Change in Canadian Equity Fund Investment Objective
Encasa Financial is a social purpose investment manager with a long-standing commitment to Responsible Investing (RI). We manage the investment of capital reserves, security deposits, member share capital and operating reserves of non-profit organizations, co-operatives, and affordable housing providers. We work daily to ensure that we meet the investment objectives our investors and deliver on our commitment to RI.
We are notifying Unitholders of the Encasa Canadian Equity Fund (“the Fund”) of a planned change to the investment objective of the Fund. This change, as outlined below, requires Unitholder approval at a special meeting of Unitholders of the Fund (the “Meeting”), to be held on June 25, 2020. The purpose of the Meeting is to approve the proposed change to the investment objective of the Fund. Due to the current public health crisis with COVID-19, Encasa has not finalized the format of this Meeting. We will respect all public health directives in place at the time of the meeting. Details on the Meeting and options for virtual participation will be provided to you in the next short while. Unitholder approval or disapproval can be provided in the form of a proxy vote. Information on how to do this will be provide to each Unitholder in the weeks ahead and well in advance of the meeting.
Current Canadian Equity Fund Investment Objective
The current investment objective of the Fund is to seek long-term capital growth by investing primarily in a diversified portfolio consisting of equity securities of companies located in Canada. The Fund now invests in a minimum of 60% Canadian securities and a maximum of 40% global securities (defined as companies located outside Canada).
Proposed Change to Canadian Equity Fund Investment Objective
Encasa Financial proposes to change the investment objective of the Fund to seek long-term capital growth by investing in a diversified portfolio consisting of equity securities of companies primarily located outside of Canada.
Consequently, there will be a corresponding shift in the allocation in the Fund to a maximum of 70% global securities and a minimum of 30% Canadian securities, with a target allocation of 65% global securities and 35% Canadian securities.
We are proposing the change to enable the Fund to better and more flexibly fulfill its RI mandate. There are two critical factors which make the current investment objective an impediment to successfully implementing the RI mandate:
1. Canada only represents 3% of world markets. Practically, that means the number of securities in the global market that meet our RI criteria is substantially greater outside Canada than inside Canada. A global mandate will mean more and better opportunities for the Fund to make investments in leading companies that capably address issues such as climate change.
2. The Canadian securities market is highly concentrated with just three sectors (Energy, Financials and Materials) representing 65% of the S&P/TSX Composite Index. With the RI mandate limiting the Fund’s exposure to fossil fuels as an example, this concentration in three sectors further reduces the number of companies that meet the Fund’s investment criteria.
Increasing the global content in the Fund will mean better choice, and increased opportunity to select good and impactful securities. Such securities have limited availability in Canada.
Upon approval of the change by Unitholders, the name of the Fund will change from the “Encasa Canadian Equity Fund” to the “Encasa Equity Fund.” This name change better aligns the Fund with its revised investment objective. On approval, this change will become effective on or about July 1, 2020.
The Independent Review Committee (IRC) of the Fund has reviewed Encasa’s proposal and has determined that the proposed change will achieve a fair and reasonable result for the Fund.
Encasa recommends that Unitholders vote FOR the change in the fundamental investment objective of the Fund. We believe this change is best for Unitholders in the short and longer term, by better enabling Encasa to fulfill the RI mandate of the Fund. Unitholders should review the proposed change as further described in the Meeting Materials, which will be mailed to Unitholders (please see below).
In early June, the full details of the proposed change will be set out in Meeting Materials, which will include an Information Circular, Meeting details, voting instructions, as well as a form for proxy voting. Individuals will be able to cast their votes on the proposal through a proxy vote conducted by a third party. The number of votes that you may cast at the Meeting (or by proxy) is equal to the number of Units your organization holds in the Fund as at May 25, 2020. This information will be included in the materials mailed to you.
The Information Circular will set out the proposed change, the rationale for the change and will outline the recommendation of the IRC in regards to the proposed change. The documents that you will receive in June will provide additional information, including detailed instructions regarding the proxy voting process. We recommend that you review the materials and if you have any questions, speak to your Investment Funds Advisor or contact us at email@example.com.
Encasa will also be holding a teleconference Information Meeting in June 2020 to discuss the proposed change and to respond to any questions you may have on the proposed change or the proxy voting process. Details regarding the Information Meeting will be provided to you in the coming weeks.
