Hartford Investment Management Company ( HIMCO ) Proxy Voting Policy and Procedures. June 30, 2016

Transcription

1 Hartford Investment Management Company ( HIMCO ) Proxy Voting Policy and Procedures June 30,

2 POLICY REVISION AND APPROVAL HISTORY Effective Date Description of Action Approved by Name and Title September 30, 2006 Update of Policy David M. Znamierowski, HIMCO President April 28, 2008 Update of Policy Barbara Keller, Chief Compliance Officer May 11, 2009 Update of Policy Barbara Keller, Chief Compliance Officer February 8, 2010 Update of Policy Barbara Keller, Chief Compliance Officer November 25, 2011 Update of Policy Robert Lewton, Chief Compliance Officer April 16, 2013 Update of Policy Robert Lewton, Chief Compliance Officer April 4, 2014 Update of Policy Robert Lewton, Chief Compliance Officer April 8, 2015 Update of Policy Robert Lewton, Chief Compliance Officer June 30, 2016 Update of Policy Robert Lewton, Chief Compliance Officer POLICY OVERSIGHT Most Recent Evaluation Date Description of Action Reviewed by 4Q 2011 Test of Policy HIMCO Office of Testing April 8, 2015 Assessment of HIMCO Chief Policy Compliance Officer June [ ], 2016 Update of Policy HIMCO Chief Compliance Officer Policy Owner Investment Management Compliance Investment Management Compliance Investment Management Compliance POLICY STATEMENT HIMCO has adopted and implemented the following policies and procedures which it believes are reasonably designed to ensure that proxies are voted in the best interests of its clients in accordance with its fiduciary duties and Rule 206(4)-6. In addition, HIMCO s proxy policies reflect the fiduciary standards and responsibilities for ERISA accounts as set out in Department of Labor Interpretive Bulletin Relating to Exercise of Shareholder Rights, 29 CFR Part 2509 (October 17, 2008) 1. Authority to Monitor Corporate Actions and to Vote Proxies HIMCO monitors corporate actions for those which contain voting activity, and votes proxies on behalf of client accounts for which it has voting discretion, including clients who have explicitly authorized HIMCO, as well as for clients that have not expressly reserved proxy-voting responsibility for themselves or to some other third party. The duty to vote proxies carries with it the responsibility on HIMCO s part to analyze the issues connected with shareholder votes, evaluate the probable impact on share prices and vote proxies in what it views to be the best interests of its clients. This duty arises from the fact that an investment adviser s proxy votes can affect the outcome of a shareholder vote and, consequently, the value of 1 With respect to ERISA clients, the Department of Labor ( DOL ) takes the position that the voting of proxies is a fiduciary act of plan asset management that should be performed by the investment manager unless the voting right is retained by a named fiduciary of the plan. 2

