Cheque Preferred Shares: The creation of any class of shares that are superior in voting orhave the potential to be superior in voting.Excessive Compensation: Involves the granting of options and/or the creation or modification ofincentive compensation plans for employees, officers, directors and ongoing service providers ofthe company.JFL is in favour of reasonable competitive compensation for company executives, officers andBoard members. Said compensation should align executives and their directors with mid to longterm shareholder value creation goals. While we prefer incentive compensation plans that reward1

executives solely on long-term value creation for shareholders, we recognize that, for practicalreasons, part of the executive pay has to be fixed.In recent years, the emergence of compensation consultants and the ever widespread use ofoption issuance have distorted the meaning of reasonable and competitive compensation.Overall levels of yearly compensation have become too high and, in many cases, have focusedon a disproportionately small group of executives, front end loading total compensation andshifting management’s focus on short term profit goals. Most compensation plans have alsobecome very complex.The most common excess with regard to compensation has been the use and amendment ofoption plans that increase the number of shares that can be issued. Option plans do not align theobjectives of management with those of shareholders, they provide holders with a leveredparticipation in share price appreciation and little or no risk of loss in share price declines.Options have also been subject to abuses such as short term share price promotion, re-pricing,re-issuing and backdating.JFL agrees with the executive compensation principles of the Canadian Coalition for GoodGovernance (CCGG) and will be reviewing proxy circulars for reasonableness and with thefollowing guidelines in mind:• “Pay for performance” should be a large component of executive compensation• “Performance” should be based on measurable risk adjusted criteria, matched to the timehorizon needed to ensure the criteria have been met• Compensation should be simplified to focus on key measures of corporate performance• Executives should build equity in their company to align their interests with shareholders• Companies should limit pensions, benefits, and severance and change of control entitlements• Effective succession planning reduces paying for retentionJarislowsky, Fraser Limited will only support Boards and their committees when overallcompensation is reasonable and built with long term sustainable growth in mind. The samecriteria apply for an advisory vote on executive or board compensation, including executiveseverance agreements. The Firm prefers annual advisory votes on compensation matters.Shareholder Proposals: In some cases shareholders try to use proxy proposals to effect socialchange in corporations. Jarislowsky, Fraser Limited generally opposes propositions not favouredby the independent board members.Jarislowsky, Fraser Limited will, however, generally support shareholder propositions thatencourage board independence, propose separation of Chair and CEO functions, requireshareholder approval for executive remuneration and allow minority shareholders who represent10% or more of shareholding to call a meeting.Break Fees: In takeovers or amalgamations, fees that go beyond any legal or accountingexpenses.Capital Issuance requests and preemptive rights: Companies need some financing flexibility totake advantage of growth opportunities; to that end, Jarislowsky, Fraser Limited will allow capitalissuance up to 10% of issued capital, with or without preemptive rights, so long as it is the sameclass of shares. Jarislowsky, Fraser Limited will always oppose the issuance of a new class ofshares. Each request will be reviewed on its own merits.In order to achieve a balance between client interests and the desire to avoid conflicts of interest or perceivedconflicts of interest, JFL has adopted a code of ethics and standards of professional conduct. When exercisingvoting rights, these guidelines allow JFL to meet its fiduciary duty as well as its directives set for out for proxyproposals, based on its judgment and in the best interest of shareholders. Should a conflict of interest or2

appearance of conflict of interest exist, JFL will notify the Fund Manager of said conflict and of its votingintentions, in consultation with the JFL’s Investment Strategy Committee and/or client.Jarislowsky, Fraser Limited votes all proxies internally. The firm may make use of external proxy service advisorsbut all proxy decisions, however, are made internally.The Investment Strategy Committee, consisting of members of the firm’s research team, meets on a weekly basisto review all upcoming proxy issues and events. Decisions of the Investment Strategy Committee aredocumented in writing and communicated to the Proxy Voting/Corporate Actions area as well all investmentprofessionals. As mentioned above, should a material conflict of interest arise, written notice is sent to all clientsconcerned.The firm’s Proxy Voting/Corporate Actions personnel are responsible for notifying the Investment StrategyCommittee of upcoming votes as well as the maintenance of the following:• documentation of all decisions of the Investment Strategy Committee (including the basis for eachdecision)• copies of all proxy statements (either in electronic or paper form or online)• records of each vote cast• records of all written requests from clients (and the JFL responses thereto)Jarislowsky, Fraser Limited will endeavour to vote every proxy. Proxy Voting/Corporate Actions personnelreconcile internal records of stock held against proxies received. Missing proxies are tracked, with attempts madeto receive the proxy prior to the vote date. . If unresolved, we will communicate such issues to unitholders.A complete listing of all proxies voted by the Funds is posted on our website on a quarterly basis.Please Note: Funds which participate in Securities Lending programs generally forfeit their right to voteproxies for securities which are out on loan. For contentious proxy votes Jarislowsky, Fraser Limited willmake every effort to recall these securities prior to the record date.JARISLOWSKY FRASER LIMITEDI N V E S T M E N T C O U N S E LMarch 20113