Unitholders in the Fund may obtain, at no cost, the applicable amended Simplified Prospectus, Annual Information Form, most recently filed Fund Facts, interim and annual Fund financial statements and/or reports, and Management Report of Fund Performance by accessing the SEDAR website at sedar.com, and entering “Encasa Canadian Equity Fund” on the “Search for Investment Documents” page. Additional information about Encasa Financial and the Encasa Canadian Equity Fund can be found by accessing Encasa’s website at www.encasa.ca or by emailing firstname.lastname@example.org.
FREQUENTLY ASKED QUESTIONS
1. Why is Encasa Financial proposing this change?
This proposed change will better enable the Fund to fulfill its RI mandate by substantially increasing the number of securities that meet the criteria in Encasa’s RI Policy. The high concentration of the Energy, Financials and Materials sectors in the Canadian securities market, and the fact that Canada represents only 3% of the world markets significantly limits our flexibility to invest according to the RI policy and to meet the objectives set for the Fund.
2. What is Responsible Investment?
Responsible Investment is a strategy that takes environmental, social and governance factors into account during the selection and management of investments. Investments selected for the Encasa Funds are identified as likely to perform well and meet the RI criteria.
3. I have questions about the proposed change. Where can I obtain answers?
To address any questions about the proposed change and to provide additional information, Encasa will be holding a virtual Information Meeting for Unitholders in June 2020 at a date and time to be determined. Details of the Information Meeting will be provided to Unitholders in advance.
Unitholders are invited to submit questions and comments in advance to email@example.com. You may also submit questions to Encasa after the Information Meeting at the aforementioned e-mail address.
4. Will the proposed change alter the risk level of The Fund?
The Fund risk level remains unchanged at a Medium rating with the proposed change. The risk level of the Fund is assigned based on criteria set by the by the Canadian Securities Administrators. For more information on these criteria, please contact us at firstname.lastname@example.org.
5. What actions are Unitholders required to take?
Unitholders do not need to take any specific action in response to this communication. Meeting Materials will outline the actions available to Unitholders. All Unitholders are encouraged to cast their vote in advance of the meeting by proxy or at the virtual Meeting, regardless of your decision on the proposal.
6. Will all Unitholders receive Meeting Materials?
Meeting Materials will be mailed in early June to all investors owning Units of the Fund as of May 25, 2020. The Meeting Materials will be mailed to the address that we have on file for your organization. In some cases, this may be in the care of a Property Manager engaged by your organization. If you have any questions or concerns about receiving the Meeting materials, please contact us at email@example.com.
7. How many Unitholder votes are required to approve the proposed change?
The proposed change requires approval by a majority of Unitholder votes cast at the virtual Meeting on June 25, 2020. The number of votes will include both those of organizations who have voted in advance of the meeting by proxy, and those attending the Meeting.
8. How many votes do I have?
The number of votes you have is dependent on the number of Units you hold in the Fund. You have one vote for each unit held in the Canadian Equity Fund.
9. What is a proxy?
A proxy is a third party that has been properly directed to vote in the manner in which they are instructed. A proxy form, that will be included as part of the Meeting Materials, is the instruction on how to vote for the organization filling out the proxy form. A proxy allows a Unitholder to vote on the proposed changes without having to attend the Meeting in person.
10. Who is my proxy?
As a Unitholder, you may identify an individual to act as proxy for you. You may choose to authorize the Manager, Encasa Financial, to act as your proxy, or you may choose to identify another individual to act as your proxy. The proxy must be in attendance at the Meeting in order to vote on behalf of an organization. There will be instructions in the Meeting Materials as to how to authorize proxies.
11. Given that we, as a Unitholder, are a corporation, who is authorized to act as proxy or represent us at the Meeting?
There are two options with respect to who may act as the proxy for your corporation.
As noted above, the first option (as will be outlined in the proxy form) is Encasa Financial as represented by Derek Ballantyne, CEO of Encasa Financial. If you choose this option, Derek will cast your vote (for or against) for you.
The second option is that you nominate another party to act as your proxy and/or represent you at the Meeting. This person, however, must be authorized to bind the corporation; in other words, this person must be an authorized signatory for your corporation.
11. When do proxy forms have to be received to be valid?
The deposit date for proxies to be voted at the virtual Meeting will be Tuesday, June 23, 2020.
12. How do I submit my proxy?
Meeting Materials will outline the procedure for submitting proxies. You should follow the instructions on the form of proxy that you receive and contact your Investment Funds Advisor promptly if you require assistance.