3 the securities held by its clients. Proxy voting is therefore integral to an adviser s investment management process. It is HIMCO s intent to make decisions that (1) favor proposals that tend to maximize a company s shareholder value; and (2) are not influenced by real or apparent conflicts of interest. HIMCO has implemented procedures to prevent conflicts of interests from influencing its proxy voting decisions. These procedures include HIMCO s use of Glass Lewis & Co, LLC ( Glass Lewis ) as an independent third party voting specialist, and a review and approval process for individual decisions that do not follow Glass Lewis s recommendations. PROCEDURES AND ACCOUNTABILITIES USE OF A THIRD-PARTY PROXY VOTING SPECIALIST HIMCO s portfolio managers acquire a diverse and substantial number of securities. To assist them in proxy voting and to prevent actual or apparent conflicts of interest, HIMCO has retained the services of Glass Lewis to review, process and vote all proxies on behalf of certain client accounts managed by HIMCO based upon agreed upon criteria including but not limited to Glass Lewis s Proxy Paper Policy Guidelines (the Proxy Voting Guidelines ). The Proxy Voting Guidelines are updated by Glass Lewis on an annual basis, are reviewed and approved by HIMCO s Proxy Voting Committee (the Proxy Voting Committee ) annually, and are incorporated by reference into HIMCO s Proxy Voting Policy and Procedures. The current Proxy Voting Guidelines are posted and available for review on HIMCO Compliance s SharePoint site. HIMCO s Proxy Committee is responsible for reviewing its relationship with Glass Lewis at least annually and for evaluating the quality and effectiveness of the various services provided by Glass Lewis. HIMCO may hire other service providers to replace or supplement Glass Lewis with respect to any of the services HIMCO currently receives from Glass Lewis. Glass Lewis is an established independent research firm that provides proxy advisory and voting services to institutional investors and money managers. Glass Lewis reviews proxy proposals and makes voting recommendations in accordance with its Proxy Voting Guidelines. These voting recommendations are made available to HIMCO through Glass Lewis s on-line web portal, ViewPoint. The Proxy Voting Guidelines address a wide variety of individual topics, including among others, shareholder voting rights, anti-takeover defenses, board structures, the election of directors, executive and director compensation, reorganizations, mergers and various shareholder proposals. Other information made available by Glass Lewis includes summaries of proxy proposals and publications discussing key proxy voting issues. HIMCO has access to this information through ViewPoint. From time to time, but at least annually, Glass Lewis updates and revises its Proxy Voting Guidelines. Glass Lewis also provides operational, recordkeeping and reporting services. PORTFOLIO MANAGEMENT - ELECTION TO VOTE A PROXY While it is HIMCO s general policy to follow the Proxy Voting Guidelines and recommendations of Glass Lewis, HIMCO retains the authority on any particular proxy to vote differently from the Proxy Voting Guidelines or a related Glass Lewis recommendation. However, such decisions are subject to review and approval to ensure that the decision is not influenced by any conflict of interest. 3

4 In addition, HIMCO s Proxy Committee has approved a change to the Exclusive Forum and the Fee-Shifting Bylaw Provisions portion of the Glass Lewis U.S. Proxy Voting Guidelines, and has directed Glass Lewis to in all cases vote in favor of those positions (rather than against them, as was Glass Lewis s default stance). Proxies received for securities held in HIMCO s insurance affiliate accounts and other client accounts are automatically referred to Glass Lewis for analysis and recommendation. On occasion, proxies may be sent directly to Operations. Operations will forward these proxies to Compliance. Compliance will maintain a log of all proxies received and forward them to Glass Lewis for voting. In the absence of a contrary instruction from HIMCO, Glass Lewis votes each proxy in accordance with the Proxy Voting Guidelines. In certain circumstances, HIMCO portfolio managers may disagree with Glass Lewis s recommendation. It is also possible, that with respect to a particular vote, a HIMCO portfolio manager may want to vote proxies in accordance with Glass Lewis s recommendation for certain of its clients and differently for other clients based on different investment objectives, risk profiles, or time horizons. In each case, the portfolio manager in question must notify HIMCO s Proxy Voting Committee of such an election and obtain approval before voting or instructing Glass Lewis to vote any proxies. BANK LOAN AGREEMENTS CONSENTS AND WAIVERS HIMCO may be asked to consent to an amendment to or grant a waiver under a loan agreement or other governing document of a specific financial instrument held by HIMCO clients. HIMCO will generally treat such requests for consent not as proxies subject to the Proxy Voting Policy and Procedures but as investment matters to be dealt with by the responsible HIMCO portfolio manager, provided that such consent does not relate to the election of a board of directors or the appointment of auditors of a public company. SECURITIES LENDING AND PROXY VOTING The general account portfolios of HIMCO s insurance affiliate clients have a securities lending program in place, and mutual fund and third party client accounts may also have securities lending programs in place. In such a case, HIMCO and/or Glass Lewis may be unable to vote proxies when the underlying securities have been loaned pursuant to such securities lending program (loan termination is often the only way to attempt to vote proxies on the loaned securities). WHEN CLIENTS ELECT TO VOTE CERTAIN PROXIES If a HIMCO client that has authorized HIMCO to vote proxies on its behalf instructs HIMCO to vote a proxy in a fashion different from Glass Lewis s recommendation with respect to a particular vote, HIMCO will vote the proxy in accordance with the client s written instructions, provided such instructions are received timely. CERTAIN PROXY VOTES MAY NOT BE CAST It may not be possible to cast an informed vote in certain circumstances due to the lack of information provided in the proxy statement or by the issuer or other resolution sponsor, and HIMCO and/or Glass Lewis may abstain from voting in those instances. Proxy materials not being delivered in a timely fashion also may prevent analysis or entry of a vote by voting deadlines. In some cases HIMCO may determine that it is in the best economic interests of its clients not to vote certain proxies. For example, in general HIMCO does not vote proxies requiring a formal power of 4

5 attorney designation, or that subject the underlying shares to share blocking or other liquidity restrictions. In addition, where local sub-custodians are used, certain jurisdictions may require that additional forms be executed by HIMCO, and votes cast by Glass Lewis may be rejected if those forms are not completed. In general, Glass Lewis will provide HIMCO with such additional forms only to the extent that Glass Lewis deems the vote to be controversial or significant. In deciding whether to complete such forms, HIMCO s portfolio managers will in turn consider factors including the materiality of the position size and whether HIMCO has performed sufficient fundamental research on the issuer to have a developed view of the proxy vote. PROXY VOTING COMMITTEE AND ADMINISTRATION HIMCO has established a Proxy Voting Committee. The Proxy Voting Committee is responsible for: (1) Administering HIMCO s proxy voting activities including the review and approval of HIMCO s Proxy Voting Policy and Procedures and Glass Lewis s Proxy Voting Guidelines; (2) Providing advice and guidance, when needed, on specific proxy votes; and (3) Annually reviewing the overall performance of Glass Lewis including a determination of how often Glass Lewis failed to vote in a timely manner or consistently with its stated recommendations. As part of this annual review, Glass Lewis shall provide HIMCO, on an annual basis, with an updated SSAE 16 Type 2 Report (Summarizing Glass Lewis s Service Organization Controls). From time to time, the Proxy Voting Committee may consider the merits of retaining other proxy voting specialists. The Proxy Voting Committee may be assisted by other HIMCO personnel as appropriate. GLASS LEWIS - CONFLICTS OF INTEREST PROCEDURES Glass Lewis has adopted Conflicts Avoidance Procedures which are intended to ensure that, when preparing its proxy voting recommendations, conflicts of interest do not arise regarding Glass Lewis. These Conflicts Avoidance Procedures include: (1) Having the Glass-Lewis personnel who are responsible for making proxy recommendations be walled off from Glass Lewis s parent organizations, Ontario Teachers Pension Plan (OTPP) and Alberta Investment Management Corp (AIMCO); (2) Prohibiting Glass-Lewis employees who have a personal conflict regarding a given company (e.g., if they have a relative who serves as an executive or director of a public company) from being involved in the research, analysis or making of any vote recommendations regarding that company; (3) Prominently disclosing in the relevant research report if: a. An employee of Glass Lewis or any of its subsidiaries, a member of its research Advisory Council, or a member of Glass Lewis s Strategic Committee serves as an executive or director of a public company; b. A Glass Lewis institutional investor customer is an issuer, or a division, branch or entity that either directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, an issuer; c. A Glass Lewis customer submits a shareholder proposal at a company, is a dissident shareholder in a proxy contest, or is otherwise publicly soliciting shareholder support for or against a director or proposal; or d. Glass Lewis has a material business relationship with a vendor or service provider; and 5

6 (4) Glass Lewis covenanting that it will not provide consulting services to public companies or shareholder proponents. In addition, in instances where Glass Lewis provides proxy recommendations on a company in which OTPP or AIMCO holds a stake significant enough to have publicly announced its ownership in accordance with the local market s regulatory requirements or Glass Lewis becomes aware through prominent public reference of OTPP s or AIMCO s ownership stake or intended vote in such company, through OTPP s or AIMCO s published annual report or any other publicly available information disclosed by OTPP or AIMCO, then Glass Lewis will include a precautionary disclosure on the relevant proxy recommendation. In addition, Glass Lewis also has an independent Research Advisory Council, which is designed to ensure that Glass Lewis s research consistently meets the quality standards, objectivity and independence criteria set by Glass Lewis s research team leaders. The Research Advisory Council is comprised of a number of experts in the fields of corporate governance, finance, law, management and accounting. On an annual basis, Compliance will obtain the following materials from Glass Lewis: (1) A certification from Glass Lewis regarding the current version of their conflict of interest policies and procedures; and (2) A no-conflicts certificate confirming that no conflicts of interest arose regarding Glass Lewis with respect to any proxy recommendations made during the immediately preceding twelve month period. Compliance will review the proxy procedures and, at the next regularly scheduled meeting, will brief the Proxy Voting Committee regarding the scope of any changes which were made to such procedures by Glass Lewis. On at least a quarterly basis, Glass Lewis updates a watch list (available on ViewPoint) to identify those proxy recommendations for which Glass Lewis included a precautionary disclosure. Compliance will, through a sampling analysis (consisting of a review of up to 5 such issuers per quarter), confirm that such proxy recommendations were in fact consistent with the Proxy Voting Guidelines. CONFLICTS OF INTEREST PROCEDURES A conflict of interest is any circumstance or relationship which would compromise a portfolio manager s objectivity in voting proxies in the best interests of HIMCO clients. The ultimate determination of whether a conflict of interest exists for proxy voting purposes will be made by the Proxy Voting Committee. Where Glass Lewis does not cover a company or otherwise cannot recommend a vote, or the portfolio manager does not want to vote with the Glass Lewis recommendation, the relevant portfolio manager will inform the Chief Compliance Officer (or designee) of such fact and give a recommendation as to how the proxy should be voted. The Chief Compliance Officer (or designee) will then conduct a conflicts investigation on behalf of the Proxy Voting Committee and report the findings to the members. If the Proxy Voting Committee determines that no conflict of interest exists (or that any conflict is immaterial) the portfolio manager may vote the proxy. If the Proxy Voting Committee determines that a conflict of interest exists, the portfolio manager will not be permitted to vote the proxy and will either refer the matter to the client, recommending that the client vote the proxy themselves or vote the proxy in accordance with Glass Lewis s recommendation (if Glass Lewis covers the company and has a recommendation). 6

7 Any referral of a voting matter to a client will be undertaken jointly by the relevant portfolio manager and a member of Compliance in order to make certain that the voting issue and its implications for the company in question are described and discussed in an even-handed matter, with full disclosure of the relevant conflicts of interest. As a matter of policy, the Proxy Voting Committee will presume the existence of a conflict of interest for proxy voting purposes whenever (but not limited to): (1) The portfolio manager responsible for voting a proxy has identified a personal or business interest either in a company soliciting proxies or in the outcome of a shareholder vote; or (2) The responsible portfolio manager has identified that he or she is related to an incumbent director or a candidate seeking a seat on the board; or (3) A current HIMCO client is affiliated with the company soliciting the proxy or has communicated its view to HIMCO on an impending proxy vote; or (4) The proxy relates to The Hartford Financial Services Group, Inc.; or (5) A third party (including an affiliate or parent company) with an interest in the outcome of a shareholder vote has attempted to influence either HIMCO or the portfolio manager responsible for voting the proxy; or (6) A company with respect to which the proxy is being solicited is on HIMCO s Restricted List. In addition, the existence of an issue with respect to which HIMCO is determined to have a conflict of interest will not prevent its portfolio managers from voting on other issues on the same proxy with respect to which HIMCO does not have a conflict of interest. It should be noted that, as a wholly-owned subsidiary of The Hartford Financial Services Group, Inc., HIMCO has many financial services company affiliates and, as such, could be subject to a greater number of potential conflicts of interests affecting its proxy votes on behalf of its clients than if it were a stand-alone investment adviser. In order to minimize such conflicts that may arise with its affiliated businesses, HIMCO has elected to rely primarily upon the Proxy Voting Guidelines and recommendations of Glass Lewis, and may only elect to vote proxies in a fashion which does not follow Glass Lewis s recommendations after the foregoing review and approval process has been satisfied. EMPLOYEE DUTY TO REPORT CONFLICTS OF INTEREST Any HIMCO employee who is aware of any actual or apparent conflict of interest involving personal relationships relevant to, or any attempt to improperly influence, how HIMCO votes its proxies has a duty to disclose the existence of the situation to Compliance. PROXY ADMINISTRATION OPERATIONS RESPONSIBILITIES The Proxy Voting Committee has delegated to the Operations Department responsibility for monitoring corporate actions and ensuring that proxy voting issues are promptly brought to the attention of Compliance. For each new account that is set up, Operations reviews the new account documentation and determines whether or not the account requires proxy voting services. If the documentation specifies that HIMCO is responsible for proxy voting, then Operations sends a letter to the client s custodian with a copy to Glass Lewis and Compliance notifying the custodian to send all proxies 7

8 to Glass Lewis. Glass Lewis receives notification from the client s custodian that HIMCO has a new account and Glass Lewis sets the account up on the Glass Lewis Voting Platform. Accounts become active after receipt of the first electronic ballot. Compliance can monitor the account set up process by using the Glass Lewis ViewPoint web application. For accounts not automatically set up with Glass Lewis, Operations will forward to Compliance each proxy received. COMPLIANCE RESPONSIBILITIES Compliance will forward proxies received from Operations directly to Glass Lewis for voting. Compliance will maintain a log of all proxies received internally and their disposition. Compliance is responsible for ensuring that procedures and reports relating to the voting of proxies are promptly and properly prepared and disseminated to the appropriate parties. Compliance will notify the Chief Compliance Officer of any violations of this policy. INVESTMENT LAW RESPONSIBILITIES Investment Law is responsible for ensuring that Form ADV as well as other appropriate disclosure documents contain a summary of HIMCO s Proxy Policy and Procedures and a statement that clients may request information regarding how HIMCO voted the client s proxies, and that clients may request a copy of the Policy and Procedures. IT RESPONSIBILITIES On a nightly basis, IT sends Glass Lewis a holdings file of the particular client portfolios for which Glass Lewis has been hired to vote proxies and performs ballot reconciliation. AVAILABILITY OF HIMCO S PROXY VOTING POLICY AND PROCEDURES AND CLIENT PROXY VOTING RECORDS The Compliance Department will upon request make available the Proxy Voting Policy and Procedures to clients. Compliance will also make client proxy voting reports available upon request. The proxy records for investment companies are disclosed to shareholders via publicly available annual Form N-PX filings N-PX REPORTING For HIMCO s investment company clients, Glass Lewis will create and maintain records of each investment company s proxy voting records for 12 month periods. The reports will contain the following information for each matter relating to a portfolio security considered at any shareholder meeting held during the period covered by the report and with respect to which the investment company was entitled to vote: (1) The name of the issuer of the portfolio security; (2) The exchange ticker symbol of the portfolio security; (3) CUSIP, if available; (4) The shareholder meeting date; (5) A brief identification of the matter voted on; (6) Whether the matter was proposed by the issuer or by a security holder; (7) Whether the company cast its vote on the matter; (8) How the company cast its vote (i.e., for or against proposal, or abstain for or withheld regarding the election of directors); and (9) Whether the company cast its vote for or against management. 8

9 BREACHES TO THIS POLICY Violations of this policy must be reported to the Chief Compliance Officer. Employees violating this policy may be subject to (without limitation) sanctions, fines, suspensions, and termination of employment. RECORDKEEPING Under Rule 204-2, as amended, HIMCO must retain (1) Its Proxy Voting Policy and Procedures and the Proxy Voting Guidelines; (2) Proxy statements received regarding client securities; (3) Records of votes cast on behalf of clients; (4) Records of client requests for proxy voting information and any written response from the adviser (to either a written or an oral request); and (5) Any documents prepared by HIMCO that were material to making a decision how to vote, or that memorialized the basis for the decision. Under Rule 204-2(c)(2) these records (other than proxy statements on file with the EDGAR system) may be maintained by a third party provided that HIMCO has obtained an undertaking from the third party to provide a copy of the documents promptly upon request. HIMCO has retained Glass Lewis to maintain all records of proxies voted and related research analysis. Compliance will keep records of written requests from clients and any written response from HIMCO (to either a written or an oral request) and other information pursuant to Section of the Advisers Act, ERISA, and other applicable laws. Glass Lewis will maintain these records electronically in their secure core server for five years from the end of the fiscal year during which the last entry was made on such record and will be available immediately. Records older than five years would be transferred to a warehouse server and be accessible upon request. HIMCO will maintain all relevant records which shall be available to the SEC or any representative of the SEC at any time and from time to time for reasonable periodic, special or other examination, and shall be retained for a period not less than seven years in an easily accessible location, the first three years in the adviser s principal office. Records that are stored electronically must meet Investment Advisers Act Rule 204-2(g) (Electronic Storage), which allows HIMCO to maintain records on microfilm, microfiche, or any electronic or digital storage medium so long as: (a) the records are arranged and indexed in a way that permits easy location, access, and retrieval; (b) HIMCO is able to promptly provide the SEC with a legible, true, and complete copy of the record in its storage medium; a legible true, and complete printout of the record; and means to access, view, and print the records; and (c) HIMCO separately stores a duplicate copy of the record. In the case of electronic media, HIMCO must have procedures to reasonably safeguard the records from loss, alteration, or destruction; limit access to properly authorized personnel and the SEC; and reasonably ensure that any reproduction of a nonelectronic original is complete, legible, and true when received. BREACHES TO THIS POLICY Violations of this policy must be reported to the Chief Compliance Officer. Employees violating this policy may be subject to (without limitation) sanctions, fines, suspensions, and termination of employment. 9

10 ASSOCIATED POLICIES Portfolio Holdings Disclosure Policy and Procedures Privacy Policy and Procedures Record Retention Requirements Policy and Procedures REGULATORY AUTHORITY Investment Advisers Act of 1940, Rule 206(4)-6 Investment Advisers Act of 1940, Rule Investment Company Act of 1940, Rule 3a-4, and 30b1-4 Employee Retirement Income Security Act of 1974, Department of Labor Bulletin 94-2, 29 C.F.R (July 29, 1994) 10

11 APPENDIX A ROLES AND RESPONSIBILITIES OUTLINE TASK Administration of proxy voting activities New Account Set up with Glass Lewis Glass Lewis holdings file nightly distribution Annual and Quarterly Reviews of Glass Lewis and their relationship with HIMCO Proxy disclosures OWNER(S) HIMCO s Proxy Voting Committee Operations IT HIMCO s Proxy Committee/Compliance Investment Law POLICY RISK EVALUATION ASSOCIATED RISKS Required conflict of interest disclosures that impact HIMCOs proxy decision making process when voting proxies on behalf of its clients are not made. Custodians (non -State Street) fail to forward proxies received on non-feed reliant accounts to Proxy Vote facilitator (Glass Lewis). Disclosure information is not accurate and/or complete disclosures are not made in a timely manner. Proxies are not voted in accordance with approved guidelines or in a timely manner on behalf and in the best interest of clients. INHERENT RISK LEVEL High High Medium Medium 11